Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
TBNC > SEC Filings for TBNC > Form 10-Q on 15-May-2014All Recent SEC Filings

Show all filings for T BANCSHARES, INC.

Form 10-Q for T BANCSHARES, INC.


15-May-2014

Quarterly Report


ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis represents our consolidated financial condition as of March 31, 2014 and December 31, 2013, and our consolidated results of operations for the three months ended March 31, 2014 and 2013. The discussion should be read in conjunction with our financial statements and the notes related thereto, which appear elsewhere in this Quarterly Report on Form 10-Q.

Statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including our expectations, intentions, beliefs, or strategies regarding the future. Any statements in this document about expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and "outlook," and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties, which could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document. All forward-looking statements concerning economic conditions, rates of growth, rates of income or values as may be included in this document are based on information available to us on the dates noted, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results may differ materially from those in such forward-looking statements due to fluctuations in interest rates, inflation, government regulations, economic conditions, customer disintermediation and competitive product and pricing pressures in the geographic and business areas in which we conduct operations, including our plans, objectives, expectations and intentions and other factors discussed under the section entitled "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2013, including the following:

if we are unable to implement our business plan and strategies, we will be hampered in our ability to develop business and serve our customers, which, in turn, could have an adverse effect on our financial performance;

we are subject to significant government regulation and legislation that increases the cost of doing business and inhibits our ability to compete including the potential impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau and Basel III;

if we fail to retain our key employees, growth and profitability could be adversely affected;

if we fail to retain our trust customers, our non-interest income could be adversely affected;

we face substantial competition in our primary market area;

if we fail to sustain attractive investment returns to our trust customers, our growth and profitability in our trust services could be adversely affected;

we have a significant dental industry loan concentration in which economic or regulatory changes could adversely affect the ability of those customers to fulfill their loan obligations;

we compete in an industry that continually experiences technological change, and we may not be able to compete effectively with other banking institutions with greater resources;

the Bank's current legally mandated lending limits are lower than those of our competitors, which may impair our ability to attract borrowers;

changes in governmental economic and monetary policies, the Internal Revenue Code and banking and credit regulations, as well as other factors, will affect the demand for loans and the ability of the Company to attract deposits;

changes in the general level of interest rates and other economic factors can affect the Company's interest income by affecting the spread between interest-earning assets and interest-bearing liabilities;

changes in consumer spending, borrowing and savings habits;

changes in the Company's liquidity position;


Table of Contents

acts of God or of war or terrorism;

we have no current intentions of paying cash dividends;

we may not be able to raise additional capital on terms favorable to us or we may be required to raise capital under terms which are dilutive to existing shareholders; and

our directors and executive officers beneficially own a significant portion of our outstanding common stock.

These factors and the risk factors referred to in our Annual Report on Form 10-K for the year ended December 31, 2013 could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, and you should not place undue reliance on any such forward-looking statements. Any forward-looking statement reflects only information known to us as of the date on which it is made and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which will arise.

Executive Overview

Introduction

The Company is a bank holding company headquartered in Dallas, Texas, offering a broad array of banking services through the Bank. Our principal banking markets include Dallas, Tarrant, Denton, Collin and Rockwall counties which encompass an area commonly referred to as the Dallas/Fort Worth Metroplex. We currently operate through a main office located at 16200 Dallas Parkway, Dallas, Texas as well as loan production offices located in the Phoenix, Arizona, Denver, Colorado, Greenville, South Carolina and Portland, Oregon markets. These offices originate loans throughout the United States with a focus on the western U.S. The offices are staffed by experienced bankers with significant experience in the origination, administration, and servicing of loans pursuant to programs promulgated by the SBA and the USDA. The Bank is a Preferred Lender Participant ("PLP") in the SBA program.

We were incorporated under the laws of the State of Texas on December 23, 2002 to organize and serve as the holding company for the Bank. The Bank opened for business on November 2, 2004.

The following discussion focuses on our financial condition at March 31, 2014 and December 31, 2013, and our results of operations for the three months ended March 31, 2014 and 2013.

Recent Developments

On May 12, 2014, the Bank moved its main office from 16000 Dallas Parkway, Dallas, Texas to its new building located at 16200 Dallas Parkway, Dallas, Texas. The office lease for 16000 Dallas Parkway will expire and terminate by its own terms in May 2014.


Table of Contents

Results of Operations

Key Performance Indicators at March 31, 2014

The following were key indicators of our performance and results of operations through the first quarter of 2014:

total assets were $151.9 million at the end of the first quarter of 2014, representing an increase of $7.4 million, or 5.1%, from $144.5 million at the end of 2013;

total loans held for investment, net of allowance for loan losses and deferred loan fees, increased $9.7 million, or 8.6%, to $122.0 million at the end of the first quarter of 2014, compared to $112.3 million at the end of 2013;

total loans held for sale, which consists primarily of the guaranteed portion of SBA 7(a) loans, increased $2.0 million, or 95.2%, to $4.1 million at the end of the first quarter of 2014, compared to $2.1 million at the end of 2013;

total deposits increased $15.3 million, or 14.5%, to $121.1 million at the end of the first quarter of 2014, compared to $105.8 million at the end of 2013;

net income before income taxes was $402,000 for the three months ended March 31, 2014, compared to $534,000 for the same period in the prior year. The decline was principally the result of a recorded provision for loan loss of $492,000 for the three months ended March 31, 2014. No provision for loan loss was recorded for the same period in the prior year. The Company recognized income tax expense of $156,000for the three months ended March 31, 2014. There was no income tax recorded for the three months ended March 31, 2013.

return on average assets was 0.67% and return on average equity was 5.15% for the three months ended March 31, 2014 compared to a return on average assets of 1.80% and return on average equity of 13.15% for the for the same period in 2013;

total revenue increased $689,000, or 16.1%, to $5.0 million for the three months ended March 31, 2014, compared to $4.3 million for the same period in the prior year;

tier 1 capital to average assets and total capital ratios for the Bank at March 31, 2014 were 13.57% and 16.09%, respectively, compared to 13.94% and 17.20%, respectively, at December 31, 2013; and

the tangible book value of our stock increased to $5.18 at March 31, 2014, compared to $4.32 at March 31, 2013.


Table of Contents

The following tables set forth our average balances of assets, liabilities and shareholders' equity, in addition to the major components of net interest income and our net interest margin, for the three months ended March 31, 2014 and March 31, 2013.

                               FINANCIAL SUMMARY
         Consolidated Daily Average Balances, Average Yields and Rates

                                                                   Three Months Ended March 31,
                                                       2014                                            2013
                                     Average                         Average         Average                         Average
(000's) except earnings per share    Balance        Interest          Yield          Balance        Interest          Yield
Interest-earning assets

Loans, net of reserve (1)           $  124,606     $     1,755             5.7 %    $   97,950     $     1,597             6.6 %
Federal funds sold                         461               -             0.2 %           402               -             0.2 %
Securities and other                    15,869              70             1.8 %        15,505              73             1.9 %
Total earning assets                   140,936           1,825             5.3 %       113,857           1,670             5.9 %
Cash and other assets                    6,946                                           4,568
Total assets                        $  147,882                                      $  118,425

Interest-bearing liabilities
NOW accounts                        $    3,750               3             0.3 %    $    2,855               2             0.2 %
Money market accounts                   32,238              39             0.5 %        26,060              30             0.5 %
Savings accounts                         1,688               2             0.5 %           608               1             0.5 %
Certificates of deposit less than
$100,000                                 4,036              11             1.1 %         3,919              13             1.3 %
Certificates of deposit $100,000
or greater                              52,783             102             0.8 %        37,440              73             0.8 %
Total interest bearing deposits         94,495             157             0.7 %        70,882             119             0.7 %
Borrowed funds                          13,422               3             0.1 %        15,089               4             0.1 %
Total interest bearing
liabilities                            107,917             160             0.6 %        85,971             123             0.6 %
Noninterest bearing deposits            19,213                                          15,044
Other liabilities                        1,647                                           1,163
Shareholders' equity                    19,105                                          16,247
Total liabilities and
shareholders' equity                $  147,882                                      $  118,425

Net interest income                                      1,665                                           1,547
Net interest spread                                                        4.7 %                                           5.4 %
Net interest margin                                                        4.8 %                                           5.5 %

Provision for loan loss                                    492                                               -
Non-interest income                                      3,146                                           2,612
Non-interest expense                                     3,917                                           3,625
Income before income taxes                                 402                                             534
Income taxes expense                                       156                                               -
Net income                                         $       246                                     $       534

Earnings per share                                 $      0.06                                     $      0.13
Return on average equity                                  5.15 %                                         13.15 %
Return on average assets                                  0.67 %                                          1.80 %
Equity to assets ratio                                   12.92 %                                         13.72 %

(1) Includes nonaccrual loans


Table of Contents

Net Interest Income and Net Interest Margin

Net interest income is the difference between interest income, principally from loan and investment securities portfolios, and interest expense, principally on customer deposits and borrowed funds. Net interest income is our principal source of earnings. Changes in net interest income result from changes in volume and spread and are reflected in the net interest margin. Volume refers to the average dollar level of interest-earning assets and interest-bearing liabilities. Spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. Margin refers to net interest income divided by average interest-earning assets, and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities.

The following table presents the changes in net interest income and identifies the changes due to differences in the average volume of earning assets and interest-bearing liabilities and the changes due to changes in the average interest rate on those assets and liabilities. The changes in net interest income due to changes in both average volume and average interest rate have been allocated to the average volume change or the average interest rate change in proportion to the absolute amounts of the change in each.

                                                        Three Months Ended March 31, 2014 Compared to
                                                              Three Months Ended March 31, 2013
                                                       Increase (Decrease) Due to
                                                               Change in
                                                     Yield/                  Average               Total
(000's)                                               Rate                   Volume                Change
Federal funds sold                               $            -           $           -         $          -
Securities and other                                         (5 )                     2                   (3 )
Loans, net of reserve (1)                                  (217 )                   375                  158

Total earning assets                                       (222 )                   377                  155

NOW                                                           1                       1                    2
Money market                                                  1                       7                    8
Savings                                                       -                       1                    1
Certificates of deposit $100,000 or less                     (2 )                     -                   (2 )
Certificates of deposit $100,000 or more                     (1 )                    30                   29
Borrowed funds                                                -                      (1 )                 (1 )

Total interest-bearing liabilities                           (1 )                    38                   37

Changes in net interest income                   $         (221 )         $         339         $        118

(1) Average loans include non-accrual.

Net interest income for the three months ended March 31, 2014 increased $118,000, or 7.6%, compared to the same period in the prior year. The increase was due to an increase in the average volume of interest-earning assets, partially offset by decrease in the average interest yield of earning assets.

Total interest income for the three months ended March 31, 2014 increased $155,000, or 9.3%, compared to the same period in the prior year. Average interest-earning asset volume increased $27.0 million, or 23.7%, to $140.9 for the three months ended March 31, 2014, compared to $113.9 million for the same period in the prior year, primarily due to the increase in the loan portfolio. The average interest yield of earning assets decreased to 5.3%, or 10.2%, for the three months ended March 31, 2014, compared to 5.9% for the same period in the prior year.

Total interest expense for the three months ended March 31, 2014 increased $37,000, or 30.1%, compared to same period in the prior year. The average cost of funds for interest-bearing liabilities was 0.6% for the three months ended March 31, 2014, unchanged from the same period in the prior year. Average volume of interest-bearing liabilities increased $21.9 million, or 25.5%, to $107.9 million for the three months ended March 31, 2014, compared to $86.0 million for the same period in the prior year. Average interest-bearing deposits increased $23.6 million, or 33.3%, to $94.5 million for the three months ended March 31, 2014, compared to $70.9 million for the same period in the prior year. Average borrowed funds decreased $1.7 million, or 11.3%, to $13.4 million for the three months ended March 31, 2014, compared to $15.1 million for the same period in the prior year.


Table of Contents

Provision for Loan Losses

We determined a provision for loan losses that we consider sufficient to maintain an allowance to absorb probable losses inherent in our portfolio as of the balance sheet date. For additional information concerning this determination, see the section of this discussion and analysis captioned "Allowance for Loan Losses."

We recorded a provision of $492,000 for loan losses for the three months ended March 31, 2014. We did not record a provision for loan loss for the three months ended March 31, 2013. We had one dental loan charge-off of $1.1 million during the first quarter of 2014. The loan was impaired on December 31, 2013. The borrower declared Chapter 11 bankruptcy in March 2014 and we charged it off as of March 31, 2014. We had recoveries of $36,000 during the three months ended March 31, 2014. For the three months ended March 31, 2013, we had one consumer loan charge-off of $300 and recoveries of $1,500.

Non-interest Income

Non-interest income was primarily attributable to fee income generated by the Company for trust services and service charges on depository accounts.

Total non-interest income increased $534,000, or 20.5%, to $3.1 million for the three months ended March 31, 2014, compared to $2.6 for the same period in the prior year. The increase was primarily due to increases in trust income, gain on sale of loans, and rent income.

Trust income is earned on the value of managed and non-managed assets held in custody. Trust income increased $230,000, or 9.0%, to $2.8 million for the three months ended March 31, 2014, compared to $2.6 million for the same period in the prior year. The increase is a result of improvements in market values of assets in trust accounts during the first quarter of 2014.

The Company sold $2.0 million of loans held for sale resulting in a gain on sale of loans of $207,000 for the three months ended March 31, 2014. There were no sales of loans for the three months ended March 31, 2013.

The Company recorded $79,000 of rent income for the three months ended March 31, 2014 from the office building we purchased in April 2013. No rent income was recorded for the three months ended March 31, 2013.

Other income increased $49,000, or 272.2% to $67,000 for the three months ended March 31, 2014, compared to $18,000, for the same period in the prior year. The increase was primarily due to servicing fees on sold loans.

Non-interest Expense

Total non-interest expense increased $292,000, or 8.1%, to $3.9 million for the three months ended March 31, 2014, compared to $3.6 million for the same period in the prior year.

Salaries and employee benefits increased $89,000, or 9.8%, to $996,000 for the three months ended March 31, 2014, compared to $907,000 for the same period in the prior year. This increase was primarily related to an increase in the number of employees in the loan production and operational support areas of the Company.

Occupancy and equipment expenses for the three months ended March 31, 2014 increased $62,000, or 28.4%, to $280,000, compared to $218,000 for the same period in the prior year. The increase is primarily due to expenses related to the office building purchased in April 2013.

Trust expenses are advisory fees paid to a fund advisor to advise the Company on the common trust funds managed by the Company and are based on the value of the assets held in custody. For the three months ended March 31, 2014, trust expenses increased $197,000, or 10.0%, to $2.2 million, compared to $2.0 million for the same period in the prior year. The increase is related to improvements in market values of the assets during the first quarter of 2014.

Professional fees decreased $1,000, or 1.0%, to $96,000 for the three months ended March 31, 2014, compared to $97,000 for the same period in the prior year.

Data processing fees decreased $10,000, or 4.8%, to $200,000 for the three months ended March 31, 2014, compared to $210,000 for the same period in the prior year.

Other expenses decreased $45,000, or 19.6%, to $185,000 for the three months ended March 31, 2014, compared to $230,000 for the same period in the prior year. During the first quarter of 2013, the Company recorded an operating loss totaling $54,000 related to an isolated processing error.


Table of Contents

Income Taxes

The Company recognized income tax expense of $156,000, for an effective income tax rate of 34.0% for the three months ended March 31, 2014. There was no income tax recorded for the three months ended March 31, 2013, due to available operating losses to offset taxable income.

Financial Condition

Our total assets as of March 31, 2014 increased $7.4 million to $151.9 million, compared to $144.5 million as of December 31, 2013, primarily as a result of increase in total loans. Net loans increased $9.7 million, or 8.6%, to $122.0 million as of March 31, 2014, compared to $112.3 million as of December 31, 2013. Total deposits increased $15.3 million, or 14.5%, to $121.1 million as of March 31, 2014, compared to $105.8 million as of December 31, 2013. Shareholders' equity increased $396,000, or 1.9%, to $20.8 million, compared to $20.4 million as of December 31, 2013.

Cash and Due From Banks

Cash and due from banks increased $225,000 to $1.3 million as of March 31, 2014, compared to $1.1 million as of December 31, 2013. The increase is a result of ordinary variances in operating cash.

Short-Term Investments and Interest-bearing Deposits in Other Financial Institutions

Interest-bearing deposits increased $1.8 million to $6.2 million as of March 31, 2014, compared to $4.4 million as of December 31, 2013. Interest-bearing deposits and federal funds sold allow us to meet liquidity requirements and provide temporary interest-bearing holdings until the funds can be otherwise deployed or invested.

Investment Securities

Our investment portfolio primarily serves as a source of interest income and, secondarily, as a source of liquidity and a management tool for our interest rate sensitivity. We manage our investment portfolio according to a written investment policy established by our Board of Directors and implemented by our Investment/Asset-Liability Committee.

As of March 31, 2014 and December 31, 2013, the Company held Federal Reserve Bank of Dallas stock of $527,000 and $528,000, respectively, and Federal Home Loan Bank of Dallas stock of $744,000 and $702,000, respectively. As of March 31, 2014 and December 31, 2013, we had government agency securities with amortized cost of $5.8 million and $5.9 million, respectively, and fair value of $5.7 million. As of March 31, 2014 and December 31, 2013, we had mortgage-backed securities with amortized cost of $3.6 million and $3.7 million, respectively, and fair value of $3.5 million and $3.6 million, respectively.

At March 31, 2014 and December 31, 2013, securities with fair value of $7.0 million and $7.1 million, respectively, were pledged against borrowed funds at the Federal Home Loan Bank of Dallas and securities with fair value of $1.3 million were pledged against trust deposit balances held at the Bank. One security was pledged against borrowed funds at the Federal Reserve Bank of Dallas at March 31, 2014 and December 31, 2013 with fair value of $882,000 and $1.0 million, respectively.


Table of Contents

Loan Portfolio

Our primary source of income is interest on loans. The following table presents
the composition of our loan portfolio by category as of the dates indicated:

                                      March 31,       December 31,
(000's)                                  2014             2013
Commercial and industrial             $   81,365     $       76,445
Consumer installment                       1,309              1,826
Real estate - mortgage                    20,580             18,310
Real estate - construction and land        6,862              5,756
SBA:
SBA 7(a) unguaranteed portion              8,384              7,031
. . .
  Add TBNC to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for TBNC - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.