FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
OTS Docket number 06172
Commission File Number 0-25486
ST. LANDRY FINANCIAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 72-1284436
(State or other jurisdiction of (IRS Employer
Identification No.)
incorporation or organization)
Post Office Box 72, Opelousas, Louisiana 70571-0072
(Address of principal executive offices)
(Zip Code)
(318) 942-5748
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 of the Securities Exchange Act of 1934 during the past 12
months (or 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 issuers classes
of common equity, as of the latest practicable date:
Common Stock, par value $.01 per share 414,331
Class (Outstanding at March 31, 1997)
Transitional Small Business Disclosure Format:
Yes No X
ST. LANDRY FINANCIAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statement of Financial Condition,
September 30, 1996 and March 31, 1997 1
Consolidated Statement of Operations, Quarters Ended
March 31, 1996 and 1997 2
Consolidated Statement of Opelousas, Six Months Ended
March 31, 1996 and 1997 3
Consolidated Statement of Changes in Stockholder's Equity 4
Consolidated Statement of Cash Flows, Six Months Ended
March 31, 1996 and 1997 5
Notes to Consolidated Financial Statements 6-7
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes Upon Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1996 AND MARCH 31, 1997
SEPTEMBER 30, MARCH 31,
1996 1997
------------ -----------
ASSETS
Cash and cash equivalents $ 385,363 $ 255,909
Investment securities-available for sale 1,773,450 1,820,330
Investment securities-held to maturity 989,595 1,086,250
Mortgage-backed securities-available for sale 9,484,872 10,442,230
Mortgage-backed securities-held to maturity 2,854,260 1,931,407
Federal Home Loan Bank stock 444,300 478,000
Loans receivable, net 39,856,672 40,171,975
Accrued interest receivable 264,365 278,101
Foreclosed real estate, net of allowance 97,827 71,479
Premises and equipment 605,178 624,473
Other assets 100,774 59,579
----------- -----------
Total assets 56,856,656 57,219,733
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $41,985,963 $42,612,878
Advances from Federal Home Loan Bank 7,561,322 7,595,898
Advances by borrowers for taxes and
insurance 92,468 107,555
Federal income taxes:
Currently payable 0 16,350
Deferred payable 37,127 63,888
Accrued expenses and other liabilities 476,528 218,471
----------- -----------
Total liabilities 50,153,408 50,615,040
----------- -----------
Stockholders' Equity:
Common stock, $.01 par value, 1,500,000
shares authorized; 459,093 shares
outstanding 4,591 4,591
Preferred stock, $.01 par value, 500,000
shares authorized; 0 shares outstanding
Additional paid in capital 3,347,621 3,347,621
Treasury Stock, 22,955 shares (350,561) (696,747)
Unearned ESOP shares (228,624) (228,624)
Unearned Recognition and Retention
Plan shares (291,153) (236,452)
Retained Earnings 4,049,776 4,190,758
Net unrealized gain on available-for-sale
securities 171,598 223,546
----------- -----------
Total stockholders' equity 6,703,248 6,604,693
----------- -----------
Total liabilities and
stockholders' equity $56,856,656 $57,219,733
=========== ===========
/TABLE
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF INCOME
QUARTER ENDED MARCH 31, 1996 AND 1997
MARCH 31, MARCH 31,
1996 1997
----------- ------------
INTEREST INCOME
Loans receivable
First mortgage loans $720,480 $ 781,973
Savings account loans 5,472 10,544
Consumer loans 39,298 12,392
Investment securities 50,883 51,484
Mortgage-backed securities 179,295 211,170
-------- ----------
Total interest income 995,428 1,067,563
-------- ----------
INTEREST EXPENSE
Deposits 490,577 512,091
Borrowed funds 53,342 98,387
-------- ----------
Total interest expense 543,919 610,478
-------- ----------
Net interest income 451,509 457,085
PROVISION FOR LOAN LOSSES 5,000 5,000
-------- ----------
Net interest income after provision
for loan losses 446,509 452,085
-------- ----------
NON-INTEREST INCOME
Service charges and other fees 3,984 4,315
Insurance commissions 5,310 5,392
REO operations 0 0
Other 193 132
-------- ----------
Total non-interest income 9,487 9,839
-------- ----------
NON-INTEREST EXPENSE
General and administrative
Compensation and benefits 176,174 227,698
Occupancy and equipment 29,414 35,441
Marketing and other professional
services 38,571 34,247
Deposit insurance premium 25,431 1,395
Net loss (gain) on foreclosed
real estate 3,627 0
Real estate owned expense 1,866 (1,436)
Other 45,614 46,949
-------- ----------
Total non-interest expense 320,697 344,294
-------- ----------
Income before income taxes 135,299 117,630
INCOME TAX EXPENSE 55,000 43,000
-------- ----------
NET INCOME 80,299 74,630
======== ==========
EARNINGS PER COMMON SHARE $0.19 $0.19
======== ==========
See accompanying notes to unaudited consolidated financial statements
/TABLE
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF INCOME
SIX MONTHS ENDED MARCH 31, 1996 AND 1997
MARCH 31, MARCH 31,
1996 1997
----------- ------------
INTEREST INCOME
Loans receivable
First mortgage loans $1,448,091 $1,561,227
Savings account loans 19,613 22,453
Consumer loans 49,278 31,783
Investment securities 100,342 90,685
Mortgage-backed securities 354,870 406,107
---------- ----------
Total interest income 1,972,194 2,112,255
---------- ----------
INTEREST EXPENSE
Deposits 980,194 1,013,968
Borrowed funds 99,233 202,997
---------- ----------
Total interest expense 1,079,427 1,216,965
---------- ----------
Net interest income 892,767 895,290
PROVISION FOR LOAN LOSSES 25,000 5,000
---------- ----------
Net interest income after provision for
loan losses 867,767 890,290
---------- ----------
NON-INTEREST INCOME
Service charges and other fees 7,631 9,525
Insurance commissions 11,835 11,560
REO operations 0 0
Other 576 313
---------- ----------
Total non-interest income 20,042 21,398
---------- ----------
NON-INTEREST EXPENSE
General and administrative
Compensation and benefits 355,005 408,414
Occupancy and equipment 59,530 67,046
Marketing and other professional
services 58,923 58,036
Deposit insurance premium 50,079 26,302
Net loss (gain) on foreclosed real
estate 3,627 690
Real estate owned expense 1,580 (139)
Other 86,409 131,357
---------- ----------
Total non-interest expense 615,153 691,706
---------- ----------
Income before income taxes 272,656 219,982
INCOME TAX EXPENSE 95,000 79,000
---------- ----------
NET INCOME 177,656 140,982
========== ==========
EARNINGS PER COMMON SHARE $0.42 $0.37
========== ==========
See accompanying notes to unaudited consolidated financial statements
/TABLE
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1996 AND 1997
MARCH 31, MARCH 31,
1996 1997
----------- ------------
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 177,656 $140,982
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of premiums and discounts on
loans and mortgage-backed and
related securities 13,746 17,924
Stock dividends - FHLB stock 6,600 0
Provision for loan losses 25,000 5,000
Deferred loan fees (2,416) 991
Depreciation of premises and equipment 15,400 16,900
Net loss(gain) on sale of real estate owned 3,627 690
Net gain on fixed assets 0 0
(Increase) decrease in accrued interest
receivable (27,408) (13,736)
(Increase) decrease in other assets 11,668 41,195
Increase (decrease) in income taxes payable 5,685 16,350
Increase (decrease) in accrued expenses
and other liabilities (3,047) (258,057)
---------- --------
Net cash provided (used)
by operating activities 226,511 (31,761)
---------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Loan originations net of principal repayments (1,214,588) (299,285)
Purchase of investment securities-
held to maturity 0 (594,811)
Maturity of investment securities-
held to maturity 0 500,000
Purchase of Federal Home Loan Bank stock (31,100) (33,700)
Purchase of mortgage-backed securities-
available for sale (2,109,006) (1,590,726)
Principal repayments of mortgage-backed
securities-available for sale 724,305 663,010
Principal repayments of mortgage-backed
securities-held to maturity 398,196 912,571
Investment in foreclosed real estate (2,970) (6,900)
Proceeds from sale of real estate 23,000 3,250
Purchases of premises and equipment (109,990) (36,195)
---------- --------
Net cash provided (used)
by investing activities (2,322,153) (482,786)
---------- --------
This statement continued on next page
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $(336,270) $626,915
Increase (decrease) in advances from FHLB 2,383,653 34,576
Increase (decrease) in mortgage escrow funds (12,498) 15,087
Proceeds from sale of common stock 0 0
Purchase of treasury stock (33,750) (346,186)
Allocation of unearned RRP shares 0 54,701
Cash dividend paid 0 0
---------- --------
Net cash provided (used)
by financing activities 2,001,135 385,093
---------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (94,507) (129,454)
CASH AND CASH EQUIVALENTS, beginning of period 140,139 385,363
---------- --------
CASH AND CASH EQUIVALENTS, end of period $ 45,632 $255,909
========== ========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Loans originated to facilitate the sale of
real estate owned $0 $29,250
========== ========
Loan principal reductions resulting from
foreclosures on real estate owned $126,586 $0
========== ========
Increase in unrealized gain (loss) on
securities available-for-sale, net of
applicable deferred income taxes $81,135 $51,948
========== ========
SUPPLEMENTAL SCHEDULE OF INTEREST AND TAXES PAID
Interest paid $984,761 $1,008,463
========== ========
Taxes paid $72,980 $62,650
========== ========
See accompanying notes to unaudited consolidated financial statements
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
MARCH 31, 1997
UNALLOCATED UNALLOCATED
TOTAL
COMMON TREASURY RETAINED ESOP RRP
UNREALIZED SHAREHOLDERS'
STOCK STOCK EARNINGS SHARES SHARES GAIN
(L0SS) EQUITY
--------- --------- --------- ----------- ----------- ---------- -------------
Balance October 1, 1996 3,352,212 (350,561) 4,049,776 (228,624) (291,153) 171,598 6,703,248
Net change in unrealized
gain (loss) on available-
for-sale securities 51,948 51,948
Purchase of Treasury Stock (346,186) (346,186)
Allocation of earned
RRP shares 54,701 54,701
Net income for the six
months ended March 31, 1997 140,982 140,982
--------- -------- --------- -------- -------- ------- ---------
Balance at March 31, 1997 3,352,212 (696,747) 4,190,758 (228,624) (236,452) 223,546 6,604,693
========= ======== ========= ======== ======== ======= =========
ST. LANDRY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--Basis of Presentation
The financial statements included in this report have been prepared by
St. Landry Financial Corporation (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission for interim
reporting and include all adjustments which are, in the opinion of management,
necessary for fair presentation. These financial statements have not been
audited by an independent accountant.
Certain information and note disclosures normally included in financial
statements in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes presented in Form 10-KSB filed for the fiscal
year ended September 30, 1996. St. Landry Financial Corporation believes that
the disclosures are adequate to make the information presented not misleading.
The financial data and results of operations for the interim periods presented
may not necessarily reflect the results to be anticipated for the complete
year.
NOTE 2--Earnings Per Share
For purpose of calculating earnings per common share the weighted average
number of shares outstanding, excluding unallocated ESOP shares and
unallocated Recognition and Retention Plan shares, was used. The weighted
average number of shares outstanding for the period ended March 31, 1996 was
425,958 (477,391 of outstanding shares reduced by 33,069 unallocated ESOP
shares and 18,364 unallocated Recognition and Retention Plan Shares). The
weighted average number of shares outstanding for the period ended March 31,
1997 presented was 384,653 (414,331 of the weighted average number of
outstanding shares reduced by 28,578 unallocated ESOP shares and 1,100
unallocated Recognition and Retention Plan shares).
NOTE 3--Accounting for Stock-Based Compensation
In October, 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-based Compensation", which is effective for transactions entered into
after December 15, 1995. This statement defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method for all of their employee stock
compensation plans. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees". Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, usually the vesting period. Under the intrinsic value based method,
compensation cost is the excess of the quoted market price of the stock at the
grant date or other measurement date over the amount an employee must pay to
acquire the stock. The adoption of SFAS No. 123 had no material impact on the
financial statements of St. Landry Financial Corporation.
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The principle business of the Company is that of a community-oriented
financial intermediary attracting deposits from the general public and using
such deposits to originate one-to-four family residential loans, and to a
lesser extent, commercial real estate, one-to-four family construction,
multi-family and consumer loans. These funds have also been used to purchase
mortgage-backed securities, U.S. government and agency obligations and other
permissible securities.
The Company's results of operations are dependent primarily on net
interest income, which is the difference between the income earned on its loan
and investment portfolios and the interest paid on deposits and borrowings.
Results of operations are also dependent upon the Company's provision for loan
losses, the level of non-interest income, including fee income and service
charges, and the level of its non-interest expenses, including employee
compensation, occupancy expenses, federal insurance premiums and other general
and administrative expenses. The Company's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of
regulatory authorities.
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 the demand for real estate loans and other types of loans, which
is in turn affected by the interest rates at which such loans are made,
general economic conditions affecting loan demand, the availability of funds
for lending activities, and changes in real estate values.
FINANCIAL CONDITION
The Company's total assets were $56.9 million at September 30, 1996 as
compared to $57.2 million at March 31, 1997. The 1.0% increase in assets
over the six month period is a direct result of loan originations exceeding
principal repayments and purchases of investment and mortgage-backed
securities.
Net loans receivable increased by $315,000 from $39.8 million at
September 30, 1996 to $40.2 million at March 31, 1997. The increase was due
to an increase in originations, in conjunction with a decrease in principal
repayments.
Total investment securities increased by $144,000 from $2.7 million at
September 30, 1996 to $2.9 million at March 31, 1997. The increase was due to
a purchase of $98,000 in investments, an increase in the unrealized gain on
investment securities-available for sale totaling $47,000 and a $1,000
discounts paid on new investment securities. The total gain in stock in
Federal Home Loan Mortgage Corporation was $407,000 and the loss on stock in
adjustable rate mortgage portfolio was $2,000, which is included in investment
securities-available for sale.
The Association experienced a $340,000 increase in mortgage-backed
securities during the six month period ending March 31, 1997. Unrealized
losses recorded in the mortgage-backed securities-available for sale portfolio
amounted to $98,000 and $66,000, for September 30, 1996 and March 31, 1997,
respectively. The loss declined by $32,000 over the six month period.
Additional mortgage-backed securities were purchased totalling $1.1 million
during the period, partially offset by principal repayments, amortization of
premiums, and accretion of discounts.
Deposits increased by $627,000 from $41.9 million at September 30, 1996
to $42.6 million at March 31,1997. The increase was due to additional monies
deposited in time deposit certificates emphasizing six to twelve month
maturities.
Federal Home Loan Bank advances remained constant at $7.5 million at
September 30, 1996 and at March 31, 1997. Borrowing proceeds are used to fund
a portion of loan originations, and purchase mortgage-backed securities.
Total stockholders' equity decreased by $99,000 from $6,703,000 at
September 30, 1996 to $6,605,000 at March 31, 1997. Stockholders' equity
increased by $52,000, as a result of an after-tax net unrealized gain on
investment securities-available for sale and mortgage-backed
securities-available for sale. In addition to the unrealized gain reflected
in equity, net income for the six month period increased total stockholders'
equity by $141,000, and the allocation of Recognition and Retention Plan
shares for 1997 increased stockholder equity by an additional 54,000.
Offsetting these factors, was the repurchase of 21,807 shares of St. Landry
Financial Corporation Stock, at a total cost of $346,000.
ASSET QUALITY
Non-performing Loans and Investments in Real Estate
The table below sets forth the amounts and categories of non-performing
assets in the Company's loan portfolio, rounded to the nearest thousand.
Loans are placed on non-accrual status when the collection of principal and/or
interest becomes doubtful. At the dates presented, the Company had no
accruing loans which were contractually past due 90 days or more and no
troubled debt restructuring (which involve forgiving a portion of interest or
principal on any loans or making loans at a rate materially less than that of
market rates). Foreclosed assets include assets acquired in settlement loans.
September 30, 1996 March 31, 1997
Non-Performing Assets
Non-accruing loans:
One-to four-family $623 $494
Consumer 184 149
Total 807 643
Foreclosed assets:
one-to four-family 131 105
Total non-performing assets 938 748
Total as a percentage of
total assets 1.65% 1.30%
Non-performing assets decreased by $190,000 over the six month period
ended March 31, 1997, due to a decline in non-accruing loans of $164,000 and a
decrease of $26,000 in real estate owned.
Allowance for Losses on Loans and Real Estate Owned
The allowance for loan losses is established through a provision for
loan losses based on management's evaluation of the risk inherent in its loan
portfolio and changes in the nature and volume of its loan activity, including
those loans which are being specifically monitored by management. Such
evaluation, which includes a review of loans for which full collectibility may
not be reasonably assured, considers among other matters, the estimated fair
value of the underlying collateral, economic conditions, historical loan loss
experience and other factors that warrant recognition in providing for an
adequate loan loss allowance.
Real estate properties acquired through foreclosure are recorded at lower
of cost or fair value, less estimated disposition costs. If fair value at the
date of foreclosure is lower than the balance of the related loan, the
difference will be charged-off to the allowance for loan losses at the time of
transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on such property is established by a
charge to operations.
The Company's allowance for loan losses totaled $580,000 and $561,000,
for September 30, 1996 and March 31, 1997, respectively. Allowance for loan
losses as a percentage of net loans receivable equaled 1.46% at September 30,
1996 and 1.40% at March 31, 1997.
RESULTS OF OPERATIONS
Comparison of Operating Results for Quarters Ended March 31, 1996 and 1997
General. The Company had net income of $80,000 for the three months
ended March 31, 1996, as compared to $75,000 for the three months ended March
31, 1997. The decrease in net income of $5,000 was primarily due to an
increase in total non-interest expense of $24,000. This increase was
partially offset by an increase in net interest income of $6,000, an increase
in total non-interest income of $1,000 and a decrease in income taxes of
$12,000.
Interest Income. Interest income increased by $72,000 from $995,000 for
the three months ended March 31, 1996 to $1,067,000 for the three months ended
March 31, 1997. The $72,000 increase was due primarily to the increase in
loans receivable of approximately $1.7 million, resulting in an increase in
interest on loans of $40,000. The increase of $31,000 in interest earned on
mortgage backed securities was due to an average balance increase of $1.8
million over the comparable periods. Interest income on investment securities
increased by $1,000, since balances remained comparable for the three month
periods.
Interest Expense. Interest expense increased by $66,000 from $544,000
for the three months ended March 31, 1996 to $610,000 for the three months
ended March 31, 1997. This was due primarily to the increased cost of funds.
Cost of funds increased because of increased Federal Home Loan Bank borrowings
outstanding during the three months that cost more than deposit accounts and
the overall increase in interest rates paid on deposits from the prior year.
Total interest-bearing liabilities increased from $47.7 million at March 31,
1996 to $50.2 million at March 31, 1997. The weighted average cost of funds
was 4.73% and 4.96% during the comparable periods. Consequently, increased
interest-bearing liabilities, in conjunction with increased funding cost,
caused an incline of interest expense for the quarter ended March 31, 1996, as
compared to the quarter ended March 31, 1997.
Net Interest Income. The Company's net income is dependent upon net
interest income. Net interest income is the difference between the yield on
interest-earning assets and the cost of interest-bearing liabilities. Net
interest income increased by $6,000 from $451,000 for the three months ended
March 31, 1996 to $457,000 for the three months ended March 31, 1997. The
increase was due to the increase in earnings on interest earning assets
exceeding the increase of cost on interest bearing liabilities.
Provision for Loan Losses. The provision for loan losses was $5,000 for
the three months ended March 31, 1996 and March 31, 1997. Non-performing
assets were $519,000 and $748,000 at March 31, 1996 and 1997 respectively.
Non-performing assets as a percentage of total assets were .93% and 1.30% at
March 31, 1996 and 1997, respectively.
Management and the Board of Directors review the loan loss reserve
monthly to determine sufficiency. The allowance for loan losses is
established through a provision for loan losses based on management's
evaluation of the risk inherent in its loan portfolio and changes in the
nature and volume of its loan activity, including those loans which are being
specifically monitored by management. Such evaluation, which includes a
review of loans for which full collectibility may not be reasonably assured,
considers among other matters, the estimated fair value of the underlying
collateral, economic conditions, historical loan loss experience and other
factors that warrant recognition in providing for an adequate loan loss
allowance.
Non-interest Income. Non-interest income increased by $400 from $9,500
for the quarter ended March 31, 1996 to $10,000 for the quarter ended March
31, 1997. The increase was due to an increase in service charges and
insurance commissions and lower income on REO operations.
Non-interest Expense. Total non-interest expense increased by $23,000
from $321,000 for the three months ended March 31, 1996 to $344,000 for the
three months ended March 31, 1997. There were increases in employee
compensation of $54,000, caused by the allocation of the 1997 Recognition and
Retention Plan shares, occupancy and equipment of $6,000, and other expenses
of $1,000. These increases were partially offset by decreases in marketing
and other professional services of $4,000, real estate owned of $7,000 and
decreases in the FDIC insurance expense of $24,000.
Income Tax Provision. Income tax expense decreased by $12,000 for the
quarter ended March 31, 1997 as compared to the quarter ended March 31, 1996
due to a decrease in pre-tax income.
Comparison of Operating Results for the Six Months Ended March 31, 1996 and
1997
General. Net income totaled $178,000 and 141,000, respectively for the
six month ended March 1996 and 1997. The decrease was primarily the result of
an increase in total non-interest expense of $77,000. The increase in total
non-interest expense was offset by an increase in net interest income of
$3,000 and increase of $1,000 in non-interest income and a reduction of
$20,000 in provisions for loan loss and a reduction in income tax expense of
$16,000.
Interest Income. Total interest income increased by $140,000 for the six
months ended March 31, 1997, as compared to the six months ended March 31,
1996. The increase resulted from an increase of $1.8 million in the average
balance of interest-earning assets, primarily due to the increase in the loan
portfolio and mortgage backed securities.
Interest Expense. Total interest expense increased by $137,000 during
the six month period ended March 31, 1997, as compared to the six month period
ended March 31, 1996. The weighted average cost of funds was 4.73% and 4.96%
during the comparable periods. This was due primarily to higher prevailing
rates of interest in the company's market. Cost of funds also increased
because of increased borrowings outstanding during the six month period,
which were used to fund additional lending and the purchase of mortgage-backed
securities. Federal Home Loan Bank advances outstanding resulted in an
increase of $104,000 in interest expense on borrowed funds.
Net Interest Income. The Company's net income is dependent upon net
interest income. Net interest income is the difference between the yield on
interest-earning assets and the cost of interest-bearing liabilities. During
the six month ended March 31, 1997, the Company's net interest income
increased by $3,000. The increase in interest income of $140,000 was offset
by the increase in interest expense in the amount of $137,000.
Provision for Loan Losses. The provision for loan losses was $25,000 for
the six months ended March 31, 1996, as compared to $5,000 for the six months
ended March 31, 1997. The provision for loan losses is determined by
management, based on monthly reviews of problem assets.
Non-interest Income. Late charges and insurance commissions are the
focus of non-interest income for the Company. Non-interest income totaled
$20,000 for the six months ended March 31, 1996, as compared to $21,000 for
the six months ended March 31, 1997. The slight increase was due to service
charges and other fees collected.
Non-interest Expense. Non-interest expense totaled $615,000 for the six
months ended March 31, 1996, as compared to $692,000 for the six months ended
March 31, 1997. The increase of $77,000, was partially caused by a $53,000
increase in compensation and benefits expense. Compensation and benefits
expense increased due to the first allocation of the Recognition and Retention
shares for 1997. Other increased expenses were occupancy and equipment
expenses of $8,000 and other expenses of $44,000. Offsetting these increased
expenses were decreases in real estate owned expenses of $4,000 and FDIC
insurance expense of $24,000. The increase in other expenses was due
primarily to an additional $26,000 in property taxes as a result of being a
stock company.
Provision for Income Taxes. Income tax expenses for the six month period
ended March 31, 1996 was $95,000, as compared to $79,000 for the six month
period ended March 31, 1997. The decrease was due to a decrease in pre-tax
income of the comparable time period. Pre-tax income was $273,000 and
$220,000, respectively, for the six month periods.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, borrowings,
principal and interest payments on loans, mortgage-backed securities, and
investment securities. In the event that the Company should require funds
beyond its ability to generate them internally, additional sources of funds
are available through the use of FHLB advances. While scheduled loan
repayments and maturing investments are relatively predictable, deposit flows
and early loan repayments are more influenced by interest rates, general
economic conditions and competition.
Federal regulations have required the Company 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 5% of net
withdrawable savings deposits and borrowings payable on demand or in one year
or less during the preceding calendar month. Liquid assets for purposes of
this ratio include cash, certain time deposits, government agency and other
securities and obligations generally having remaining maturities of less than
five years. The Association's most liquid assets are cash and cash
equivalents, short-term investments and mortgage-backed and related
securities. The levels of these assets are dependent on the Company's
operating, financing, lending and investing activities during any given
period. At September 30, 1996 and March 31, 1997 liquidity eligible assets
totaled $3.2 million and $2.7 million, respectively. At those same dates, the
Association's liquidity ratios were 6.5% and 5.4%, respectively, all in excess
of the 5% minimum regulatory requirement.
The Association uses its liquid resources principally to meet ongoing
commitments, to fund maturing certificates of deposit and deposit withdrawals,
to invest, to fund existing and future loan commitments, to maintain liquidity
and to meet operating expenses. At March 31, 1997 the Association had
outstanding commitments to extend credit which amounted to $1,269,000.
Management believes that loan repayments and other sources of funds will be
adequate to meet the Association's foreseeable liquidity needs.
At March 31, 1997, the Company had $25.7 million in certificates of
deposit due within one year and $11.6 million in other deposits without
specific maturity. Based on past experience, management expects that most of
the deposits will be retained or replaced by new deposits.
Capital
Federally insured savings associations, such as First Federal, are
required to maintain a minimum level of regulatory capital. The OTS has
established capital standards, including a tangible capital requirement, a
leverage ratio (or core capital) requirement and a risk-based capital
requirement applicable to such savings associations. These capital
requirements must be generally as stringent as the comparable capital
requirements for national banks. The OTS is also authorized to impose capital
requirements in excess of these standards on individual associations on a
case-by-case basis.
The following table sets forth First Federal's compliance with each of
its capital requirements as of March 31, 1997 (dollars in thousands).
Current Actual
Capital Association
Requirement Capital Capital Excess
----------------- ----------------- ----------------
Amount % Amount % Amount %
Tangible Capital 861 1.50% 5,423 9.46% 4,563 7.96%
Core Capital 1,720 3.00% 5,423 9.46% 3,703 6.46%
Risk-Based Capital 2,594 8.00% 5,771 17.79% 3,177 9.79%
Tangible and core capital figures are determined as a percentage of total
adjusted assets; risk-based capital figures are determined as a percentage of
risk-weighted assets in accordance with OTS regulations.
Total capital includes general loan loss reserves of $348,000.
The OTS and the Federal Deposit Insurance Corporation are authorized and,
under certain circumstances required, to take certain actions against
associations that fail to meet capital requirements. Effective December 19,
1992, the federal banking agencies, including OTS, have been given additional
enforcement authority over undercapitalized depository institutions. The OTS
is generally required to take action to restrict the activities of an
"undercapitalized association" (generally defined to be one with less than
either a 4% core ratio, a Tier 1 risked-based capital ratio or an 8%
risk-based capital ratio). Any such association must submit a capital
restoration plan and until such plan is approved by the OTS may not increase
its assets, acquire another institution, establish a branch or engage in any
new activities, and generally may not make capital distributions. The OTS is
authorized to impose the additional restrictions, discussed below, that are
applicable to significantly undercapitalized associations.
Any savings association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
subject to one or more additional specified actions and operating restrictions
mandated by federal law. First Federal is considered a well capitalized
institution based upon its capital ratios at March 31, 1997.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or the
Association is party to or of which any of their property is subject.
Occasionally, the Association is involved in legal proceedings incidental to
its business.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
Not Applicable
(b) Reports on Form 8-K
Not Applicable
SIGNATURES
Pursuant to the requirements 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.
St. Landry Financial Corporation
(Registrant)
Date: 5/12/97 /s/ Wayne McK. Gilmore
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Wayne McK. Gilmore
President
Date: 5/12/97 /s/ Jutta Codori
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Jutta Codori
Controller