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 March 31, 2001
--------------
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)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of April 30, 2001, there were 1,207,698 shares of the Registrant's
common stock issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Form 10-QSB
Index
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statement of Financial Condition
As of March 31, 2001 and June 30, 2000 3
Consolidated Condensed Statement of Income for the Three
And Nine Months Ended March 31, 2001 and 2000 4
Consolidated Condensed Statement of Cash Flows for the
Nine Months Ended March 31, 2001 and 2000 5
Consolidated Condensed Statement of Stockholders'
Equity for the Nine Months Ended March 31, 2001 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 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Financial Condition
(Unaudited)
March 31, June 30,
2001 2000
---------------- ----------------
Assets
Cash $ 551,419 $ 394,392
Short-term interest-bearing deposits 14,812,387 10,131,874
--------------- ---------------
Total cash and cash equivalents 15,363,806 10,526,266
Interest-bearing deposits 238,816 258,689
Investment securities available for sale 340,174 443,917
Loans 119,135,333 119,356,784
Allowance for loan losses (226,000) (226,000)
---------------- ---------------
Net loans 118,909,333 119,130,784
Premises and equipment 3,248,310 3,236,258
Federal Home Loan Bank Stock 1,893,300 1,893,300
Foreclosed assets and real estate held for development, net 1,594,368 1,301,996
Interest receivable 835,444 951,010
Other assets 501,429 380,038
--------------- ---------------
Total assets $142,924,980 $138,122,258
=============== ===============
Liabilities
Deposits
Noninterest bearing $ 1,990,807 $ 2,580,192
Interest bearing 104,578,968 88,926,339
--------------- ---------------
Total deposits 106,569,775 91,506,531
Federal Home Loan Bank advances 17,629,678 28,241,258
Interest payable 584,425 534,341
Other liabilities 1,209,005 859,417
--------------- ---------------
Total liabilities 125,992,883 121,141,547
--------------- ---------------
Stockholders' Equity
Preferred stock, $.01 par value
authorized and unissued - 2,000,000 shares
Common stock, $.01 par value - 8,000,000 shares
authorized; 1,208,584 and 1,244,790 issued 12,086 12,448
Paid-in capital 9,877,120 10,176,190
Retained earnings - substantially restricted 8,177,951 8,102,308
Unearned ESOP shares (992,766) (1,055,482)
Unearned compensation (166,851) (199,633)
Accumulated other comprehensive income (loss) 24,557 (55,120)
--------------- ----------------
Total stockholders' equity 16,932,097 16,980,711
--------------- ---------------
Total liabilities and stockholders' equity $ 142,924,980 $ 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 Nine Months Ended
March 31, March 31,
------------------------------- ------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- ------------
Interest and Dividend Income
Loans $2,405,735 $2,343,987 $7,225,620 $6,873,080
Investment securities 3,579 4,491 13,074 16,528
Deposits with financial institutions 117,299 128,969 439,778 361,229
Dividend Income 37,347 37,659 118,252 103,338
---------- ---------- ---------- ----------
Total interest and dividend income 2,563,960 2,515,106 7,796,724 7,354,175
---------- ---------- ---------- ----------
Interest Expense
Deposits 1,380,180 1,110,329 4,094,376 3,258,506
Federal Home Loan Bank advances 257,978 411,582 978,459 1,102,598
---------- ---------- ---------- ----------
Total interest expense 1,638,158 1,521,911 5,072,835 4,361,104
---------- ---------- ---------- ----------
Net Interest Income 925,802 993,195 2,723,889 2,993,071
Provision for Losses on Loans 0 0 0 0
---------- ---------- ---------- ----------
Net Interest Income After
Provision for Losses on Loans 925,802 993,195 2,723,889 2,993,071
---------- ---------- ---------- ----------
Other Income
Service charges on deposit accounts 32,245 15,283 78,505 43,961
Gain(loss) on sale of investment securities (736) 34,593 55,644
Real estate operations, net 508 1,591 11,393 20,385
Other income 5,775 6,777 43,397 21,143
---------- ---------- ---------- ----------
Total other income 37,792 23,651 167,888 141,133
---------- ---------- ---------- ----------
Other Expenses
Salaries and employee benefits 458,587 425,695 1,355,156 1,215,434
Net occupancy expense 54,253 47,822 150,320 128,733
Equipment expense 61,033 58,191 172,568 176,497
Data processing expense 42,985 48,820 130,334 137,610
Deposit insurance expense 4,857 4,554 14,148 29,327
Advertising expense 15,506 20,308 47,958 66,299
Other expenses 147,452 146,756 469,243 458,336
---------- ---------- ---------- ----------
Total other expenses 784,673 752,146 2,339,727 2,212,236
---------- ---------- ---------- ----------
Income Before Income Tax 178,921 264,700 552,050 921,968
Income tax expense 73,500 93,590 221,000 364,050
---------- ---------- ---------- ----------
Net Income $ 105,421 $ 171,110 $ 331,050 $ 557,918
========== ========== ========== ==========
Net Income Per Share:
Basic $ 0.10 $ 0.14 $ 0.31 $ 0.44
Diluted $ 0.10 $ 0.14 $ 0.30 $ 0.43
Dividends Per Share $ 0.055 $ 0.055 $ 0.165 $ 0.165
See Notes to Consolidated Condensed Financial Statements.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
-----------------------------
2001 2000
------------ ------------
Operating Activities
Net income $ 331,050 $ 557,918
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 222,225 238,020
(Gain) loss on sale of securities available for sale (34,593) (55,644)
ESOP stock amortization 62,045 57,057
Amortization of unearned compensation 30,265 15,505
Change In
Interest receivable 115,566 (116,399)
Interest payable 50,084 (92,414)
Other assets (121,391) (46,645)
Other liabilities 298,238 319,173
---------- --------
Net cash provided by operating activities 953,489 876,571
---------- --------
Investing Activities
Net change in interest bearing deposits 19,873 60,774
Proceeds from sale of securities
available for sale 320,273 358,644
Purchase of securities available for sale (50,000)
Net change in loans (95,490) (7,357,874)
Additions to real estate owned and held for investment (103,478) (87,782)
Proceeds from Real Estate Owned Sales 94,742 187,853
Purchases of premises and equipment (200,972) (621,785)
Purchase of FHLB of Indianapolis stock (642,600)
---------- -----------
Net cash used by investing activities (15,052) (8,102,770)
----------- -----------
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Cash Flows
(Continued)
Nine Months Ended
March 31,
----------------------------------
2001 2000
------------ ------------
Financing Activities
Net Change In
Noninterest-bearing, interest-bearing demand and
savings deposits $ 2,877,215 $ 4,569,095
Certificates of deposit 12,186,029 2,646,289
Proceeds from FHLB advances
and other borrowings 906,493 22,500,000
Repayment of FHLB advances
and other borrowings (11,518,073) (14,890,811)
Stock purchase (365,936) (2,894,430)
Dividends paid (186,625) (214,559)
------------- -------------
Net cash provided by financing activities 3,899,103 11,715,584
------------ ------------
Net Change in Cash and Cash Equivalents 4,837,540 4,489,385
Cash and Cash Equivalents, Beginning of Period 10,526,266 4,932,813
------------ ------------
Cash and Cash Equivalents, End of Period $ 15,363,806 $ 9,422,198
============ ============
Additional Cash Flow and Supplementary Information
Interest Paid $ 5,022,751 $ 4,453,518
Income Tax Paid 165,000 402,394
Transfer from Loans to Other Real Estate Owned 316,941 44,484
Cash Dividends Payable 66,837 67,383
See Notes to Consolidated Condensed Financial Statements.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Stockholders' Equity
(Unaudited)
Accumulated
Common Stock 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 nine
months ended
March 31, 2001 $331,050 331,050 331,050
--------
Other comprehensive income,
net of tax
Unrealized holding gains
arising during the
period, net of tax
expense of $65,937 100,571
Less: Reclassification
adjustment for gain
included in net income,
net of tax expense
of $13,699 20,894
--------
Unrealized gain on securities 79,677 79,677 79,677
--------
Other comprehensive income $410,727
========
Cash dividends ($.165 per
share) (185,715) (185,715)
Stock purchase (36,206) (362) (295,882) (69,692) (365,936)
ESOP shares earned (671) 62,716 62,045
Amortization of unearned
compensation expense (2,517) 32,782 30,265
- ------------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 2001 1,208,584 $12,086 $9,877,120 $8,177,951 $(992,766) $(166,851) $ 24,557 $16,932,097
====================================================================================================================================
See Notes to Consolidated Condensed Financial Statements.
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 March 31, 2001, results of
operations for the three and nine-month periods ending March 31, 2001 and 2000,
and cash flows for the nine-month periods ended March 31, 2001 and 2000. The
results of operations for the three and nine-month periods ended March 31, 2001
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 nine-month periods ended March 31, 2001
and 2000 are computed by dividing net earnings by the weighted average shares of
common stock outstanding during the period.
For the Three Months Ended March 31, 2001 March 31, 2000
-------------- --------------
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 $ 105,421 1,080,784 $ 0.10 $ 171,110 1,232,010 $ 0.14
======= =======
Effect of Dilutive Stock Options
and Grants 0 16,117 0 5,220
--------- --------- ---------- ---------
Diluted Net Income Per Share:
Net Income Available
To Common Stockholders $ 105,421 1,096,901 $ 0.10 $ 171,110 1,237,230 $ 0.14
========= ========= ======= ========== ========= =======
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
For the Nine Months Ended March 31, 2001 March 31, 2000
-------------- --------------
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 $ 331,050 1,081,060 $ 0.31 $ 557,918 1,281,955 $ 0.44
======= =======
Effect of Dilutive Stock Options
and Grants 0 11,827 0 7,318
--------- --------- ---------- ---------
Diluted Net Income Per Share:
Net Income Available
To Common Stockholders $ 331,050 1,092,887 $ 0.30 $ 557,918 1,289,273 $ 0.43
========= ========= ======= ========== ========= =======
Other Comprehensive Income
2001
---------------------------------------------
Before-Tax Tax Net-of-Tax
Three months ended March 31, Amount Benefit(Expense) Amount
------------ ---------------- ----------
Unrealized gains (losses) on securities
Unrealized holding gains arising
during the year $38,624 $(15,295) $ 23,329
Less: reclassifications adjustment for losses
realized in net income (736) 291 (445)
---------- -------- ---------
Net unrealized gains $ 39,360 $(15,586) $ 23,774
========= ========= ========
2000
---------------------------------------------
Before-Tax Tax Net-of-Tax
Three months ended March 31, Amount Benefit(Expense) Amount
------------ ---------------- ----------
Unrealized losses on securities
Unrealized holding losses arising
during the year $ (9,696) $ 3,840 $ (5,856)
Less: reclassifications adjustment for gains
realized in net income
---------- -------- ---------
Net unrealized losses $ (9,696) $ 3,840 $ (5,856)
========== ======== =========
2001
---------------------------------------------
Before-Tax Tax Net-of-Tax
Nine months ended March 31, Amount Benefit(Expense) Amount
------------ ---------------- ----------
Unrealized gains on securities
Unrealized holding gains arising
during the year $ 166,508 $(65,937) $100,571
Less: reclassifications adjustment for gains
realized in net income 34,593 (13,699) 20,894
--------- --------- --------
Net unrealized gains $ 131,915 $(52,238) $ 79,677
========= ========= ========
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
2000
---------------------------------------------
Before-Tax Tax Net-of-Tax
Nine months ended March 31, Amount Benefit(Expense) Amount
----------- ---------------- ----------
Unrealized gains (losses) on securities
Unrealized holding losses arising
during the year $ (24,126) $ 9,556 $(14,570)
Less: reclassifications adjustment for gains
realized in net income 55,644 (22,041) 33,603
---------- --------- ---------
Net unrealized losses $ (79,770) $ 31,597 $(48,173)
========== ======== =========
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 $142.9 million at March
31, 2001, an increase of $4.8 million, or 3.5 percent from June 30, 2000. During
this nine-month period interest-earning assets, including Federal Home Loan Bank
stock, increased $4.3 million, or 3.3 percent. Short-term interest-earning
deposits increased $4.7 million, or 46.2 percent. This increase was primarily
due to an increase in deposit accounts with a decrease in loan growth. Loans
decreased $221,000, or 0.2 percent. Foreclosed assets and real estate held for
development increased $292,000, or 22.5 percent. Deposits increased $15.1
million, or 16.5 percent primarily due to 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 $10.6 million, or 37.6
percent, causing a net decrease in interest-bearing liabilities of $5.0 million,
or 4.3 percent.
Capital and Liquidity. At March 31, 2001, Montgomery's stockholders' equity
was $16.9 million, or 11.8 percent of total assets, a decrease of $49,000 from
June 30, 2000. Montgomery began to repurchase 62,240 shares of its outstanding
common stock on December 5, 2000. As of March 31, 2001, Montgomery had
repurchased 36,206 shares at a total cost of $366,000. The Association continues
to exceed all minimum capital requirements. At March 31, 2001, the Association's
tangible and core capital was $15.5 million, or 10.9 percent of tangible assets,
$13.4 million in excess of the 1.5 percent minimum required tangible capital and
$9.8 million in excess of the 4.0 percent minimum required core capital.
Risk-based capital equaled $15.0 million, or 17.2 percent of risk-weighted
assets, $8.0 million more than the minimum 8.0 percent risk-based level
required.
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 March
31, 2001, the Association's total assets were $142.9 million and risk-based
capital was 17.2 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 December 31, 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 $2.78 million, which was less than $3.46 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 December 31, 2000 NPV
information, the amount of the Association's deduction from capital, had it been
subject to reporting, would have been approximately $340,000.
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 December 31, 2000, and December 31, 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 December 31, 2000 and December 31,
1999, the NPV of the Association was $19.4 million and $18.9 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 December 31, 2000 At December 31, 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 -5,549 -29 -7,311 -39
- --------------------------------------------------------------------------------
+200 -50 -3,463 -18 -4,774 -25
- --------------------------------------------------------------------------------
+100 -30 -1,524 -8 -2,254 -12
- --------------------------------------------------------------------------------
0 0 0 0 0 0
- --------------------------------------------------------------------------------
-100 -30 +781 +4 +1,571 +8
- --------------------------------------------------------------------------------
-200 -50 +1,630 +8 +2,678 +14
- --------------------------------------------------------------------------------
-300 -60 +2,745 +14 +3,630 +19
- --------------------------------------------------------------------------------
In the event of a 300 basis point change in interest rate based upon
estimates as of December 31, 2000, the Association would experience a 14%
increase in NPV in a declining rate environment and a 29% 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
March 31, 2001, was $105,000 compared to $171,000 for the three months ended
March 31, 2000, a decrease of $66,000. Net interest income decreased $67,000, or
6.8 percent. Average interest-earning assets increased $776,000, or 0.6 percent,
from $130.0 million for the three months ended March 31, 2000, to $130.8 million
for the 2001 three-month period. Average interest-bearing liabilities increased
$1.7 million from $114.6 million to $116.3 million during the comparable
three-month period. Interest rate spread decreased from 2.43 percent for the
three months ended March 31, 2000, to 2.21 percent for the three months ended
March 31, 2001. Net interest margin decreased to 2.83 percent for the three
months ended March 31, 2001 from 3.06 percent for the three months ended March
31, 2000. Non-interest income was $38,000 for the 2001 three-month period
compared to $24,000 for the 2000 period. Non-interest expense was $785,000 for
the three months ended March 31, 2001 compared to $752,000 for the 2000
three-month period, an increase of $33,000, or 4.3 percent. Income before income
tax was $179,000 for the three months ended March 31, 2001 compared to $265,000
for the 2000 period, a decrease of $86,000. Income tax expense decreased from
$94,000 to $74,000 for the comparable periods.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
For the nine months ended March 31, 2001, net income was $331,000 compared
to $558,000 for the nine months ended March 31, 2000, a decrease of $227,000.
Net interest income decreased from $3.0 million for the nine months ended March
31, 2000 to $2.7 million for the nine months ended March 31, 2001, a decrease of
$269,000, or 9.0 percent. Average interest-earning assets increased $5.5 million
from $127.1 million for the nine months ended March 31, 2000, to $132.6 million
for the 2001 nine-month period while average interest-bearing liabilities
increased $7.2 million during the comparable periods. Non-interest income
increased $27,000 and non-interest expense increased $127,000. Income tax
expense was $221,000 for the nine months ended March 31, 2001, compared to
$364,000 for the nine months ended March 31, 2000.
Interest Income. Montgomery's total interest income for the three months
ended March 31, 2001, was $2.6 million, an increase of $49,000, or 1.9 percent,
compared to interest income for the three months ended March 31, 2000. This
increase was primarily caused by an increase in average interest-earning assets
from $130.0 million for the three months ended March 31, 2000, to $130.7 million
for the three months ended March 31, 2001, an increase of $776,000, or 0.6
percent principally due to mortgage loan growth. Average loans increased from
$117.0 million for the 2000 three-month period to $119.2 million for the 2001
three-month period and average interest-earning deposits decreased from $9.6
million to $9.3 million for the respective periods. The average yield on
interest-earning assets was 7.84 percent for the three months ended March 31,
2001, compared to 7.74 percent for the three months ended March 31, 2000.
Interest income for the nine months ended March 31, 2001, was $7.8 million,
an increase of $443,000, or 6.0 percent, from interest income for the same
period in 2000. Average interest-earning assets for the nine months ended March
31, 2001, was $132.6 million compared to $127.1 million for the 2000 nine-month
period, an increase of $5.5 million, or 4.3 percent, principally due to loan
growth. The average yield for the 2001 period was 7.84 percent compared to 7.71
percent for the 2000 period.
Interest Expense. Interest expense for the three months ended March 31,
2001, was $1.6 million, which was an increase of $116,000, or 7.6 percent, from
the three months ended March 31, 2000. Average interest-bearing liabilities
increased $1.7 million, or 1.5 percent, from $114.6 million for the three months
ended March 31, 2000, to $116.3 million for the three months ended March 31,
2001. Average interest-bearing deposits increased $12.5 million and average
borrowings decreased $11.1 million for the comparable periods. The average cost
of funds increased from 5.31 percent to 5.63 percent for the comparable periods.
The average cost of deposits increased from 5.18 percent to 5.60 percent for the
comparable three-month periods. The average cost of borrowings increased from
5.73 percent to 5.85 percent for the comparable periods.
Interest expense for the nine months ended March 31, 2001, was $5.1
million, an increase of $712,000, or 16.3 percent, from the nine months ended
March 31, 2000. The average cost of funds for the 2001 period was 5.73 percent
compared to 5.25 percent for the 2000 period. Average interest-bearing
liabilities increased from $110.8 million for the nine months ended March 31,
2000 to $118.0 million for the 2001 nine-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 nine-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 $1,050,000 at March 31, 2001, compared to $990,000 at June 30,
2000. Non-performing loans to total loans at March 31, 2001 were 0.88 percent
compared to 0.83 percent at June 30, 2000. The allowance for losses to
non-performing loans was 21.5 percent at March 31, 2001 compared to 22.8 percent
at June 30, 2000. The allowance to total loans was 0.19 percent at March 31,
2001 and at June 30, 2000. After review of the current loans delinquent ninety
days or more at March 31, 2001, 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
March 31, 2001 totaled $38,000 compared to $24,000 for the three months ended
March 31, 2000, an increase of $14,000. Service charges on deposit accounts
increased $17,000 primarily due to implementation of new fee schedules for
demand deposit accounts. Loss on the sale of available for sale securities was
$1,000 while no gain or loss was recorded for the comparable 2000 three-month
period. Real estate operations net income decreased $1,000 for the comparable
periods and other income decreased $1,000.
Other income for the nine months ended March 31, 2001, was $168,000, an
increase of $27,000 from the comparable 2000 nine-month period. During the nine
months ended March 31, 2001, service charges on deposit accounts increased
$35,000 and gain on the sale of securities available for sale decreased $21,000.
Income from real estate operation decreased $9,000 and other income increased
$22,000 from the 2000 nine-month period.
Non-Interest Expense. Montgomery's other expenses for the three months
ended March 31, 2001 totaled $785,000, an increase of $33,000, or 4.3 percent,
from the three months ended March 31, 2000. Salaries and employee benefits
increased $33,000 primarily due to an increase in personnel to accommodate
growth. Net occupancy expense increased $6,000 and equipment expense increased
$3,000. Data processing expense decreased $6,000 and other expenses increased
$1,000 primarily due to Montgomery's growth. Advertising expense decreased
$5,000 primarily due to increased advertising in the 2000 period to promote the
newly opened Lafayette office operation.
Non-interest expense for the nine months ended March 31, 2001, was $2.3
million, an increase of $127,000, or 5.8 percent, from the nine months ended
March 31, 2000. Salary and employee benefits increased $140,000 due to an
increase in personnel to accommodate growth and a decrease in deferred loan fee
costs due to a decrease in mortgage loan originations. Net occupancy expense
increased $22,000, equipment expense decreased $4,000 and data processing
expense decreased $7,000. Advertising expense decreased $18,000 primarily due to
the increased advertising during the 2000 period to promote the Lafayette
office. Other expense increased $11,000 primarily due to Montgomery's growth.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Income Tax Expense. Income tax expense for the three months ended March 31,
2001 was $74,000 compared to $94,000 for the three months ended March 31, 2001
due to the decrease in taxable income.
Income tax expense for the comparable nine-month periods decreased from
$364,000 for the 2000 period to $221,000 for the 2001 period, again due to the
decrease in net taxable income.
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 None.
Item 5. Other Information None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(ii) Montgomery Financial Corporation's Amended and Restated By-laws.
(b) Reports on Form 8-K
Montgomery filed no reports on Form 8-K during the quarter ended March
31, 2001.
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: May 14, 2001 By: /s/ J. Lee Walden
----------------------------------------
J. Lee Walden, President and Chief
Executive Officer
Date: May 14, 2001 By: /s/ Steven V. Brier
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Steven V. Brier, Vice President and Chief
Financial Officer