SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
(Mark One)
[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
-----------------
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 0-29312
MONTGOMERY FINANCIAL CORPORATION
(Exact Name of Small Business Issuer in its Charter)
Indiana 35-1962246
------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or organization)
119 East Main Street
Crawfordsville, Indiana 47933
----------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(765) 362-4710
--------------
(Registrant's telephone number, including area code)
Check here whether the issuer (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 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 [ ]
As of January 31, 2001, there were 1,215,190 shares of the Registrant's
common stock issued and outstanding.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Form 10-QSB
Index
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statement of Financial Condition
As of December 31, 2000 and June 30, 2000 3
Consolidated Condensed Statement of Income for the Three
And Six Months Ended December 31, 2000 and 1999 4
Consolidated Condensed Statement of Cash Flows for the
Six Months Ended December 31, 2000 and 1999 5
Consolidated Condensed Statement of Stockholders'
Equity for the Six Months Ended December 31, 2000 7
Notes to Consolidated Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Financial Condition
(Unaudited)
December 31, June 30,
2000 2000
--------------- ----------------
Assets
Cash $ 453,279 $ 394,392
Short-term interest-bearing deposits 7,086,430 10,131,874
--------------- ----------------
Total cash and cash equivalents 7,539,709 10,526,266
Interest-bearing deposits 238,816 258,689
Investment securities available for sale 389,100 443,917
Loans 120,377,637 119,356,784
Allowance for loan losses (226,000) (226,000)
--------------- ----------------
Net loans 120,151,637 119,130,784
Premises and equipment 3,288,064 3,236,258
Federal Home Loan Bank Stock 1,893,300 1,893,300
Foreclosed assets and real estate held for development, net 1,561,813 1,301,996
Interest receivable 908,822 951,010
Other assets 479,045 380,038
--------------- ----------------
Total assets $ 136,450,306 $ 138,122,258
=============== ================
Liabilities
Deposits
Noninterest bearing $ 5,043,587 $ 2,580,192
Interest bearing 94,170,392 88,926,339
--------------- ----------------
Total deposits 99,213,979 91,506,531
Federal Home Loan Bank advances 18,536,171 28,241,258
Interest payable 735,592 534,341
Other liabilities 1,011,520 859,417
--------------- ----------------
Total liabilities 119,497,262 121,141,547
--------------- ----------------
Stockholders' Equity
Preferred stock, $.01 par value
authorized and unissued - 2,000,000 shares
Common stock, $.01 par value - 8,000,000 shares
authorized; 1,220,190 and 1,244,790 issued 12,202 12,488
Paid-in capital 9,971,036 10,176,190
Retained earnings - substantially restricted 8,160,471 8,102,308
Unearned ESOP shares (1,013,670) (1,055,482)
Unearned compensation (177,778) (199,633)
Accumulated other comprehensive income (loss) 783 (55,120)
--------------- ----------------
Total stockholders' equity 16,953,044 16,980,711
--------------- ----------------
Total liabilities and stockholders' equity $ 136,450,306 $ 138,122,258
=============== ================
See notes to Consolidated Condensed Financial Statements.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Income
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
---------------------------- ----------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Interest and Dividend Income
Loans $2,459,073 $2,291,716 $4,819,885 $4,529,093
Investment securities 3,978 4,491 9,496 12,037
Deposits with financial institutions 125,112 134,978 322,478 232,259
Dividend Income 40,452 36,635 80,905 65,680
---------- ---------- ---------- ----------
Total interest and dividend income 2,628,615 2,467,820 5,232,764 4,839,069
---------- ---------- ---------- ----------
Interest Expense
Deposits 1,386,919 1,097,181 2,714,196 2,148,177
Federal Home Loan Bank advances 312,063 370,080 720,481 691,016
---------- ---------- ---------- ----------
Total interest expense 1,698,982 1,467,261 3,434,677 2,839,193
---------- ---------- ---------- ----------
Net Interest Income
Provision for losses on loans 929,633 1,000,559 1,798,087 1,999,876
---------- ---------- ---------- ----------
Net Interest Income After
Provision for Losses on Loans 929,633 1,000,559 1,798,087 1,999,876
---------- ---------- ---------- ----------
Other Income
Service charges on deposit accounts 30,350 14,863 46,260 28,678
Gain on sale of investment securities 35,330 55,644 34,795 55,644
Real estate operations, net 4,682 13,093 10,885 18,794
Other income 18,568 11,408 32,526 19,637
---------- ---------- ---------- ----------
Total other income 88,930 95,008 124,466 122,753
---------- ---------- ---------- ----------
Other Expenses
Salaries and employee benefits 477,382 423,416 896,568 789,739
Net occupancy expense 49,158 38,224 96,068 80,911
Equipment expense 55,869 57,487 111,535 118,306
Data processing expense 43,437 38,055 87,349 88,790
Deposit insurance expense 4,642 12,424 9,292 24,773
Advertising expense 12,279 20,847 32,452 45,991
Other expenses 164,426 161,433 316,160 316,851
---------- ---------- ---------- ----------
Total other expenses 807,193 751,886 1,549,424 1,465,361
---------- ---------- ---------- ----------
Income Before Income Tax 211,370 343,681 373,129 657,268
Income tax expense 92,615 148,235 147,500 270,460
---------- ---------- ---------- ----------
Net Income $ 118,755 $ 195,446 $ 225,629 $ 386,808
========== ========== ========== ==========
Net Income Per Share:
Basic $ 0.11 $ 0.16 $ 0.20 $ 0.30
Diluted $ 0.11 $ 0.16 $ 0.20 $ 0.29
Dividends Per Share $ 0.055 $ 0.055 $ 0.110 $ 0.110
See Notes to Consolidated Condensed Financial Statements.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Cash Flows
(Unaudited)
Six Months Ended
December 31,
---------------------------------
2000 1999
----------- -----------
Operating Activities
Net income $ 225,629 $ 386,808
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 157,222 156,030
(Gain) loss on sale of securities available for sale (34,795) (55,644)
ESOP stock amortization 39,377 39,390
Amortization of unearned compensation 20,177 10,636
Change In
Interest receivable 42,188 (108,457)
Interest payable 201,251 24,056
Other assets (99,007) 3,456
Other liabilities 114,980 156,819
----------- -----------
Net cash provided by operating activities 667,022 613,094
----------- -----------
Investing Activities
Net change in interest bearing deposits 19,873
Proceeds from sale of securities
available for sale 232,182 358,644
Purchase of securities available for sale (50,000)
Net change in loans (1,337,794) (5,709,063)
Additions to real estate owned and held for investment (56,874) (76,021)
Proceeds from Real Estate Owned Sales 94,742 187,853
Purchases of premises and equipment (189,772) (469,152)
Purchase of FHLB of Indianapolis stock (642,600)
----------- -----------
Net cash used by investing activities (1,287,643) (6,350,339)
----------- -----------
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Cash Flows
(Continued)
Six Months Ended
December 31,
---------------------------------
2000 1999
----------- -----------
Financing Activities
Net Change In
Noninterest-bearing, interest-bearing demand and
savings deposits $ 3,014,480 $ 4,433,645
Certificates of deposit 4,692,968 (240,771)
Proceeds from FHLB advances
and other borrowings 906,493 13,500,000
Repayment of FHLB advances
and other borrowings (10,611,580) (3,740,811)
Stock purchase (243,980) (1,630,436)
Dividends paid (125,317) (145,972)
----------- -----------
Net cash provided by financing activities (2,365,936) 12,175,655
----------- -----------
Net Change in Cash and Cash Equivalents (2,986,557) 6,438,410
Cash and Cash Equivalents, Beginning of Period 10,526,266 4,932,813
----------- -----------
Cash and Cash Equivalents, End of Period $ 7,539,709 $11,371,223
=========== ===========
Additional Cash Flow and Supplementary Information
Interest Paid $ 3,233,426 $ 2,815,137
Income Tax Paid 165,000 277,824
Transfer from Loans to Other Real Estate Owned 316,941
Cash Dividends Payable 66,837 68,587
See Notes to Consolidated Condensed Financial Statements
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Stockholders' Equity
(Unaudited)
Common Stock Accumulated
------------ Other
Paid-in Comprehensive Retained Unearned Unearned Comprehensive
Shares Amount Capital Income Earnings ESOP Shares Compensation Income (Loss) Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance July 1, 2000 1,244,790 $12,448 $10,176,190 $8,102,308 $(1,055,482) $(199,633) $(55,120) $16,980,711
Net income for the
six months ended
December 31, 2000 $225,629 225,629 225,629
--------
Other comprehensive
income, net of tax
Unrealized holding
gains arising during
the period, net of tax
expense of $50,449 76,916
Less: Reclassification
adjustment for gain
included in net income,
net of tax expense
of $13,782 21,013
--------
Unrealized gain
on securities 55,903 55,903 55,903
--------
Other comprehensive
income $281,532
========
Cash dividends
($.110 per share) (124,773) (124,773)
Stock purchase (24,600) (246) (201,041) (42,693) (243,980)
ESOP shares earned (2,435) 41,812 39,377
Amortization of unearned
compensation expense (1,678) 21,855 20,177
- ------------------------------------------------------------------------------------------------------------------------------------
Balance
December 31, 2000 1,220,190 $12,202 $ 9,971,036 $8,160,471 $(1,013,670) $(177,778) $ 783 $16,953,044
====================================================================================================================================
See Notes to Consolidated Condensed Financial Statement
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Basis of Presentation
The unaudited interim consolidated condensed financial statements include the
accounts of Montgomery Financial Corporation ("Montgomery"), its subsidiary,
Montgomery Savings, A Federal Association (the "Association") and its
subsidiary, MSA SERVICE CORP.
The unaudited interim consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-QSB and, therefore, do
not include all information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the financial statements reflect all adjustments necessary to
present fairly Montgomery's financial position as of December 31, 2000, results
of operations for the three and six-month periods ending December 31, 2000 and
1999, and cash flows for the six-month periods ended December 31, 2000 and 1999.
The results of operations for the three and six-month periods ended December 31,
2000 are not necessarily indicative of the results of operations which may be
expected for the fiscal year ending June 30, 2001.
Net Income Per Share
Net income per share for the three and six-month periods ended December 31, 2000
and 1999 are computed by dividing net earnings by the weighted average shares of
common stock outstanding during the period.
For the Three Months Ended December 31, 2000 December 31, 1999
----------------- -----------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
Basic Net Income Per Share:
Net Income Available
to Common Stockholders $ 118,755 1,108,575 $ 0.11 $ 195,446 1,237,994 $ 0.16
========= =========
Effect of Dilutive Stock Options
and Grants 0 10,050 0 6,588
--------- --------- ---------- ---------
Diluted Net Income Per Share:
Net Income Available
To Common Stockholders $ 118,755 1,118,625 $ 0.11 $ 195,446 1,244,582 $ 0.16
========= ========= ========= ========== ========= =========
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
For the Six Months Ended December 31, 2000 December 31, 1999
----------------- -----------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
Basic Net Income Per Share:
Net Income Available
to Common Stockholders $ 225,629 1,108,052 $ 0.20 $ 386,808 1,303,570 $ 0.30
========= =========
Effect of Dilutive Stock Options
and Grants 0 9,863 0 8,367
--------- --------- ---------- ---------
Diluted Net Income Per Share:
Net Income Available
To Common Stockholders $ 225,629 1,117,915 $ 0.20 $ 386,808 1,311,937 $ 0.29
========= ========= ========= ========== ========= =========
Other Comprehensive Income
2000
-----------------------------------------------
Before-Tax Tax Net-of-Tax
Three months ended December 31, Amount Benefit(Expense) Amount
---------- ---------------- ----------
Unrealized losses on securities
Unrealized holding gains arising
during the year $ 23,842 $(9,444) $14,398
Less: reclassifications adjustment for gains
realized in net income 35,330 (13,994) 21,336
--------- -------- --------
Net unrealized losses $(11,488) $ 4,550 $(6,938)
========= ======== ========
1999
-----------------------------------------------
Before-Tax Tax Net-of-Tax
Three months ended December 31, Amount Benefit(Expense) Amount
---------- ---------------- ----------
Unrealized losses on securities
Unrealized holding losses arising
during the year $(43,260) $17,135 $(26,125)
Less: reclassifications adjustment for gains
realized in net income 55,644 (22,041) 33,603
--------- -------- ---------
Net unrealized losses $(98,904) $39,176 $(59,728)
========= ======= =========
2000
-----------------------------------------------
Before-Tax Tax Net-of-Tax
Six months ended December 31, Amount Benefit(Expense) Amount
---------- ---------------- ----------
Unrealized gains on securities
Unrealized holding gains arising
during the year $127,365 $ 50,449 $76,916
Less: reclassifications adjustment for gains
realized in net income 34,795 (13,782) 21,013
--------- --------- --------
Net unrealized gains $ 92,570 $(36,667) $55,903
========= ========= =======
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
1999
-----------------------------------------------
Before-Tax Tax Net-of-Tax
Six months ended December 31, Amount Benefit(Expense) Amount
---------- ---------------- ----------
Unrealized losses on securities
Unrealized holding losses arising
during the year $(14,430) $ 5,716 $ (8,714)
Less: reclassifications adjustment for gains
realized in net income 55,644 (22,041) 33,603
--------- -------- --------
Net unrealized losses $(70,074) $27,757 $(42,317)
========= ======= =========
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements. When used in this Form 10-QSB or future
filings by Montgomery with the Securities and Exchange Commission, in
Montgomery's press releases or other public shareholder communications, or in
oral statements made with the approval of an authorized executive officer, the
words or phrases, "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", "believe", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Montgomery wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made, and to advise readers that various
factors, including regional and national economic conditions, changes in levels
of market interest rates, credit risks of lending activities, and competitive
and regulatory factors, could affect Montgomery's financial performance and
could cause Montgomery's actual results for future periods to differ materially
from those anticipated or projected. Montgomery does not undertake, and
specifically disclaims any obligation, to revise any forward-looking statements
to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
Financial Condition. Montgomery's total assets were $136.5 million at
December 31, 2000, a decrease of $1.6 million, or 1.2 percent from June 30,
2000. During this six month period interest-earning assets, including Federal
Home Loan Bank stock, decreased $2.1 million, or 1.6 percent. Short-term
interest-earning deposits decreased $3.1 million, or 29.5 percent. This decrease
was primarily due to the use of excess liquidity to reduce Federal Home Loan
Bank advances. Loans increased $1.0 million, or 0.9 percent. Foreclosed assets
and real estate held for development increased $260,000, or 20.0 percent.
Deposits increased $7.7 million, or 8.4 percent primarily due to an increase of
$2.5 million in noninterest bearing deposits and an increase in public funds
deposits. The increase in deposits was primarily used to reduce Federal Home
Loan Bank advances. Federal Home Loan Bank advances decreased $9.7 million, or
34.4 percent, causing a net decrease in interest-bearing liabilities of $4.5
million, or 3.8 percent.
Capital and Liquidity. At December 31, 2000, Montgomery's
stockholders' equity was $17.0 million, or 12.4 percent of total assets, a
decrease of $28,000 from June 30, 2000. Montgomery began to repurchase 62,240
shares of its outstanding common stock on December 5, 2000. As of December 31,
2000 Montgomery had repurchased 24,600 shares at a total cost of $244,000. The
Association continues to exceed all minimum capital requirements. At December
31, 2000, the Association's tangible and core capital was $15.3 million, or 11.3
percent of tangible assets, $13.3 million in excess of the 1.5 percent minimum
required tangible capital and $9.9 million in excess of the 4.0 percent minimum
required core capital. Risk-based capital equaled $14.8 million, or 17.0 percent
of risk-weighted assets, $7.9 million more than the minimum 8.0 percent risk
based level required. The director of the OTS is required to set minimum
liquidity levels between four and 10 percent of assets. Current regulations
require a minimum liquidity level of four percent. The Association's average
liquidity ratio for the six months ended December 31, 2000, was 7.5 percent.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Asset/Liability Management. The Association, like other financial
institutions, is subject to interest rate risk to the extent that its
interest-bearing liabilities reprice on a different basis than its
interest-bearing assets. The OTS issued a regulation which provides 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
liabilities, expected cash flows from assets and cash flows from off balance
sheet contracts. Under this OTS regulation, an institution's "normal" level of
interest rate risk in the event of an assumed change in interest rates is a
decrease in the institution's NPV in an amount not exceeding 2 percent of the
present value of its assets. Under the regulation, thrift institutions with
greater than "normal" interest rate exposure must take a deduction from their
total capital available to meet their risk-based capital requirement. The amount
of that deduction is one-half of the difference between (a) the institution's
actual calculated exposure to the 200 basis point interest rate increase or
decrease (whichever results in the greater pro forma decrease in NPV) or (b) its
"normal" level of exposure which is 2 percent of the present value of its
assets. The regulation does exempt all institutions under $300 million in assets
with risk-based capital above 12 percent from reporting information to the OTS
to calculate exposure and making any deduction from risk-based capital. At
December 31, 2000, the Association's total assets were $136.5 million and risk
based capital was 17.0 percent; therefore the Association would have been exempt
from calculating or making any risk-based capital reduction. Montgomery's
management, however, believes interest-rate risk is an important factor and
makes all reports necessary to the OTS to calculate interest-rate risk on a
voluntary basis. At September 30, 2000, the most recent date for which
information is available from the OTS, 2 percent of the present value of the
Association's assets was approximately $2.83 million, which was less than $4.16
million, the greatest decrease in NPV resulting from a 200 basis point change in
interest rates. As a result, the Association, for OTS reporting purposes, would
have been required to make a deduction from total capital in calculating its
risk-based capital requirement had this rule been in effect and had the
Association not been exempt from reporting on such date. Based on September 30,
2000 NPV information, the amount of the Association's deduction from capital,
had it been subject to reporting, would have been approximately $665,000.
It has been and continues to be a priority of the Association's Board
of Directors and management to manage interest-rate risk and thereby limit any
negative effect of changes in interest rates on Montgomery's NPV. The
Association's Interest Rate Risk Policy, established by the Board of Directors,
promulgates acceptable limits on the amount of change in NPV given certain
changes in interest rates. Specific strategies have included shortening the
amortized maturity of fixed-rate loans and increasing the volume of adjustable
rate loans to reduce the average maturity of the Association's interest-earning
assets. FHLB advances are used in an effort to match the effective maturity of
the Association's interest-bearing liabilities to its interest-earning assets.
Presented below, as of September 30, 2000, and September 30, 1999, is
an analysis of the Association's estimated interest-rate risk as measured by
changes in NPV for instantaneous and sustained parallel shifts in interest
rates, up and down 300 basis points in 100 point increments, compared to limits
set by the Board. Assumptions used in calculating the amounts in this table are
assumptions utilized by the OTS in assessing the interest risk of the thrifts it
regulates. Based upon these assumptions at September 30, 2000 and September 30,
1999, the NPV of the Association was $18.9 million and $19.9 million
respectively. NPV is calculated by the OTS for the purpose of interest-rate risk
assessment and should not be considered as an indicator of value of the
Association.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
At September 30, 2000 At September 30, 1999
--------------------------- --------------------------
Assumed Board
Change in Limit
Interest Rates % Change $ Change % Change $ Change % Change
(Basis Points) in NPV in NPV in NPV in NPV in NPV
-------------- ------- -------- -------- -------- --------
(Dollars in Thousands)
+300 -60 -6,403 -34 -7,061 -35
+200 -50 -4,160 -22 -4,503 -23
+100 -30 -1,955 -10 -2,029 -10
0 0 0 0 0 0
-100 -30 +1,272 +7 +1,242 +6
-200 -50 +2,108 +11 +1,221 +11
-300 -60 +3,006 +16 +3,281 +16
In the event of a 300 basis point change in interest rate based upon
estimates as of September 30, 2000 the Association would experience a 16%
increase in NPV in a declining rate environment and a 34% decrease in NPV in a
rising environment. During periods of rising rates, the value of monetary assets
and liabilities declines. Conversely, during periods of falling rates, the value
of monetary assets and liabilities increases. However, the amount of change in
value of specific assets and liabilities due to changes in rates is not the same
in a rising rate environment as in a falling rate environment (i.e., the amount
of value increase under a specific rate decline may not equal the amount of
value decrease under an identical upward rate movement). Based upon the NPV
methodology, the increased level of interest rate risk experienced by the
Association in recent periods was primarily due to the maturities of
interest-bearing assets increasing more than the maturities on interest-bearing
liabilities due to the increase in fixed-rate residential mortgage loans and
non-residential loans.
Results of Operations. Montgomery's net income for the three months
ended December 31, 2000, was $119,000 compared to $195,000 for the three months
ended December 31, 1999, a decrease of $76,000. Net interest income decreased
$71,000, or 7.1 percent. Average interest-earning assets increased $2.8 million,
or 2.2 percent, from $128.2 million for the three months ended December 31,
1999, to $131.0 million for the 2000 three-month period. Average
interest-bearing liabilities increased $3.8 million from $112.7 million to
$116.5 million during the comparable three-month period. Interest rate spread
decreased from 2.49 percent for the three months ended December 31, 1999, to
2.19 percent for the three months ended December 31, 2000. Net interest margin
decreased to 2.84 percent for the three months ended December 31, 2000 from 3.12
percent for the three months ended December 31, 1999. Non-interest income was
$89,000 for the 2000 three-month period compared to $95,000 for the 1999 period.
Non-interest expense was $807,000 for the three months ended December 31, 2000
compared to $752,000 for the 1999 three-month period, an increase of $55,000, or
7.3 percent. Income before income tax was $211,000 for the three months ended
December 31, 2000 compared to $344,000 for the 1999 period, a decrease of
$133,000. Income tax expense decreased from $148,000 to $93,000 for the
comparable periods.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
For the six months ended December 31, 2000, net income was $226,000
compared to $387,000 for the six months ended December 31, 1999, a decrease of
$161,000. Net interest income decreased from $2.0 million for the six months
ended December 31, 1999 to $1,798,000 for the six months ended December 31,
2000, a decrease of $202,000, or 10.1 percent. Average interest-earning assets
increased $7.8 million from $125.5 million for the six months ended December 31,
1999, to $133.3 million for the 2000 six-month period while average
interest-bearing liabilities increased $9.5 million during the comparable
periods. Non-interest income increased $2,000 and non-interest expense increased
$84,000. Income tax expense was $148,000 for the six months ended December 31,
2000, compared to $270,000 for the six months ended December 31, 1999.
Interest Income. Montgomery's total interest income for the three
months ended December 31, 2000, was $2.6 million, an increase of $161,000, or
6.5 percent, compared to interest income for the three months ended December 31,
1999. This increase was primarily caused by an increase in average
interest-earning assets from $128.2 million for the three months ended December
31, 1999, to $130.7 million for the three months ended December 31, 2000, an
increase of $2.5 million, or 2.0 percent principally due to loan growth. Average
loans increased from $115.9 million for the 1999 three-month period to $120.3
million for the 2000 three-month period and average interest-earning deposits
decreased from $9.8 million to $8.2 million for the respective periods. The
average yield on interest-earning assets was 8.03 percent for the three months
ended December 31, 2000, compared to 7.70 percent for the three months ended
December 31, 1999.
Interest income for the six months ended December 31, 2000, was $5.2
million, an increase of $394,000, or 8.1 percent, from interest income for the
same period in 1999. Average interest-earning assets for the six months ended
December 31, 2000, was $133.3 million compared to $125.5 million for the 1999
six-month period, an increase of $7.8 million, or 6.2 percent, principally due
to loan growth. The average yield for the 2000 period was 7.85 percent compared
to 7.71 percent for the 1999 period.
Interest Expense. Interest expense for the three months ended December
31, 2000, was $1.7 million, which was an increase of $232,000, or 15.8 percent,
from the three months ended December 31, 1999. Average interest-bearing
liabilities increased $3.8 million, or 3.4 percent, from $112.7 million for the
three months ended December 31, 1999, to $116.5 million for the three months
ended December 31, 2000. Average interest-bearing deposits increased $10.2
million and average borrowings decreased $6.5 million for the comparable
periods. The average cost of funds increased from 5.21 percent to 5.84 percent
for the comparable periods. The average cost of deposits increased from 5.10
percent to 5.76 percent for the comparable three-month periods. The average cost
of borrowings increased from 5.57 percent to 6.21 percent for the comparable
periods.
Interest expense for the six months ended December 31, 2000, was $3.4
million, an increase of $595,000, or 21.0 percent, from the six months ended
December 31, 1999. The average cost of funds for the 2000 period was 5.79
percent compared to 5.20 percent for the 1999 period. Average interest-bearing
liabilities increased from $112.7 million for the six months ended December 31,
1999 to $118.7 million for the 2000 six-month period.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Provision for Losses on Loans. There was no provision for losses on
loans made for either of the three or six-month comparable periods. Provision or
adjustment entries are made based on the Internal Loan and Asset Review Policy.
A review is performed at least quarterly to determine the adequacy of the
current balance in the allowance for losses on loans. Loans delinquent ninety
days or more were $1,442,000 at December 31, 2000, compared to $990,000 at June
30, 2000. Non-performing loans to total loans at December 31, 2000 were 1.20
percent compared to 0.83 percent at June 30, 2000. The allowance for losses to
non-performing loans was 15.7 percent at December 31, 2000 compared to 22.8
percent at June 30, 2000. The allowance to total loans was 0.19 percent at
December 31, 2000 and at June 30, 2000. After review of the current loans
delinquent ninety days or more at December 31, 2000, it was determined this
level of delinquency was abnormal and a reduction in the total delinquency will
be made. Montgomery is continually re-evaluating the level of the allowance for
loan losses as the amount of non-residential mortgage loans and other new loan
products are offered.
Non-Interest Income. Montgomery's other income for the three months
ended December 31, 2000 totaled $89,000 compared to $95,000 for the three months
ended December 31, 1999, a decrease of $6,000. Service charges on deposit
accounts increased $15,000 primarily due to implementation of new fee schedules
for demand deposit accounts. Gain on the sale of available for sale securities
decreased from $56,000 in the 1999 three-month period to $35,000 for the
comparable 2000 period. Real estate operations net income decreased $8,000 for
the comparable periods and other income increased $7,000.
Other income for the six months ended December 31, 2000, was $124,000,
an increase of $2,000 from the comparable 1999 six-month period. During the six
months ended December 31, 2000, service charges on deposit accounts increased
$17,000 and gain on the sale of securities available for sale decreased $21,000.
Income from real estate operation decreased $8,000 and other income increased
$13,000 from the 1999 six-month period.
Non-Interest Expense. Montgomery's other expenses for the three months
ended December 31, 2000 totaled $807,000, an increase of $55,000, or 7.4
percent, from the three months ended December 31, 1999. Salaries and employee
benefits increased $54,000 primarily due to an increase in personnel to
accommodate growth. Net occupancy expense increased $11,000 and equipment
expense decreased $2,000. Data processing expense increased $5,000 and other
expenses increased $3,000 primarily due to Montgomery's growth. Advertising
expense decreased $9,000 primarily due to increased advertising in the 1999
period to promote the newly opened Lafayette office operation.
Non-interest expense for the six months ended December 31, 2000, was
$1.5 million, an increase of $84,000, or 5.7 percent, from the six months ended
December 31, 1999. Salary and employee benefits increased $107,000. Net
occupancy expense increased $15,000, equipment expense decreased $7,000 and data
processing expense decreased $1,000. Advertising expense decreased $14,000
primarily due to the increased advertising during the 1999 period to promote the
Lafayette office.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Income Tax Expense. Income tax expense for the three months ended
December 31, 2000 was $93,000 compared to $148,000 for the three months ended
December 31, 1999 due to the change in taxable income.
Income tax expense for the comparable six-month periods decreased from
$270,000 for the 1999 period to $148,000 for the 2000 period again due to the
change in net taxable income.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Part II. OTHER INFORMATION
Item 1. Legal Proceedings None.
Item 2. Changes in Securities None.
Item 3. Defaults Upon Senior Securities None.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Montgomery Financial Corporation
("Montgomery") was held at the principal office of Montgomery, 119 East Main
Street, Crawfordsville, Indiana 47933, on Tuesday, October 17, 2000, at 2:00
p.m., Crawfordsville time for purposes of electing three Directors, to ratify
the appointment of Olive LLP, as Montgomery's independent auditors for the 2000
fiscal year and transacting such other business as may properly come before the
Annual Meeting. Proxy Statements were furnished to such holders on or about
September 15, 2000. A total of 1,244,790 shares of common stock of Montgomery
were outstanding on August 31, 2000, and a total of 1,074,470 shares were
represented at the meeting. The 1,074,470 shares were all voted by proxy.
Earl F. Elliott, Mark E. Foster and Robert C. Wright were nominated to hold
office as directors until the year 2003 Annual Meeting of Shareholders. Mr.
Elliott has been a director since 1973, Mr. Foster since 1990 and Mr. Wright
since 1996. No other nominations were made at the meeting. Earl F. Elliott was
elected as a director receiving 1,026,512 votes for, with 47,958 votes withheld.
Mark E. Foster was elected as a director receiving 1,026,512 votes for, with
47,958 votes withheld. Robert C. Wright was elected as a director receiving
1,026,412 votes for, with 48,058 votes withheld. With the election of Messrs.
Elliott, Foster and Wright, the terms of the Directors as of October 17, 2000,
expire as follows: 2001 - Joseph M. Malott and J. Lee Walden; 2002 - C. Rex
Henthorn and John E. Woodward; 2003 - Earl F. Elliott, Mark E. Foster and Robert
C. Wright.
Olive LLP ("Olive"), served as independent auditors for Montgomery in fiscal
2000. The Board of Directors approved the appointment of Olive as independent
auditors for fiscal 2001, subject to ratification by the shareholders. The
appointment of the independent auditors is ratified if more votes are cast in
favor of the appointment than against the appointment. The ratification of Olive
was approved by 1,056,669 votes in favor, 4,508 votes against and 13,293
abstentions.
Item 5. Other Information None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Montgomery filed one report on Form 8-K during the quarter ended
December 31, 2000. This Form 8-K, filed on November 30, 2000, reported
two press releases dated November 9, 2000 and November 29, 2000.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Montgomery Financial Corporation
Date: February 14, 2001 By: /s/ J. Lee Walden
----------------------------------
J. Lee Walden, President and Chief
Executive Officer
Date: February 14, 2001 By: /s/ Steven W. Brier
----------------------------------
Steven W. Brier, Vice President and Chief
Financial Officer