SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22790STATEFED FINANCIAL CORPORATION
(Exact name of small business issuer as specified in its charter)Delaware
(State of other jurisdiction
of incorporation or organization) | 42-1410788
(I.R.S. Employer Identification
or Number) |
519 Sixth Avenue, Des Moines, Iowa 50309
(Address of principal executive offices)(515) 282-0236
(Issuer's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of Shares outstanding of each of the issuer's classes of common equity, as the latest date:
As of February 12, 2001, there were 1,511,600 shares of the Registrant's common stock issued and outstanding.
STATEFED FINANCIAL CORPORATIONForm 10-QSBIndex| Financial Information | Page No. |
| Item 1. | Consolidated Financial Statements: | |
| Consolidated Statements of Financial Condition
as of December 31, 2000 and June 30, 2000 | 3 |
| Consolidated Statements of Operations for
the Three Months Ending December 31, 2000
and December 31, 1999 and for the Six Months Ending
December 31, 2000 and December 31, 1999 | 4 |
| Consolidated Statements of Comprehensive Income for
the Three Months Ending December 31, 2000 and
December 31,1999 and for the Six Months ending
December 31, 2000 and December 31, 1999 | 5 |
| Consolidated Statement of Stockholders' Equity
for the Six Months Ending December 31,2000 | 6 |
| Consolidated Statements of Cash Flows for the Six
Months Ending December 31, 2000 and
December 31,1999 | 7 |
| Notes to Consolidated Financial Statements | 8 |
| Item 2. | Management's Discussion and Analysis of
Financial Condition and Results of Operations | 11 |
| PART II. | Other Information | 17 |
| Signatures | 18 |
2
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 2000 and June 30, 2000PART I. Financial Information
Item 1. Financial Statements| ASSETS | (Unaudited)
December 31, 2000
| June 30, 2000
|
| Cash and amounts due from depository institutions | $2,884,597 | $2,477,494 |
| Investments in certificates of deposit | 396,454 | 495,692 |
| Investment securities held-for-sale | 1,979,917 | 2,231,274 |
| Loans receivable, net | 92,020,855 | 86,572,585 |
| Real estate held for investment, net | 2,142,379 | 2,175,785 |
| Property acquired in settlement of loans | 1,408,461 | 1,337,847 |
| Office property and equipment, net | 3,625,200 | 2,965,659 |
| Federal Home Loan Bank stock, at cost | 1,762,200 | 1,464,600 |
| Accrued interest receivable | 699,744 | 573,293 |
| Other assets | 415,855
| 390,550
|
| TOTAL ASSETS | $107,335,662
| $100,684,779
|
| | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | |
| | | |
| Liabilities: | | |
| Deposits | $54,220,051 | $53,648,118 |
| Advances from Federal Home Loan Bank | 35,235,250 | 29,283,906 |
| Advances from borrowers for taxes and insurance | 360,123 | 353,743 |
| Accrued interest payable | 4,154 | 140,243 |
| Dividends payable | 191,100 | 113,220 |
| Income taxes: current and deferred | 166,439 | 296,992 |
| Accounts payable and other liabilities | 191,347
| 198,689
|
| TOTAL LIABILITIES | 90,368,464
| 84,034,911
|
| Stockholders' equity: | | |
| Common stock | 17,810 | 17,810 |
| Additional paid-in capital | 8,505,091 | 8,546,501 |
| Common stock acquired by employee stock ownership plan | (174,321) | (205,761) |
| Unrealized gain (loss) on investments | 19,805 | (124,579) |
| Treasury stock | (2,376,066) | (2,362,921) |
| Retained earnings - substantially restricted | 10,974,879
| 10,778,818
|
| TOTAL STOCKHOLDERS' EQUITY | 16,967,198
| 16,649,868
|
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $107,335,662
| $100,684,779
|
3
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ending December 31, 2000 and 1999
and For the Six Months Ending December 31, 2000 and 1999 | Three Months Ended
December 31
(Unaudited)
| Six Months Ended
December 31
(Unaudited)
|
| 2000
| 1999
| 2000
| 1999
|
| Interest Income: | | | | |
| Loans | $2,025,510 | $1,646,931 | $3,946,394 | $3,154,013 |
| Investments | 56,992 | 66,494 | 118,154 | 136,306 |
| Other | 37,028
| 16,179
| 64,450
| 102,765
|
| Total interest income | 2,119,530 | 1,729,604 | 4,128,998 | 3,393,084 |
| Interest Expense: | | | | |
| Deposits | 772,173 | 672,276 | 1,447,359 | 1,362,215 |
| Borrowings | 504,183
| 281,271
| 960,474
| 556,132
|
| Total interest expense | | | | |
| 1,276,356
| 953,547
| 2,407,833
| 1,918,347
|
| Net interest Income | 843,174 | 776,057 | 1,721,165 | 1,474,737 |
| Provision for loan losses | 9,000
| 9,000
| 18,000
| 18,000
|
Net interest income after
provision for loan losses | 834,174 | 767,057 | 1,703,165 | 1,456,737 |
| | | | | |
| Non-interest Income: | | | | |
| Real estate operations | 134,386 | 128,328 | 262,131 | 264,411 |
| | | | |
| Gain on sale of real estate | 7,772 | 5,998 | 7,809 | 6,027 |
| Loss on sale of investments | (90,673) | - | (90,673) | - |
| Other | 31,599
| 26,789
| 60,322
| 53,554
|
| Total non-interest income | 83,084 | 161,115 | 239,589 | 323,992 |
| | | | | |
| Non-interest expense: | | | | |
| Salaries and benefits | 273,617 | 265,234 | 514,480 | 506,318 |
| Real estate operations | 64,626 | 83,461 | 144,505 | 162,700 |
| Occupancy and equipment | 38,526 | 41,043 | 76,404 | 79,370 |
| FDIC premiums and OTS assessments | 9,627 | 15,328 | 19,175 | 30,524 |
| Data processing | 30,286 | 27,509 | 58,986 | 47,557 |
| Other | 233,472
| 110,040
| 377,222
| 202,263
|
| Total non-interest expense | 650,154
| 542,615
| 1,190,772
| 1,028,732
|
| Income before income taxes | 267,104 | 385,557 | 751,982 | 751,997 |
| Income tax expense | 90,740
| 130,140
| 251,526
| 251,380
|
| Net income | $176,364
| $255,417
| $500,456
| $500,617
|
| Basic earnings per share | $0.12 | $0.17 | $0.34 | $0.34 |
| Diluted earnings per share | $0.12 | $0.17 | $0.33 | $0.33 |
4
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ending December 31, 2000 and 1999
and For the Six Months Ending December 31, 2000 and 1999
(Unaudited) | Three Months Ended
December 31,
(Unaudited)
| Six Months Ended
December 31,
(Unaudited)
|
| 2000
| 1999
| 2000
| 1999
|
| | | | | |
| Net income | $176,364 | $255,417 | $500,456 | $500,617 |
| | | | | |
Other comprehensive income,
net of tax: | | | | |
Unrealized holding gains (losses) on
securities arising during period | 141,906 | (101,789) | 144,384 | (195,445) |
| Reclassification adjustment | (60,750) | - | (60,750) | - |
| Comprehensive income | $257,520
| $153,628
| $584,090
| $305,172
|
5
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended December 31, 2000
(Unaudited)| | |
| Balance - June 30, 2000 | $16,649,868 |
| | |
| Additional paid in capital | (41,410) |
| | |
Other comprehensive income--unrealized gain on
investment securities, net of deferred income taxes | 144,384 |
| | |
| Dividends declared | (304,395) |
| | |
| Repurchase of 17,200 shares treasury stock | (180,325) |
| | |
| Stock options exercised (19,200 shares) | 167,180 |
| | |
| ESOP common stock released for allocation | 31,440 |
| | |
| Net income | 500,456
|
| | |
| Balance - December 31, 2000 | $16,967,198
|
6
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Month Periods Ending December 31, 2000 and December 31, 1999
(Unaudited)| CASH FLOWS FROM OPERATING ACTIVITIES | December 31, 2000
| December 31, 1999
|
| Net Income | $500,456 | $500,617 |
Adjustments to reconcile net income to
net cash provided by operating activities: | | |
| Depreciation | 110,107 | 82,712 |
| Amortization of purchase loan discounts | - | (2,678) |
| Amortization of ESOP | (9,970) | 44,510 |
| Deferred loan fees | 23,043 | 15,505 |
| Provision for losses on loans | (693) | 7,802 |
| Change in: | | |
| Accrued interest receivable | (126,450) | (5,597) |
| Other assets | (25,305) | 756 |
| Accrued interest payable | (136,089) | (131,633) |
| Current income tax liability | (130,553) | (35,645) |
| Other liabilities | (7,342) | (7,808) |
| NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES | $197,204 | $468,541 |
| | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | |
| Investment in certificates of deposit | $ - | $ - |
| Maturity of investments in certificates of deposit | 99,238 | 198,640 |
| Purchase of available-for-sale investment securities | - | (468,745) |
| Proceeds from sale or maturity of available-for-sale investment securities | 395,741 | - |
| (Purchase) redemption of FHLB Stock | (297,600) | - |
| Net (increase) decrease in loans outstanding | (5,470,621) | (7,499,759) |
| Investment in real estate held for development | (28,923) | 79,994 |
| Investment in real estate held for investment | - | (508,959) |
| Investment in real estate acquired in settlement of loans | (70,614) | 150,893 |
| Purchase of office property and equipment | (707,320) | (8,090) |
| NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES | $(6,080,099) | $(8,056,026) |
| | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | |
| Net increase (decrease) in deposits | $571,933 | $(174,685) |
| Advances from the Federal Home Loan Bank | 6,000,000 | 1,000,000 |
| Repayment of advances from the Federal Home Loan Bank | (48,656) | (45,889) |
| Net decrease in advances from borrowers | 6,380 | (13,766) |
| Proceeds from stock options exercised | 167,181 | 65,670 |
| Dividends paid | (226,515) | (227,108) |
| Purchase of treasury stock | (180,325)
| (202,312)
|
| NET CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES | $6,289,998
| $401,910
|
| CHANGE IN CASH AND CASH EQUIVALENTS | $407,103
| $(7,185,575)
|
| CASH AND CASH EQUIVALENTS, beginning of period | $2,477,494
| $8,481,216
|
| CASH AND CASH EQUIVALENTS, end of period | $2,884,597
| $1,295,641
|
7
STATEFED FINANCIAL CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ending December 31, 2000 and December 31, 1999
And for the Six Months Ending December 31, 2000 and December 31, 1999
(Unaudited)1.
BASIS OF PRESENTATIONS These consolidated financial statements are unaudited (with the exception of the Consolidated Statement of Financial Condition for June 30, 2000). These consolidated financial statements were prepared in accordance with institutions for Form 10-QSB and therefore, do not include all disclosures necessary for a complete presentation of the statements of financial condition, statements of income and statements of cash flows in accordance with generally accepted accounting principles. However, in the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. Results for any interim period are not necessarily indicative of results expected for the year. The interim consolidated financial statements include the accounts of StateFed Financial Corporation (the "Corporation"), its subsidiary, State Federal Savings and Loan Association (the "Association" or "State Federal") and the Association's subsidiary, State Service Corporation.
These statements should be read in conjunction with the consolidated financial statements and related notes, which are incorporated by reference in the Company's Annual Report on Form 10-KSB for the year ended June 30, 2000.
2.
EARNINGS PER SHARE OF COMMON STOCK Basic earnings per share are computed based upon the weighted-average shares outstanding during the period, less shares in the ESOP that are unallocated and are not committed to be released.
Diluted earnings per share are computed by considering common stocks outstanding and dilutive potential common shares to be issued under the Company's stock option plan.
| Weighted Average Shares Outstanding: | For the three months ended
December 31, 2000
| For the six months ended
December 31, 2000
|
| Basic earnings per share | 1,483,478 | 1,477,857 |
| Fully diluted earnings per share | 1,512,492 | 1,506,331 |
| | | |
| Weighted Average Shares Outstanding: | For the three months ended
December 31, 1999
| For the six months ended
December 31, 1999
|
| Basic earnings per share | 1,460,438 | 1,460,015 |
| Fully diluted earnings per share | 1,495,429 | 1,496,682 |
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3.
REGULATORY CAPITAL REQUIREMENTS Pursuant to Federal law, savings institutions must meet three separate capital requirements. The Association's capital ratios and balances at December 31, 2000 are as follows:
| Amount
| %
|
| (Dollars in thousands) |
| Tangible Capital: | | |
| Association's | $8,834 | 8.79% |
| Requirement | 1,507
| 1.50
|
| Excess | $7,327 | 7.29% |
| Core Capital: | | |
| Association's | $8,834 | 8.79% |
| Requirement | 3,014
| 3.00
|
| Excess | $5,820 | 5.79% |
| Risk-Based Capital: | | |
| Association's | $9,092 | 13.51% |
| Requirement | 5,385
| 8.00
|
| Excess | $3,707 | 5.51% |
| Tier 1 Risk-Based Capital: | | |
| Association's | $8,834 | 13.12% |
| Requirement | 4,018
| 4.00
|
| Excess | $4,816 | 9.12% |
4.
STOCK OPTION PLAN At December 31, 2000 there were unexercised options for 42,106 shares of common stock under the terms of the StateFed Financial Corporation 1993 Stock Option Plan. The options have an exercise price of $5 per share. There were 19,200 shares exercised during the six months ended December 31, 2000.
5.
STOCK REPURCHASE PLAN On August 23, 2000, the Company's Board of Directors authorized management to repurchase up to 75,530 shares of the Company's common stock over the next six months. During the six-month period ending December 31, 2000, 17,200 shares were repurchased. As of February 9, 2001, 17,200 shares had been repurchased since August 23, 2000, at a cost of $180,325.
9
6.
CENTRATIONS OF CREDIT RISK, COMMITMENTS AND FINANCIAL NSTRUMENTS WITH OFF-BALANCE SHEET RISK The Association grants residential real estate, consumer and commercial loans to borrowers located primarily in Polk and surrounding counties in Iowa. No significant changes in geographic distribution of the loan portfolio occurred from September 30, 2000 to December 31, 2000.
The Association is a defendant in various legal actions arising from normal business activities. Management believes the ultimate liability, if any, resulting from these actions will not materially affect the Association's financial position or results of operations.
The Association is party to financial instruments with off-balance-sheet risk in the normal course of business to meet financing needs of its customers, for which management follows the same credit policy as is followed for loans recorded in the financial statements. The Association's exposure to credit loss in case of nonperformance by the other party to the financial instrument for commitments to make loans is represented by the contractual amount of those instruments.
10
PART I ITEM 2STATEFED FINANCIAL CORPORATIONManagement's Discussion and Analysis of Financial
Condition and Results of OperationsGeneral The accompanying Consolidated Financial Statements include StateFed Financial Corporation (the "Company") and its wholly owned subsidiary, State Federal Savings and Loan Association (the "Association"). All significant inter-company transactions and balances are eliminated in consolidation. The Company's results of operations are primarily dependent on the Association's net interest margin, which is the difference between interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities. The Association's net income is also affected by the level of its non-interest expenses, such as employee compensation and benefits, occupancy expenses, and other expenses.
Forward Looking Statements When used in this Form 10-QSB and in future filings with the SEC, in the Company's press releases or other public or shareholder communications, as well as in oral statements made by the executive officers of the Company or its primary subsidiary, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect its financial performance and could cause its actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
The Company does not undertake--and specifically declines any obligation--to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
11
Financial Condition The Company's total assets increased $6.6 million from $100.7 million at June 30, 2000 to $107.3 million at December 31, 2000. This increase was due primarily to increases from $5.4 million in net loans receivable, $660,000 in net office property and equipment, $407,000 in cash and amounts due from depository institutions and $298,000 in Federal Home Loan Bank stock, at cost, which were partially offset by decreases in investment securities held-for-sale of $251,000 and investments in certificate of deposit of $99,000.
Net loans receivable increased $5.4 million, from $86.6 million at June 30, 2000 to $92.0 million at December 31, 2000. Loan originations of primarily residential loans totaled $10.2 million for the six month period and purchased loan participations totaled $2.6 million, while repayment of principal totaled $7.4 million.
Total deposits increased by $572,000 from $53.6 million at June 30, 2000 to $54.2 million at December 31, 2000. The increases in demand deposits, savings and money markets deposits, and certificate of deposits were $291,000, $238,000, and $43,000 respectively.
Total stockholders' equity increased $317,300 from $16,649,900 at June 30, 2000 to $16,967,200 at December 31, 2000. The increase was primarily the result of net earnings of $500,500, accounting for employee stock awards and options of $157,100, and unrealized gains on investment securities of $144,400, which was partially offset by dividends declared of $304,400 and the cost to repurchase the Company's stock of $180,300.
Comparison of Operating Results for the Three Month Periods Ended December 31, 2000and December 31, 1999 General. Net income decreased $79,000 from $255,400 for the three months ended December 31, 1999 to $176,400 for the three months ended December 31, 2000. The decrease in net income was primarily due to $117,100 of expenses incurred from the October 2000 annual meeting proxy fight and $90,700 loss on sale of investments. This decrease was partially offset by increases in net interest income of $ 67,100, other non-interest income of $12,700, and decreases in non-interest expense of $9,600, and income tax expense of $39,400.
Net Interest Income. Net interest income increased $67,100 from $776,100 for the three months ended December 31, 1999 to $843,200 for the three months ended December 31, 2000. This increase was primarily the result from increases in interest income on loans of $378,600 and in other interest income of $20,800. Which were offset by increases in interest paid on borrowings of $222,900, interest paid on deposits of $99,900 and a decrease in interest on investments of $9,500.
Interest Income. Interest income increased $389,900 from $1,729,600 for the three months ended December 31, 1999 to $2,119,500 for the three months ended December 31, 2000. This increase was primarily the result of an increase in interest earned on the loan portfolio of $378,600, and other interest earned of $20,800, which was offset by a decrease in income from interest earned on investments of $9,500.
12
The interest on loans increased primarily as a result of an increase in outstanding loans receivable and to a lesser extent the yield earned on the loan portfolio. Other interest income increased as a result of an increase in the balance of interest bearing deposit accounts. The decrease in income on the investment portfolio was primarily due to the maturity in certificate of deposits and the sale of securities held for sale.
Interest Expense. Interest expense increased $322,800 from $953,500 in the three months ended December 31, 1999 to $1,276,300 in the three months ended December 31, 2000. This increase
resulted primarily from increases in interest paid on deposits and borrowings of $99,900 and $222,900 respectively. The increase in interest paid on deposits was primarily the result of an average rate increase on deposit balances. The increase in interest paid on borrowings was due to the average balance of Federal Home Loan Bank advances and to a lesser extent the average rate paid on advances.
Provision for Loan Losses. The provision for loan losses remained unchanged in the three months ended December 31,2000 as compared to the three months ended December 31,1999. The provision during the three months ended December 31,2000 was based on management's analysis of the allowance for loan losses. The Company will continue to monitor its allowance for loan losses and make future additions to the allowance through the provision for loan losses as economic conditions dictate. Although the Company maintains its allowance for loan losses at a level which it considers to be adequate to provide for potential losses, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required for future periods.
Non-interest Income. Non-interest income decreased $78,000 from $161,100 in the three months ended December 31, 1999 to $83,100 in the three months ended December 31, 2000. The decrease was primarily due to a loss on the sale of an equity investment of $90,700, which was offset by a gain on sale of real estate of $1,800, and increases in real estate operation income of $6,100, as a result of seasonal fluctuation in rental payments, and an increase of $4,800 in other income.
Non-interest Expense. Non-interest expense increased from $542,600 in the three months ended December 31, 1999 to $650,100 in the three months ended December 31, 2000. This increase of $107,500 was primarily the result of increases in other expenses of $123,400 ($117,000 of the other expenses were incurred from the October 2000 annual meeting proxy fight), salaries and benefits of $8,400, data processing expense of $2,700, which was partially offset by decreases in real estate operations expense of $18,800, FDIC premiums and OTS assessments of $5,700, and occupancy and equipment expense of $2,500.
Income Tax Expense. Income tax expense was $130,100 for the three months ended December 31, 1999 compared to $90,700 for the three months ended December 31, 2000, a decrease of $39,400, primarily due to the decrease in taxable income.
13
Comparison of the Six Months Ended December 31, 2000 and December 31, 1999 General. Net income was $500,600 for the six months ended December 31, 1999 as compared to $500,500 for the six months ended December 31, 2000.
Net Interest Income. Net interest income increased $246,400 from $1,474,700 for the six months ended December 31, 1999 to $1,721,100 for the six months ended December 31, 2000. The increase was primarily from an increase in interest on loans of $792,400, which was partially offset by increases in interest paid on borrowings of $404,300 and interest paid on deposits of $85,200, and to a lesser extent from decreases in other interest income of $38,300 and in investment interest income of $18,200.
Interest Income. Interest income increased $735,900 from $3,393,100 for the six months ended December 31, 1999 to $4,129,000 the six months ended December 31, 2000. The increase was primarily due to interest earned on the loan portfolio of $792,400, partially offset by decreases in interest earned on investments of $18,200 and in other interest income of $38,300. The interest on loans increased primarily as a result of an increase in outstanding loans receivable and to a lesser extent the yield earned on the loan portfolio. The decrease in income on the investment portfolio was primarily due to the maturity in certificate of deposits and the sale of securities held for sale. The decrease in other interest income was primarily the result of the decrease in the average balances of interest-bearing deposits held at other depository institutions.
Interest Expense. Interest expense increased $489,500 from $1,918,300 in the six months ended December 31, 1999 to $2,407,800 in the six months ended December 31, 2000. This increase was primarily due to increases in interest paid on deposits and on borrowings of $85,100 and $404,400, respectively. The increase in interest paid on deposits was primarily the result of an average rate increase on deposit balances. The increase in interest paid on borrowings was due to the average balance of Federal Home Loan Bank advances and to a lesser extent the average rate paid on advances.
Provision for Loan Losses.The provision for loan losses remained unchanged in the six months ended December 31, 1999 as compared to the six months ended December 31, 2000. The provision during the six months ended December 31, 2000 was based on management's analysis of the allowance for loan losses. The Company will continue to monitor its allowance for loan losses and make future additions to the allowance through the provision for loan losses as economic conditions dictate. Although the Company maintains its allowance for loan losses at a level which it considers to be adequate to provide for potential losses, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required for future periods.
14
Non-interest Income. Non-interest income decreased $84,400 from $324,000 in the six months ended December 31, 1999 to $239,600 in the six months ended December 31, 2000. The decrease was primarily due to a loss on the sale of an equity investments of $90,700 and a decrease in real estate operation income of $2,300, which was offset by a gain on sale of real estate of $1,800, and an increase in other non-interest income of $6,800.
Non-interest Expense.Non-interest expense increased from $1,028,700 in the six months ended December 31, 1999 to $1,190,800 in the six months ended December 31, 2000. This increase of $162,100 was primarily the result of increases in other expenses of $175,000 ($162,000 of the other expenses were incurred from the October 2000 annual meeting proxy fight), salaries and benefits expense of $8,200, and data processing expense of $11,400, which were partially offset by decreases in real estate operations expense of $18,200, FDIC premiums and OTS assessments of $11,300, and occupancy and equipment expense of $3,000.
Income Tax Expense. Income tax expense was $251,400 for the six months ended December 31, 1999 and $251,500 for the six months ended December 31, 2000.
Liquidity and Capital Resources. The Company's primary sources of funds are deposits, principal and interest payments on loans, FHLB Des Moines advances, and funds provided by operations. While scheduled loan repayments and maturity of short-term investments are a relatively predictable source of funds; deposit flows are greatly influenced by general interest rates, economic conditions, and competition. Current Office of Thrift Supervision regulations require the bank to maintain cash and eligible investments in an amount equal to at least 4% of customer accounts and short-term borrowings to assure its ability to meet demands for withdrawals and repayment of short-term borrowings. As of December 31, 2000, the Association's average liquidity ratio was 4.85%, which exceeded the minimum regulatory requirement on such date.
The Company uses its capital resources principally to meet its ongoing commitments, to fund maturing certificates of deposits and loan commitments, maintain its liquidity, and meet its foreseeable short- and long term needs. The Company expects to be able to fund or refinance, on a timely basis, its material commitments and long-term liabilities.
Regulatory standards impose the following capital requirements: a risk-based capital standard expressed as a percent of risk adjusted assets, a leverage ratio of core capital to total adjusted assets, and a tangible capital ratio expressed as a percent of total adjusted assets. As of December 31, 2000, the Association exceeded all fully phased-in regulatory capital requirements.
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At December 31, 2000, the Association's tangible equity capital was $8.8 million, or 8.79%, of tangible assets, which is in excess of the 1.5% requirement by $7.3 million. In addition, at December 31, 2000, the Association had core capital of $8.8 million, or 8.79%, of adjusted total assets, which exceeds the 3% requirement by $5.8 million. The Association had total risk-based capital of $9.1 million at December 31, 2000, or 13.51%, of risk-weighted assets, which exceeds the 8.0% risk-based capital requirements by $3.7 million.
As required by Federal law, the OTS has proposed a rule revising its minimum core capital requirement to be no less stringent than that imposed on national banks. the OTS has proposed that only those savings associations rated a composite one (the highest rating) under the MACRO rating system for savings associations will be permitted to operate at or near the regulatory minimum leverage ratio of 3%. all other savings associations will be required to maintain a minimum leverage ratio of 3% plus at least an additional 100 to 200 basis points.
The OTS will assess each individual savings association through the supervisory process on a case-by-case basis to determine the applicable requirement. No assurance can be given as to the final form of any such regulation, the date of its effectiveness or the requirement applicable to the Association. As a result of the prompt corrective action provisions of federal law discussed below, however, a savings association must maintain a core capital ratio of at least 4% to be considered adequately capitalized unless its supervisory condition is such to allow it to maintain a 3% ratio.
At December 31, 2000, and June 30, 2000, management believes the Association complies with all regulatory capital requirements. Based on the Association's computed regulatory capital ratios, the Association is considered well capitalized under the Federal Deposit Insurance Act.
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STATEFED FINANCIAL CORPORATIONPart II - Other Information As of December 31, 2000, management is not aware of any current recommendations by regulatory authorities which, if they were to be implemented, would have or are reasonably likely to have a material adverse effect on the Company's liquidity, capital resources or operations.
| Item 1 - | Legal Proceedings |
| Not applicable |
| Item 2 - | Changes in Securities |
| Not applicable |
| Item 3 - | Defaults upon Senior Securities |
| Not applicable |
| Item 4 - | Submission of Matters to Vote of Security Holders |
| Not applicable |
| Item 5 - | Other Information |
| None |
| Item 6 - | Exhibits and Reports on Form 8-K |
| Exhibits |
| | (a) | Not applicable. |
| | (b) | The following is a description of the Form 8-K's filed during the three months ended December 31, 2000: |
| | | 1. | On October 4, 2000, a current report on Form 8-K was filed announcing increased cash dividend, a special dividend and stock repurchase. |
| | | 2. | On November 13, 2000, a current report on Form 8-K was filed reflecting quarterly financial information |
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SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly cause this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | |
| | | STATEFED FINANCIAL CORPORATION
Registrant |
| | | | |
| | | | |
| | | | |
| | | | |
| Date: | February 12, 2001
| | /s/ Craig Wood
Craig Wood
Co-President |
| | | | |
| | | | |
| | | | |
| | | | |
| Date: | February 12, 2001
| | /s/ Andra K. Black
Andra K. Black
Co-President and Chief Financial Officer |
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