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, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
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 407,873
- ------------------------ ---------------------------------
Class (Outstanding at March 31, 1998)
Transitional Small Business Disclosure Format:
Yes No X
------ -----
ST. LANDRY FINANCIAL CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statement of Financial Condition,
September 30, 1997 and March 31, 1998 1
Consolidated Statement of Operations,
Quarters Ended March 31, 1997 and 1998 2
Consolidated Statement of Operations,
Six Months Ended March 31, 1997 and 1998 3
Consolidated Statement of Changes in Stockholder's Equity 4
Consolidated Statement of Cash Flows,
Six Months Ended March 31, 1997 and 1998 5-6
Notes to Consolidated Financial Statements 7-8
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes Upon Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
1
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1997 AND MARCH 31, 1998
SEPTEMBER 30, MARCH 31,
1997 1997
------------- -------------
ASSETS
Cash and cash equivalents $ 780,554 $ 1,038,705
Investment securities - available for sale 1,952,316 2,136,126
Investment securities - held to maturity 1,088,124 1,590,157
Mortgage-backed securities - available for sale 12,505,148 13,072,547
Mortgage-backed securities - held to maturity 1,607,964 1,167,936
Federal Home Loan Bank stock 549,100 591,200
Loans receivable, net 42,192,721 42,142,260
Accrued interest receivable 309,728 305,473
Foreclosed real estate, net of allowance 84,919 129,716
Premises and equipment 647,901 626,297
Other assets 97,208 50,062
----------- -----------
Total assets 61,815,683 62,850,479
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $43,577,912 $44,731,130
Advances from Federal Home Loan Bank 10,825,154 10,345,662
Advances by borrowers for taxes and insurance 84,727 84,784
Federal income taxes:
Currently payable 0 40,668
Deferred payable 226,948 278,501
Accrued expenses and other liabilities 247,101 276,757
----------- -----------
Total liabilities 54,961,842 55,757,502
----------- -----------
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 3,369,740 3,379,577
Treasury Stock, 50,470 and 51,220 shares (757,199) (769,699)
Unearned ESOP shares (194,288) (177,944)
Unearned Recognition and Retention Plan shares (230,027) (200,041)
Retained Earnings 4,315,189 4,410,584
Net unrealized gain on available-for-sale
securities 345,835 445,909
----------- -----------
Total stockholders' equity 6,853,841 7,092,977
----------- -----------
Total liabilities and stockholders' equity 61,815,683 62,850,479
=========== ===========
/TABLE
2
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF INCOME
QUARTER ENDED MARCH 31, 1997 AND 1998
MARCH 31, MARCH 31,
1997 1998
------------ -----------
INTEREST INCOME
Loans receivable
First mortgage loans $ 781,973 $834,453
Savings account loans 10,544 8,855
Consumer loans 12,392 17,682
Investment securities 51,484 66,635
Mortgage-backed securities 211,170 219,017
---------- ---------
Total interest income 1,067,563 1,146,642
---------- ---------
INTEREST EXPENSE
Deposits 512,091 555,597
Borrowed funds 93,387 159,219
---------- ---------
Total interest expense 610,478 714,816
---------- ---------
Net interest income 457,085 431,826
PROVISION FOR LOAN LOSSES 5,000 0
---------- ---------
Net interest income after provision
for loan losses 452,085 431,826
---------- ---------
NON-INTEREST INCOME
Service charges and other fees 4,315 6,344
Insurance commissions 5,392 5,108
REO operations 0 0
Other 132 345
---------- ---------
Total non-interest income 9,839 11,797
---------- ---------
NON-INTEREST EXPENSE
General and administrative
Compensation and benefits 227,698 207,314
Occupancy and equipment 35,441 41,283
Marketing and other professional services 34,247 46,719
Deposit insurance premium 1,395 6,890
Net loss (gain) on foreclosed real estate 0 (3,904)
Real estate owned expense (1,436) (2,784)
Other 46,949 54,958
---------- ---------
Total non-interest expense 344,294 350,476
---------- ---------
Income before income taxes 117,630 93,147
INCOME TAX EXPENSE 43,000 40,200
---------- ---------
NET INCOME 74,630 52,947
========== =========
EARNINGS PER COMMON SHARE $0.19 $0.14
========== =========
DILUTED EARNINGS PER COMMON SHARE $0.19 $0.14
========== =========
/TABLE
3
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF INCOME
SIX MONTHS ENDED MARCH 31, 1997 AND 1998
MARCH 31, MARCH 31,
1997 1998
------------ -----------
INTEREST INCOME
Loans receivable
First mortgage loans $1,561,227 $1,641,506
Savings account loans 22,453 18,752
Consumer loans 31,783 34,682
Investment securities 90,685 130,373
Mortgage-backed securities 406,107 437,574
---------- ----------
Total interest income 2,112,255 2,262,887
---------- ----------
INTEREST EXPENSE
Deposits 1,013,968 1,117,505
Borrowed funds 202,997 309,230
---------- ----------
Total interest expense 1,216,965 1,426,735
---------- ----------
Net interest income 895,290 836,152
PROVISION FOR LOAN LOSSES 5,000 0
---------- ----------
Net interest income after provision
for loan losses 890,290 836,152
---------- ----------
NON-INTEREST INCOME
Service charges and other fees 9,525 11,070
Insurance commissions 11,560 10,942
REO operations 0 0
Other 313 598
---------- ----------
Total non-interest income 21,398 22,610
---------- ----------
NON-INTEREST EXPENSE
General and administrative
Compensation and benefits 408,414 423,872
Occupancy and equipment 67,046 75,558
Marketing and other professional services 58,036 78,132
Deposit insurance premium 26,302 13,642
Net loss (gain) on foreclosed real estate 690 (20,300)
Real estate owned expense (139) (2,021)
Other 131,357 102,727
---------- ----------
Total non-interest expense 691,706 671,610
---------- ----------
Income before income taxes 219,982 187,152
INCOME TAX EXPENSE 79,000 72,500
---------- ----------
NET INCOME 140,982 114,652
========== ==========
EARNINGS PER COMMON SHARE $0.36 $0.31
========== ==========
DILUTED EARNINGS PER COMMON SHARE $0.36 $0.30
========== ==========
/TABLE
4
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
MARCH 31, 1998
UNALLOCATED UNALLOCATED TOTAL
COMMON TREASURY RETAINED ESOP RRP UNREALIZED SHAREHOLDERS'
STOCK STOCK EARNINGS SHARES SHARES GAIN(L0SS) EQUITY
--------- --------- --------- ---------- ----------- ---------- -------------
Balance October 1, 1997 3,374,331 (757,199) 4,315,189 (194,288) (230,027) 345,835 6,853,841
Net change in unrealized gain
(loss) on available-for-sale
securities 100,074 100,074
Purchase of Treasury Stock (12,500) (12,500)
Dividends Paid (19,257) (19,257)
Allocation of earned RRP shares (4,464) 29,986 25,522
Allocation of earned ESOP shares 14,301 16,344 30,645
Net income for the six months
ended March 31, 1997 114,652 114,652
--------- -------- --------- -------- -------- ------- ---------
Balance March 31, 1997 3,384,168 (769,699) 4,410,584 (177,944) (200,041) 445,909 7,092,977
========= ======== ========= ======== ======== ======= =========
/TABLE
5
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1997 AND 1998
MARCH 31, MARCH 31,
1997 1998
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES
Net income $140,982 $114,652
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 17,924 54,311
Allocation of ESOP shares 0 30,645
Allocation of RRP shares 54,701 25,522
Provision for loan losses 5,000 0
Deferred loan fees 991 1,064
Depreciation of premises and equipment 16,900 22,300
Net loss(gain) on sale of real estate owned 690 (20,300)
(Increase) decrease in accrued interest receivable (13,736) 4,255
(Increase) decrease in other assets 41,195 47,146
Increase (decrease) in income taxes payable 16,350 40,668
Increase (decrease) in accrued expenses and other
liabilities (258,057) 29,678
--------- -----------
Net cash provided (used) by operating activities 22,940 349,941
--------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Loan originations net of principal repayments (299,285) 24,391
Purchase of investment securities - held to maturity (594,811) (500,273)
Maturity of investment securities - held to maturity 500,000 0
Purchase of Federal Home Loan Bank stock (33,700) (42,100)
Purchase of mortgage-backed securities-available for sale (1,590,726) (2,276,350)
Principal repayments of mortgage-backed securities-
available for sale 663,010 1,630,294
Principal repayments of mortgage-backed securities-
held to maturity 912,571 435,679
Investment in foreclosed real estate (6,900) (16,661)
Proceeds from sale of real estate 3,250 11,900
Purchases of premises and equipment (36,195) (696)
--------- -----------
Net cash provided (used) by investing activities (482,786) (733,816)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 626,915 $1,153,218
Increase (decrease) in advances from FHLB 34,576 (479,492)
Increase (decrease) in mortgage escrow funds 15,087 57
Proceeds from sale of common stock 0 0
Purchase of treasury stock (346,186) (12,500)
Cash dividend paid 0 (19,257)
--------- -----------
Net cash provided (used) by financing activities 330,392 642,026
--------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (129,454) 258,151
CASH AND CASH EQUIVALENTS, beginning of period 385,363 780,554
--------- -----------
CASH AND CASH EQUIVALENTS, end of period 255,909 1,038,705
========= ===========
This statement continued on next page
/TABLE
6
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1997 AND 1998
MARCH 31, MARCH 31,
1997 1998
----------- ------------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Loans originated to facilitate the sale of real
estate owned $ 29,250 $ 234,000
========== ==========
Loan principal reductions resulting from foreclosures
on real estate owned $0 $ 253,758
========== ==========
Increase in unrealized gain (loss) on securities
available-for-sale, net of applicable deferred income
taxes $ 51,948 $ 100,074
========== ==========
SUPPLEMENTAL SCHEDULE OF INTEREST
AND TAXES PAID
Interest paid $1,008,463 $1,092,165
========== ==========
Taxes paid $ 62,650 $ 32,380
========== ==========
See accompanying notes to unaudited consolidated financial statements
/TABLE
7
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, 1997. 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
The Company adopted FAS 128, Earnings per Share, as of December 31,
1997. Restatement of all prior years presented is required. FAS 128 replaces
the presentation of primary EPS with a presentation of basic EPS. The
Statement also requires dual presentation of basic and diluted EPS by
companies with complex capital structures, and requires a reconciliation of
the numerator and denominator of basic EPS to those for diluted EPS. Basic
EPS includes no dilution, and is computed by dividing income available to
common shareholders by the weighted-average number of shares outstanding
during the period. Diluted EPS reflects the potential dilution of securities
such as, in the case of the Company, options and restricted stock grants.
Six months ended March 31, 1998
--------------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic EPS
Income available to common stockholders 114,652 373,807 $ 0.31
Effect of Diluted Securities
Stock Options Outstanding 2,360
Restricted Stock Grants 4,158
Diluted EPS
Income available to common stockholders
plus assumed conversions 114,652 380,325 $ 0.30
8
Six months ended March 31, 1997
--------------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic EPS
Income available to common stockholders 140,982 389,194 $ 0.36
Effect of Dilutive Securities
Stock Options Outstanding 2,414
Restricted Stock Grants 1,326
Diluted EPS
Income available to common stockholders
plus assumed conversions 140,982 392,934 $ 0.36
9
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,
multifamily 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 as 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 $61.8 million at September 30, 1997 as
compared to $62.8 million at March 31, 1998. The 1.0% increase in assets over
the six month period is a direct result of purchases of investment and
mortgage-backed securities.
Net loans receivable remained constant at 42.1 million at September 30,
1997 and at March 31, 1998. Loan originations were offset by principal
repayments during the period.
Total investment securities increased by $685,000 from $3.0 million at
September 30, 1997 to $3.7 million at March 31, 1998. The increase was
primarily due to the purchase of a $500,000 investment security and an
increase in unrealized gains on investment securities available for sale
totaling $185,000. 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 $127,000 increase in mortgage-backed
securities during the six month period ending March 31, 1998. Unrealized
losses recorded in the mortgage-backed securities-available for sale portfolio
amounted to $45,000 at March 31, 1998, a $32,000 increase from September 30,
1997. Additional mortgage-backed securities were purchased totaling $2.3
million during the period, partially offset by principal repayments,
amortization of premiums, and accretion of discounts.
Deposits increased by $1.1 from $43.6 million at September 30, 1997 to
$44.7 million at March 31, 1998. The increase was due to additional monies
deposited in time deposit certificates emphasizing six to twelve month
maturities.
10
Federal Home Loan Bank advances decreased by $500,000 from $10.8 million
at September 30, 1997 to $10.3 million at March 31, 1998. Borrowing proceeds
are used to fund a portion of loan originations, and purchase mortgage-backed
securities.
Total stockholder's equity increased by $239,000 from $6.8 million at
September 30, 1997 to $7.1 million at March 31, 1998. Stockholders' equity
increase by $100,000, 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 six month period
increased total stockholders' equity by $115,000 and the reduction in unearned
ESOP and RRP shares increased stockholders' equity by 56,000. Partially
offsetting these increases was a cash dividend of $19,000, and the purchase of
750 shares of Treasury stock in the amount of $13,000.
ASSET QUALITY
Non-performing Loans and Investments in Real Estate
The table below sets forth the amounts and categories of nonperforming
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 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, 1997 March 31, 1998
------------------ -----------------
(Dollars in Thousands)
Non-Performing Assets
Non-accruing loans:
One-to four-family $717 $370
Consumer 154 162
Total 871 532
Foreclosed assets:
one-to four-family 122 167
Total non-performing assets $993 $699
Total as a percentage of
total assets 1.61% 1.11%
Non-performing assets decreased by $294,000 over the six month period
ended March 31, 1998, due to a decline in non-accruing loans of $339,000,
partially offset by an increase of $45,000 in real estate owned due to
foreclosure of a property, that had a commitment for sale with no additional
losses or reserves required.
Allowance for Losses on Loans and Real Estate Owned
The allowance for losses on loans 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 allowance for losses.
11
Real estate properties acquired through foreclosure are recorded at the
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 losses on loans 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 $556,000 and $551,000,
for September 30, 1997 and March 31, 1998, respectively. Allowance for losses
on loans as a percentage of net loans receivable equaled 1.32% at September
30, 1997 and 1.31% at March 31, 1998.
RESULTS OF OPERATIONS
Comparison of Operating Results for Quarters Ended March 31, 1997 and 1998
General. The Company had net income of $75,000 for the three months
ended March 31, 1997, as compared to $53,000 for the three months ended March
31, 1998. The decrease in net income was primarily due to a decrease in net
interest income of $25,000 and an increase in total non-interest expense of
$6,000, partially offset by a decrease of $3,000 in income tax expense, a
decrease in provision for loan losses of $5,000 and an increase in other
income of $1,000.
Interest Income. Interest income increased by $79,000 from $1,067,000
for the three months ended March 31, 1997 to $1,146,000 for the three months
ended March 31, 1998. The $79,000 increase was due primarily to the increase
in the average balance of loans receivable of approximately $1.9 million,
resulting in an increase in interest on loans of $56,000. The increase of
$23,000 in interest earned on mortgage-backed securities and investment
securities was due to an average balance increase of $2.1 million over the
comparable periods.
Interest Expense. Interest expense increased by $105,000 from $610,000
for the three months ended March 31, 1997 to $715,000 for the three months
ended March 31, 1998. This was due primarily to the increased cost of funds.
Cost of funds increased because of increased average balance of Federal Home
Loan Bank borrowings outstanding during the three months with a higher cost
than deposit accounts and the overall increase in interest rates paid on
deposits from the prior year. Total average balance of interest-bearing
liabilities increased from $50.2 million at March 31, 1997 to $55.1 million at
March 31, 1998. The weighted average cost of funds was 4.96% and 5.24% at
March 31, 1997 and 1998, respectively. Consequently, increased interest-
bearing liabilities, in conjunction with increased funding cost, caused an
increase of interest expense for the quarter ended March 31, 1997, as compared
to the quarter ended March 31, 1998.
Net Interest Income. The Company's net income is dependent upon net
interest income. Net interest income decreased by $25,000 from $457,000 for
the three months ended March 31, 1997 to $432,000 for the three months ended
March 31, 1998. The decrease was due to a greater increase in interest
expense that the increase in interest income, caused by increased rates paid
on deposits and borrowings.
Provision for Loan Losses. The provision for loan losses was $5,000 for
the three months ended March 31, 1997. An additional provision for loan
losses was not deemed necessary for the three months ended March 31, 1998.
Non-performing assets were $748,000 and $699,000 at March 31, 1997 and 1998
respectively. Non-performing assets as a percentage of total assets were
1.30% and 1.11% at March 31, 1997 and 1998, respectively.
12
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 $2,000 from
$10,000 for the quarter ended March 31, 1997 to $12,000 for the quarter ended
March 31, 1998. The increase was due to an increase in service charges.
Non-interest Expense. Total non-interest expense increased by $6,000
from $344,000 for the three months ended March 31, 1997 to $350,000 for the
three months ended March 31, 1998. There were increases in occupancy and
equipment expense of $6,000, marketing and other professional services of
$12,000, deposit insurance premium of 6,000 and other expenses of $8,000.
These increases were offset by decreases in compensation and benefits of
$20,000, real estate owned of $2,000 and increases in gain on foreclosed real
estate of $4,000.
Income Tax Provision. Income tax expense decreased by $3,000 for the
quarter ended March 31, 1998 as compared to the quarter ended March 31, 1997
due to a decrease in pre-tax income.
Comparison of Operating Results for the Six Months Ended March 31, 1997 and
1998
General. Net income totaled $141,000 and $115,000, respectively for the
six month ended March 1997 and 1998. The decrease was primarily due a
decrease in net interest income of $59,000. The decrease was partially offset
by an increase in non-interest income of $1,000 and a decrease of $20,000 in
non-interest expense, a reduction of $5,000 in provisions for loan loss and a
reduction in income tax expense of $7,000.
Interest Income. Total interest income increased by $151,000 for the
six months ended March 31, 1998, as compared to the six months ended March 31,
1997. The increase resulted from an increase of $5.1 million in the average
balance of interest-earning assets, primarily the loan portfolio and mortgage
backed securities.
Interest Expense. Total interest expense increased by $210,000 during
the six month period ended March 31, 1998, as compared to the six month period
ended March 31, 1997. The weighted average cost of funds was 4.96% at March
31, 1997 and 5.24% at March 31, 1998. 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. The higher average balance of Federal Home Loan
Bank advances outstanding resulted in an increase of $106,000 in interest
expense on borrowed funds.
Net Interest Income. The Company's net income is dependent upon net
interest income. Net interest income decreased by $59,000 from $895,000 for
the six month ended March 31, 1997 to $836,000 for the six months ended March
31, 1998. The decrease was due to a greater increase in interest expense than
the increase in interest income, caused by increased rates paid on deposits
and borrowings.
Provision for Loan Losses. The provision for loan losses was $5,000 for
the six months ended March 31, 1997. An additional provision for loan losses
was not deemed necessary for the three months ended March 31, 1998. The
provision for loan losses is determined by management, based on monthly
reviews of problem assets.
13
Non-interest Income. Late charges and insurance commissions are the
focus of non-interest income for the Company. Non-interest income totaled
$21,000 for the six months ended March 31, 1997, as compared to $23,000 for
the six months ended March 31, 1998. The slight increase was due to service
charges and other fees collected.
Non-interest Expense. Non-interest expense totaled $692,000 for the six
months ended March 31, 1997, as compared to $672,000 for the six months ended
March 31, 1998. The decrease of $20,000, was caused by decreases in real
estate owned expenses of $2,000, FDIC insurance expenses of $12,000, other
expenses of $29,000 and gain on foreclosed real estate of $21,000. Offsetting
these decreased expenses were an increase in compensation and benefits
expenses of $15,000, occupancy and equipment expenses of $9,000 and marketing
and professional expenses of $20,000. Other expenses declined due to the
shareholder assessment tax that had been paid in October of 1996.
Provision for Income Taxes. Income tax expenses for the six month
period ended March 31, 1997 was $79,000, as compared to $72,500 for the six
month period ended March 31, 1998. The decrease was due to a decrease in pre-
tax income of the comparable time period. Pre-tax income was $220,000 and
$187,000, 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 FBLB 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 4% 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, 1997 and March 31, 1998 liquidity eligible assets
totaled $2.7 million and $2.2 million, respectively. At those same dates, the
Association's liquidity ratios were 5.2% and 5.6%, respectively, all in excess
of the 4% 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, 1998 the Association had
outstanding commitments to extend credit which amounted to $1,120,000.
Management believes that loan repayments and other sources of funds will be
adequate to meet the Association's foreseeable liquidity needs.
At March 31, 1998, the Company had $21.0 million in certificates of
deposit due within one year and $14.5 million in other deposits with specific
maturity dates. Based on past experience, management expects that most of the
deposits will be retained or replaced by new deposits.
14
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, 1998 (dollars in thousands).
Current Actual
Capital Association Capital
Requirement Capital Excess
-------------- -------------- ----------------
Amount % Amount % Amount %
------ --- ------ --- ------ ---
Tangible Capital 936 1.50% 5,828 9.34% 4,892 7.84%
Core Capital 1,872 3.00% 5,828 9.34% 3,956 6.34%
Risk-Based Capital 2,689 8.00% 6,199 18.45% 3,510 10.45%
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 March 31, 1998. Total capital includes general loan loss reserves
of $371,000.
The Company is taking steps to make sure that it is in compliance with
the Year 2000 project. It has taken steps to review possible equipment
problems and has obtained written documentation from the service bureaus that
are currently supporting its operations. At this time management is taking
steps to complete a contingency plan for the Year 2000 that will cover any
operational problems that could arise and would have to be solved. The
Company's data processing operations are in the process of being revised and
updated in order to comply with Year 2000 requirements, as well as to allow
the Company to be more competitive in its market area. Also it was felt by
management that since a branch location will be opened in Eunice, Louisiana by
September this will benefit operational income. Another service the company
will be offering come September is Checking Accounts which should increase
future service fee income.
The Company determined to deregister with the Securities and Exchange
Commission, at its April Board of Directors meeting. It was discussed that
deregistration would benefit the Company by reducing expenses. Limited
financial information will still be available to all stockholders.
15
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
16
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: May 14, 1998 /s/ Wayne McK. Gilmore
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Wayne McK. Gilmore
President
Date: May 14, 1998 /s/ Jutta Codori
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Jutta Codori
Controller