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 June 30, 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
incorporation or organization) Identification No.)
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 409,423
Class (Outstanding at June 30, 1997)
Transitional Small Business Disclosure Format:
Yes No X
ST. LANDRY FINANCIAL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 1
Consolidated Statement of Financial Condition,
September 30, 1996 and June 30, 1997 2
Consolidated Statement of Operations, Quarters Ended
June 30, 1996 and 1997 3
Consolidated Statement of Operations, Nine Months
Ended June 30, 1996 and 1997 4
Consolidated Statement of Changes in Stockholder's Equity 5
Consolidated Statement of Cash Flows, Nine Months Ended
June 30, 1996 and 1997 6-7
Notes to Consolidated Financial Statements 8-9
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes Upon Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of
Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1996 AND JUNE 30, 1997
SEPTEMBER 30, JUNE 30,
1996 1997
------------ -----------
ASSETS
Cash and cash equivalents $ 385,363 $ 195,772
Investment securities - available for sale 1,773,450 1,952,452
Investment securities - held to maturity 989,595 1,087,187
Mortgage-backed securities - available
for sale 9,484,872 10,927,111
Mortgage-backed securities - held to
maturity 2,854,260 1,843,082
Federal Home Loan Bank stock 444,300 485,100
Loans receivable, net 39,856,672 41,118,277
Accrued interest receivable 264,365 282,720
Foreclosed real estate, net of allowance 97,827 86,404
Premises and equipment 605,178 637,744
Other assets 100,774 44,460
----------- -----------
Total assets $56,856,656 $58,660,309
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $41,985,963 $42,654,431
Advances from Federal Home Loan Bank 7,561,322 8,811,202
Advances by borrowers for taxes and
insurance 92,468 90,750
Federal income taxes:
Currently payable 0 53,025
Deferred payable 37,127 114,517
Accrued expenses and other liabilities 476,528 218,056
----------- -----------
Total liabilities 50,153,408 51,941,981
----------- -----------
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 and 49,670 shares,
respectively) (350,561) (757,199)
Unearned ESOP shares (228,624) (228,624)
Unearned Recognition and Retention
Plan shares (291,153) (236,452)
Retained Earnings 4,049,776 4,266,565
Net unrealized gain on available-for-sale
securities 171,598 321,826
----------- -----------
Total stockholders' equity 6,703,248 6,718,328
----------- -----------
Total liabilities and
stockholders' equity $56,856,656 $58,660,309
=========== ===========
/TABLE
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF INCOME
QUARTER ENDED JUNE 30, 1996 AND 1997
JUNE 30, JUNE 30,
1996 1997
----------- ----------
INTEREST INCOME
Loans receivable
First mortgage loans $ 752,425 $ 784,959
Savings account loans 10,566 10,385
Consumer loans 26,193 16,764
Investment securities 45,241 52,189
Mortgage-backed securities 189,693 201,074
---------- ----------
Total interest income 1,024,118 1,065,371
---------- ----------
INTEREST EXPENSE
Deposits 488,661 529,014
Borrowed funds 72,245 112,532
---------- ----------
Total interest expense 560,906 641,546
---------- ----------
Net interest income 463,212 423,825
PROVISION FOR LOAN LOSSES 0 0
---------- ----------
Net interest income after provision
for loan losses 463,212 423,825
---------- ----------
NON-INTEREST INCOME
Service charges and other fees 6,963 7,890
Insurance commissions 5,013 5,223
REO operations 0 0
Other 614 228
---------- ----------
Total non-interest income 12,590 13,341
---------- ----------
NON-INTEREST EXPENSE
General and administrative
Compensation and benefits 156,373 156,305
Occupancy and equipment 32,673 37,251
Marketing and other professional
services 29,424 29,145
Deposit insurance premium 25,297 7,050
Net loss (gain) on foreclosed
real estate 615 0
Real estate owned expense 5,830 (1,090)
Other 34,600 44,493
---------- ----------
Total non-interest expense 284,812 273,154
---------- ----------
Income before income taxes 190,990 164,012
INCOME TAX EXPENSE 73,000 68,000
---------- ----------
NET INCOME 117,990 96,012
========== ==========
EARNINGS PER COMMON SHARE $0.29 $0.25
========== ==========
See accompanying notes to unaudited consolidated financial statements
/TABLE
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
JUNE 30, JUNE 30,
1996 1997
----------- ------------
INTEREST INCOME
Loans receivable
First mortgage loans $2,200,516 $2,346,186
Savings account loans 30,179 32,838
Consumer loans 75,471 48,547
Investment securities 145,583 142,874
Mortgage-backed securities 544,563 607,181
---------- ----------
Total interest income 2,996,312 3,177,626
---------- ----------
INTEREST EXPENSE
Deposits 1,468,855 1,542,982
Borrowed funds 171,478 315,529
---------- ----------
Total interest expense 1,640,333 1,858,511
---------- ----------
Net interest income 1,355,979 1,319,115
PROVISION FOR LOAN LOSSES 25,000 5,000
---------- ----------
Net interest income after provision for
loan losses 1,330,979 1,314,115
---------- ----------
NON-INTEREST INCOME
Service charges and other fees 14,594 17,415
Insurance commissions 16,848 16,783
REO operations 0 0
Other 1,190 541
---------- ----------
Total non-interest income 32,632 34,739
---------- ----------
NON-INTEREST EXPENSE
General and administrative
Compensation and benefits 511,378 564,719
Occupancy and equipment 92,203 104,297
Marketing and other professional
services 88,347 87,181
Deposit insurance premium 75,376 33,352
Net loss (gain) on foreclosed real
estate 4,242 690
Real estate owned expense 7,410 (1,229)
Other 121,009 175,850
---------- ----------
Total non-interest expense 899,965 964,860
---------- ----------
Income before income taxes 463,646 383,994
INCOME TAX EXPENSE 168,000 147,000
---------- ----------
NET INCOME 295,646 236,994
========== ==========
EARNINGS PER COMMON SHARE $0.71 $0.62
========== ==========
See accompanying notes to unaudited consolidated financial statements
/TABLE
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1996 AND 1997
JUNE 30, JUNE 30,
1996 1997
----------- ------------
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 295,646 $ 0,982
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 24,003 17,924
Stock dividends - FHLB stock 6,600 0
Provision for loan losses 25,000 5,000
Deferred loan fees (3,121) 991
Depreciation of premises and equipment 26,500 16,900
Net loss(gain) on sale of real estate owned 3,164 690
Net gain on fixed assets 0 0
(Increase) decrease in accrued interest
receivable (35,262) (13,736)
(Increase) decrease in other assets 49,932 41,195
Increase (decrease) in income taxes payable 42,195 16,350
Increase (decrease) in accrued expenses
and other liabilities 8,673 (258,057)
---------- ----------
Net cash provided (used)
by operating activities 443,330 (31,761)
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Loan originations net of principal repayments (2,114,110) (299,285)
Purchase of investment securities-
held to maturity 0 (594,811)
Maturity of investment securities-
held to maturity 500,000 500,000
Purchase of Federal Home Loan Bank stock (31,100) (33,700)
Purchase of mortgage-backed securities-
available for sale (2,106,334) (1,590,726)
Principal repayments of mortgage-backed
securities-available for sale 1,173,506 663,010
Principal repayments of mortgage-backed
securities-held to maturity 718,783 912,571
Investment in foreclosed real estate (5,931) (6,900)
Proceeds from sale of real estate 27,320 3,250
Purchases of premises and equipment (110,393) (36,195)
---------- ----------
Net cash provided (used)
by investing activities (1,948,259) (482,786)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $ (615,526) $ 626,915
Increase (decrease) in advances from FHLB 2,404,153 34,576
Increase (decrease) in mortgage escrow funds (12,824) 15,087
Proceeds from sale of common stock 0 0
Purchase of treasury stock (291,153) (346,186)
Allocation of unearned RRP shares 0 54,701
Cash dividend paid (21,919) 0
---------- ----------
Net cash provided (used)
by financing activities 1,462,731 385,093
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (42,198) (129,454)
CASH AND CASH EQUIVALENTS, beginning of period 140,139 385,363
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 97,941 $ 255,909
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Loans originated to facilitate the sale of
real estate owned $ 68,580 $ 29,250
========== ==========
Loan principal reductions resulting from
foreclosures on real estate owned $ 167,472 $ 0
========== ==========
Increase in unrealized gain (loss) on
securities available-for-sale, net of
applicable deferred income taxes $ 54,631 $ 51,948
========== ==========
SUPPLEMENTAL SCHEDULE OF INTEREST AND TAXES PAID
Interest paid $1,634,618 $1,008,463
========== ==========
Taxes paid $ 109,470 $ 98,484
========== ==========
See accompanying notes to unaudited consolidated financial statements
/TABLE
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
JUNE 30, 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 150,228 150,228
Purchase of Treasury Stock (406,638) (406,638)
Allocation of earned
RRP shares 54,701 54,701
Cash Dividends paid on
June 24, 1997 (20,205) (20,205)
Net income for the nine
months ended June 30, 1997 236,994 236,994
--------- -------- --------- -------- -------- ------- ---------
Balance at June 30, 1997 3,352,212 (757,199) 4,266,565 (228,624) (236,452) 321,826 6,718,328
========= ======== ========= ======== ======== ======= =========
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 June 30, 1996 was
413,580 (465,013 of the weighted average number 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 June 30,1997 presented was 380,845 (410,523 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 instrinsic 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 $58.6 million at June 30, 1997. The 3.0% increase in assets over
the nine month period is a direct result of loan originations exceeding
principal repayments and purchases of mortgage backed and investment
securities.
Net loans receivable increased by $1.2 million from $39.9 million at
September 30, 1996 to $41.1 million at June 30, 1997. The increase was due to
an increase in originations, in conjunction with a decrease in principal
repayments. A portion of these originations were funded with Federal Home
Loan Bank advances.
Total investment securities increased by $276,000 from $2.7 million at
September 30, 1996 to $3.0 million at June 30, 1997. The increase was
primarily due to the purchase of a $98,000 CD investment and an increase in
unrealized gains on investment securities available for sale totaling
$179,000. This increase in unrealized gains on investment securities available
for sale was primarily due to favorable interest rates and increased market
prices on marketable securities held in the company's portfolio.
The Company experienced a $431,000 increase in mortgage-backed
securities during the nine month period ending June 30, 1997. Unrealized
losses recorded in the mortgage-backed securities-available for sale portfolio
amounted to $50,000 at June 30, 1997, a $48,000 reduction from September 30,
1996. Additional mortgage-backed securities were purchased totalling $2.5
million, during the period, partially offset by principal repayments,
amortization of premiums, and accretion of discounts.
Deposits increased by $668,000 from $41.9 million at September 30, 1996
to $42.6 million at June 30, 1997. The increase was due to additional monies
deposited in time deposit certificates based on the Association's emphasizing
certificates with six to twelve month maturities.
Federal Home Loan Bank advances increased by $1.2 million from $7.6
million at September 30, 1996 to $8.8 million at June 30, 1997. Proceeds from
such borrowings were used to fund a portion of the loan originations, and to
purchase mortgage-backed securities.
Total stockholders' equity increased by $15,000 from $6,703,000 at
September 30, 1996 to $6,718,000 at June 30, 1997. Stockholders' equity
increased by $150,000, 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, net income for the nine month
period increased total stockholders' equity by $237,000. Partially offsetting
these increases was a stock repurchase of 25,615 shares of St. Landry
Financial Corporation stock, at a total cost of $406,000, a cash dividend of
$20,000 and the first issuance of Recognition and Retention Plan shares
totaling $54,000.
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. 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 restructurings,
(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 June 30, 1997
------------------ -------------
(Dollars in Thousands)
Non-Performing Assets
Non-accruing loans:
One-to four-family $623 $563
Consumer 184 9
---- ----
Total 807 572
Foreclosed assets:
one-to four-family 131 123
---- ----
Total non-performing assets $938 $695
==== ====
Total as a percentage of
total assets 1.65% 1.18%
Non-performing assets decreased by $243,000 over the nine month period
ended June 30, 1997, due to a decline in non-accruing loans of $235,000, and a
decrease in real estate owned of $8,000.
Allowance for Loan Losses 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 $558,000,
for September 30, 1996 and June 30, 1997, respectively. The Allowance for
loan losses as a percentage of net loans receivable equaled 1.46% at September
30, 1996 and 1.36% at June 30, 1997.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Quarters Ended June 30, 1996 and 1997
General. The Company had net income of $118,000 for the three months
ended June 30, 1996, as compared to $96,000 for the three months ended June
30, 1997. The decrease in net income was primarily due to a decrease in net
interest income of $39,000, partially offset by a decrease of $12,000 in
non-interest expense and a decrease of $5,000 in income tax expense.
Interest Income. Interest income increased by $41,000 from $1,024,000
for the three months ended June 30, 1996 to $1,065,000 for the three months
ended June 30, 1997. This increase was due primarily to the increase in loans
receivable and mortgage-backed securities over the comparative three month
period.
Interest Expense. Interest expense increased by $81,000 from $561,000
for the three months ended June 30, 1996 to $642,000 for the three months
ended June 30, 1997. This was due primarily to the increased cost of funds.
The 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 $47.5 million
at June 30, 1996 to $51.5 million at June 30, 1997. The weighted average cost
of funds was 4.76% and 5.11% during the three month period ended June 30, 1996
and 1997, respectively.
Net Interest Income. The Company's net income is dependent upon net
interest income. Net interest income decreased by $39,000 from $463,000 for
the three months ended June 30, 1996 to $424,000 for the three months ended
June 30, 1997. The decrease was due to a greater increase in interest expense
than the increase in interest income, caused by increased yields on deposits
and borrowings.
Provision for Loan Losses. Provision for loan losses were not deemed
necessary for the three months ended June 30, 1997 and 1996. Non-performing
assets were $511,000 and $693,000 at June 30, 1996 and 1997, respectively.
Non-performing assets as a percentage of total assets were .93% and 1.18% at
June 30, 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 was relatively consistent
during the three month ended June 30, 1996 and June 30, 1997.
Non-interest Expense. Total non-interest expense decreased by $12,000
from $285,000 for the three months ended June 30, 1996 to $273,000 for the
three months ended June 30, 1997. Decreases in real estate owned of $8,000
and FDIC insurance premiums of $18,000 were offset by increases in occupancy
and equipment expenses of $4,000 and other expenses of $10,000.
Income Tax Provision. Income tax expense decreased by $5,000 for the
quarter ended June 30, 1997 as compared to the quarter ended June 30, 1996.
The decrease was due to a decrease in pre-tax income.
Comparison of Operating Results for the Nine Months Ended June 30, 1995 and
1996
General. Net income totaled $296,000 and $237,000, respectively, for
the nine months ended June 30, 1996 and 1997. The decrease was primarily the
result of an increase in total non-interest expense of $65,000 and a decrease
in net interest income of $37,000. Partially offsetting these factors were an
increase of $2,000 in non-interest income, a reduction of $20,000 in provision
for loan loss and a reduction in income tax expenses of $21,000.
Interest Income. Total interest income increased by $181,000 from $3.0
million for the nine months ended June 30, 1996, as compared to $3.2 million
the nine months ended June 30, 1997. The increase resulted from an increase
of $2.0 million in the average balance of interest-earning assets, primarily
the loan portfolio and mortgage backed securities.
Interest Expense. Total interest expense increased by $218,000, from
$1.6 million for the nine month period ended June 30, 1996, to $1.8 million
for the nine month period ended June 30, 1997. The weighted average cost of
funds was 4.76% and 5.11% during the three month period ended June 30, 1996
and June 30, 1997. 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 nine month period ended June 30,
1997, 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 $131,000 in interest expense on borrowed funds.
Net interest income. During the nine months ended June 30, 1997, the
Company's net interest income decreased by $37,000. The decrease was due to
the increased cost on interest-bearing liabilities exceeding the increased
earnings on interest earning assets, caused by increased yields on deposits
and borrowings.
Provision for Loan Losses. The provision for loan losses was $25,000
for the nine months ended June 30, 1996, as compared to $5,000 for the nine
months ended June 30, 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
$33,000 for the nine months ended June 30, 1996, as compared to $35,000 for
the nine months ended June 30, 1997. The $2,000 increase was due to increased
service charges and other fees.
Non-interest Expense. Non-interest expense totaled $900,000 for the
nine months ended June 30, 1996 as compared to $965,000 for the nine months
ended June 30, 1997. The increase of $65,000, 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 Plan shares. Other increased expenses were occupancy and equipment
expenses of $12,000 and other expenses of $55,000. Offsetting these increased
expenses were decreases in real estate owned expenses of $12,000, FDIC
insurance premiums of $42,000 and marketing and other professional services of
$1,000. The increase in other expenses was primarily due to an additional
$26,000 in property taxes as a result of being a stock company.
Provision for Income Taxes. Income tax expense for the nine month
period ended June 30, 1996 was $168,000, as compared to $141,000 for the nine
month period ended June 30, 1997. The decrease was due to a decrease in
pre-tax income from the comparable time period. Pre-tax income was $464,000
and $384,000, respectively, for the 1996 and 1997 nine month periods.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, borrowings and
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 June 30, 1997 liquidity eligible assets
totaled $3.2 million and $2.5 million, respectively. At those same dates, the
Association's liquidity ratios were 6.5% and 5.0%, respectively, all in
compliance with 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 June 30, 1997, the Association had
outstanding commitments to extend credit which amounted to $1.5 million.
Management believes that loan repayments and other sources of funds will be
adequate to meet the Association's foreseeable liquidity needs.
At June 30, 1997, the Company had $25.4 million in certificates of
deposit due within one year and $10.4 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 June 30, 1997 (dollars in thousands).
Current Actual
Capital Association
Requirement Capital Capital Excess
----------------- ----------------- -----------------
Amount % Amount % Amount %
-------- ----- ------- ------ --------- -----
Tangible Capital 871 1.50% 5,517 9.50% 4,646 8.00%
Core Capital 1,742 3.00% 5,517 9.50% 3,775 6.50%
Risk-Based Capital 2,599 8.00% 5,914 18.20% 3,314 10.20%
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. First
Federal is considered a well capitalized institution based upon its capital
ratios at June 30, 1997. Total capital includes general loan loss reserves of
$396,000.
PAGE>
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: 8/11/97 /s/ Wayne McK. Gilmore
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Wayne McK. Gilmore
President
Date: 8/11/97 /s/ Jutta Codori
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Jutta Codori
Controller