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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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 0-32041
CITIZENS FIRST BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 38-3573582
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization Identification No.)
525 Water Street, Port Huron, Michigan 48060
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(Address of principal executive offices) (Zip Code)
(810) 987-8300
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(Issuer's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changes since last report)
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. (1) Yes [X] No [ ]
(2) Yes [ ] No [X]
The Issuer had no shares of common stock, par value $0.01 per share,
outstanding as of February 26, 2001.
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CITIZENS FIRST BANCORP, INC.
FORM 10-Q
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of
December 31, 2000 and March 31, 2000.................................1
Consolidated Statements of Income for the Three and Nine
Months Ended December 31, 2000 and 1999 .............................2
Consolidated Statements of Changes in Equity
for the Nine Months Ended December 31, 2000 and 1999.................3
Consolidated Statements of Cash Flows for the
Nine Months Ended December 31, 2000 and 1999.........................4
Notes to Consolidated Financial Statements...........................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................5
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings...................................................11
Item 2. Changes in Securities and Use of Proceeds...........................11
Item 3. Defaults Upon Senior Securities.....................................11
Item 4. Submission of Matters to a Vote of Security Holders.................12
Item 5. Other Information...................................................12
Item 6. Exhibits and Reports on Form 8-K....................................12
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PART I. FINANCIAL INFORMATION
Citizens First Bancorp, Inc. (the "Company") is a recently formed
holding company, formed for the purpose of acquiring all of the common stock of
Citizens First Savings Bank (the "Bank") concurrent with the Bank's conversion
from the mutual to stock form of organization. At this time and until the
conversion is complete, the Company is a noncapitalized shell corporation with
no business activities. Accordingly, the financial statements which are set
forth below reflect the operations of the Bank. Upon completion of its
conversion, the Bank will become the wholly-owned subsidiary of the Company.
Item 1. Financial Statements.
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CITIZENS FIRST SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
AT DECEMBER 31, AT MARCH 31,
2000 2000
------------------ ----------------
(IN THOUSANDS)
Assets
Cash and cash equivalents:
Cash and due from depository institutions............................... $ 10,102 $ 5,194
Interest-bearing deposits in other depository institutions.............. 25,058 34,788
Federal funds sold...................................................... -- 5,200
-------- --------
Total cash and cash equivalents...................................... 35,160 45,182
Securities available for sale........................................... 82,750 94,288
Loans held for sale..................................................... 3,189 5,740
Loans - Net............................................................. 658,440 568,503
Federal Home Loan Bank Stock............................................ 6,150 5,119
Accrued interest receivable and other assets............................ 16,266 13,270
Premises and equipment - Net............................................ 9,637 9,468
-------- --------
Total assets............................................................ $811,592 $741,570
======== ========
LIABILITIES
- -----------
Deposits:
Noninterest-bearing.................................................. $ 18,528 $ 15,867
Interest-bearing..................................................... 592,872 585,141
-------- --------
Total deposits 611,400 601,008
-------- --------
Federal Home Loan Bank advances......................................... 118,004 70,502
Accrued interest and other liabilities.................................. 12,107 6,801
-------- --------
Total liabilities.................................................... 741,511 678,311
-------- --------
EQUITY
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Retained earnings....................................................... 69,960 $ 63,419
Accumulated other comprehensive income (loss)........................... 121 (160)
-------- --------
Total equity......................................................... 70,081 63,259
-------- --------
Total liabilities and equity......................................... $811,592 $741,570
======== ========
See accompanying notes to unaudited consolidated financial statements.
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CITIZENS FIRST SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED UNAUDITED
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------------- -------------------------
2000 1999 2000 1999
------------- ----------- ------------ ------------
(IN THOUSANDS)
INTEREST INCOME:
Loans....................................................... $13,294 $13,244 $38,436 $37,574
Federal funds sold and other cash equivalents............... 200 104 861 317
Securities:
Tax-exempt............................................... 116 -- 337 --
Taxable.................................................. 1,437 137 4,364 409
-------- --------- -------- --------
Total interest income................................. 15,047 13,485 43,998 38,300
INTEREST EXPENSE
Deposits.................................................... 7,423 5,765 21,412 16,764
FHLB advances............................................... 1,316 1,088 3,716 2,983
-------- --------- -------- --------
Total interest expense................................ 8,739 6,853 25,128 19,747
-------- --------- -------- --------
NET INTEREST INCOME - Before provision for loan losses......... 6,308 6,632 18,870 18,553
PROVISION FOR LOAN LOSSES...................................... 86 (84) 192 (84)
-------- ---------- -------- ---------
NET INTEREST INCOME............................................ 6,222 6,716 18,678 18,637
NON-INTEREST INCOME (LOSS):
Service charges and other fees.............................. 367 331 1,233 980
Mortgage banking activities................................. 300 (3,036) 768 (2,426)
Gain on sale of securities.................................. -- -- 89 --
Other....................................................... 51 202 621 700
-------- --------- -------- --------
Total noninterest income (loss)....................... 718 (2,503) 2,711 (746)
NON-INTEREST EXPENSE:
Compensation, payroll taxes and employee benefits........... 2,205 2,131 6,084 5,548
Office occupancy and equipment.............................. 800 748 2,419 2,113
Deposit insurance premiums.................................. 49 76 114 230
Advertising and business promotion.......................... 181 131 412 421
Stationery, printing and supplies........................... 267 267 833 753
Data processing............................................. 133 108 339 352
Deposit statement preparation and collection................ 159 118 436 338
Professional fees........................................... 79 173 212 447
State of Michigan taxes..................................... 82 6 223 146
Contributions............................................... -- -- -- 140
Appraisal fee............................................... 114 121 326 386
Other....................................................... 32 375 1,040 1,001
-------- --------- -------- --------
Total noninterest expense............................. 4,101 4,254 12,438 11,875
-------- --------- -------- --------
INCOME - Before federal income tax expense..................... 2,839 (41) 8,951 6,016
FEDERAL INCOME TAX EXPENSE..................................... 427 1 2,410 1,986
-------- --------- -------- --------
NET INCOME..................................................... $ 2,412 $ (42) $ 6,541 $ 4,030
======== ========== ======== ========
See accompanying notes to unaudited consolidated financial statements.
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CITIZENS FIRST SAVINGS BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
UNAUDITED
(IN THOUSANDS)
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE
EARNINGS INCOME (LOSS) TOTAL
----------- --------------- -----------------
BALANCE - April 1, 1998......................................... $ 50,909 $ 4,229 $ 55,138
Comprehensive income:
Net income................................................... 6,604 -- 6,604
Change in net unrealized gain on securities available
for sale - Net of reclassification adjustments and tax
effect.................................................... -- (4,229) (4,229)
---------- ---------
Total comprehensive income............................. -- -- 2,375
--------- ---------- ---------
BALANCE - March 31, 1999........................................ 57,513 -- 57,513
Comprehensive income:
Net income................................................... 5,906 -- 5,906
Change in net unrealized loss on securities available
for sale - Net of reclassification adjustments and tax
effect.................................................... -- (160) (160)
---------
Total comprehensive income............................. -- -- 5,746
--------- ---------- ---------
BALANCE - March 31, 2000........................................ 63,419 (160) 63,259
Comprehensive income (unaudited):
Net income................................................... 6,541 -- 6,541
Change in net unrealized loss on securities available
for sale - Net of reclassification adjustments and tax
effect.................................................... -- 281 281
--------- ---------- ---------
Total comprehensive income............................. -- -- 6,822
--------- ---------- ---------
BALANCE - December 31, 2000 (unaudited)......................... $69,960 $ 121 $70,081
====== ========= ======
See accompanying notes to unaudited consolidated financial statements.
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CITIZENS FIRST SAVINGS BANK AND INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
NINE MONTHS ENDED
DECEMBER 31,
--------------------------------
2000 1999
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(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................. $ 6,541 $ 4,030
Adjustments to reconcile net income to net cash operating activities:
Provision for deferred taxes............................................. (200) 600
Provision for loan losses................................................ 192 (84)
Depreciation............................................................. 656 665
(Accretion) amortization................................................. (154) 1
Proceeds from sale of mortgage loans held for sale....................... 18,739 178,416
Origination of mortgage loans held for sale.............................. (15,839) (177,717)
Gain on sale of investment securities.................................... (89) --
(Gain) loss on sale of mortgage loans.................................... (349) 4,178
Change in assets and liabilities:
Increase in accrued interest receivable and other assets................. (2,852) (4,190)
Increase (decrease) in accrued interest parable and other liabilities.... 5,306 (765)
------- ----------
Net cash provided by operating activities.......................... 11,951 5,134
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available for sale................... 13,125 --
Proceeds from sale of securities available for sale......................... 13,000 --
Purchase of available-for-sale securities................................... (14,007) --
Purchase of FHLB Stock...................................................... (1,031) (573)
Net increase in loans....................................................... (90,129) 46,024
Purchases of premises and equipment......................................... (825) (1,267)
------- ----------
Net cash (used for) provided by investing activities............... (79,867) 44,184
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits.................................................... 10,392 34,755
Repayment of FHLB advances.................................................. (2,398) (10,597)
Proceeds from FHLB advances................................................. 49,900 53,700
------- ----------
Net cash provided by financing activities.......................... 57,894 77,858
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................... (10,022) 127,176
CASH AND CASH EQUIVALENTS - Beginning of year.................................. 45,182 16,264
------- ----------
CASH AND CASH EQUIVALENTS - End of year........................................ $35,160 $143,440
======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid for:
Interest.................................................................... 24,603 20,217
Federal income taxes........................................................ 1,370 1,650
See accompanying notes to unaudited consolidated financial statements.
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CITIZENS FIRST SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. GENERAL
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The Company is a recently formed holding company formed for the purpose of
acquiring all of the common stock of the Bank concurrent with the Bank's
conversion from the mutual to the stock form of organization. At December 31,
2000, the Company was a shell corporation with no business activities and no
assets.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations.
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The following analysis discusses changes in the financial condition and
results of operations of the Bank at and for the three and nine months ended
December 31, 2000 and 1999, and should be read in conjunction with the Bank's
Consolidated Financial Statements and the notes thereto, appearing in Part I,
Item 1 of this document.
FORWARD LOOKING STATEMENTS
This report contains forward looking statements that are based on
assumptions and may describe future plans, strategies, and expectations of the
Company and the Bank. These forward looking statements are generally identified
by use of the words "believe," "expect," "intend," "anticipate," "estimate,"
"project," or similar expressions. The Company's ability to predict results or
the actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse effect on their operations and their
subsidiaries include, but are not limited to, changes in interest rates, general
economic conditions, legislative/regulatory changes, monetary and fiscal
policies of the U.S. Government, including policies of the U.S. Treasury and the
Federal Reserve Board, the quality and composition of the loan or investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in the Bank's market area and changes in relevant accounting
principles and guidelines. These risks and uncertainties should be considered in
evaluating forward looking statements and undue reliance should not be placed on
such statements. The Company and the Bank do not undertake, and specifically
disclaim any obligation, to publicly release the result of any revisions which
may be made to any forward looking statements to reflect events or circumstances
after the date of the statements or to reflect the occurrence of anticipated or
unanticipated events.
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2000 AND MARCH 31, 2000
Total assets increased by $70.0 million, or 9.4%, to $811.6 million at
December 31, 2000 from $741.6 million at March 31, 2000, primarily as a result
of an increase of $89.9 million in net loans. The increase in loans was due
mainly to an increase of $44.5 million in loans secured by one- to four-family
properties, an increase of $21.8 million in commercial and commercial real
estate loans and an increase of $11.9 million in consumer loans. The increase in
commercial real estate loans and commercial loans was primarily due to Citizens
First's continued emphasis and increased marketing of commercial real estate and
commercial loans which resulted in increased originations. The increase in
consumer loans resulted from the continued expansion into the indirect
automobile financing market through the establishment of additional
relationships with automobile dealers.
Total cash and cash equivalents decreased by $10.0 million, or 22.2%, to
$35.2 million at December 31, 2000 from $45.2 million at March 31, 2000.
Investment securities decreased by $11.5
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million to $82.8 million at December 31, 2000 from $94.3 million at March 31,
2000, as a result of maturing investment securities. These proceeds as well as
the cash and cash equivalents were used to fund loan originations.
The growth in net loans and total assets was funded primarily by an
increase in Federal Home Loan Bank advances of $47.5 million to $118.0 million
at December 31, 2000 from $70.5 million at March 31, 2000 and also from an
increase in deposits of $10.4 million to $611.4 million at December 31, 2000
from $601.0 million at March 31, 2000.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2000
AND 1999
NET INCOME
Net income increased by $2.5 million to $2.4 million for the three months
ended December 31, 2000 compared to a loss of $42,000 reported for the three
months ended December 31, 1999. The increase from period to period was primarily
the result of a loss of $4.5 million on the sale of $130.8 million of one- to
four-family loans to Freddie Mac reported in the quarter ended December 31,
1999. The loss was partially offset by the recording of $1.0 million in mortgage
servicing rights income related to the loans sold. These transactions resulted
in mortgage banking activities reflecting a loss of $3.0 million for the three
months ended December 31, 1999 compared to income in that category of $300,000
for the three months ended December 31, 2000. A decrease of $494,000 in net
interest income to $6.2 million for the three months ending December 31, 2000
offset the increase in mortgage banking activities.
NET INTEREST INCOME
Net interest income decreased $494,000, or 7.4%, to $6.2 million for the
three months ended December 31, 2000 from $6.7 million for the three months
ended December 31,1999. This was largely due to an increase in interest expense
of $1.9 million, or 27.5%, to $8.7 million for the three months ended December
31, 2000 from $6.8 million for the three months ended December 31, 1999. The
largest portion of this increase was due to increases in the average rates paid
on deposits, attributable to a rise in market interest rates on certificates of
deposit and on government and municipal deposits, which increased more than the
rates on earning assets for the comparison periods. An increase in average
deposits of $41.1 million, or 7.4%, also contributed to higher deposit expense.
The average balance of FHLB advances also increased from period to period by
slightly over $5.0 million.
Interest income increased by $1.5 million to $15.0 million for the three
months ended December 31, 2000 as compared to $13.5 million for the three months
ended December 31, 1999. The increase in net interest income was primarily due
to additional income generated through the purchase of securities with the
proceeds from the sale of $130.8 million in fixed-rate one- to four-family loans
in December 1999 to Freddie Mac.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased by $170,000 to $86,000 for the
three months ended December 31, 2000 as compared to a credit of $84,000 for the
three months ended December 31, 1999. The credit in the loan loss provision
during 1999 was due primarily to the sale of $130.8 million in loans previously
mentioned, which reduced loans outstanding. The increase in the provision
reflects management's assessment of the need to increase the allowance primarily
as a result of the growth in
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commercial real estate, multi-family real estate, commercial and consumer loans,
which have a greater inherent risk than one- to four-family loans. At December
31, 2000 and December 31, 1999, the allowance for loan losses was $10.53 million
and $10.99 million, respectively, which represented 383.9% of nonperforming
loans and 1.56% of total loans at December 31, 2000 compared to 747.5% of
nonperforming loans and 1.93% of total loans at December 31, 1999.
Provisions for loan losses are charges to earnings to bring the total
allowance for loan losses to a level considered by management as adequate to
provide for estimated loan losses based on management's evaluation of the
collectibility of the loan portfolio. While management believes that, based on
the information currently available, Citizens First's allowance for loan losses
is sufficient to cover losses inherent in its loan portfolio at this time, no
assurances can be given that Citizens First's level of allowance for loan losses
will be sufficient to cover future loan losses incurred by Citizens First or
that future adjustments to the allowance for loan losses will not be necessary
if economic and other conditions differ substantially from the economic and
other conditions used by management to determine the current level of the
allowance for loan losses.
NONINTEREST INCOME
For the three months ended December 31, 2000, noninterest income increased
by $3.3 million to $718,000 as compared to a loss of $2.5 million for the three
months ended December 31, 1999. The loss in 1999 was again due primarily to the
loss of $4.5 million on the sale of $130.8 million in one- to four- family loans
to Freddie Mac during December 1999, which was included in mortgage banking
activities. This was offset by the recording of mortgage servicing rights income
of $1.0 million related to the $130.8 million of loans sold.
NONINTEREST EXPENSE
Noninterest expense decreased by $153,000 to $4.1 million for the three
months ended December 31, 2000 from $4.3 million in the three months ended
December 31, 1999. This was a result of a decrease of $343,000 in other expense
of which loan related fees and other insurance expense were the largest
decreases. Professional fees also decreased by $94,000, due primarily to a
reduction in services required due to functions being performed by employees
that were previously performed by outside professionals. These decreases were
offset by an increase of 3.4% or $74,000 in compensation and benefits and an
increase of $52,000 in occupancy and equipment expenses.
INCOME TAXES
Income taxes for the three months ended were $427,000 resulting in an
effective tax rate of 15.0% for the period while the Company received a credit
of $1,000 for the three months ended December 31, 1999 resulting from a pre tax
loss in the period of $41,000. The effective tax rate for the three months
ending December 31, 2000 was reduced by 17.6% due to the reversal of the
deferred tax valuation allowance by $500,000. The valuation allowance was
reduced from $500,000 to $0 based on management's estimate that Citizens First
will realize a benefit from all deferred tax assets in future years. The change
in the valuation allowance during this period relates specifically to the
estimation by management that a contribution carry-forward in excess of $4.7
million will be utilized over the remaining four years available.
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COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND
- -------------------------------------------------------------------------------
1999
- ----
NET INCOME
Net income increased by $2.5 million, or 62.5%, to $6.5 million for the
nine months ended December 31, 2000 compared to $4.0 million for the nine months
ended December 31, 1999. The increase from period to period was primarily the
result of a loss of $4.5 million on the sale of $130.8 million of one- to
four-family loans to Freddie Mac partially offset by the recording of $1.0
million in mortgage servicing rights income related to the loans sold. From
period to period, net interest income increased also by $317,000, or 1.7%, to
$18.9 million for the nine months ended December 31, 2000 from $18.6 million for
the nine months ended December 31, 1999. These increases were offset by an
increase of $563,000, or 4.7%, in noninterest expense to $12.4 million for the
nine months ended December 31, 2000 from $11.9 million for the nine months ended
December 31, 1999.
NET INTEREST INCOME
Net interest income increased $317,000, or 1.7%, to $18.9 million for the
nine months ended December 31, 2000 from $18.6 million for the nine months ended
December 31, 1999. This was largely due to an increase in interest income in
investment securities of $4.3 million to $4.7 million for the nine months ended
December 31, 2000 from $409,000 for the nine months ended December 31, 1999.
This increase was due to an increase in the average balance of investment
securities as a result of purchases made with the proceeds from the loans sold
in December 1999. Interest income on loans increased by $862,000 or 2.3% to
$38.4 million for the nine months ended December 31, 2000 from $37.5 million for
the nine months ended December 31, 1999 due to a higher average balance of
loans.
Interest expense increased by $5.4 million, or 27.2%, to $25.1 million for
the nine months ended December 31, 2000 from $19.7 million for the nine months
ended December 31, 1999. The increase came primarily from deposits, which
increased by $4.6 million, or 27.7%, to $21.4 million for the nine months ended
December 31, 2000 from $16.8 million for the nine months ended December 31, 1999
largely due to increases in the rates paid on deposits, the increases of which
were attributable to a rise in market interest rates on certificates of deposit
and on government and municipal deposits. Interest expense on FHLB advances also
increased as the result of increases in advances.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased by $276,000 to $192,000 for the
nine months ended December 31, 2000 as compared to a credit of $84,000 for the
nine months ended December 31, 1999. The credit in the loan loss provision
during 1999 was due primarily to the sale of $130.8 million in loans previously
mentioned. The increase in the provision reflects management's assessment of the
need to increase the allowance primarily as a result of the growth in commercial
real estate, multi-family real estate, commercial and consumer loans, which have
a greater inherent risk than one- to four-family loans.
NONINTEREST INCOME
For the nine months ended December 31, 2000, noninterest income increased
by $3.5 million to $2.7 million as compared to a loss of $746,000 for the nine
months ended December 31, 1999. This was due primarily to the loss of $4.5
million on the sale of $130.8 million in one- to four-family loans to Freddie
Mac during December 1999. This was offset by the recording of mortgage serving
rights income
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of $1.0 million related to the $130.8 million of loans sold. Increases in
service charges as well as the introduction of new products resulted in
additional service charge revenues of $253,000, or 25.8%, to $1.2 million for
the nine months ended December 31, 2000, as compared to $980,000 for the nine
months ended December 31, 1999.
NONINTEREST EXPENSE
Noninterest expense increased by $563,000, or 4.7%, to $12.4 million for
the nine months ended December 31, 2000 from $11.9 million in the nine months
ended December 31, 1999. This was primarily due to an increase of $536,000, or
9.7%, to $6.1 million in compensation and benefits expense and an increase of
$306,000, or 14.5% to $2.4 million in occupancy and equipment expenses. These
increases were offset by a decrease in professional fees of $235,000 to $212,000
for the nine months ended December 31, 2000 as less services were required due
to functions being performed by employees that were previously performed by
outside professionals. Deposit insurance premiums decreased by $116,000 to
$114,000 and contributions were down $140,000 in the same periods.
INCOME TAXES
Income taxes for the nine months ended December 31, 2000 were $2.4
million, resulting in an effective tax rate of 26.9% for the period, while
income taxes for the nine months ended December 31, 1999 were $1.9 million, or
33.0% of pre-tax net income. The effective tax rate for the nine months ending
December 31, 2000 was reduced by 5.6% due to the reversal of the deferred tax
valuation allowance by $500,000. The valuation allowance was reduced from
$500,000 to $0 based on management's estimate that Citizens First will realize a
benefit from all deferred tax assets in future years. The change in the
valuation allowance during this period relates specifically to the estimation by
management that a contribution carry-forward in excess of $4.7 million will be
utilized over the remaining four years available.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability to meet current and future financial obligations
of a short-term nature. Citizens First further defines liquidity as the ability
to have funds available to respond to the needs of depositors and borrowers as
well as maintaining the flexibility to take advantage of investment
opportunities. Citizens First's primary sources of funds consist of deposit
inflows, loan repayments, maturities and sales of investment securities and
borrowings from the Federal Home Loan Bank. While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.
Liquidity management is both a daily and long-term responsibility of
management. Citizens First adjusts its investments in liquid assets based upon
management's assessment of (1) expected loan demand, (2) expected deposit flows,
(3) yields available on interest-earning deposits and securities, and (4) the
objectives of its asset/liability management program. Excess liquid assets are
invested generally in interest-earning overnight deposits and short- and
intermediate-term U.S. Government and agency obligations.
Federal and state regulations require Citizens First to maintain minimum
levels of liquid assets. The required percentage has varied from time to time
based upon economic conditions and savings flows and is currently 4.0% of net
withdrawable savings deposits and borrowings payable on demand or in one
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year or less during the preceding calendar month. Liquid assets for purposes of
this ratio include cash, certain time deposits, U.S. Government, government
agency and corporate securities and other obligations generally having remaining
maturities of less than five years. Citizens First has historically maintained
its liquidity ratio for regulatory purposes at levels in excess of those
required. At December 31, 2000, Citizens First's liquidity ratio for regulatory
purposes was 14.5%.
Citizens First's most liquid assets are cash and short-term investments
(securities maturing in one year or less). The levels of these assets are
dependent on Citizens First's operating, financing, lending and investing
activities during any given period. At December 31, 2000, cash and short-term
investments totaled $35.2 million and securities classified as
available-for-sale totaled $82.8 million. In addition, at December 31, 2000,
Citizens First had the ability to borrow a total of approximately $318.1 million
from the Federal Home Loan Bank of Indianapolis. On that date, Citizens First
had advances outstanding of $127.7 million.
The primary investing activities of Citizens First are the origination of
loans and the purchase of securities. In the first nine months of fiscal 2001,
Citizens First originated $240.6 million of loans and purchased $10.4 million of
securities. In fiscal 2000, Citizens First originated $292.5 million of loans
and purchased $95.9 million of securities. In fiscal 1999, Citizens First
originated $295.8 million of loans and purchased $824,000 of securities.
Citizens First originates fixed-rate loans conforming to Freddie Mac
guidelines generally for sale in the secondary market. The proceeds of such
sales provide funds for both additional lending and liquidity to meet current
obligations. In December 1999, Citizens First sold $130.8 million of mortgage
loans for the purpose of reorganizing the balance sheet, managing interest rate
risk and providing liquidity. This transaction was unusual and management does
not have any current plans to engage in another such loan sale.
Financing activities consist primarily of activity in deposit accounts and
Federal Home Loan Bank advances. Citizens First experienced a net increase in
total deposits of $10.4 million, $74.2 million and $23.4 million for the first
nine months of fiscal 2001, and fiscal 2000 and 1999, respectively. Deposit
flows are affected by the overall level of interest rates, the interest rates
and products offered by Citizens First and its local competitors and other
factors. Citizens First generally manages the pricing of its deposits to be
competitive and to increase core deposit relationships. Occasionally, Citizens
First offers promotional rates on certain deposit products in order to attract
deposits. In the first nine months of fiscal 2001, Federal Home Loan Bank
advances increased $47.5 million. During fiscal 2000 and 1999, Federal Home Loan
Bank advances increased $16.2 million and $2.7 million, respectively.
At December 31, 2000, Citizens First had outstanding commitments to
originate loans of $35.2 million, $28.0 million of which had fixed interest
rates. These loans are to be secured by properties located in its market area.
Citizens First anticipates that it will have sufficient funds available to meet
its current loan commitments. Loan commitments have, in recent periods, been
funded through liquidity or through Federal Home Loan Bank borrowings.
Certificates of deposit that are scheduled to mature in one year or less from
December 31, 2000 totaled $241.8 million. Management believes, based on past
experience, that a significant portion of those deposits will remain with
Citizens First. Based on the foregoing, Citizens First considers its liquidity
and capital resources sufficient to meet its outstanding short-term and
long-term needs.
Citizens First is subject to various regulatory capital requirements
administered by the Federal Deposit Insurance Corporation including a risk-based
capital measure. The risk-based capital guidelines
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include both a definition of capital and a framework for calculating
risk-weighted assets by assigning balance sheet assets and off-balance sheet
items to broad risk categories. At December 31, 2000, Citizens First exceeded
all of its regulatory capital requirements. Citizens First is considered "well
capitalized" under regulatory guidelines.
The capital from the conversion will significantly increase liquidity and
capital resources. Over time, the initial level of liquidity will be reduced as
net proceeds from the stock offering are used for general corporate purposes,
including the funding of lending activities. Citizens First's financial
condition and results of operations will be enhanced by the capital from the
conversion, resulting in increased net interest-earning assets and net income.
However, due to the large increase in equity resulting from the capital
injection, return on equity will be adversely impacted following the conversion
until that capital can be effectively deployed at market rates, a goal that may
take a number of years to achieve.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------
As of December 31, 2000, there have been no material changes in the
quantitative and qualitative disclosures about market risks since the report in
the Company's prospectus for the period ending August 31, 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
Periodically, there have been various claims and lawsuits involving
Citizens First Savings Bank, such as claims to enforce liens, condemnation
proceedings on properties in which Citizens First Savings Bank holds security
interests, claims involving the making and servicing of real property loans and
other issues incident to Citizens First Savings Bank's business. Citizens First
Bancorp is not a party to any pending legal proceedings that it believes would
have a material adverse effect on the financial condition or operations of
Citizens First Bancorp.
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities.
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
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None.
Item 5. Other Information.
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None.
Item 6. Exhibits and Reports on Form 8-K (ss.249.308 of this Chapter).
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(a) Exhibits
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2.1 Plan of Conversion for Citizens First Savings Bank (including the
Amended and Restated Articles of Incorporation and Stock Bylaws of
Citizens First Savings Bank) (1)
3.1 Certificate of Incorporation of Citizens First Bancorp, Inc. (1)
3.2 Bylaws of Citizens First Bancorp, Inc. (1)
4.0 Form of Stock Certificate for Citizens First Bancorp, Inc. (1)
-----------------------------
(1) Incorporated by reference into this document from the Exhibits filed
with the Registration Statement on Form S-1, and any amendments
thereto, Registration No. 333-49234.
(b) Reports on Form 8-K
None.
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CONFORMED
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITIZENS FIRST BANCORP, INC.
Dated: February 26, 2001 By: /s/ Marshall J. Campbell
-----------------------------------
Marshall J. Campbell
Chairman of the Board
(principal executive officer)
Dated: February 26, 2001 By: /s/ Timothy D. Regan
-----------------------------------
Timothy D. Regan
Secretary, Treasurer and Director
(principal financial and accounting
officer)