SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-22790
STATEFED FINANCIAL CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 42-1410788
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(State of other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) or Number)
519 Sixth Avenue, Des Moines, Iowa 50309
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(Address of principal executive offices)
(515) 282-0236
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(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
State the number of Shares outstanding of each of the issuer's classes
of common equity, as the latest date:
As of May 8, 2000, there were 1,508,600 shares of the Registrant's
common stock issued and outstanding.
STATEFED FINANCIAL CORPORATION
Form 10-QSB
Index
Financial Information Page No.
Item 1. Consolidated Financial Statements:
Consolidated Statements of Financial Condition
as of March 31, 2000 and June 30, 1999 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 2000 and 1999 and for the Nine
Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Comprehensive Income for
the Three Months Ended March 31, 2000 and
1999 and for the Nine Months Ended
March 31, 2000 and 1999 5
Consolidated Statement of Changes In Stockholders'
Equity for the Nine Months Ended March 31, 2000 6
Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Items 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. Other Information 16
Signatures 17
2
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 2000 and June 30, 1999
PART 1. Financial Information
Item 1. Financial Statements
ASSETS (Unaudited)
March 31, 2000 June 30, 1999
-------------- -------------
Cash and amounts due from depository institutions $ 820,373 $ 8,481,216
Investments in certificates of deposit 685,000 884,300
Investment securities held-for-sale 2,214,611 1,944,374
Loans receivable, net 82,496,102 72,330,884
Real estate acquired for development 195,292 236,602
Real estate held for investment, net 3,406,130 2,645,245
Property acquired in settlement of loans 1,223,792 1,133,517
Office property and equipment, net 1,144,493 1,188,247
Federal Home Loan Bank stock, at cost 1,147,600 1,147,600
Accrued interest receivable 539,012 536,028
Other assets 255,962 295,695
----------- -----------
TOTAL ASSETS $94,128,367 $90,823,708
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $54,206,305 $54,713,072
Advances from Federal Home Loan Bank 22,807,705 18,877,047
Advances from borrowers for taxes and insurance 281 337,371
Accrued interest payable 71,390 133,773
Dividends payable 113,145 114,300
Income taxes:current and deferred 361,848 324,643
Other liabilities 262,799 200,123
----------- -----------
TOTAL LIABILITIES $77,823,473 $74,700,329
----------- -----------
Stockholders' equity:
Common stock $ 8,905 $ 8,905
Additional paid-in capital 8,548,442 8,526,563
Unearned compensation - restricted stock awards (221,786) (271,290)
Unrealized gain (loss) on investments (218,797) 3,803
Treasury stock (2,371,629) (2,234,986)
Retained earnings - substantially restricted 10,559,759 10,090,384
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $16,304,894 $16,123,379
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $94,128,367 $90,823,708
=========== ===========
3
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and
1999 and For the Nine Months Ended March 31, 2000 and 1999
Three Months Ended Nine Months Ended
March 31 March 31
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Interest Income:
Loans $1,665,770 $1,489,460 $4,819,783 $4,493,883
Investments 72,865 59,736 209,171 211,399
Other 12,972 114,889 115,738 357,789
---------- ---------- ---------- ----------
Total interest income $1,751,608 $1,664,085 $5,144,692 $5,063,071
Interest Expense:
Deposits $ 666,051 $ 715,662 $2,028,266 $2,187,927
Borrowings 308,888 269,542 865,020 839,356
---------- ---------- ---------- ----------
Total interest expense $ 974,939 $ 985,204 $2,893,286 $3,027,283
Net interest Income $ 776,669 $ 678,881 $2,251,406 $2,035,788
Provision for loan losses 9,000 9,000 27,000 27,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses $ 767,669 $ 669,881 $2,224,406 $2,008,788
Non-interest Income:
Real estate operations $ 127,418 $ 140,837 $ 391,829 $ 426,348
Gain on sale of investments 1,941 33,911 1,941 40,202
Gain on sale of real estate 34,948 33,075 40,976 34,347
Other 25,455 23,180 79,008 68,618
---------- ---------- ---------- ----------
Total non-interest income $ 189,762 $ 231,003 $ 513,754 $ 569,515
Non-interest expense:
Salaries and benefits $ 262,147 $ 216,604 $ 768,465 $ 674,493
Real estate operations 74,514 91,496 237,214 256,787
Occupancy and equipment 43,528 43,740 122,898 117,204
FDIC premiums and OTS assessments 9,761 22,827 40,286 45,118
Data processing 30,677 26,686 78,234 81,053
Other 74,710 86,221 276,974 280,000
---------- ---------- ---------- ----------
Total non-interest expense $ 495,337 $ 487,574 $1,524,069 $1,454,655
---------- ---------- ---------- ----------
Income before income taxes $ 462,094 $ 413,310 $1,214,091 $1,123,648
Income tax expense 154,240 137,240 405,620 369,720
---------- ---------- ---------- ----------
Net income $ 307,854 $ 276,070 $ 808,471 $ 753,928
========== ========== ========== ==========
Basic earnings per share $ 0.21 $ 0.19 $ 0.55 $ 0.51
Diluted earnings per share $ 0.21 $ 0.18 $ 0.54 $ 0.49
4
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2000 and 1999 and For
the Nine Months Ended March 31, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Net income $307,854 $276,070 $808,471 $753,928
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on (28,450) (35,066) (223,895) (37,903)
securities arising during the period
Reclassification adjustment 1,295 (22,721) 1,295 (26,935)
-------- -------- -------- --------
(27,155) (57,787) (222,600) (64,838)
-------- -------- -------- --------
Comprehensive income $280,699 $218,283 $585,871 $689,090
========= ========= ========= =========
5
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended March 31, 2000
(Unaudited)
Balance - June 30, 1999 $ 16,123,379
Additional paid in capital 21,879
Other comprehensive income--unrealized loss on
investment securities, net of deferred income taxes (222,600)
Dividends declared (339,097)
Repurchase of 18,000 shares treasury stock (202,313)
Stock options exercised (7,596 shares) 65,670
ESOP common stock released for allocation 49,505
Net income 808,471
--------------
Balance -March 31, 2000 $ 16,304,894
==============
6
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31, 2000 and 1999
(Unaudited)
March 31, 2000 March 31, 1999
-------------- --------------
Cash Flows From Operating Activities
Net Income $ 808,471 $ 753,928
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 125,501 122,256
Amortization of purchase loan discounts (2,677) (60)
Amortization of ESOP 71,384 85,655
Deferred loan fees 17,250 (10,151)
Provision for losses on loans 7,672 27,000
Change in:
Accrued interest receivable (2,984) (1,002)
Other assets 39,733 (12,524)
Accrued interest payable (62,383) (62,892)
Other liabilities 99,882 (4,080)
-------------- --------------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 1,101,849 $ 898,130
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in certificates of deposit $ - $ (99,054)
Maturity of investments in certificates of deposit 198,484 596,225
Purchase of available-for-sale investment securities (496,062) (323,199)
Proceeds from sale or maturity of available-for-sale
investment securities 4,040 1,055,342
(Purchase) redemption of FHLB Stock - (198,600)
Net (increase) decrease in loans outstanding (10,187,463) (805,837)
Investment in real estate held for development (813,982) (4,731)
Investment in real estate held for investment 41,310 (16,855)
Investment in real estate acquired in
settlement of loans (90,276) 110,668
Purchase of office property and equipment (28,649) (35,492)
-------------- --------------
NET CASH FLOWS PROVIDED (USED) BY
INVESTING ACTIVITIES $ (11,372,598) $ 278,467
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $ (506,767) $ 1,081,097
Advances from the Federal Home Loan Bank 4,000,000 -
Repayment of advances from the Federal Home Loan Bank (69,341) (65,398)
Net decrease in advances from borrowers (337,090) (335,463)
Proceeds from stock options exercised 65,670 78,077
Dividends paid (340,253) (233,034)
Purchase of treasury stock (202,313) (320,000)
-------------- --------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES $ 2,609,906 $ 205,279
-------------- --------------
CHANGE IN CASH AND CASH EQUIVALENTS $ (7,660,843) $ 1,381,876
-------------- --------------
CASH AND CASH EQUIVALENTS, beginning of period $ 8,481,216 $ 9,445,404
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 820,373 $ 10,827,280
============== ==============
7
STATEFED FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ending March 31, 2000 and March 31, 1999
And for the Nine Months Ending March 31, 2000 and March 31, 1999
(Unaudited)
1. BASIS OF PRESENTATIONS
These consolidated financial statements are unaudited (with the
exception of the Consolidated Statement of Financial Condition for June 30,
1999). These consolidated financial statements were prepared in accordance with
instructions for Form 10-QSB and therefore, do not include all disclosures
necessary for a complete presentation of the statements of financial condition,
statements of income and statements of cash flows in accordance with generally
accepted accounting principles. However, in the opinion of management, all
adjustments necessary for a fair presentation of the consolidated financial
statements have been included. Results for any interim period are not
necessarily indicative of results expected for the year. The interim
consolidated financial statements include the accounts of StateFed Financial
Corporation (the "Company"), its subsidiary, State Federal Savings and Loan
Association (the "Association" or "State Federal") and the Association's
subsidiary, State Service Corporation.
These statements should be read in conjunction with the consolidated
financial statements and related notes, which are incorporated by reference in
the Company's Annual Report on Form 10-KSB for the year, ended June 30, 1999.
2. EARNINGS PER SHARE OF COMMON STOCK
Basic earnings per share are computed based upon the weighted-average
shares outstanding during the period, less shares in the employee stock
ownership plan (ESOP) that are unallocated and are not committed to be released.
Diluted earnings per share are computed by considering common stocks
outstanding and dilutive potential common shares to be issued under the
Company's stock option plan.
For the three months For the nine months
ended March 31, 2000 ended March 31, 2000
-------------------- --------------------
Weighted Average Shares Outstanding:
Basic earnings per share 1,464,029 1,461,353
Fully diluted earnings per share 1,488,665 1,493,467
For the three months For the nine months
ended March 31, 1999 ended March 31, 1999
-------------------- --------------------
Weighted Average Shares Outstanding:
Basic earnings per share 1,485,950 1,487,868
Fully diluted earnings per share 1,525,166 1,535,540
8
3. REGULATORY CAPITAL REQUIREMENTS
Pursuant to Federal law, savings institutions must meet three separate
capital requirements. The Association's capital ratios and balances at March 31,
2000 are as follows:
Amount %
---------- ----------
(Dollars in thousands)
Tangible Capital:
Association's $7,945 9.12%
Requirement 1,307 1.50%
------ -----
Excess $6,638 7.62%
Core Capital:
Association's $7,945 9.12%
Requirement 3,486 4.00%
------ -----
Excess $4,459 5.12%
Risk-Based Capital:
Association's $8,195 13.89%
Requirement 4,720 8.00%
------ -----
Excess $3,475 5.89%
Tier 1 Risk-Based Capital:
Association's $7,945 13.47%
Requirement 1,770 3.00%
------ -----
Excess $6,175 10.47%
4. STOCK OPTION PLAN
At June 30, 1999 there were unexercised options for 62,306 shares of
common stock under the terms of the StateFed Financial Corporation 1993
Stock Option Plan. The options have an exercise price of $5 per share.
There were 7,596 shares exercised during the nine months ended March
31, 2000.
5. STOCK REPURCHASE PLAN
On May 24, 1999, the Company's Board of Directors authorized management
to repurchase up to 77,980 shares of the Company's common stock over the next
twelve months. During the three month period ending March 31, 2000, no shares
were repurchased. As of March 31, 2000 a total of 50,500 shares have been
repurchased since May 24, 1999, at a cost of $572,000.
9
PART I ITEM 2
STATEFED FINANCIAL CORPORATION
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The accompanying Consolidated Financial Statements include StateFed
Financial Corporation (the "Company") and its wholly owned subsidiary, State
Federal Savings and Loan Association (the "Association"). All significant
inter-company transactions and balances are eliminated in consolidation. The
Company's results of operations are primarily dependent on the Association's net
interest margin, which is the difference between interest income earned on
interest-earning assets and interest expense paid on interest-bearing
liabilities. The Association's net income is also affected by the level of its
non-interest expenses, such as employee compensation and benefits, occupancy
expenses, and other expenses.
When used in this Form 10-QSB and in future filings with the SEC, in
the Company's press releases or other public or shareholder communications, as
well as in oral statements made by the executive officers of the Company or its
primary subsidiary, the words or phrases "will likely result," "are expected
to," "will continue," "is anticipated," "estimated," "project" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
are subject to certain risks and uncertainties, including, among other things,
changes in economic conditions in the Company's market area, changes in policies
by regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition, that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed above could affect its
financial performance and could cause its actual results for future periods to
differ materially from any opinions or statements expressed with respect to
future periods in any current statements.
The Company does not undertake--and specifically declines 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 such statements or to reflect the occurrence of anticipated or
unanticipated events.
10
Financial Condition
The Company's total assets increased $3.3 million, or 3.6%, from $90.8
million at June 30, 1999 to $94.1 million at March 31, 2000. This increase was
due primarily to an increase in net loans receivable of $10.2 million and an
increase in real estate held for investment of $761,000, partially offset by a
decrease in cash and amounts due from depository institutions of $7.7 million.
Net loans receivable increased $10.2 million, or 14.1%, from $72.3
million at June 30, 1999 to $82.5 million at March 31, 2000. The increase in the
loan portfolio occurred as a result of an increase in loan originations
comprised primarily of fixed-rate mortgage loans on residential properties and
purchased adjustable rate mortgage loans on commercial real estate.
Total deposits decreased by $500,000, from $54.7 million at June 30,
1999 to $54.2 million at March 31, 2000. Certificate accounts decreased $1.7
million and passbook accounts decreased $112,300, while money market fund
accounts increased $1.1 million and NOW accounts increased $212,300.
Total stockholders' equity increased $181,500 from $16.1 million at
June 30, 1999 to $16.3 million at March 31, 2000. The increase was due
primarily, to net income of $808,500 and accounting for employee stock awards
and options of $137,000 partially offset by the result of the treasury stock
repurchases of $202,300, dividends declared of $339,100, and an increase in net
unrealized losses on investment securities of $222,600.
Results of Operations
The operating results of the Company are affected by general economic
conditions monetary and fiscal policies of federal agencies and regulatory
policies at agencies regulating financial institutions and their holding
companies. The Company's cost of funds is influenced by interest rates on
competing investments and general market rates of interest. Lending activities
are influenced by demand for real estate loans and other types of loans, which
in turn are affected by the interest rates at which such loans are made, general
economic conditions, and the availability of funds for lending activities.
The Association's net income is primarily dependent on its net interest
income, which is the difference between interest income generated on
interest-earning assets and expense incurred on interest-bearing liabilities.
Net interest income is affected by the interest rate environment and the volume
and composition of interest-earning assets and interest-bearing liabilities. Net
income is also affected by provisions for losses on loans, service charges,
gains or losses on sales of assets, other income, non-interest expense and
income taxes.
11
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
March 31, 1999
General. Net income increased $31,800 to $307,900 for the three months
ended March 31, 2000, from $276,100 for the three months ended March 31, 1999.
The increase was primarily the result of an increase in net interest income of
$97,800, partially offset by a decrease in non-interest income of $41,200, an
increase in non-interest expense of $7,800, and an increase in income tax
expense of $17,000.
Net Interest Income. Net interest income increased $97,800, from
$678,900 for the three months ended March 31, 1999 to $776,700 for the three
months ended March 31, 2000. This increase was the result of an increase in
interest income of $87,500 and a decrease in interest expense $10,300.
Interest Income. Interest income increased $87,500, from $1.66 million
for the three months ended March 31, 1999 to $1.75 million for the three months
ended March 31, 2000 primarily as a result of an increase in the balance of
loans receivable, partially offset by a decrease in other interest income. The
decrease in other interest income is the result in a decrease in deposits in
interest bearing accounts in other depository institutions.
Interest Expense. Interest expense decreased $10,300 from $985,200 in
the three months ended March 31, 1999 to $974,900 for the three months ended
March 31, 2000. This decrease resulted primarily from slightly lower interest
rates paid on deposit accounts, and interest costs capitalized on real estate
project held for investment, partially offset by an increase in the amount of
borrowings.
Provision for Loan Losses. The provision for loan losses remained
unchanged in the three months ended March 31, 2000 as compared to the three
months ended March 31, 1999. The provision during the three months ended March
31, 2000 was based on management's analysis of the allowance for loan losses.
The Company will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Company maintains its allowance for
loan losses at a level, which it considers to be adequate to provide for
potential losses, there can be no assurance that future losses will not exceed
estimated amounts or that additional provisions for loan losses will not be
required for future periods.
Non-interest Income. Non-interest income decreased $41,200 from
$231,000 in the three months ended March 31, 1999 to $189,800 in the three
months ended March 31, 2000. This decrease reflects a decrease in gain on sale
of investments of $32,000 as well as a decrease in income from the Company's
real estate operations of $13,400.
Non-interest Expense. Non-interest expense increased from $487,600 in
the three months ended March 31, 1999 to $495,300 in the three months ended
March 31, 2000. This increase of $7,700, was primarily the result of an increase
in salaries and benefits expense of $45,500 and an increase in data processing
expense of $4,000, partially offset by a decrease in real estate operations
expense of $17,000, a decrease in FDIC premiums and OTS assessments of $13,000,
and a decrease in other non-interest expenses of $11,500.
12
Income Tax Expense. Income tax expense was $154,200 for the three
months ended March 31, 2000 compared to $137,200 for the three months ended
March 31, 1999, an increase of $17,000, primarily due to the increase in taxable
income.
Comparison of the Nine Months Ended March 31, 2000 and March 31, 1999
General. Net income increased $54,500 from $753,900 for the nine months
ended March 31, 1999 to $808,500 for the nine months ended March 31, 2000. The
increase was primarily the result of an increase in net interest income of
$215,600, partially offset by an increase in non-interest expense of $69,400, an
increase in income tax expense of $35,900, and a decrease in non-interest income
of $55,800.
Net Interest Income. Net interest income increased $215,600, from $2.0
million for the nine months ended March 31, 1999 to $2.2 million for the nine
months ended March 31, 2000. This increase was primarily the result of an
increase in interest on loans receivable of $325,900 and a decrease in interest
paid on deposits of $159,700, partially offset by a decrease in other interest
income of $242,100 and an increase in interest paid on borrowings of $25,700.
Interest Income. Interest income increased $81,600, from $5.06 million
for the nine months ended March 31, 1999 to $5.14 million the nine months ended
March 31, 2000. The increase is primarily the result of an increase in the
balance of loans receivable, partially offset by a decrease in other interest
income.
Interest Expense. Interest expense decreased $134,000 from $3.03
million in the nine months ended March 31, 1999 to $2.89 million in the nine
months ended March 31, 2000. This decrease resulted from a decrease in the rates
paid on deposits, and interest capitalized in connection with a real estate
construction project of the Company, partially offset by an increase in the
amount of borrowings.
Provision for Loan Losses. The provision for loan losses remained
unchanged in the nine months ended March 31, 2000 as compared to the nine months
ended March 31, 1999. The provision during the nine months ended March 31, 2000
was based on management's analysis of the allowance for loan losses. The Company
will continue to monitor its allowance for loan losses and make future additions
to the allowance through the provision for loan losses as economic conditions
dictate. Although the Company maintains its allowance for loan losses at a
level, which it considers to be adequate to provide for potential losses, there
can be no assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required for future periods.
Non-interest Income. Non-interest income decreased $55,800 from
$569,500 in the nine months ended March 31, 1999 to $513,700 in the nine months
ended March 31, 2000. The decrease was primarily the result of a decrease in
real estate operations of $34,500 and a decrease in gain on sale of investments
of $38,300, partially offset by an increase in other non-operating income of
$10,400 and an increase in gain on sale of real estate of $6,600.
13
Non-interest Expense. Non-interest expense increased from $1.45 million
in the nine months ended March 31, 1999 to $1.52 million in the nine months
ended March 31, 2000. This increase of $69,400 was primarily the result of an
increase of $94,000 in salaries and benefit expense and an increase in occupancy
and equipment expense of $5,700, partially offset by a decrease in real estate
operations expense of 19,600, a decrease in other non-interest expense of
$3,000, a decrease in FDIC premiums and OTS assessments expense of $4,800, and a
decrease in data processing expense of $2,800.
Income Tax Expense. Income tax expense increased from $369,700 for the
nine months ended March 31, 1999 to $405,600 for the nine months ended March 31,
2000, an increase of $35,900. The increase was primarily due to the increase in
taxable income.
Liquidity and Capital Resources. The Company's primary sources of funds
are deposits, principal and interest payments on loans, FHLB Des Moines
advances, and funds provided by operations. While scheduled loan repayments and
maturity of short-term investments are a relatively predictable source of funds,
deposit flows are greatly influenced by general interest rates, economic
conditions, and competition. Current Office of Thrift Supervision regulations
require the bank to maintain cash and eligible investments in an amount equal to
at least 4% of customer accounts and short-term borrowings to assure its ability
to meet demands for withdrawals and repayment of short-term borrowings. As of
March 31, 2000, the Association's average liquidity ratio was 6.02%, which
exceeded the minimum regulatory requirement on such date. Management considers
this liquidity position adequate to meet its expected needs for the foreseeable
future.
The Company uses its capital resources principally to meet its ongoing
commitments, to fund maturing certificates of deposits and loan commitments,
maintain its liquidity, and meet its foreseeable short- and long term needs. The
Company expects to be able to fund or refinance, on a timely basis, its material
commitments and long-term liabilities.
Regulatory standards impose the following capital requirements: a
risk-based capital standard expressed as a percent of risk adjusted assets, a
leverage ratio of core capital to total adjusted assets, and a tangible capital
ratio expressed as a percent of total adjusted assets. As of March 31, 2000, the
Association exceeded all fully phased-in regulatory capital requirements.
At March 31, 2000, the Association's tangible capital was $7.9 million,
or 9.12%, of adjusted total assets, which is in excess of the 1.5% requirement
by $6.6 million. In addition, at March 31, 2000, the Association had core
capital of $7.9 million, or 9.12%, of adjusted total assets, which exceeds the
3% requirement by $6.2 million. The Association had risk-based capital of $8.2
million at March 31, 2000, or 13.89%, of risk-adjusted assets, which exceeds the
8.0% risk-based capital requirements by $3.5 million.
As required by Federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks. The OTS has proposed that only those savings associations rated
a composite one (the highest rating) under the MACRO rating system for savings
associations will be permitted to operate at or near the
14
regulatory minimum leverage ratio of 3%. All other savings associations will be
required to maintain a minimum leverage ratio of 3% plus at least an additional
100 to 200 basis points. The OTS will assess each individual savings association
through the supervisory process on a case-by-case basis to determine the
applicable requirement. No assurance can be given as to the final form of any
such regulation, the date of its effectiveness or the requirement applicable to
the Association. As a result of the prompt corrective action provisions of
federal law, however, a savings association must maintain a core capital ratio
of at least 4% to be considered adequately capitalized unless its supervisory
condition is such to allow it to maintain a 3% ratio.
15
STATEFED FINANCIAL CORPORATION
Part II - Other Information
Item 1 - Legal Proceedings
Not applicable.
Item 2 - Changes in Securities Not applicable.
Item 3 - Defaults upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to Vote of Security Holders Not applicable.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) The following is a description of the Form 8-K's filed during
the three months ended March 31, 2000:
(1) February 17, 2000, a current report on Form 8-K was filed
announcing second quarter earnings.
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STATEFED FINANCIAL CORPORATION
Registrant
Date: May 10,2000 /s/ John F. Golden
-------------------------------------
John F. Golden
President and Chief Executive Officer
Date: May 10,2000 /s/ Andra K. Black
-------------------------------------
Andra K. Black
Executive Vice President and
Chief Financial Officer
17