SECURITIES AND EXCHANGE COMMISSION FORM 10-Q |
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005 |
[ ] | OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ________ Commission file number 0-25070. LSB FINANCIAL CORP. |
Indiana (State or other jurisdiction of incorporation or organization) | 35-1934975 (I.R.S. Employer Identification No.) | |
101 Main Street, Lafayette, Indiana (Address of principal executive offices) | 47902 (Zip Code) | |
(765) 742-1064 (Registrant's telephone number, including area code) |
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 [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X] State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: |
CLASS Common stock, par value $.01 per share | OUTSTANDING AT MAY 1, 2005 1,472,818 |
LSB FINANCIAL CORP. INDEX |
PART I. FINANCIAL INFORMATION | 1 |
Item 1. Financial Statements (Unaudited) | 1 |
Consolidated Balance Sheets | 1 |
Consolidated Statements of Income | 2 |
Consolidated Statements of Changes in Shareholders' Equity | 3 |
Consolidated Statements of Cash Flows | 4 |
Notes to Consolidated Financial Statements | 5 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 7 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 16 |
Item 4. Controls and Procedures | 17 |
PART II. OTHER INFORMATION | 18 |
Item 1. Legal Proceedings | 18 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 18 |
Item 3. Defaults Upon Senior Securities | 18 |
Item 4. Submission of Matters to a Vote of Security Holders | 18 |
Item 5. Other Information | 18 |
Item 6. Exhibits | 18 |
SIGNATURES | 19 |
EXHIBIT INDEX | 20 |
PART I FINANCIAL INFORMATION Item 1. Financial Statements LSB FINANCIAL CORP. |
March 31, 2005 | December 31, 2004 | ||||
---|---|---|---|---|---|
(unaudited) | |||||
Assets | |||||
Cash and due from banks | $1,861 | $2,395 | |||
Short-term investments | 10,943 | 6,818 | |||
Cash and cash equivalents | 12,804 | 9,213 | |||
Available-for-sale securities | 7,932 | 7,947 | |||
Loans held for sale | 715 | 1,050 | |||
Total loans | 327,233 | 319,972 | |||
Less: Allowance for loan losses | (2,239 | ) | (2,095 | ) | |
Net loans | 324,994 | 317,877 | |||
Premises and equipment, net | 6,715 | 6,750 | |||
Federal Home Loan Bank stock, at cost | 4,154 | 4,110 | |||
Bank owned life insurance | 2,649 | 2,627 | |||
Interest receivable and other assets | 6,087 | 5,471 | |||
Total Assets | 366,050 | 355,045 | |||
Liabilities and Shareholders' Equity | |||||
Liabilities | |||||
Deposits | 266,047 | 256,631 | |||
Federal Home Loan Bank advances | 66,808 | 66,808 | |||
Interest payable and other liabilities | 1,937 | 1,213 | |||
Total liabilities | 334,792 | 324,652 | |||
Commitments and Contingencies | |||||
Shareholders' Equity | |||||
Common stock, $.01 par value | |||||
Authorized - 7,000,000 shares | |||||
Issued and outstanding 2005 - 1,469,382 shares, | |||||
2004 - 1,437,250 shares | 14 | 14 | |||
Additional paid-in-capital | 8,599 | 8,235 | |||
Retained earnings | 22,837 | 22,304 | |||
Unearned recognition and retention plan (RRP) shares | (44 | ) | (51 | ) | |
Unearned ESOP compensation | (88 | ) | (103 | ) | |
Accumulated other comprehensive income (loss) | (60 | ) | (6 | ) | |
Total shareholders' equity | 31,258 | 30,393 | |||
Total liabilities and shareholders' equity | $366,050 | $355,045 | |||
See notes to consolidated condensed financial statements. 1 LSB FINANCIAL CORP. |
Three months Ended March 31, | |||||
---|---|---|---|---|---|
2005 | 2004 | ||||
Interest and Dividend Income | |||||
Loans | $4,994 | $4,492 | |||
Securities | |||||
Taxable | 78 | 120 | |||
Tax-exempt | 32 | 42 | |||
Other | 18 | 7 | |||
Total interest and dividend income | 5,122 | 4,661 | |||
Interest Expense | |||||
Deposits | 1,503 | 1,237 | |||
Borrowings | 742 | 756 | |||
Total interest expense | 2,245 | 1,993 | |||
Net Interest Income | 2,877 | 2,668 | |||
Provision for Loan Losses | 175 | 125 | |||
Net Interest Income After Provision for Loan Losses | 2,702 | 2,543 | |||
Noninterest Income | |||||
Deposit account service charges and fees | 206 | 211 | |||
Net gains on loan sales | 65 | 128 | |||
Other | 213 | 175 | |||
Total noninterest income | 484 | 514 | |||
Noninterest Expense | |||||
Salaries and employee benefits | 1,191 | 1,062 | |||
Net occupancy and equipment expense | 276 | 293 | |||
Computer service | 99 | 95 | |||
Advertising | 41 | 78 | |||
Other | 436 | 334 | |||
Total noninterest expense | 2,043 | 1,862 | |||
Income Before Income Taxes | 1,143 | 1,195 | |||
Provision for Income Taxes | 376 | 475 | |||
Net Income | $ 767 | $ 720 | |||
Basic Earnings Per Share | $ 0.54 | $ 0.51 | |||
Diluted Earnings Per Share | $ 0.53 | $ 0.49 | |||
Common Stock | Additional Paid-In Capital | Retained Earnings | Benefit Plans Compensation | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, January 1, 2004 | $ 14 | $ 8,020 | $ 19,841 | ($ 239 | ) | $ 91 | $ 27,727 | ||||||
Comprehensive income | |||||||||||||
Net income | 720 | 720 | |||||||||||
Change in unrealized | |||||||||||||
appreciation (depreciation) | |||||||||||||
on available-for-sale | |||||||||||||
securities, net of taxes | 31 | 31 | |||||||||||
Total comprehensive income | 751 | ||||||||||||
Dividends on common | |||||||||||||
stock, $0.145 per share | (197 | ) | (197 | ) | |||||||||
Stock options exercised | 7 | 7 | |||||||||||
(681 shares) | |||||||||||||
Amortization of RRP expense | 7 | 7 | |||||||||||
ESOP shares earned | 48 | 14 | 62 | ||||||||||
Balance, March 31, 2004 | $ 14 | $ 8,075 | $ 20,364 | ($ 218 | ) | $ 122 | $ 28,357 | ||||||
Balance, January 1, 2005 | 14 | 8,235 | 22,304 | (154 | ) | (6 | ) | 30,393 | |||||
Comprehensive income | |||||||||||||
Net income | 767 | 767 | |||||||||||
Change in unrealized | |||||||||||||
appreciation (depreciation) | |||||||||||||
on available-for-sale | |||||||||||||
securities, net of taxes | (54 | ) | (54 | ) | |||||||||
Total comprehensive income | 713 | ||||||||||||
Dividends on common | |||||||||||||
stock, $0.16 per share | (234 | ) | (234 | ) | |||||||||
Purchase and retirement of stock | |||||||||||||
(9,087 shares) | (240 | ) | (240 | ) | |||||||||
Stock options exercised | |||||||||||||
(51,390 shares) | 219 | 219 | |||||||||||
Stock option and RRP | 339 | 339 | |||||||||||
tax benefit | |||||||||||||
Amortization of RRP | |||||||||||||
expense | 7 | 7 | |||||||||||
ESOP shares earned | 46 | 15 | 61 | ||||||||||
Balance, March 31, 2005 | $ 14 | $ 8,599 | $ 22,837 | ($ 132 | ) | ($ 60 | ) | $ 31,258 | |||||
See notes to consolidated condensed financial statements. 3 LSB FINANCIAL CORP. |
Three months ended March 31, | |||||
---|---|---|---|---|---|
2005 | 2004 | ||||
Operating Activities | |||||
Net income | $ 767 | $ 720 | |||
Items not requiring (providing) cash | |||||
Depreciation | 106 | 122 | |||
Provision for loan losses | 175 | 125 | |||
Amortization of premiums and discounts on securities | 9 | 46 | |||
Federal Home Loan Bank stock dividend | (44 | ) | (49 | ) | |
ESOP shares earned | 61 | 62 | |||
Gain on sale of loans | 30 | 55 | |||
Loans originated for sale | (4,025 | ) | (7,985 | ) | |
Proceeds on loans sold | 4,330 | 7,709 | |||
Changes in | |||||
Interest receivable and other assets | (595 | ) | (312 | ) | |
Interest payable and other liabilities | 723 | 781 | |||
Net cash provided by operating activities | 1,537 | 1,274 | |||
Investing Activities | |||||
Purchases of available-for-sale securities | (171 | ) | 0 | ||
Proceeds from maturities of available-for-sale securities | 88 | 1,307 | |||
Net change in loans | (7,292 | ) | (9,275 | ) | |
Purchase of premises and equipment | (71 | ) | (25 | ) | |
Net cash from investing activities | (7,446 | ) | (7,993 | ) | |
Financing Activities | |||||
1,027 | 1,602 | ||||
Net change in demand deposits, money market, NOW and savings accounts | |||||
Net change in certificates of deposit | 8,389 | 10,177 | |||
Proceeds from Federal Home Loan Bank advances | 12,000 | 3,000 | |||
Repayment of Federal Home Loan Bank advances | (12,000 | ) | (3,000 | ) | |
Proceeds from stock options exercised | 219 | 7 | |||
Tax benefit related to stock option and RRP | 339 | 0 | |||
Repurchase of stock | (240 | ) | 0 | ||
Dividends paid | (234 | ) | (197 | ) | |
Net cash provided by financing activities | 9,500 | 11,589 | |||
Increase (Decrease) in Cash and Cash Equivalents | 3,591 | 4,870 | |||
Cash and Cash Equivalents, Beginning of Period | 9,213 | 9,397 | |||
Cash and Cash Equivalents, End of Period | $ 12,804 | $ 14,267 | |||
Supplemental Cash Flows Information | |||||
Interest paid | 2,247 | 1,995 | |||
Income taxes paid | 256 | 470 | |||
Supplemental Non-Cash Disclosures | |||||
Capitalization of mortgage servicing rights | 35 | 73 |
Three months ended | |||||
---|---|---|---|---|---|
2005 | 2004 | ||||
Net income as reported | $ 767 | $ 720 | |||
Deduct: Stock-based compensation expense determined under fair value based method | (11 | ) | (4 | ) | |
Pro forma net income | $ 756 | $ 716 | |||
Basic earnings per share as reported | $ 0.54 | $ 0.51 | |||
Pro forma basic earnings per share | 0.53 | 0.51 | |||
Diluted earnings per share as reported | 0.53 | 0.49 | |||
Pro forma diluted earnings per share | 0.52 | 0.49 |
Quarter ended March 31 | |||||
---|---|---|---|---|---|
2005 | 2004 | ||||
Weighted average shares outstanding (excluding unearned ESOP shares) | 1,430,010 | 1,398,389 | |||
Shares used to compute diluted earnings per share | 1,457,173 | 1,462,482 | |||
Earnings per share | $ 0.54 | $ 0.51 | |||
Diluted earnings per share | $ 0.53 | $ 0.49 |
6 |
Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION |
OTS | FDIC | |||||
---|---|---|---|---|---|---|
Actual | For Capital Adequacy Purposes | To Be Well Capitalized Under Corrective Action Provisions | ||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |
(Dollars in thousands) | ||||||
As of March 31, 2005 | ||||||
Total risk-based capital (to risk-weighted assets) | $32,318 | 11.4% | $22,689 | 8.0% | $28,362 | 10.0% |
Tier I capital (to risk-weighted assets) | 30,294 | 10.7% | 11,345 | 4.0% | 17,017 | 6.0% |
Tier I capital (to adjusted total assets) | 30,294 | 8.3% | 10,973 | 3.0% | 18,289 | 5.0% |
Tier I capital (to adjusted tangible assets) | 30,294 | 8.3% | 7,316 | 2.0% | N/A | N/A |
Tangible capital (to adjusted tangible assets) | 30,294 | 8.3% | 5,487 | 1.5% | N/A | N/A |
As of December 31, 2004 | ||||||
Total risk-based capital (to risk-weighted assets) | $31,657 | 11.6% | $21,812 | 8.0% | $27,265 | 10.0% |
Tier I capital (to risk-weighted assets) | 29,797 | 10.9% | 10,906 | 4.0% | 16,359 | 6.0% |
Tier I capital (to adjusted total assets) | 29,797 | 8.4% | 10,656 | 3.0% | 17,761 | 5.0% |
Tier I capital (to adjusted tangible assets) | 29,767 | 8.4% | 7,104 | 2.0% | N/A | N/A |
Tangible capital (to adjusted tangible assets) | 29,797 | 8.4% | 5,328 | 1.5% | N/A | N/A |
• | the strength of the United States economy in general and the strength of the local economies in which we conduct our operations; |
• | the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; |
• | financial market, monetary and interest rate fluctuations, particularly the relative relationship of short-term interest rates to long-term interest rates; |
• | the timely development of and acceptance of our new products and services of Lafayette Savings and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services; |
• | the willingness of users to substitute competitors' products and services for our products and services; |
• | the impact of changes in financial services’ laws and regulations (including laws concerning taxes, accounting standards, banking, securities and insurance); |
• | the impact of technological changes; |
• | acquisitions; |
• | changes in consumer spending and saving habits; and |
• | our success at managing the risks involved in the foregoing. |
15 |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We, like other financial institutions, are subject to interest rate risk to the extent that our interest-bearing liabilities reprice on a different basis than our interest-earning assets. The Office of Thrift Supervision (“OTS”), our primary regulator, supports the use of a net portfolio value (“NPV”) approach to the quantification of interest rate risk. In essence, this approach calculates the difference between the present value of expected cash flows from assets and the present value of expected cash flows from liabilities, as well as cash flows from off balance sheet contracts. An NPV ratio, in any interest rate scenario, is defined as the NPV in that rate scenario divided by the market value of assets in the same scenario, essentially a market value adjusted capital ratio. It has been and continues to be a priority of the Board and management to manage interest rate risk to maintain an acceptable level of potential changes to interest income as a result of interest rate changes. Our asset/liability policy, established by the board of directors, sets forth acceptable limits on the amount of change in net portfolio value given certain changes in interest rates. We have an asset/liability management committee which meets quarterly to review our interest rate position, and an investment committee which reviews the interest rate risk position and other related matters with the Board, and makes recommendations for adjusting this position to the full Board of Directors. In addition, the investment committee of the Board meets semi-annually with our outside investment advisors to review our investment portfolio and strategies relating to interest rate risk. Specific strategies have included the sale of long-term, fixed rate loans to reduce the average maturity of our interest-earning assets and the use of Federal Home Loan Bank advances to lengthen the effective maturity of our interest-bearing liabilities. In the future, our community banking emphasis, including the origination of commercial business loans, is intended to further increase our portfolio of short-term and/or adjustable rate loans. Presented below, as of December 31, 2004 and 2003, is an analysis of our interest rate risk as measured by the effect on NPV caused by instantaneous and sustained parallel shifts in the yield curve, in 100 basis point increments, up and down 300 basis points, and compared to Board policy limits. The Board Limit column indicates the lowest allowable limits for NPV after each interest rate shock. Assumptions used in calculating the amounts in this table are OTS assumptions. No information is provided for a negative 200 or 300 basis point shift in interest rates, due to a low prevailing interest rate environment making such scenarios unlikely. |
Change in | Board Limit | At December 31, 2004 | At December 31, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Interest Rate (Basis Points) | Post-shock NPV Ratio | Post-shock NPV Ratio | Change (Basis Points) | Post-shock NPV Ratio | Change (Basis Points) | ||||||
300 | bp | 6 | .00% | 10 | .55% | (12) | bp | 9 | .64% | (35) | bp |
200 | 7 | .00 | 10 | .82 | 14 | 9 | .98 | 0 | |||
100 | 8 | .00 | 10 | .89 | 21 | 10 | .13 | 14 | |||
0 | 8 | .00 | 10 | .68 | -- | 9 | .98 | -- | |||
-100 | 8 | .00 | 10 | .16 | (52 | ) | 9 | .40 | (59 | ) |
16 In evaluating our exposure to interest rate risk, certain shortcomings inherent in the method of analysis presented in the foregoing table must be noted. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Further, in the event of a change in interest rates, prepayments and early withdrawal levels may deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. As a result, the actual effect of changing interest rates may differ from that presented in the foregoing table. Management believes that at March 31, 2005 there have been no material changes in Lafayette Savings’ interest rate sensitivity which would cause a material change in the market risk exposures that affect the quantitative and qualitative risk disclosures as presented above, from the Company’s Annual Report on Form 10-KSB for the period ended December 31, 2004. |
Item 4. | CONTROLS AND PROCEDURES. |
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934 (the “Act”)), as of March 31, 2005, was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and several other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended March 31, 2005, that has materially affected, or is reasonably likely to affect, our internal control over the financial reporting. The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company’s business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures. 17 PART II — OTHER INFORMATIONItem 1.LEGAL PROCEEDINGS The Company, from time to time, is involved as plaintiff or defendant in various legal actions arising in the normal course of business. While the ultimate outcome of these proceedings cannot be predicted with certainty, it is the opinion of management, after consultation with counsel representing the Company in the proceedings, that the resolution of any prior and pending proceedings should not have a material effect on the Company or the Bank’s financial condition or results of operations. Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The following table sets forth the number and prices paid for repurchased shares. Issuer Purchases of Equity Securities |
Month of Purchase | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (2) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan | |||||
---|---|---|---|---|---|---|---|---|---|
January 1 - January 31, 2005 | 1,472 | 26 | .295 | 1,472 | 60,547 | ||||
February 1 - February 28, 2005 | 4,200 | 26 | .482 | 4,200 | 56,347 | ||||
March 1 - March 31, 2005 | 3,415 | 26 | .334 | 3,415 | 52,932 | ||||
Total | 9,087 | 26 | .396 | 9,087 | 52,932 |
(1) | There were no shares repurchased other than through a publicly announced plan or program. |
(2) | We have in place a plan, announced September 27, 2004, to repurchase 5% of our common stock. |
Date: May 9, 2005 —————————————— | /s/ Randolph F. Williams —————————————— Randolph F. Williams, President (Principal Executive Officer) |
Date: May 9, 2005 —————————————— | /s/ Mary Jo David —————————————— Mary Jo David, Treasurer (Principal Financial and Accounting Officer) |
19 INDEX TO EXHIBITS |
Regulation S-K Exhibit Number | Document |
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31.1 | Rule 13(a)-14(a) Certification (Chief Executive Officer) |
31.2 | Rule 13(a)-14(a) Certification (Chief Financial Officer) |
32 | Section 1350 Certifications |
20 |