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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
MONTGOMERY FINANCIAL CORPORATION
(Exact Name of Small Business Issuer in its Charter)
Indiana 35-1962246
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
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 October 31, 1997, there were 1,653,032 shares of the Registrant's
common stock issued and outstanding.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Form 10-Q
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statement of Financial Condition
As of September 30, 1997 and June 30, 1997
Consolidated Condensed Statement of Income for the Three
Months Ended September 30, 1997 and 1996
Consolidated Condensed Statement of Cash Flows for the
Three Months Ended September 30, 1997 and 1996
Consolidated Condensed Statement of Changes in Stockholders'
Equity for the Three Months Ended September 30, 1997
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults in Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Financial Condition
(Unaudited)
September 30, June 30,
1997 1997
------------- -------------
Assets
Cash ............................................ $ 326,110 $ 221,456
Short-term interest-bearing deposits ............ 6,057,744 11,373,316
------------- -------------
Total cash and cash equivalents .......... 6,383,854 11,594,772
Interest-bearing deposits ....................... 100,000 100,000
Securities available for sale ................... 32,407 42,494
Loans ........................................... 90,770,595 87,088,294
Allowance for loan losses ....................... (183,000) (180,000)
------------- -------------
Net loans .................................. 90,587,595 86,908,294
Real estate owned and held for development, net . 1,333,281 1,301,734
Premises and equipment .......................... 1,656,368 1,620,885
Federal Home Loan Bank stock .................... 921,500 921,500
Interest receivable ............................. 719,623 684,479
Other assets .................................... 251,412 225,147
------------- -------------
Total assets ............................. $ 101,986,040 $ 103,399,305
============= =============
Liabilities
Deposits
Noninterest bearing ......................... $ 1,188,896 $ 1,165,223
Interest bearing .......................... 71,217,905 70,100,001
------------- -------------
Total deposits .................... 72,406,801 71,265,224
Federal Home Loan Bank advances ................. 8,428,373 11,428,373
Interest payable ................................ 486,631 423,305
Deferred tax liability .......................... 360,156 360,156
Dividends Payable .............................. 90,917
Other liabilities ............................... 692,087 555,669
------------- -------------
Total liabilities ........................ 82,464,965 84,032,727
------------- -------------
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Financial Condition
(Unaudited)
(continued)
September 30, June 30,
1997 1997
------------- -------------
Stockholders' Equity
Preferred stock, $.01 par value
authorized and unissued--2,000,000 shares
Common stock, $.01 par value--8,000,000 shares
authorized; 1,653,032 issued ............... 16,530 16,530
Paid-in capital ................................. 13,550,925 13,547,619
Retained earnings - substantially restricted .... 7,271,152 7,136,492
Unearned ESOP shares--129,906 and 132,250 ...... (1,305,969) (1,322,500)
Unearned compensation ........................... (11,563) (11,563)
------------- -------------
Total stockholders' equity ............... 19,521,075 19,366,578
Total liabilities and stockholders' equity $ 101,986,040 $ 103,399,305
============= =============
See notes to Consolidated Condensed Financial Statements.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Income
(Unaudited)
Three Months Ended
September 30,
-------------------------------
1997 1996
Interest and Dividend Income
Loans ........................................... $ 1,854,433 $ 1,676,124
Investment securities ........................... 567 6,008
Deposits with financial institutions ............ 114,746 48,079
Dividend income ................................. 19,163 14,799
----------- -----------
Total interest and dividend income ......... 1,988,909 1,745,010
----------- -----------
Interest Expense
Deposits ........................................ 956,764 961,702
Federal Home Loan Bank advances ................. 145,160 132,583
----------- -----------
Total interest expense ..................... 1,101,924 1,094,285
----------- -----------
Net Interest Income ............................... 886,985 650,725
Provision for losses on loans ................... 3,000
----------- -----------
Net Interest Income After
Provision for Losses on Loans ................... 883,985 650,725
----------- -----------
Other Income
Service charges on deposit accounts ............. 7,238 6,015
Net appraisal income (expense) .................. (1,054) 3,081
Other income .................................... 1,318 892
----------- -----------
Total other income ......................... 7,502 9,988
----------- -----------
Other Expenses
Salaries and employee benefits .................. 275,858 213,680
Net occupancy expense ........................... 26,186 25,531
Equipment expense ............................... 35,333 34,121
Data processing expense ......................... 27,958 22,425
Deposit insurance expense ....................... 11,428 468,838
Real estate operations, net ..................... (10,685) (13,071)
Advertising expense ............................. 8,599 8,590
Other expenses .................................. 114,183 106,897
----------- -----------
Total other expenses ................... 488,860 867,011
----------- -----------
Income (Loss) Before Income Tax ................... 402,627 (206,298)
Income tax expense (benefit) .................... 177,050 (79,232)
----------- -----------
Net Income (Loss) ................................. $ 225,577 $ (127,066)
=========== ===========
Net Income (Loss) Per Share ....................... $ 0.15 $ (0.27)
=========== ===========
Dividends Per Share ............................... $ 0.055 $ 0.054
=========== ===========
Weighted Average Shares Outstanding ............... 1,521,954 466,350
See Notes to Consolidated Condensed Financial Statements.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Cash Flows
(Unaudited)
Three Months Ended
September 30,
-----------------------------
1997 1996
----------- -----------
Operating Activities
Net income ........................................... $ 225,577 $ (127,066)
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses ........................ 3,000 --
Depreciation ..................................... 50,450 52,177
Deferred income tax .............................. -- 24
ESOP stock amortization .......................... 19,837 --
Change in
Interest receivable .......................... (35,144) (35,464)
Interest payable ............................. 63,326 47,924
Other assets ................................. (26,265) (56,231)
Other liabilities ........................... 136,418 361,604
----------- -----------
Net cash provided by operating activities .... 437,199 242,968
----------- -----------
Investing Activities
Proceeds from paydowns of securities
available for sale ............................... 10,087 9,454
Net change in loans .................................. (3,682,301) (3,504,665)
Additions to real estate owned and held for investment (39,824) (77,776)
Purchases of premises and equipment .................. (77,656) (71,213)
----------- -----------
Net cash used by investing activities ........ (3,789,694) (3,644,200)
----------- -----------
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Cash Flows
(Continued)
Three Months Ended
September 30,
-------------------------------
1997 1996
------------ ------------
Financing Activities
Net change in
Noninterest-bearing, interest-bearing demand and
savings deposits ............................... $ 1,472,058 $ (558,861)
Certificates of deposit ............................ (330,481) 396,500
Short-term borrowing ............................... -- 1,293,775
Proceeds from FHLB advances ............................ 2,000,000
Repayment of FHLB advances ............................. (3,000,000) --
Dividends paid ........................................... -- (25,000)
------------ ------------
Net cash provided (used) by financing activities (1,858,423) 3,106,414
------------ ------------
Net Change in Cash and Cash Equivalents .................. (5,210,918) (294,818)
Cash and Cash Equivalents, Beginning of Period ........... 11,594,772 3,636,204
------------ ------------
Cash and Cash Equivalents, End of Period ................. $ 6,383,854 $ 3,341,386
============ ============
Additional Cash Flow and Supplementary Information
Interest Paid .......................................... $ 1,038,598 $ 1,169,252
Income Tax Paid ........................................ 102,800 15,847
Transfer from Loans to Other Real Estate Owned ......... 307,894
Cash Dividends Payable ................................ 90,917
See Notes to Consolidated Condensed Financial Statements
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Consolidated Condensed Statement of Changes in Stockholders' Equity
(Unaudited)
Common Stock
------------------
Paid-in Retained Unearned Unearned
Shares Amount Capital Earnings ESOP Shares Compensation Total
------ ------ ------- -------- ----------- ------------ -----
Balance July 1, 1997 1,653,032 $16,530 $13,547,619 $7,136,492 $(1,322,500) $(11,563) $19,366,578
Net income for the three months
ended September 30, 1997 225,577 225,577
Cash dividends ($.055 per share) (90,917) (90,917)
ESOP shares earned 3,306 16,531 19,837
--------- ------- ----------- ---------- ----------- -------- -----------
Balance September 30, 1997 1,653,032 $16,530 $13,550,925 $7,271,152 $(1,305,969) $(11,563) $19,521,075
========= ======= =========== ========== =========== ======== ===========
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-Q 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 September 30, 1997, results
of operations for the three month periods ending September 30, 1997 and 1996,
and cash flows for the three month periods ended September 30, 1997 and 1996.
The results of operations for the three month period ended September 30, 1997
are not necessarily indicative of the results of operations which may be
expected for the fiscal year ending June 30, 1998.
Net Income Per Share
Net income per share for the three month period ended September 30, 1997, and
the three month period ended September 30, 1996, are computed by dividing net
earnings by the weighted average shares of common stock outstanding during the
period. For the three month period ended September 30, 1996, the weighted
average shares is computed based upon the weighted average of the 250,000 shares
of publicly owned common stock of the Association that were outstanding during
the three month period converted to 466,350 shares of Montgomery common stock in
connection with the second conversion and reorganization completed on June 30,
1997.
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" 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 $102.0 million at
September 30, 1997, a decrease of $1.4 million, or 1.4 percent from June 30,
1997. During this three month period interest-earning assets decreased $1.6
million, or 1.6 percent. Short-term interest-earning deposits decreased $5.3
million, or 46.3 percent primarily due to the use of liquidity received from the
sale of stock on June 30, 1997 to repay Federal Home Loan Bank advances and fund
loan growth. Loans increased $3.7 million, or 4.3 percent, which is the
approximate increase budgeted for the current year-to-date. Real estate owned
increased $32,000, or 2.4 percent. Deposits increased $1.1 million, or 1.5
percent and borrowings decreased $3.0 million, or 26.3 percent, causing a net
decrease in interest-bearing liabilities of 2.3 percent. The increase in
deposits was primarily due to normal growth.
Capital and Liquidity. At September 30, 1997, stockholders' equity was
$19,521,000 or 19.1 percent of total assets, compared with stockholders' equity
of $19,367,000, or 18.7 percent, at June 30, 1997. The Association continues to
exceed all minimum capital requirements. At September 30, 1997, the
Association's tangible and core capital was $14,838,000, or 14.6 percent of
tangible assets, $13,316,000 in excess of the 1.5 percent minimum required
tangible capital and $11,793,000 in excess of the 3.0 percent minimum required
core capital. Risk-based capital equaled $13,797,000, or 22.5 percent of
risk-weighted assets, $8,890,000 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 five percent. The Association's average liquidity
ratio for the three months ended September 30, 1997, was 8.7 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. OTS regulations provide 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
OTS regulations, an institution's "normal" level of interest rate risk in the
event of an immediate and sustained 200 basis point 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. Beginning September 30, 1995, 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.
Regulations exempt all institutions under $300 million in assets with risk-based
capital above 12 percent from reporting information to calculate exposure and
making any deduction from risk-based capital. At September 30, 1997, the
Association would have been exempt from calculating or making any risk-based
capital reduction. The Association's management however, feels interest-rate
risk is an important factor and makes all reports necessary to OTS to calculate
interest-rate risk on a voluntary basis. At June 30, 1997, the most recent date
for which information available from the OTS, 2.0% of the present value of the
Association's assets was approximately $2.12 million, which was less than $3.64
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 June 30, 1997
NPV information, the amount of the Association's deduction from capital, had it
been subject to reporting, would have been approximately $758,000.
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 the Association'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.
These strategies have resulted in the Association maintaining acceptable limits
as set out in the Interest Rate Risk Policy.
Presented below, as of June 30, 1997 and June 30, 1996, is an analysis
of Montgomery'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 June 30, 1997, and June 30, 1996, the NPV of the
Association was $18.4 million and $10.7 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 June 30, 1997 At June 30,1996
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 -5,754 -43 -4,823 -45
+200 -50 -3,637 -31 -3,042 -29
+100 -30 -1,622 -20 -1,351 -13
0 0 0 0 0 0
-100 -30 +988 +5 +838 +8
-200 -50 +1,237 +7 +1,097 +10
-300 -60 +1,347 +7 +1,112 +10
In the event of a 300 basis point change in interest rate based upon
estimates as of June 30, 1997, the Association would experience a 7% increase in
NPV in a declining rate environment and a 43% decrease in NPV in a rising
environment. During periods of rising rates, the value of monetary assets and
liabilities decline. Conversely, during periods of falling rates, the value of
monetary assets and liabilities increase. 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 interest rate on
interest-bearing liabilities increasing more than the interest rate on
interest-earning assets because of the annual and lifetime caps on interest rate
adjustments for adjustable rate loans and because of the lag in rate adjustments
for such loans as compared to interest-bearing liabilities.
Results of Operations. Montgomery's net income for the three months
ended September 30, 1997, was $226,000 compared to a net loss $127,000 for the
three months ended September 30, 1996, an increase of $353,000. Net interest
income increased $236,000, or 36.3 percent, primarily due to an increase in
average interest-earning assets of $10.9 million, or 12.6 percent. Average
interest-earning assets were $97.3 million for the three months ended September
30, 1997 compared to $86.4 million for the 1996 period. Average interest-bearing
liabilities decreased from $78.8 million to $78.7 million during the comparable
periods. Interest rate spread increased from 2.53 percent for the three months
ended September 30, 1996, to 2.58 percent for the three months ended September
30, 1997. Due to the increase in average interest-earning assets, net interest
margin increased to 3.64 percent for the three months ended September 30, 1997
from 3.01 percent for the three months ended September 30, 1996. The provision
for losses on loans was $3,000 for the three months ended September 30, 1997,
with no provision being made during the comparable
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
1996 period. Non-interest income was $8,000 for the 1997 three month period
compared to $10,000 for the 1996 period. Non-interest expense was $489,000 for
the three months ended September 30, 1997 compared to $867,000 for the 1996
period, a decrease of $378,000, or 43.6 percent, primarily due to the Savings
Association Insurance Fund ("SAIF") one time special assessment in the amount of
$428,000 in the 1996 period. Income before income tax was $403,000 for the three
months ended September 30, 1997, compared to a loss of $206,000 for the three
months ended September 30, 1996, an increase of $609,000. Income tax for the
three months ended September 30, 1997, was $177,000 compared to a net income tax
benefit of $79,000 for the three months ended September 30, 1996. Net income for
the three months ended September 30, 1996 was $132,000, before the after tax net
effect of the SAIF time special assessment in the amount of $259,000, as
compared to $226,000 for the current three month period.
Interest Income. Montgomery's total interest income for the three
months ended September 30, 1997, was $2.0 million, an increase of $244,000, or
14.0 percent, compared to interest income for the three months ended September
30, 1996. This increase was primarily caused by an increase in average
interest-earning assets from $86.4 million for the three months ended September
30, 1996, to $97.3 million for the three months ended September 30, 1997, an
increase of $10.9 million, or 12.6 percent. Average loans increased from $81.7
million for the 1996 period to $88.9 million for the 1997 period and average
interest-earning deposits increased from $3.7 million to $7.5 million for the
respective periods. The average yield on interest-earning assets was 8.17
percent for the three months ended September 30, 1997, compared to 8.08 percent
for the three months ended September 30, 1996. This increase was primarily
caused by an increase in the average yield on loans from 8.21 percent to 8.35
percent for the current three month period.
Interest Expense. Interest expense for the three months ended
September 30, 1997, was $1.1 million, which was an increase of $8,000, or 0.7
percent, from the three months ended September 30, 1996. Average
interest-bearing liabilities decreased $94,000, or 0.1 percent, from $78.8
million for the three months ended September 30, 1996, to $78.7 million for the
three months ended September 30, 1997. The average cost of funds increased
however, from 5.55 percent to 5.60 percent for the comparable periods and the
average cost of deposits increased from 5.50 percent to 5.51 percent. In
addition, the average rate on borrowings increased from 5.94 percent to 6.22
percent for the comparable periods due to converting some short term FHLB
advances to longer term fixed rate advances.
Provision for Losses on Loans. The provision for losses on loans was
$3,000 for the three months ended September 30, 1997. There was no provision
made for the three months ended September 30, 1996. 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
allowance for loss accounts. Based on the most recent review, to comply with the
current review policy, it was necessary to make the $3,000 provision. Loans
delinquent ninety days or more were $640,000 at September 30, 1997, compared to
$502,000 at June 30, 1997 and $544,000 at September 30, 1996. Non-performing
loans to total loans at September 30, 1997, was 0.71 percent compared to 0.58
percent at June 30, 1997 and 0.65 percent at September 30, 1996.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Non-performing assets, consisting of non-performing loans in the amount of
$640,000 and other real estate in the amount of $109,000, totaled $749,000, or
0.73 percent of total assets, at September 30, 1997. At June 30, 1997,
non-performing assets were $611,000, or 0.59 percent of total assets and
$1,018,000, or 1.1 percent at September 30, 1996. The allowance for losses to
non-performing assets was 24.4 percent at September 30, 1997, 29.5 percent at
June 30, 1996 and 15.5 percent at September 30, 1996. The allowance to total
loans was 0.20 percent at September 30, 1997, 0.21 percent at June 30, 1997 and
0.19 percent at September 30, 1996. As new loan products are offered, and
Montgomery increases its amount of non-residential and consumer loans,
management will re-evaluate the level of the allowance for loan losses.
Non-Interest Income. Montgomery's other income for the three months
ended September 30, 1997, totalled $8,000 compared to $10,000 for the three
months ended September 30, 1996, a decrease of $2,000, or 20.0 percent.
Appraisal income decreased $4,000 during the comparable period due to the
reduction in the number of loan applications in the comparative periods.
Non-Interest Expense. Montgomery's other expenses for the three months
ended September 30, 1997, totalled $489,000, compared to $867,000 for the three
months ended September 30, 1996, a decrease of $378,000, or 43.6 percent.
Salaries and employee benefits increased $62,000. Stock benefit plans were
adopted subsequent to the September, 1996 three month period and the cost of
these plans was $26,000 for the three months ended September 30, 1997. The
balance of the increase was primarily due to an increase in branch office
personnel to accommodate growth. Equipment expense increased $1,000 and data
processing expense increased $6,000. These increases are generally reflective of
Montgomery's growth. Deposit insurance expense decreased $458,000 for the
comparative periods due to the one time special assessment of $428,000 and a
decrease of $30,000 in the quarterly premium resulting from the one time SAIF
special assessment. Real estate operations net income for the three months ended
September 30, 1997, was $11,000 compared to $13,000 for the 1996 comparable
period, an decrease of $2,000. This was due to a decrease in net rental income.
Other expenses increased $7,000, or 6.5 percent, for the three months ended
September 30, 1997, compared to the same 1996 period, primarily due to the
growth in activity in demand deposits and the related costs of operation of
Montgomery's first ATM at its Mill Street Office.
Income Tax Expense (Benefit). Income tax expense for the three months
ended September 30, 1997, was $177,000 compared to a tax benefit of $79,000 for
the three months ended September 30, 1996. The tax benefit for the three months
ended March 31, 1996, was caused primarily by the one time SAIF special
assessment.
MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
Crawfordsville, Indiana
Part II. OTHER INFORMATION
Item 1. Legal Proceedings None.
Item 2. Changes in Securities and Use of Proceeds 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
27. Financial Data Schedule
(b) Reports on Form 8-K
None
MONTGOMERY SAVINGS, A FEDERAL ASSOCIATION
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: November 12, 1997 By: /s/Earl F. Elliott
------------------
Earl F. Elliott, President and Chief
Executive Officer
Date: November 12, 1997 By: /s/J. Lee Walden
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J. Lee Walden, Vice President and Chief
Financial Officer