CAMERON FINANCIAL CORPORATION ANNUAL REPORT TO STOCKHOLDERS.
EXHIBIT 13
TABLE OF CONTENTS
-----------------
Page
----
President's Message.............................................. 1
General Information.............................................. 2
Selected Consolidated Financial and Other Data of the Company.... 3
Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 5
Consolidated Financial Statements................................ 19
Stockholder Information.......................................... 43
Corporate Information............................................ 44
CFC CAMERON FINANCIAL CORPORATION
Holding Company for The Cameron Savings & Loan Association, F.A.
- ----------------------------------------------------------------------------
December 30, 1996
To Our Stockholders:
The Board of Directors, management and staff of Cameron Financial Corporation
and its wholly-owned subsidiary, The Cameron Savings & Loan Association, F.A.,
are pleased to present our second Annual Report.
The fiscal year ended September 30, 1996, our first full year as a public
company, was one of solid performance. Although net earnings for the year were
$2.1 million, down from $2.3 million for fiscal 1995, the Association expensed
$800,000 as a special assessment to recapitalize the Savings Association
Insurance Fund (SAIF). The result of the special assessment will be lower SAIF
premiums in the future. Loans receivable net increased by $24.7 million, with
increases in residential, construction and consumer loans. Cameron Financial
will continue to focus on planned and controlled growth, emphasizing mortgage
and consumer lending and developing new products and services for our customers.
Construction of our new home office in Cameron is schedule for completion in
March 1997. The new facility will provide the additional space needed for the
customer services and growth planned by your Board of Directors and management.
Land has been contracted for purchase in Liberty, Missouri for the construction
of a new building and the conversion of the loan origination office to a full
service branch.
Your Board and management remain committed to building strong stockholder value.
We continue to be a financial institution that emphasizes family financial
relationships, and we are committed to our customers and to the communities we
serve.
Thank you for your investment in Cameron Financial Corporation. We are looking
forward to a long and prosperous relationship.
Sincerely,
/s/ David G. Just
David G. Just
President
- --------------------------------------------------------------------------------
123 East 3rd Street
[LOGO OF RECYCLED PAPER P.O. Box 555 [LOGO OF BOY INK
APEARS HERE] CAMERON, MO 64429 APPEARS HERE]
(816)632-2154
GENERAL INFORMATION
-------------------
Cameron Financial Corporation (the "Company") is a Delaware Corporation which is
the holding company for The Cameron Savings & Loan Association, F.A. (the
"Association"). The Company was organized by the Association for the purpose of
acquiring all of the capital stock of the Association in connection with the
conversion of the Association from mutual to stock form, which was completed on
March 31, 1995 (the "Conversion"). The only significant assets of the Company
are the capital stock of the Association, the Company's loan to an employee
stock ownership plan, and investment securities in United States government and
agency obligations. The business of the Company initially consists of the
business of the Association.
The Association, which was originally chartered in 1887 as a Missouri-chartered
mutual savings and loan association, is headquartered in Cameron, Missouri. The
Association amended its mutual charter to become a federal mutual savings and
loan association in 1994. Its deposits are insured up to the maximum allowable
amount by the Federal Deposit Insurance Corporation (FDIC). The Association
serves the financial needs of its customers throughout northwestern Missouri
through its main office located at 123 East Third Street, Cameron, Missouri, two
branch offices located in Maryville and Mound City, Missouri, and one loan
production office located in Liberty, Missouri.
The Association has been, and intends to continue to be, a community-oriented
financial institution offering financial services to meet the needs of the
market area it serves. The Association attracts deposits from the general
public and uses such funds together with FHLB advances to originate loans
secured by first mortgages on owner-occupied one- to four-family residences and
construction loans in its market area. To a lesser extent, the Association
originates land, commercial real estate, multifamily and consumer loans in its
market area.
2
SELECTED CONSOLIDATED FINANCIAL
-------------------------------
AND OTHER DATA OF THE COMPANY
-----------------------------
Set forth below are selected consolidated financial and other data of the
Company. The financial data is derived in part from, and should be read in
conjunction with, the Consolidated Financial Statements and Notes thereto
presented elsewhere in this Annual Report.
At September 30,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ----------- -------- -------- --------
(In thousands)
Selected Financial Condition Data:
- ----------------------------------
Total assets $ 186,346 $ 173,077 $144,821 $142,334 $137,427
Loans receivable, net 154,444 129,740 113,981 110,023 112,863
Mortgage-backed securities 13 17 20 29 32
Investment securities 18,297 26,473 16,309 11,850 6,088
Cash and cash equivalents 3,783 3,315 1,072 1,584 1,648
Certificates of deposit in other 2,500 8,611 10,221 16,054 13,822
financial institutions
Savings deposits 123,108 121,280 123,110 122,378 119,508
FHLB advances 12,250 - - - -
Total stockholders' equity 46,815 48,727 19,267 17,740 15,491
Year Ended September 30,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- -------- -------- --------
(In thousands, except share information)
Selected Operations Data:
- -------------------------
Total interest income $ 13,921 $ 12,289 $ 10,662 $ 11,100 $ 12,016
Total interest expense 6,679 6,317 5,710 6,203 7,388
---------- ---------- -------- -------- --------
Net interest income 7,242 5,972 4,952 4,897 4,628
Provision for loan losses 368 120 252 9 76
---------- ---------- -------- -------- --------
Net interest income after
provision for loan losses 6,874 5,852 4,700 4,888 4,552
---------- ---------- -------- -------- --------
Loan and deposit service charges 130 131 136 140 158
(Loss) gain on sales of investment - (4) 7 - -
securities
Other income 92 100 43 46 37
---------- ---------- -------- -------- --------
Total noninterest income 222 227 186 186 195
---------- ---------- -------- -------- --------
Total noninterest expense 3,772 2,503 2,443 1,942 2,079
- ------------------------- ---------- ---------- -------- -------- --------
Earnings before income taxes and
cumulative effect of a change in 3,324 3,576 2,443 3,132 2,668
accounting principle
Income taxes 1,214 1,272 894 1,180 1,021
Cumulative effect of a change in
accounting for - - - 289 -
income taxes (1) ---------- ---------- -------- -------- --------
Net earnings $ 2,110 $ 2,304 $ 1,549 $ 2,241 $ 1,647
========== ========== ======== ======== ========
Net earnings per share 0.77 0.83 - - -
========== ========== ======== ======== ========
Average common shares outstanding 2,740,759 2,784,906 - - -
========== ========== ======== ======== ========
(Footnotes on the following page)
3
At or For the Year Ended September 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Selected Financial Ratios and Other
Data (1):
- ----------------------------------------
Performance Ratios:
Return on assets (ratio of earnings
before cumulative effect of a change in
accounting principle to average total
assets) 1.20% 1.45% 1.08% 1.39% 1.20%
Return on equity (ratio of earnings
before cumulative effect of a change in
accounting principle to average equity) 4.43 6.62 8.26 11.62 11.20
Interest rate spread (2):
Average during period 2.78 2.71 2.89 2.92 2.79
End of period 2.71 2.35 2.67 2.55 2.82
Net interest margin (3) 4.23 3.84 3.50 3.54 3.45
Dividend payout ratio 36.36 8.43 - - -
Ratio of noninterest expense to
average total assets (4) 2.14 1.57 1.70 1.39 1.5
Ratio of noninterest income to
average total assets 0.13 0.14 0.13 0.13 0.14
Ratio of average interest-earning
assets to average interest-bearing
liabilities 137.06 127.79 115.12 113.88 111.97
Quality Ratios:
Nonperforming loans to total loans
receivable at end of period 0.84 0.92 0.97 2.03 2.25
Allowance for loan losses to
nonperforming loans 91.54 74.46 71.51 26.64 23.99
Allowance for loan losses to total
loans receivable 0.77 0.69 0.69 0.54 0.54
Nonperforming assets to total assets
at end of period 0.83 0.77 0.85 1.86 2.35
Classified assets to total assets (5) 4.15 2.26 2.93 5.14 5.39
Ratio of net charge-offs to average
loans receivable .006 .002 0.01 0.02 -
Capital Ratios (6):
Equity to total assets at end of 25.12 28.15 13.30 12.46 11.27
period
Average equity to average assets 27.06 21.96 13.06 11.99 10.76
Other Data:
Number of full-service offices 3 3 3 3 3
Number of loan production offices 1 1 1 1 1
Real estate loan originations (in $92,606 $64,257 $54,474 $41,748 $44,664
thousands)
(1) The Association adopted Statement of Financial Accounting Standards
("SFAS") No. 109 during the year ended September 30, 1993.
(2) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate on interest-
bearing liabilities.
(3) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
(4) Without the SAIF assessment of $800,000, noninterest expense would have
been $2,972,000 for 1996 or 1.69% of average total assets.
(5) Includes assets designated as Special Mention.
(6) For a discussion of the Association's regulatory capital ratios, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
4
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
General
- -------
Cameron Financial Corporation ("Cameron Financial" and, with its subsidiary, the
"Company") was formed in December 1994 by The Cameron Savings & Loan
Association, F.A., (the "Association") to become the holding company of the
Association. The acquisition of the Association by Cameron Financial was
consummated on March 31, 1995 in connection with the Association's conversion
from the mutual to the stock form (the "Conversion"). All references to the
Company prior to March 31, 1995, except where otherwise indicated, are to the
Association and its subsidiary on a consolidated basis.
The Company's results of operation depend primarily on its level of net interest
income, which is the difference between interest earned on interest-earning
assets, consisting primarily of mortgage loans and investments, and the interest
paid on interest-bearing liabilities, consisting primarily of deposits and
Federal Home Loan Bank (FHLB) advances. Net interest income is a function of
the Company's "interest rate spread," which is the difference between the
average yield earned on interest-earning assets and the average rate paid on
interest-bearing liabilities, as well as a function of the average balance of
interest-earning assets as compared to interest-bearing liabilities. The
interest rate spread is affected by regulatory, economic and competitive factors
that influence interest rates, loan demand and deposit flows. The Company, like
other financial institutions, is subject to interest-rate risk to the degree
that its interest-earning assets mature or reprice at different times, or on a
different basis, than its interest-bearing liabilities. The Company's operating
results are also affected by the amount of its noninterest income, including
loan fees and service charges and other income, which includes commissions from
sales of insurance by the Association's service corporation. Noninterest
expense consists principally of employee compensation, occupancy expense, data
processing, federal deposit insurance premiums, advertising, real estate owned
operations and other operating expenses. The Company's operating results are
significantly affected by general economic and competitive conditions, in
particular, the changes in market interest rates, government policies and
actions by regulatory authorities.
Financial Condition
- -------------------
Total assets increased $13.2 million, or 7.63%, to $186.3 million at September
30, 1996 from $173.1 million at September 30, 1995. The increase was primarily
funded by an increase in FHLB advances of $12.3 million and a savings deposit
increase of $1.8 million. These funds, and a $13.8 million decrease in
investment securities, cash and cash equivalents and certificates of deposit in
other financial institutions, were used to finance a $24.7 million increase in
net loans receivable.
Net loans receivable increased by $24.7 million, or 19.04%, to $154.4 million at
September 30, 1996 from $129.7 million at September 30, 1995 due primarily to
the $14.3 million increase in one- to four-family permanent lending, the $5.5
million increase in land loans, and the $2.4 million increase in short-term
construction lending, net of loans in process.
Investment securities, certificates of deposit in other financial institutions
and cash equivalents decreased $13.8 million, or 35.9%, to $24.6 million at
September 30, 1996 from $38.4 million at September 30, 1995. This decrease
primarily represents the maturity of investment securities and certificates and
reinvestment of the proceeds in loans.
5
Deposits increased $1.8 million, or 1.48%, to $123.1 million at September 30,
1996 from $121.3 million at September 30, 1995. FHLB advances increased to
$12.3 million at September 30, 1996 from none at September 30, 1995. During the
last several years, loan originations have exceeded savings inflows, loan
repayments and cash provided by operations. Prior to fiscal year 1996, the
excess resulted in reductions in the investment securities portfolio and total
liquidity. It is anticipated that FHLB advances will continue to supplement
projected savings inflows and loan repayments to fund continued loan demand.
Total equity decreased $1.9 million, to $46.8 million at September 30, 1996 from
$48.7 million at September 30, 1995. Earnings for the year provided a $2.1
million increase, which was offset by the purchase of 177,248 shares of treasury
stock for $3.9 million, declaration of dividends of $752,000 and the adoption of
the Recognition and Retention Plan (RRP) and amortization of RRP and unearned
ESOP shares.
The Association's capital exceeds all of the capital requirements imposed by
FIRREA. OTS regulations provide that an institution that exceeds all capital
requirements before and after a proposed capital distribution and, like the
Association, has not been notified of a need for more than normal supervision
could, after prior notice but without approval by the OTS, make capital
distributions during the calendar year of up to 100% of its net income to date
during the calendar year plus the amount that would reduce by one-half its
"surplus capital ratio" (the excess capital over its capital requirements) at
the beginning of the calendar year. Any additional capital distributions would
require prior regulatory approval.
The Association declared and paid a dividend of $2,248,000 to Cameron Financial
in fiscal year 1996 and has notified OTS of it plans to declare an additional
$47,000 dividend to Cameron Financial in mid-December 1996. Those dividends
approximate the Association's net income from July 1, 1995 through September 30,
1996.
Results of Operations
- ---------------------
The Company's results of operations depend primarily on the level of its net
interest income and noninterest income and its control of operating expenses.
Net interest income depends upon the volume of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on them.
The Company's noninterest income consists primarily of fees charged on
transaction accounts and fees charged for delinquent payments received on
mortgage and consumer loans. In addition, noninterest income is derived from
the activities of the Association's wholly-owned subsidiary, which engages in
the sale of various insurance products.
The schedule on the following page presents, for the periods indicated, the
total dollar amount of interest income from average interest-earning assets and
the resultant yields, as well as the total dollar amount of interest expense on
average interest-bearing liabilities and resultant rates. The average yields
include loan fees which are considered adjustments to yields. The amount of
interest income resulting from the recognition of loan fees was $397,000,
$321,000 and $275,000 for the years ended September 30, 1996, 1995 and 1994,
respectively. No tax-equivalent adjustments have been made. All average
balances are monthly average balances. Management does not believe that the use
of monthly balances instead of daily balances has caused a material difference
in the information presented. Nonaccruing loans have been included as loans
carrying a zero yield.
6
Years Ended September 30,
------------------------------------------------------------------------
1996 1995
-------------------------------------- ------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ----
(Dollars in thousands)
Interest-earning assets:
Loans receivable (1) $ 141,896 $ 12,181 8.58% $ 122,970 $ 10,472 8.52%
Mortgage-backed securities 15 2 13.33 18 2 11.11
Investment securities 21,955 1,319 6.01 20,771 1,190 5.73
Certificates of deposit 3,525 225 6.38 8,278 484 5.85
Other interest-bearing deposits 2,572 103 4.00 2,063 50 2.42
Federal Home Loan Bank (FHLB) stock 1,254 91 7.26 1,235 91 7.37
-------- ------ ---- ------- ------ ----
Total interest-earning assets (1) 171,217 13,921 8.13 155,335 12,289 7.91
------ ---- ------ ----
Noninterest earning assets 4,954 3,855
-------- -------
Total average assets $ 176,171 $ 159,190
======= =======
Interest-bearing liabilities:
Passbook accounts $ 10,710 348 3.25 $ 12,458 426 3.42
NOW and money market accounts 12,915 364 2.82 14,758 418 2.83
Certificates 98,102 5,780 5.89 94,031 5,454 5.80
FHLB advances 3,192 187 5.86 308 19 6.17
-------- ------ ---- ------- ------ ----
Total interest-bearing liabilities 124,919 6,679 5.35 121,555 6,317 5.20
------ ---- ------ ----
Noninterest bearing liabilities 3,587 2,675
-------- ------
Total average liabilities $ 128,506 $ 124,230
======= =======
Net interest income $ 7,242 $ 5,972
====== =====
Net interest rate spread (2) 2.78% 2.71%
==== ====
Net interest-earning assets $ 46,298 $ 33,780
====== =======
Net interest margin (3) 4.23% 3.84%
==== ====
Average interest-earning assets to average
interest-bearing liabilities 137.06% 127.79%
====== ======
---------------------------------------
1994
---------------------------------------
Average Interest
Outstanding Earned/ Yield/
Balance Paid Rate
------- ---- ----
(Dollars in thousands)
Interest-earning assets:
Loans receivable (1) $ 111,277 $ 9,339 8.36%
Mortgage-backed securities 24 2 8.33
Investment securities 15,158 724 4.78
Certificates of deposit 12,219 486 3.98
Other interest-bearing deposits 1,211 9 0.74
Federal Home Loan Bank (FHLB) stock 1,235 102 8.26
------- ------ ----
Total interest-earning assets (1) 141,594 10,662 7.53
------ ----
Noninterest earning assets 2,013
-------
Total average assets $ 143,607
=======
Interest-bearing liabilities:
Passbook accounts $ 16,393 534 3.26
NOW and money market accounts 17,106 493 2.88
Certificates 89,496 4,683 5.23
FHLB advances - - 0.00
------- ----- ----
Total interest-bearing liabilities 122,995 5,710 4.64
----- ----
Noninterest bearing liabilities 1,863
-------
Total average liabilities $ 124,858
=======
Net interest income $ 4,952
=====
Net interest rate spread (2) 2.89%
====
Net interest-earning assets $ 18,599
=======
Net interest margin (3) 3.50%
====
Average interest-earning assets to average
interest-bearing liabilities 115.12%
======
(1) Calculated net of deferred loan fees and discounts, loans in process and
loss reserves.
(2) Net interest rate spread represents the difference between the average yield
on interest-earning assets and the average rate on interest-bearing
liabilities.
(3) Net interest margin represents net interest income divided by average
interest-earning assets.
7
The following schedule presents the weighted average yields earned on loans,
investments and other interest-earning assets, and the weighted average rates
paid on deposits and FHLB advances and the resultant interest rate spreads at
the dates indicated:
At September 30,
--------------------------
1996 1995 1994
------ ------ ------
Weighted average yield on:
Loans receivable 8.48% 8.32% 8.01%
Mortgage-backed securities 10.48 10.59 10.57
Investment securities 6.20 5.88 5.02
Certificates of deposit in other 5.85 6.37 4.71
financial institutions
Other interest-bearing deposits 3.69 4.23 1.00
FHLB stock 7.25 7.00 8.50
Combined weighted average yield on
interest-earning assets 8.11 7.76 7.40
----- ----- -----
Weighted average rate paid on:
Passbook accounts 3.25 3.25 3.25
NOW and money market accounts 2.84 2.84 2.88
Certificates 5.89 5.99 5.32
FHLB advances 6.09 - -
Combined weighted average rate paid on
interest-bearing liabilities 5.40 5.41 4.73
----- ----- -----
Spread 2.71% 2.35% 2.67%
===== ===== =====
8
Rate/Volume Analysis
- --------------------
The following schedule presents the dollar amount of changes in interest income
and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes due to
changes in outstanding balances and those due to changes in interest rates. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by prior interest rate) and (ii) changes in rate
(i.e., changes in rate multiplied by prior volume). For purposes of this table,
changes attributable to both rate and volume, which cannot be segregated, have
been allocated proportionately to the changes due to volume and the changes due
to rate.
Year Ended September 30,
-----------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
---------------------------------- ---------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Total Due to Total
-------------------- Increase ------------------- Increase
Volume Rate (Decrease) Volume Rate (Decrease)
--------- ------- ---------- --------- ------ ----------
Interest-earning assets:
Loans receivable $1,634 $ 75 $1,709 $ 951 $182 $1,133
Mortgage-backed securities - - - - - -
Investment securities 70 59 129 303 163 466
Certificates of deposit in other
financial institutions (308) 49 (259) (157) 155 (2)
Other interest-bearing deposits 14 39 53 11 30 41
FHLB stock 1 (1) - - (11) (11)
------ ---- ------ ------ ---- ------
Total interest-earning assets 1,411 221 1,632 1,108 519 1,627
- ---------------------------------------- ------ ---- ------ ------ ---- ------
Interest-bearing liabilities:
Passbook accounts (58) (20) (78) (135) 27 (108)
NOW and money market accounts (53) (1) (54) (66) (9) (75)
Certificates 240 86 326 245 526 771
FHLB advances 169 (1) 168 19 - 19
------ ---- ------ ------ ---- ------
Total interest-bearing 298 64 362 63 544 607
liabilities ------ ---- ------ ------ ---- ------
Net interest income $1,113 $157 $1,270 $1,045 $(25) $1,020
====== ==== ====== ====== ==== ======
9
Comparison of Operating Results for the Years Ended September 30, 1996 and
- --------------------------------------------------------------------------
September 30, 1995
- ------------------
General. Net earnings for the year ended September 30, 1996 decreased by
$194,000, or 8.42%, to $2.1 million, or $0.77 per share, from $2.3 million, or
$0.83 per share, for the year ended September 30, 1995. The decrease was
primarily due to the combined effects of a $1.3 million increase in net interest
income and a $58,000 decrease in income taxes offset by a $248,000 increase in
the provision for loan loss, a $5,000 decrease in noninterest income and a $1.3
million increase in noninterest expense. For the years ended September 30, 1996
and 1995, the returns on average assets were 1.20% and 1.45%, respectively,
while the returns on average equity were 4.43% and 6.62%, respectively.
A provision in the Omnibus Appropriations Bill passed by Congress and signed by
President Clinton on September 30, 1996 included an anticipated special
assessment to recapitalize the Savings Association Insurance Fund (SAIF). The
65.7 cents per $100 of qualifying accounts as of March 31, 1995 created a pre-
tax expense of $800,000 to the Association. Without the SAIF assessment, net
income would have been $2.6 million, return on average assets would have been
1.49%, return on average equity would have been 5.49% and earnings per share
would have been $.96 for the fiscal year ended September 30, 1996.
The recapitalization of SAIF is anticipated to reduce the future deposit
insurance premiums from 23 cents per $100 of deposits to 6.4 cents per $100 of
deposits. The 6.4 cent premium is projected for the years 1997 through 1999,
then decreasing further to 2.4 cents from 2000 until 2017, assuming a merger of
SAIF and the Bank Insurance Fund (BIF).
Net Interest Income. For the year ended September 30, 1996, net interest income
increased by $1.3 million to $7.2 million from $6.0 million for 1995. This
reflects an increase of $1.6 million in interest income to $13.9 million from
$12.3 million and an increase of $362,000 in interest expense to $6.7 million
from $6.3 million. The increase in interest income was primarily due to an
increase in total interest-earning assets and a change in asset mix with a
higher percentage of loans as compared to investment securities. The increase
in interest expense was due to increased interest-bearing liabilities and
increased rates paid.
Interest Income. Interest income for the year ended September 30, 1996
increased $1.6 million to $13.9 million from $12.3 million for the year ended
September 30, 1995. The $15.9 million increase in average interest-earning
assets resulted in an increase in interest income of $1.4 million. The increase
in average yield on interest-earning assets provided $221,000 additional
interest income in fiscal 1996.
Interest income on loans increased $1.7 million, or 16.32%, to $12.2 million
from $10.5 million for the year ended September 30, 1995. Interest income on
investment securities, certificates of deposit and other interest-bearing
deposits decreased $77,000, or 4.24%, to $1.6 million from $1.7 million for the
year ended September 30, 1995. Interest income on loans increased due to
increased average balances and increased yields on those balances. Decreases in
average balances of investment securities, certificates of deposit and other
interest-bearing deposits offset increased yields on those items. This was the
result of the changing mix of assets with higher concentration of assets in
loans.
Interest Expense. Interest expense for the year ended September 30, 1996
increased $362,000 to $6.7 million from $6.3 million for the year ended
September 30, 1995. The increase was due to increased average balances
outstanding on interest-bearing liabilities and an increase in the average rate
paid on certificates of deposit. Depositors continued their transfer of funds
from passbook and checking accounts to higher rate certificates. Average
balances in certificates of
10
deposit increased $4.1 million to $98.1 million for the year ended September 30,
1996 from $94.0 million for the prior fiscal year. Average noncertificate
balances decreased $3.6 million to $23.6 million from $27.2 million for the
prior fiscal year. Interest expense on FHLB advances increased to $187,000 for
the year ended September 30, 1996 from $19,000 for the prior year. The
Association borrowed $12.3 million in fiscal 1996 compared to $2.0 million for
part of fiscal 1995.
Provision for Loan Losses. The Association maintains a program for establishing
general loan loss reserves by classifying various components of the loan
portfolio by potential risk. Management reviews the composition of the loan
portfolio monthly and adjusts the valuation allowance. In addition, the
Internal Auditor reviews the general valuation allowance on a quarterly basis
and reports the findings to the Board of Directors. During the year ended
September 30, 1996, the Association charged $368,000 against earnings as a
provision for loan losses compared to $120,000 for the year ended September 30,
1995. This resulted in an allowance for loan losses of $1.4 million, or 0.77%
of total loans receivable at September 30, 1996, compared to $994,000, or 0.69%
of total loans receivable at September 30, 1995. The ratio increased during
fiscal 1996 due to increased land and development loans, consumer loans,
construction loans and one- to four-family loans. Land and development loans
increased to $9.6 million from $4.1 million, consumer loans increased to $8.3
million from $5.6 million, construction loans increased to $41.6 million from
$33.0 million, and one- to four-family loans increased to $109.3 million from
$95.0 million. Net charge-offs totaled $9,000 and $2,000 in 1996 and 1995,
respectively. While the Association has not experienced any significant charge-
offs in the past three years, the allowance for loan losses has been increased
to recognize the changing composition of the Association's loan portfolio and
the risk associated with different types of loans.
The Association had $2.3 million in loans classified as substandard, doubtful or
loss at September 30, 1996, compared to $1.8 million at September 30, 1995.
Management will continue to monitor its allowances for loan losses and make
future additions to the allowance through provision for loan losses as economic
conditions dictate. Although the Association maintains its allowance for loan
losses at a level which it considers to be adequate to provide for potential
losses, there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
future periods.
Noninterest Income. For the year ended September 30, 1996, noninterest income
was $222,000 compared to $227,000 for the year ended September 30, 1995. Loan
service charges, which consist primarily of late charges on loans receivable,
were $61,000 and $58,000 for fiscal 1996 and 1995, respectively. The increase
is primarily due to the increase in the number of loans outstanding. Service
charges on transaction accounts were $55,000 and $58,000 for fiscal 1996 and
1995, respectively. The decrease is due to fewer NOW accounts and a
corresponding decline in the service charges associated with the maintenance of
such accounts. Commissions from insurance sales by the Association's service
corporation were $22,000 and $24,000 for fiscal 1996 and 1995. Gains on the
sale of loans originated for sale were $17,000 and $19,000 for fiscal 1996 and
1995, respectively. There were no gains or losses on sales of equity securities
in fiscal 1996 compared to a net loss of $4,000 in fiscal 1995. A patronage
dividend of $40,000 was received in 1996 from a cooperative service bureau
compared to $52,000 in 1995.
Noninterest Expense. Noninterest expense increased $1.3 million, or 50.7%, to
$3.8 million for the year ended September 30, 1996 from $2.5 million for the
year ended September 30, 1995. Compensation, payroll taxes and fringe benefits
expense increased $220,000 in fiscal 1996 compared to 1995. Expenses associated
with the RRP adopted January 29, 1996 were $186,000. There was no related
expense in 1995. ESOP expenses increased $122,000 for fiscal 1996 to
11
$425,000. The increase was due to more shares allocated and a higher average
monthly price in 1996 compared to 1995. Cash compensation increased $89,000 in
fiscal 1996 to $1.24 million from $1.15 million in 1995. The increase was due
to more employees, raises to existing employees and an increase in incentive
bonuses. Payroll taxes and other fringe benefits increased $19,000 due to
increased compensation. In accordance with SFAS No. 91, the Association defers
certain direct loan origination and modification costs and amortizes these costs
as an adjustment to yield. The Association has deferred $100,000 more in
compensation costs for fiscal 1996 than 1995. In fiscal 1995, the Association
accrued bonus expense of $94,000. There was no related expense in fiscal 1996.
Occupancy expense increased $22,000 in fiscal 1996 to $209,000 from $187,000 in
1995. The increase was primarily due to increased depreciation on new equipment
during the year. Federal insurance premiums increased $799,000 to $1.1 million
from $283,000 for 1995. The increase was primarily due to the special SAIF
assessment. Other operating expenses increased to $585,000 for fiscal 1996 from
$390,000 in fiscal 1995. The increase was primarily due to increased expenses
as a publicly-owned stock institution.
Income Taxes. Income taxes decreased to $1.2 million for fiscal 1996 from $1.3
million in fiscal 1995. The decrease was due to a decrease in taxable income
for 1996 as compared to 1995.
Comparison of Operating Results for the Years Ended September 30, 1995 and
- --------------------------------------------------------------------------
September 30, 1994
- ------------------
General. Net earnings for the year ended September 30, 1995 increased by
$755,000, or 48.7%, to $2.3 million from $1.5 million for the year ended
September 30, 1994. The increase was primarily due to the combined effects of a
$1.0 million increase in net interest income, a $132,000 decrease in the
provision for loan losses, a $41,000 increase in noninterest income, offset by a
$60,000 increase in noninterest expense, and a $378,000 increase in income
taxes. For the years ended September 30, 1995 and 1994, the returns on average
assets were 1.45% and 1.08%, respectively, while the returns on average equity
were 6.62% and 8.26%, respectively.
Net Interest Income. For the year ended September 30, 1995, net interest income
increased by $1.0 million to $6.0 million from $5.0 million for 1994. This
reflects an increase of $1.6 million in interest income to $12.3 million from
$10.7 million and an increase of $607,000 in interest expense to $6.3 million
from $5.7 million. The increase in interest income was primarily due to an
increase in the ratio of average interest-earning assets to average interest-
bearing liabilities to 127.8% in 1995 from 115.1% in 1994. The increase in the
ratio was due primarily to the deployment of the $29.4 million of net proceeds
from the Company's stock conversion. The average net interest rate spread
declined to 2.71% for the year ended September 30, 1995 from 2.89% for the year
ended September 30, 1994. The decline is attributed to the average yield on
interest-bearing liabilities increasing more rapidly than the yield on interest-
earning assets during the year ended September 30, 1995. In addition, the net
proceeds of the conversion were invested in short-term assets with yields that
were below yields on existing assets of the Association.
Interest Income. Interest income for the year ended September 30, 1995
increased $1.6 million to $12.3 million from $10.7 million for the year ended
September 30, 1994. The $13.7 million increase in average interest-earning
assets resulted in an increase in interest income of $1.1 million in fiscal
1995. The increase in average yield on interest-earning assets provided
$519,000 additional interest income in fiscal 1995.
12
The primary reason for interest income increasing was interest on loans
receivable increasing by $1.1 million, or 12.13%, to $10.5 million for the year
ended September 30, 1995 from $9.3 million for the year ended September 30,
1994, and interest on investment securities increasing by $466,000, or 64.36%,
to $1.2 million for the year ended September 30, 1995 from $724,000 for the year
ended September 30, 1994. Interest income increases from both loans and
investments were due to volume increases, from investment of the proceeds from
the stock conversion, and increases in the respective average yields in 1995
compared with 1994.
Interest Expense. Interest expense for the year ended September 30, 1995
increased $607,000 to $6.3 million from $5.7 million for the year ended
September 30, 1994. The increase was primarily due to the weighted average
interest rate on interest-bearing liabilities increasing to 5.20% in 1995 from
4.64% in 1994. With general interest rates increasing from April 1994 through
December 1994, depositors transferred funds from passbook and checking accounts
to higher rate certificates. Average balances in certificates of deposits
increased $4.5 million to $94.0 million for the year ended September 30, 1995
from $89.5 million for the year ended September 30, 1994. Average
noncertificate balances decreased $6.3 million to $27.2 million for the year
ended September 30, 1995 from $33.5 million for the year ended September 30,
1994. The Association borrowed up to $2.0 million from the FHLB of Des Moines
in January 1995 to meet short-term cash needs, on which $19,000 interest was
paid. Those advances were repaid in full during March 1995. There were no FHLB
advances during fiscal 1994.
Provision for Loan Losses. The Association maintains a program for establishing
general loan loss reserves by classifying various components of the loan
portfolio by potential risk. Management reviews the composition of the loan
portfolio monthly and adjusts the valuation allowances. Quarterly, the Internal
Auditor/Compliance Officer reviews the general valuation allowances for adequacy
and reports the findings to the Board of Directors. During the fiscal year
ended September 30, 1995, the Association charged $120,000 against earnings as a
provision for loan losses compared to a provision of $252,000 for the year ended
September 30, 1994. This resulted in an allowance for loan losses of $994,000,
or .69% of total loans receivable at September 30, 1995, compared to $876,000,
or .69% of total loans receivable at September 30, 1994. The allowance for loan
losses as a percentage of nonperforming loans increased to 74.5% at September
30, 1995 from 71.5% at September 30, 1994. The ratio increased during fiscal
1995 due to increased construction lending which is assigned a higher risk
factor. Total construction loans increased to $33.0 million at September 30,
1995 compared to $25.2 million at September 30, 1994. The fiscal 1995 net
charge-offs against general valuation allowances totaled $2,000 and the net
charge-offs for fiscal 1994 were $13,000. While the Association has not
experienced any significant charge-offs in the past three years, the decision
was made to increase the allowance for loan losses based on a more refined
evaluation process which, in management's view, more fully recognizes the
changing composition of the Association's loan portfolio and the inherent risk
associated with different types of loans.
The Association had $1.8 million in loans classified as substandard, doubtful or
loss at both September 30, 1995 and 1994.
Management will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Association maintains its allowance
for loan losses at a level which it considers to be adequate to provide for
potential losses, there can be no assurance that future losses will not exceed
estimated amounts or that additional provisions for loan losses will not be
required in future periods.
13
Noninterest Income. For the year ended September 30, 1995, noninterest income
was $227,000 compared with $186,000 for the year ended September 30, 1994.
Included in noninterest income is loan service charges which consist primarily
of late charges on loans receivable of $58,000 and $60,000 for fiscal 1995 and
1994, respectively, and service charges on transaction accounts of $58,000 and
$65,000 for fiscal 1995 and 1994, respectively. The respective decreases
occurred largely as a result of a decline in delinquencies and late fees as well
as a decline in the number of NOW accounts and a corresponding decline in the
service charges associated with the maintenance of such accounts. Commissions
from insurance sales by the Association's service corporation of $24,000 and
$20,000 for fiscal 1995 and 1994 and gains on the sale of loans originated for
sale of $20,000 and $18,000 for fiscal 1995 and 1994 are included as other
income. During 1995, gains versus losses on the sales of equity securities
netted a loss of $4,000 compared to a profit of $7,000 during 1994. A patronage
dividend of $52,000 was received in 1995 from a cooperative service bureau,
which compares with $1,000 during 1994.
Noninterest Expense. Noninterest expense increased by $60,000, or 2.5%, to $2.5
million for the year ended September 30, 1995 from $2.4 million for the year
ended September 30, 1994. Compensation, payroll taxes and fringe benefits
expense increased $70,000 in fiscal 1995 over fiscal 1994. ESOP expense for
1995 was $302,000, an increase of $243,000 over the $59,000 pension plan expense
for 1994. The Association also accrued employee bonuses of $94,000 during 1995,
which had previously been expensed when paid. Adoption by the Association in
fiscal 1994 of a supplemental retirement plan for members of the board, created
an initial one-time charge of $380,000 reflecting past service costs. Federal
insurance premiums remained consistent at $283,000 for 1995 compared with
$282,000 for 1994. All other operating expenses combined increased $11,000 to
$786,000 in fiscal 1995 from $775,000 in fiscal 1994.
Income Taxes. Income taxes increased by $378,000 to $1.3 million during the
year ended September 30, 1995 from $894,000 for the year ended September 30,
1994, primarily due to an increase in income before income taxes. The effective
tax rates were 35.6% and 36.6% for fiscal 1995 and 1994.
Interest Rate Sensitivity
- -------------------------
Net Portfolio Value. Since 1982, the Association has measured its interest rate
sensitivity by computing the gap between the assets and liabilities which were
expected to mature or reprice within certain periods based on historically
gathered assumptions regarding loan prepayment and deposit decay rates. In
addition, the Association has during recent years computed the amounts by which
the net present value of the Association's cash flows from assets, liabilities
and off-balance sheet items, if any (the institution's net portfolio value, or
"NPV"), would change in the event of a range of assumed changes in market
interest rates. These computations estimate the effect on the Association's NPV
of instantaneous and permanent 1% to 4% increases and decreases in market
interest rates. The Board of Directors has established maximum increases and
decreases in NPV. The following schedule indicates the Board limits and the
estimates of projected changes in NPV in the event of 1%, 2%, 3% and 4%
instantaneous and permanent increases and decreases in market interest rates,
respectively. The changes in portfolio value are provided from an OTS report of
the Association at September 30, 1996.
14
At September 30, 1996
Percent Change in
Change in Market Interest Rate Board Limit Net Portfolio Value
- ---------------------------------- ------------ ----------------------
+4% -40% -21.0%
+3 -30 -15.0
+2 -20 -9.0
+1 -10 -3.0
- - - -
- -1 -5 1.0
- -2 -5 -1.0
- -3 -5 -2.0
- -4 -5 -2.0
Computations of prospective effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and deposit run-offs, and should not be relied upon as
indicative of actual results. Further, the computations do not contemplate any
actions the Association may undertake in response to changes in interest rates.
Certain shortcomings are inherent in the method of analysis presented in both
the computation of NPV and in an analysis of the maturing and repricing of
interest-earning assets and interest-bearing liabilities. Although certain
assets and liabilities may have similar maturities or periods within which they
will reprice, they may react differently to changes in market interest rates.
The interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other types
may lag behind changes in market rates. Additionally, adjustable-rate mortgages
have features which restrict changes in interest rates on a short-term basis and
over the life of the asset. The proportion of adjustable-rate loans could be
reduced in future periods if market interest rates would decrease and remain at
lower levels for a sustained period, due to increased refinance activity.
Further, in the event of a change in interest rates, prepayment and early
withdrawal levels would likely deviate significantly from those assumed in the
table. Finally, the ability of many borrowers to service their adjustable-rate
debt may decrease in the event of a sustained interest rate increase.
Liquidity and Capital Resources
- -------------------------------
The Association's primary sources of funds are deposits, repayments on and sales
of loans, FHLB advances, the maturity of investment securities and interest
income. Although maturity and scheduled amortization of loans are relatively
predictable sources of funds, deposit flows and prepayments on loans are
influenced significantly by general interest rates, economic conditions and
competition.
The primary investing activity of the Association is the origination of loans to
be held for investment. For the fiscal years ended September 30, 1996 and 1995,
the Association originated loans for portfolio in the amounts of $98.1 million
and $66.8 million, respectively. Purchases of loans during these periods
totaled $882,000 and $26,000, respectively. The Association also originates
loans for sale. For the fiscal years ended September 30, 1996 and 1995, the
Association originated $1.5 million and $1.1 million, respectively, of mortgage
loans for sale. For the fiscal years ended September 30, 1996 and 1995, these
activities were funded primarily by principal repayments of $67.5 million and
$48.5 million, respectively, proceeds from the sale of loans of $1.5 million and
$1.1 million, respectively, and FHLB advances of $12.3 million in fiscal 1996.
15
The Association is required to maintain minimum levels of liquid assets under
OTS regulations. Savings institutions are required to maintain an average daily
balance of liquid assets (including cash, certain time deposits, certain
bankers' acceptances, certain corporate debt securities and highly rated
commercial paper, securities of certain mutual funds and specified U. S.
government, state or federal agency obligations) of not less than 5.0% of its
average daily balance of net withdrawal accounts plus short-term borrowings. It
is the Association's policy to maintain its liquidity portfolio in excess of
regulatory requirements. The Association's eligible liquidity ratios were 6.43%
and 18.63%, respectively, at September 30, 1996 and 1995.
The Company's most liquid assets are cash and cash equivalents, which include
short-term investments. The levels of these assets are dependent on the
operating, financing, lending and investing activities during any given period.
At September 30, 1996 and 1995, cash and cash equivalents were $3.8 million and
$3.3 million, respectively. The increase in cash and cash equivalents in 1996
compared to 1995 results primarily from sources of cash receipts and the use of
cash to fund loans and investments. The principal components of cash provided
during the fiscal year ended September 30, 1996 were FHLB advances and maturing
investments. Additional sources of cash include loan repayments, sales of loans
and deposit activity.
Liquidity management for the Company is both an ongoing and long-term function
of the asset/liability management strategy. Excess Association funds generally
are invested in overnight deposits at the FHLB of Des Moines. Should the
Association require funds beyond its ability to generate them internally,
additional sources of funds are available through FHLB of Des Moines advances.
During fiscal 1996, the Association borrowed $12.3 million in FHLB advances.
The Association borrowed $2.0 million in FHLB advances to meet cash flow needs
in January 1995, repaying those advances in full during March 1995. During the
last several years, loan originations have exceeded savings inflows, loan
repayments and cash provided by operations. Prior to fiscal year 1996, the
excess resulted in reductions in the investment securities portfolio and total
liquidity. To maintain liquidity above the required minimum, it is anticipated
that FHLB advances will continue to supplement projected savings inflows and
loan repayments to fund continued loan demand.
At September 30, 1996, the Association had outstanding loan commitments of $6.7
million, unused lines of credit of $1.5 million, and undisbursed loan funds in
process of approximately $19.5 million. Construction of the new home office
building in Cameron continues. Completion is expected in March 1997. Estimated
construction costs are $4.2 million, of which approximately $2.1 million has
been disbursed. In November 1996, the Association commenced a plan to purchase
a parcel of land for $850,000 in Liberty, Missouri for the purpose of building a
branch location and development and sale of the adjoining lots. It is expected
that the construction costs of the new branch will be $1.0 million with
completion expected in December 1997. The Association anticipates it will have
sufficient funds available to meet its current loan commitments, including loan
applications received and in process prior to the issuance of firm commitments
and building costs. Certificates of deposit which are scheduled to mature in
one year or less at September 30, 1996 were $49.5 million. Management believes
that a significant portion of such deposits will remain with the Association.
At September 30, 1996, the Association had tangible capital of $32.9 million, or
18.9% of total adjusted assets, which is approximately $30.3 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date.
The Association had core capital of $32.9 million, or 18.9% of adjusted total
assets, which is $27.7 million above the minimum leverage ratio of 3.0% in
effect on that date. The Association had total risk-based capital of $33.1
million and total risk-weighted assets of $117.3 million, or total capital of
28.3% of risk-weighted assets. This was $23.8 million above the 8.0%
requirement in effect on that date.
16
The deposits of savings associations such as the Association are presently
insured by the SAIF which along with the BIF is one of the two insurance funds
administered by the FDIC. On September 30, 1996, President Clinton signed into
law the fiscal year 1997 Omnibus Appropriations Bill which included the Deposit
Insurance Funds Act of 1996. Provisions of the bill included a one-time
assessment on SAIF-insured deposits. The Association's assessment of $800,000
was recorded in the 1996 consolidated financial statements. Following the
recapitalization, SAIF premiums will be reduced to the same level as for BIF
deposits.
Separately, Financing Corporation (FICO) bond payments will be shared by SAIF
and BIF-insured financial institutions with SAIF-insured institutions paying 80%
of the annual cost and BIF-insured institutions paying 20% of the annual cost
through December 31, 1999, after which assessments will be paid on a pro rata
basis. Until then, the FICO assessment will be 1.3 basis points for banks
versus 6.4 basis points for thrifts per $100 of deposits. Previously, the
minimum combined SAIF and FICO assessments for thrifts had been 23 basis points.
Although the special one-time assessment significantly increased noninterest
expense for the current year, the anticipated reduction in the premium schedule
will reduce the Association's federal insurance premiums for future periods.
Recent Accounting Developments
- ------------------------------
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed Of," is effective for the fiscal year beginning October 1,
1996. The statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss is recognized if the sum of the
expected future cash flow is less than the carrying amount of the asset.
Management does not expect the implementation of SFAS No. 121 to have a material
impact on the Company's consolidated financial position or results of
operations.
SFAS No. 122, "Accounting for Mortgage Servicing Rights," will be effective for
the Company for the year beginning October 1, 1996 and generally requires
entities that sell or securitize loans and retain the mortgage servicing rights
to allocate the total costs of the mortgage loans to the mortgage servicing
right and the loan based on their relative fair value. Costs allocated to
mortgage servicing rights should be recognized as a separate asset and amortized
over the period of estimated net servicing income and evaluated for impairment
based on fair value. The adoption of this statement is not expected to have a
material effect on the consolidated financial statements.
SFAS No. 123, "Accounting for Stock-based Compensation," established optional
financial accounting and reporting standards for stock-based employee
compensation plans. These plans include all arrangements by which employees
receive shares of stock or other equity investments of the employer or the
employer incurs liabilities to employees in amounts based on the price of the
employers stock. This statement also applies to transactions in which an entity
issues its equity instruments to acquire goods or services from nonemployees.
This statement is effective for fiscal years beginning after December 15, 1995.
The Company does not expect to adopt the optional accounting method.
17
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," supersedes SFAS No. 122 and will be effective
for all transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. This statement provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings.
Under the financial-components approach, after a transfer of financial assets,
an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial-components
approach focuses on the assets and liabilities that exist after the transfer.
Many of these assets and liabilities are components of financial assets that
existed prior to the transfer. If a transfer does not meet the criteria for a
sale, the transfer is accounted for as a secured borrowing with pledge of
collateral. Management does not expect the implementation of SFAS No. 125 to
have a material impact on the Company's consolidated financial position or
results of operations.
Impact of Inflation and Changing Prices
- ---------------------------------------
The audited Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with generally accepted accounting principles.
These principles generally require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation.
The primary assets and liabilities of the Company and savings institutions such
as the Association are monetary in nature. As a result, interest rates have a
more significant impact on the Association's performance than the effects of
general levels of inflation. Interest rates, however, do not necessarily move
in the same direction or with the same magnitude as the prices of goods and
services, since such prices are affected by inflation. In a period of rapidly
rising interest rates, the liquidity and maturity structure of the Association's
assets and liabilities are critical to the maintenance of acceptable performance
levels.
The principal effect of inflation, as distinct from levels of interest rates, on
the Association's earnings is in the area of noninterest expense. Expense items
such as employee compensation and benefits, occupancy and equipment costs may be
subject to increases as a result of inflation. An additional effect of
inflation is the possible increase in the dollar value of the collateral
securing loans made by the Association. The Association is unable to determine
the extent, if any, to which the properties securing its loans have appreciated
in dollar value due to inflation.
18
[LOGO OF KPMG PEAT MARWICK LLP APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Cameron Financial Corporation:
We have audited the accompanying consolidated balance sheets of Cameron
Financial Corporation and subsidiary (the Company) as of September 30, 1996 and
1995 and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the years in the three-year period ended September
30, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cameron Financial
Corporation and subsidiary as of September 30, 1996 and 1995 and the results of
their operations and their cash flows for each of the years in the three-year
period ended September 30, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Kansas City, Missouri
November 22, 1996
19
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 1996 and 1995
Assets 1996 1995
------ ---- ----
Cash and cash equivalents $ 3,783,000 3,315,000
Certificates of deposit in other financial institutions 2,500,000 8,611,000
Investment securities held-to-maturity (estimated fair value of
$18,249,000 in 1996 and $26,497,000 in 1995) (note 3) 18,297,000 26,473,000
Mortgage-backed securities held-to-maturity 13,000 17,000
Loans receivable, net (notes 4 and 8) 154,444,000 129,740,000
Accrued interest receivable:
Loans and mortgage-backed securities 1,090,000 847,000
Investment securities 206,000 397,000
Certificates of deposit -- 3,000
Office properties and equipment, net (note 6) 2,874,000 699,000
Stock in Federal Home Loan Bank (FHLB) of Des Moines, at cost 1,259,000 1,235,000
Deferred income taxes (note 9) 611,000 208,000
Other assets (notes 5 and 10) 1,269,000 1,532,000
----------- -----------
$ 186,346,000 173,077,000
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
Savings deposits (note 7) $ 123,108,000 121,280,000
Borrowings from the FHLB (note 8) 12,250,000 --
Advance payments by borrowers for property taxes and insurance 1,729,000 1,628,000
Accrued interest payable on savings deposits 141,000 155,000
Accrued expense and other liabilities 1,989,000 997,000
Current income taxes payable 314,000 290,000
----------- -----------
Total liabilities 139,531,000 124,350,000
----------- -----------
Stockholders' equity (notes 1 and 2):
Serial preferred stock, $0.1 par; 2,000,000 shares authorized;
none issued or outstanding -- --
Common stock, $.01 par; 10,000,000 shares authorized;
3,026,928 shares issued 30,000 30,000
Additional paid-in-capital 29,622,000 29,476,000
Retained earnings, substantially restricted (note 9) 22,756,000 21,398,000
Unearned employee benefits (note 10) (3,082,000) (2,177,000)
Treasury stock; 177,248 shares of common stock at cost (2,511,000) --
----------- -----------
Total stockholders' equity 46,815,000 48,727,000
Commitments (notes 4 and 12) ----------- -----------
$ 186,346,000 173,077,000
=========== ===========
See accompanying notes to consolidated financial statements.
20
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
Years ended September 30
1996 1995 1994
---- ---- ----
Interest income:
Loans $ 12,181,000 10,472,000 9,339,000
Investment securities 1,319,000 1,190,000 724,000
Mortgage-backed securities 2,000 2,000 2,000
Certificates of deposit and other 419,000 625,000 597,000
---------- ---------- ----------
Total interest income 13,921,000 12,289,000 10,662,000
---------- ---------- ----------
Interest expense:
Savings deposits (note 7) 6,492,000 6,298,000 5,710,000
Borrowed money 187,000 19,000 -
---------- ---------- ----------
Total interest expense 6,679,000 6,317,000 5,710,000
---------- ---------- ----------
Net interest income 7,242,000 5,972,000 4,952,000
Provision for loan losses (note 4) 368,000 120,000 252,000
---------- ---------- ----------
Net interest income after provision for loan losses 6,874,000 5,852,000 4,700,000
---------- ---------- ----------
Noninterest income:
Loan and deposit service charges 130,000 131,000 136,000
(Loss) gain on sale of investment securities - (4,000) 7,000
Other income 92,000 100,000 43,000
---------- ---------- ----------
Total noninterest income 222,000 227,000 186,000
---------- ---------- ----------
Noninterest expense:
Compensation, payroll taxes and fringe benefits (note 10) 1,665,000 1,445,000 1,375,000
Occupancy expense 209,000 187,000 160,000
Data processing 151,000 129,000 120,000
Federal deposit insurance premiums (note 11) 1,082,000 283,000 282,000
Advertising 81,000 67,000 56,000
Loss (income) on real estate owned, net (1,000) 2,000 (6,000)
Other operating expenses 585,000 390,000 456,000
---------- ---------- ----------
Total noninterest expense 3,772,000 2,503,000 2,443,000
---------- ---------- ----------
Earnings before income taxes 3,324,000 3,576,000 2,443,000
Income taxes (note 8) 1,214,000 1,272,000 894,000
---------- ---------- ----------
Net earnings $ 2,110,000 2,304,000 1,549,000
========== ========== ==========
Net earnings per share (note 2) $ 0.77 0.83 -
========== ========== ==========
Average common shares outstanding $ 2,740,759 2,784,906 -
========== ========== ==========
See accompanying notes to consolidated financial statements.
21
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended September 30
Net
Additional unrealized loss
Common paid-in Retained on marketable
stock capital earnings equity securities
----- ------- -------- -----------------
Balance at September 30, 1993 $ -- -- 17,742,000 (2,000)
Net earnings -- -- 1,549,000 --
Change in gain (loss) on marketable equity securities -- -- -- (22,000)
------- ----------- ----------- -----------
Balance at September 30, 1994 -- -- 19,291,000 (24,000)
October 1, 1994 adoption of SFAS No. 115 -- -- -- 24,000
Sale of common stock, net of offering cost of $821,000 30,000 29,418,000 -- --
Unearned ESOP shares -- -- -- --
Net earnings -- -- 2,304,000 --
Dividend declared ($.07 per share) -- -- (197,000) --
Allocation of ESOP shares -- 58,000 -- --
Change in gain (loss) on available for sale securities -- -- -- --
------- ----------- ----------- -----------
Balance at September 30, 1995 30,000 29,476,000 21,398,000 --
January 29, 1996 adoption of Recognition and
Retention Plan (RRP) (note 10) 1,000 1,398,000 -- --
Amortization of RRP, net of forfeitures -- -- -- --
Net earnings -- -- 2,110,000 --
Dividend declared ($.28) per share) -- -- (752,000) --
Allocation of ESOP shares -- 124,000 -- --
Purchase of treasury stock -- -- -- --
Retirement of treasury stock (1,000) (1,376,000) -- --
------- ----------- ----------- -----------
Balance at September 30, 1996 $ 30,000 29,622,000 22,756,000 --
======= =========== =========== ===========
Net gain
(loss) on Unearned
available-for- employee Treasury
sale securities benefits stock Total
--------------- -------- -------- -----
Balance at September 30, 1993 $ -- -- -- 17,740,000
Net earnings -- -- -- 1,549,000
Change in gain (loss) on marketable equity securities -- -- -- (22,000)
------- ----------- ----------- -----------
Balance at September 30, 1994 -- -- -- 19,267,000
October 1, 1994 adoption of SFAS No. 115 2,000 -- -- 26,000
Sale of common stock, net of offering cost of $821,000 -- -- -- 29,448,000
Unearned ESOP shares -- (2,422,000) -- (2,422,000)
Net earnings -- -- -- 2,304,000
Dividend declared ($.07 per share) -- -- -- (197,000)
Allocation of ESOP shares -- 245,000 -- 303,000
Change in gain (loss) on available for sale securities (2,000) -- -- (2,000)
------- ----------- ----------- -----------
Balance at September 30, 1995 -- (2,177,000) -- 48,727,000
January 29, 1996 adoption of Recognition and
Retention Plan (RRP) (note 10) -- (1,399,000)
Amortization of RRP, net of forfeitures -- 193,000 (7,000) 186,000
Net earnings -- -- -- 2,110,000
Dividend declared ($.28) per share) -- -- -- (752,000)
Allocation of ESOP shares -- 301,000 -- 425,000
Purchase of treasury stock -- -- (3,881,000) (3,881,000)
Retirement of treasury stock -- -- 1,377,000 --
------- ----------- ----------- -----------
Balance at September 30, 1996 $ -- (3,082,000) (2,511,000) 46,815,000
======= =========== =========== ===========
See accompanying notes to consolidated financial statements.
22
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended September 30
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net earnings $ 2,110,000 2,304,000 1,549,000
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 50,000 7,000 50,000
Provision for loan losses 368,000 120,000 252,000
Provision for losses on real estate owned - - 1,000
Amortization of RRP and allocation of ESOP shares 611,000 303,000 -
Deferred income taxes (403,000) 64,000 (183,000)
(Gain) loss on sales of real estate owned (3,000) 1,000 (22,000)
Loss on sale of fixed assets - 1,000 -
Loss (gain) on sales of investment securities - 4,000 (7,000)
Stock dividend received on FHLB stock (24,000) - -
Amortization of deferred loan fees (397,000) (321,000) (275,000)
Proceeds from sales of loans held for sale 1,549,000 1,121,000 2,574,000
Origination of loans held for sale (1,450,000) (1,184,000) (2,556,000)
Gain on sale of loans held for sale (17,000) (19,000) (18,000)
Changes in assets and liabilities:
Accrued interest receivable (49,000) (307,000) (72,000)
Other assets 333,000 (118,000) (15,000)
Accrued interest payable (14,000) 29,000 13,000
Accrued expenses and other liabilities 1,003,000 118,000 287,000
Current income taxes payable 24,000 133,000 (37,000)
---------- ---------- -----------
Cash provided by operating activities 3,691,000 2,256,000 1,541,000
---------- ---------- -----------
Cash flows from investing activities:
Net increase in loans receivable (23,938,000) (15,451,000) (3,431,000)
Purchase of loans receivable (882,000) (26,000) (373,000)
Mortgage-backed securities principal repayments 4,000 3,000 9,000
Maturities of investment securities held-to-maturity 12,751,000 2,560,000 2,555,000
Purchase of investment securities held-to-maturity (4,541,000) (14,528,000) (7,088,000)
Proceeds from sale of investment securities
available-for-sale - 1,870,000 -
Proceeds from the sale of marketable equity securities - - 57,000
Net decrease in certificates of deposit in other
financial institutions 991,000 5,050,000 894,000
Net proceeds from sales of real estate owned 2,000 - 227,000
Purchase of life insurance policies - (1,270,000) -
Additions and improvements to real estate owned (7,000) - (76,000)
Purchase of office properties and equipment (2,259,000) (126,000) (462,000)
---------- ---------- -----------
Net cash used in investing activities $ (17,879,000) (21,918,000) (7,688,000)
---------- ---------- -----------
(Continued)
23
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
1996 1995 1994
Cash flows from financing activities: ---- ---- ----
Proceeds from sale of common stock, net of costs of issuance $ - 27,026,000 -
Net increase (decrease) in NOW, passbook and money market
demand amounts 139,000 (7,864,000) (1,090,000)
Net increase in certificate accounts 1,689,000 6,034,000 1,822,000
Net increase (decrease) in advance payments by borrowers
for taxes and insurance 101,000 149,000 (36,000)
Proceeds from Federal Home Loan Bank advances 12,250,000 2,500,000 -
Repayment of Federal Home Loan Bank advances - (2,500,000) -
Dividends paid (762,000) - -
Purchase of treasury stock (3,881,000) - -
----------- ---------- ----------
Net cash provided by financing activities 9,536,000 25,345,000 696,000
----------- ---------- ----------
Net (decrease) increase in cash (4,652,000) 5,683,000 (5,451,000)
Cash and cash equivalents at beginning of year 10,935,000 5,525,000 10,703,000
----------- ---------- ----------
Cash and cash equivalents at end of year $ 6,283,000 10,935,000 5,252,000
----------- ---------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes $ 1,594,000 1,061,000 1,114,000
----------- ---------- ----------
Cash paid during the year for interest $ 6,505,000 6,268,000 5,697,000
----------- ---------- ----------
Supplemental schedule of noncash investing and financing activities:
Conversion of loans to real estate owned $ 121,000 63,000 127,000
----------- ---------- ----------
Conversion of real estate owned to loans $ 59,000 63,000 257,000
----------- ---------- ----------
Dividends declared and payable $ 186,000 197,000 -
----------- ---------- ----------
Issuance of unearned ESOP $ - 2,422,000 -
----------- ---------- ----------
Issuance of unearned RRP shares $ 1,399,000 - -
----------- ---------- ----------
See accompanying notes to consolidated financial statements.
24
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 1996 and 1995
(1) Conversion and Acquisition of the Association by the Company
------------------------------------------------------------
Cameron Financial Corporation (the Company) was incorporated in December
1994 for the purpose of becoming the savings and loan holding company
of The Cameron Savings & Loan Association, F.A. (the Association) in
connection with the Association's conversion from a federally
chartered mutual savings and loan to a federally chartered stock
savings and loan. Pursuant to its Plan of Conversion, on March 31,
1995, the Company issued and sold 3,026,928 shares of its common
stock, in a subscription and community offering to the Association's
depositors and borrowers, the Company's employee stock ownership plan,
and the general public. Total proceeds of the offering, net of costs
and funding the ESOP, were approximately $27,026,000. The Company
utilized $14,724,000 of the net proceeds to acquire all of the common
stock issued by the Association in connection with its conversion. The
remaining proceeds were retained by the Company and invested in
government and agency securities.
The acquisition of the Association by the Company was accounted for in a
manner similar to the pooling-of-interests method. Accordingly, the
accounting basis of the assets, liabilities and equity accounts of the
Association remained the same as prior to the conversion and
acquisition and were not adjusted to their fair values, and no
purchase accounting adjustments were recorded. All intercompany
accounts and transactions are eliminated in consolidation.
In order to grant priority to eligible account holders in the event of
future liquidation, the Association, at the time of conversion
established a liquidation account in the amount equal to the
Association's capital as of September 30, 1994 ($19,291,000). In the
event of the future liquidation of the Association, eligible account
holders and supplemental eligible account holders who continue to
maintain their deposit accounts shall be entitled to receive a
distribution from the liquidation account. The total amount of the
liquidation account will be decreased as the balance of the eligible
account holders and supplemental eligible account holders is reduced
subsequent to the conversion, based on an annual determination of such
balances. The Association may not declare or pay a cash dividend to
the Company on, or repurchase any of its common stock if the effect
thereof would cause the retained earnings of the Association to be
reduced below the amount required for the liquidation account. Except
for such restrictions, the existence of the liquidation account does
not restrict the use or application of the Association's retained
earnings.
(Continued)
25
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies
------------------------------------------
(a) Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, all short-term investments
with a maturity of three months or less at date of purchase are
considered cash equivalents. Cash and cash equivalents reflected on
the balance sheet include interest earning deposits of $3,333,000 and
$3,082,000 at September 30, 1996 and 1995, respectively.
(b) Investment Securities
---------------------
The Company and the Association classify their investment securities as
held-to-maturity, available-for-sale or trading. Held-to-maturity
securities are recorded at amortized cost adjusted for amortization of
premiums and accretion of discounts that are recognized in income
using the interest method over the period to maturity. Available-for-
sale and trading securities are recorded at fair value. Adjustments to
record available-for-sale securities at fair value are reflected, net
of tax, in equity. At September 30, 1996 and 1995, all of the
Company's and Association's investment and mortgage-backed securities
are classified as held-to-maturity.
Gain or loss on the sale of securities is recognized using the specific
identification method.
(c) Provisions for Losses on Loans and Interest Receivable
------------------------------------------------------
Provision for losses on loans receivable are based upon management's
estimate of the amount required to maintain an adequate allowance for
losses, relative to the risks in the loan portfolio. The estimate is
based on reviews of the portfolio, including assessment of the
carrying value of the loans to the estimated net realizable value of
the related underlying collateral, considering past loss experience,
current economic conditions and such other factors which, in the
opinion of management, deserve current recognition. The Association is
subject to the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities. As an integral
part of those examinations, the various regulatory agencies
periodically review the Association's allowance for loan losses. Such
agencies may require the Association to recognize changes to the
allowance based on their judgments about information available to them
at the time of their examination.
Accrual of interest income on loans is discontinued for those loans with
interest more than ninety days delinquent or sooner if management
believes collectibility of the interest is not probable. Management's
assessment of collectibility is primarily based on a comparison of the
estimated value of underlying collateral to the related loan and
accrued interest receivable balances.
(Continued)
26
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
The Association adopted Statements of Financial Accounting Standards (SFAS)
No. 114, "Accounting by Creditors for Impairment of a Loan," and SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," on October 1, 1995. SFAS No. 114, as
amended by SFAS No. 118, defines the recognition criteria for loan
impairment and the measurement methods for certain impaired loans and
loans for which terms have been modified in troubled-debt
restructurings (a restructured loan). Specifically, a loan is
considered impaired when it is probable a creditor will be unable to
collect all amounts due - both principal and interest - according to
the contractual terms of the loan agreement. When measuring
impairment, the expected future cash flows of an impaired loan are
required to be discounted at the loan's effective interest rate.
Alternatively, impairment can be measured by reference to an
observable market price, if one exists, or the fair value of the
collateral for a collateral-dependent loan. Regardless of the
historical measurement method used, SFAS No. 114 requires a creditor
to measure impairment based on the fair value of the collateral when
the creditor determines foreclosure is probable. Additionally,
impairment of a restructured loan is measured by discounting the total
expected future cash flows at the loan's effective rate of interest as
stated in the original loan agreement.
The Association applies the recognition criteria of SFAS No. 114 to
multifamily real estate loans, commercial real estate loans and
restructured loans. Smaller balance, homogeneous loans, including one-
to-four-family residential and construction loans and consumer loans,
are collectively evaluated for impairment. SFAS No. 118 amended SFAS
No. 114 to allow a creditor to use existing methods for recognizing
interest income on impaired loans. The Association has elected to
continue to use its existing nonaccrual methods for recognizing
interest on impaired loans. The adoption of SFAS No. 114 and SFAS No.
118 resulted in no adjustment to the allowance for loan losses and did
not affect the Association's policies regarding charge-offs or
recoveries.
(d) Deferred Loan Fees and Costs
----------------------------
Mortgage loan origination fees and direct mortgage loan origination costs
are deferred and the net fee or cost is recognized in earnings using
the interest method over the contractual life of the loan. Direct loan
origination costs for other loans are expensed, as such costs are not
material in amount.
(e) Loans Held for Sale
-------------------
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or fair value. Net unrealized losses are
recognized through a valuation allowance by charges to income. At
September 30, 1996, there were no loans held for sale. At September
30, 1995, loans held for sale totaled $82,000. There was no valuation
allowance at September 30, 1995.
(Continued)
27
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(f) Real Estate Owned
-----------------
Real estate owned includes real estate acquired through, or in lieu of,
loan foreclosure and is carried at the lower of cost or estimated fair
value less estimated cost to sell. Revenue and expenses from
operations and the provision for losses on real estate owned are
included in income (loss) on real estate owned in the accompanying
consolidated statements of earnings.
(g) Office Properties and Equipment
-------------------------------
Office properties and equipment are recorded at cost, less accumulated
depreciation. Depreciation is provided on office properties and
equipment using the straight-line method over the estimated useful
lives of the related assets.
(h) Stock in Federal Home Loan Bank (FHLB)
--------------------------------------
The Association is a member of the FHLB system. As a member, the
Association is required to purchase and hold stock in the FHLB of Des
Moines in an amount equal to the greater of (a) 1% of unpaid
residential loans at the beginning of each year, (b) 5% of FHLB
advances, or (c) .3% of total assets. The Association's investment in
such stock is recorded at cost.
(i) Income Taxes
------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(j) Earnings Per Share
------------------
Earnings per share is based upon the weighted average common and common
equivalent shares outstanding, less treasury shares and unallocated
ESOP shares. Stock options and the shares awarded under the RRP (see
note 10) are regarded as common stock equivalents and are therefore
considered in both primary and fully diluted earnings per share
calculations. Common stock equivalents are computed using the treasury
stock method.
For 1995, earnings per share is based upon the total number of common
shares outstanding after the conversion and acquisition described
above and are presented as if those shares had been outstanding for
the entire year. The 1995 computation does not reflect the pro forma
effect of any investment income that would have been earned if the net
proceeds from conversion had been received at the beginning of the
year.
(Continued)
28
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(k) Use of Estimates
----------------
Management of the Association has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
(l) New Account Pronouncements
--------------------------
SFAS No. 122, "Accounting for Mortgage Servicing Rights," will be adopted
October 1, 1996 and generally requires entities that sell or
securitize loans and retain the mortgage servicing rights to allocate
the total cost of the mortgage loans to the mortgage servicing rights
and the loan based on their relative fair value. Costs allocated to
mortgage servicing rights should be recognized as a separate asset and
amortized over the period of estimated net servicing income and
evaluated for impairment based on fair value.
SFAS No. 123, "Accounting for Stock-Based Compensation," will be adopted by
the Company during the fiscal year ending September 30, 1997. This
statement establishes financial accounting and reporting standards for
stock-based employee compensation plans. These plans include all
arrangements by which employees receive shares of stock or other
equity investments of the employer or the employer incurs liabilities
to employees in amounts based on the price of the employer's stock.
This statement also applies to transactions in which an entity issues
its equity instruments to acquire goods and services from
nonemployees.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," supersedes SFAS No. 122 and will
be effective for all transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. This
statement provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial-components approach
that focuses on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial and servicing assets it
controls and liabilities it has incurred and derecognizes financial
assets it no longer controls and liabilities that have been
extinguished. The financial-components approach focuses on the assets
and liabilities that exist after the transfer. Many of these assets
and liabilities are components of financial assets that existed prior
to the transfer. If a transfer does not meet the criteria for a sale,
the transfer is accounted for as a secured borrowing with pledge of
collateral.
Management believes adoption of SFAS Nos. 122, 123 and 125 will not have a
material effect on the financial position or results of operations,
nor will adoption require additional capital resources.
(Continued)
29
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) Investment Securities
---------------------
A summary, by maturity dates, of investment securities held-to-maturity at
September 30, 1996 follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
United States government and agency
obligations maturing in less than
one year $ 3,988,000 16,000 (1,000) 4,003,000
United States government and agency
obligations maturing after one year 12,194,000 41,000 (122,000) 12,113,000
but within five years
United States government and agency
obligations maturing after five
years but within ten years 500,000 - (4,000) 496,000
---------- -------- -------- ----------
16,682,000 57,000 (127,000) 16,612,000
---------- -------- -------- ----------
Privately issued bonds maturing in:
2001 615,000 41,000 - 656,000
2005 1,000,000 - (19,000) 981,000
---------- -------- -------- ----------
1,615,000 41,000 (19,000) 1,637,000
---------- -------- -------- ----------
Total $ 18,297,000 $ 98,000 (146,000) 18,249,000
========== ======== ======== ==========
A summary, by maturity dates, of investment securities held-to-maturity
at September 30, 1995 follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
United States government and agency
obligations maturing in less than
one year $ 7,389,000 10,000 (23,000) 7,376,000
United States government and agency
obligations maturing after one year
but within five years 17,867,000 152,000 (132,000) 17,887,000
United States government and agency
obligations maturing after five
years but within ten years 500,000 - (2,000) 498,000
---------- -------- -------- ----------
25,756,000 162,000 (157,000) 25,761,000
---------- -------- -------- ----------
Privately issued bonds maturing in:
1996 103,000 - - 103,000
2001 614,000 19,000 - 633,000
---------- -------- -------- ----------
717,000 19,000 - 736,000
---------- -------- -------- ----------
Total $ 26,473,000 $ 181,000 (157,000) 26,497,000
========== ======== ======== ==========
(Continued)
30
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Proceeds from the sale of investment securities for the years ended
September 30, 1995 and 1994 totaled $1,870,000 and $57,000,
respectively, and resulted in gross realized losses of $53,000 and $0
and gross realized gains of $49,000 and $7,000, respectively. There
were no sales of investment securities in the year ended September 30,
1996.
(4) Loans Receivable
----------------
Loans receivable at September 30 are summarized as follows:
1996 1995
---- ----
Residential real estate loans:
One to four family $109,292,000 94,958,000
Multifamily 2,908,000 3,181,000
Held for sale - 82,000
Construction loans, primarily
single family 41,646,000 32,956,000
Land 9,605,000 4,106,000
Commercial real estate 4,322,000 3,759,000
Consumer loans 8,330,000 5,587,000
------------ -----------
Total loans receivable 176,103,000 144,629,000
Less:
Loans in process 19,502,000 13,253,000
Deferred loans fees, net 804,000 642,000
Allowance for loan losses 1,353,000 994,000
------------ -----------
$154,444,000 129,740,000
============ ===========
The Association grants residential and commercial real estate, and other
consumer and commercial loans primarily in its lending territory,
Clinton County, Missouri and contiguous counties. Although the
Association has a diversified loan portfolio, a substantial portion of
its borrowers' ability to repay their loans is dependent upon economic
conditions in the Association's lending territory.
The Association makes contractual commitments to extend credit which are
subject to the Association's credit monitoring procedures. At
September 30, 1996, the Association was committed to originate loans
receivable aggregating approximately $6,693,000, including fixed-rate
loan commitments of approximately $3,385,000, with interest rates
ranging from 7.375% to 8.750%. At September 30, 1996, commitments to
sell loans were $140,000. There were no commitments to buy loans.
At September 30, 1996 and 1995, the Association had loans of $715,000 and
$946,000, respectively, to various directors, officers and their
families. During 1996, $222,000 of new loans were made and repayments
totaled $453,000. These loans are made subject to the same interest
rates and underwriting standards used to originate loans to other
borrowers of the Association.
(Continued)
31
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
The following is a summary of activity in the allowance for loan losses for
the years ended September 30:
1996 1995 1994
---- ---- ----
Balance at beginning of year $ 994,000 876,000 637,000
Provision for loan losses 368,000 120,000 252,000
Charge-offs (9,000) (2,000) (13,000)
---------- ------- -------
Balance at end of year $1,353,000 994,000 876,000
========== ======= =======
Loans delinquent ninety days or more at September 30, 1996 and 1995 were
approximately $1,478,000 and $1,335,000, respectively, including
nonaccrual loans of approximately $769,000 and $560,000, respectively.
Interest that would have been recognized on nonaccrual loans under
their original terms but for which an allowance has been established
amounted to $40,000 and $15,000 at September 30, 1996 and 1995,
respectively. The amount that was included in income on such loans was
$40,000 and $19,000 for the years ended September 30, 1996 and 1995,
respectively.
(5) Real Estate Owned
-----------------
At September 30, 1996 the Association had $70,000 in real estate owned
included in other assets in the accompanying balance sheet. At
September 30, 1995, the Association had no real estate owned.
(6) Office Properties and Equipment
-------------------------------
At September 30, 1996 and 1995, office properties and equipment consisted
of the following:
1996 1995
---- ----
Land $ 428,000 428,000
Buildings and improvements 127,000 129,000
Furniture, fixtures and equipment 427,000 263,000
Construction in progress 2,105,000 54,000
---------- -------
3,087,000 874,000
Less accumulated depreciation 213,000 175,000
---------- -------
2,874,000 699,000
========== =======
The Association is in the process of constructing its new home office
building in Cameron, Missouri. Total project costs of the new building
is expected to be $4,250,000 with completion expected in March 1997.
In November 1996, the Association commenced a plan to purchase a
parcel of land for $850,000 in Liberty, Missouri for the purpose of
building a branch location and development and sale of the adjoining
lots. It is expected that the construction costs of the new branch
will be $1,000,000 with completion expected in December 1997. The
Association plans to fund the purchase and the construction of both
facilities with existing short-term investment securities and cash
provided from operations.
(Continued)
32
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(7) Savings Deposits
----------------
Savings deposits at September 30, 1996 and 1995 are summarized as follows:
1996 1995
-------------------- ---------------------
rate Amount Percent Amount Percent
---- ------ ------- ------ -------
Balance by interest rate:
NOW and super
NOW accounts 0-2.75% $ 5,294,000 4.3% $ 5,322,000 4.4%
Passbook accounts 3.25 11,179,000 9.1 10,415,000 8.6
Money market
demand accounts 3.00 7,494,000 6.1 8,091,000 6.7
----------- ----- ----------- -----
23,967,000 19.5 23,828,000 19.7
----------- ----- ----------- -----
Certificate accounts 0-3.99% 4,000 - % 52,000 -
4.00-4.99 1,280,000 1.0 4,884,000 4.0
5.00-5.99 62,586,000 50.8 47,885,000 39.5
6.00-6.99 25,793,000 21.0 30,714,000 25.3
7.00-7.99 7,389,000 6.0 11,651,000 9.6
8.00-8.99 1,923,000 1.6 2,106,000 1.8
9.00 166,000 .1 160,000 .1
----------- ----- ----------- -----
99,141,000 80.5 97,452,000 80.3
----------- ----- ----------- -----
$123,108,000 100.0% $121,280,000 100.0%
=========== ===== =========== =====
Weighted average interest rate on
savings deposits at September 30 5.33% 5.41%
==== ====
1996 1995
-------------------- ---------------------
Amount Percent Amount Percent
------ ------- ------ -------
Contractual maturity of
certificate accounts:
Under 12 months $49,547,000 50.0% $54,348,000 55.8%
12 to 24 months 18,131,000 18.3 13,534,000 13.9
24 to 36 months 6,383,000 6.4 7,729,000 7.9
36 to 48 months 4,506,000 4.5 4,766,000 4.9
48 to 60 months 2,851,000 2.9 4,036,000 4.1
Over 60 months 17,723,000 17.9 13,039,000 13.4
----------- ----- ----------- -----
$99,141,000 100.0% $97,452,000 100.0%
=========== ===== =========== =====
(Continued)
33
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
The components of interest expense on savings deposits are as follows for
the years ended September 30:
1996 1995 1994
---- ---- ----
NOW, super NOW, passbook and
money market $ 691,000 844,000 1,027,000
Certificate accounts 5,801,000 5,454,000 4,683,000
---------- --------- ---------
$ 6,492,000 6,298,000 5,710,000
========== ========= =========
The aggregate amount of certificates of deposit with a minimum denomination
of $100,000 was approximately $9,119,000 and $7,524,000 at
September 30, 1996 and 1995, respectively. The amount by which
individual certificates of deposit exceed $100,000 are not insured by
the Federal Deposit Insurance Corporation. The Association has pledged
investment securities with an amortized cost of approximately
$3,170,000 and $2,920,000 at September 30, 1996 and 1995,
respectively, as additional security on savings deposits.
(8) FHLB Advances
-------------
The Association had the following debt outstanding from the Federal Home
Loan Bank of Des Moines at September 30, 1996:
$2,000,000 advance, interest at 5.64%,
due November 1996 $ 2,000,000
$1,000,000 advance, interest at 6.18%,
due July 1997 1,000,000
$2,000,000 advance, interest at 5.49%,
due February 1998 2,000,000
$2,000,000 advance, interest at 6.21%,
due September 1998 2,000,000
$1,000,000 advance, interest at 6.75%,
due July 1999 1,000,000
$2,000,000 advance, interest at 6.4%,
due September 1999 2,000,000
$1,250,000 advance, interest at 5.79%,
due December 2000 1,250,000
$1,000,000 advance, interest at 7.01%,
due July 2001 1,000,000
-----------
$12,250,000
===========
The advances to the FHLB are collateralized by first mortgage loans.
(Continued)
34
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Scheduled maturities of FHLB advances are as follows:
Year ending
September 30,
-------------
1997 $ 3,000,000
1998 4,000,000
1999 3,000,000
2000 -
2001 2,250,000
-----------
$12,250,000
===========
(9) Income Taxes
------------
The components of income tax expense are as follows:
Federal State Total
------- ----- -----
Year ended September 30, 1996:
Current $ 1,440,000 177,000 1,617,000
Deferred (351,000) (52,000) (403,000)
--------- ----------- ---------
$ 1,089000 125,000 1,214,000
========= =========== =========
Year ended September 30, 1995:
Current $ 1,088,000 120,000 1,208,000
Deferred 47,000 17,000 64,000
--------- ----------- ---------
$ 1,135,000 137,000 1,272,000
========= =========== =========
Year ended September 30, 1994:
Current $ 945,000 132,000 1,077,000
Deferred (160,000) (23,000) (183,000)
--------- ----------- ---------
$ 785,000 109,000 894,000
========= =========== =========
The reasons for the differences between the effective tax rates and the expected
federal income tax rate of 34% are as follows:
Percentage of
earnings before
income taxes
----------------------
1996 1995 1994
---- ---- ----
Expected federal income tax rate 34.0% 34.0 34.0
State taxes, net of federal tax benefit 2.3 2.5 2.9
Other, net .1 (.9) (.3)
---- ---- ----
Effective income tax rate 36.4% 35.6 36.6
==== ==== ====
(Continued)
35
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Temporary differences which give rise to a significant portion of deferred tax
assets and liabilities at September 30, 1996 and 1995 are as follows:
1996 1995
---- ----
Accrued and prepaid expenses $ 295,000 -
Accrued compensation 283,000 170,000
Loan origination fees, net of deferred - 29,000
costs
Allowance for loan losses 457,000 319,000
Other - 15,000
---------- --------
Deferred income tax asset 1,035,000 533,000
---------- --------
Loan origination fees, net of deferred (123,000) -
costs
FHLB dividends (186,000) (176,000)
Accrued and prepaid expenses - (62,000)
Federal and state taxes related to
reversing temporary differences (69,000) (27,000)
Accrued interest on loans originated
prior to September 25, 1985 (25,000) (31,000)
Depreciation of fixed assets (13,000) (29,000)
Other (8,000) -
---------- --------
Deferred income tax liability (424,000) (325,000)
----------
Net deferred income taxes 611,000 208,000
========== ========
There was no valuation allowance for deferred tax assets at September 30,
1996 or 1995.
Under the Internal Revenue Code, the Association is allowed to deduct the
greater of an experience method bad debt deduction based on actual
charge-offs or a statutory bad debt deduction based on a percentage
(8%) of taxable income before such deduction. This deduction is an
addition to tax bad debt reserves established for the purpose of
absorbing losses. The allowable deduction under the percentage of
taxable income method is subject to certain statutory limitations,
which applied at September 30, 1996, 1995 and 1994. Under the Small
Business Job Protection Act (the Act) of 1996, the allowable deduction
under the taxable income method was terminated for tax years beginning
after 1995 and will not be available to the Association for future
years. The Act also provides that federal income tax bad debt reserves
in excess of the base year reserves will be included in taxable income
over a six year inclusion period. The Association has established a
deferred tax liability of approximately $96,000 for this recapture.
Retained earnings of the Association at September 30, 1996 and 1995
includes approximately $4,600,000, for which no provision for federal
income tax has been made. This amount represents allocations of income
to bad debt deductions for tax purposes only. Reduction of amounts
allocated for purposes other than tax bad debt losses will create
income for tax purposes only, which will be subject to the then
current corporate income tax rate.
(Continued)
36
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(10) Benefit Plans
-------------
Pension and Retirement Plans
----------------------------
The Association has a supplemental retirement plan to provide members of
the Board of Directors with supplemental retirement, disability and
death benefits. The Plan provides benefits for directors or their
beneficiaries after they have completed service to the Association.
The annual benefits are equal to the number of years of service on the
board times $500, paid monthly for ten years following retirement.
Expense under the plan for the years ended September 30, 1996, 1995
and 1994 amounted to $29,000, $24,000 and $380,000, respectively. 1994
expense included an accrual for past service costs. The Association
purchased life insurance policies to fund its obligations under the
plan in October 1994, which are included in other assets.
Employee Stock Ownership Plan (ESOP)
------------------------------------
All employees meeting age and service requirements are eligible to
participate in an ESOP. Under the terms of the ESOP, contributions are
allocated to participants using a formula based upon compensation.
Participants vest over five years.
In connection with the conversion described in note 1, the ESOP purchased
242,154 shares of Company common stock. The remaining unamortized cost
of such shares purchased is reflected as unearned employee benefits in
the accompanying consolidated balance sheet. On September 30, 1996 and
1995, 30,605 and 24,366 shares were allocated to participants. The
fair value of such shares, $425,000 and $303,000, respectively, was
charged to expense. The fair value of the remaining unallocated shares
at September 30, 1996 aggregated $2,761,000.
Stock Option and Recognition and Retention Plan
-----------------------------------------------
The Board of Directors approved the adoption of a stock option plan and a
recognition and retention plan (RRP) in January 1996. Under the stock
option plan, options to acquire 302,692 shares of the Company's common
stock may be granted to certain officers and directors of the Company
or the Association. In January 1996, the Company awarded options to
acquire 186,323 shares of stock. The options enable the recipients to
purchase stock at an exercise price equal to the fair market value of
the stock at the date of the grant ($14.56). The options vest over the
five years following the date of grant. No stock options were
exercised by recipients during 1996.
Under the RRP, common stock aggregating 121,077 shares may be awarded to
certain officers and directors of the Company or the Association. In
January 1996, the Company awarded 95,675 shares with a market value of
$1,399,000. These shares have been reflected as unearned employee
benefits in the accompanying 1996 consolidated balance sheet.
Participants vest over five years. As the awards vest, they are
reflected as compensation expense. The amortization of the RRP awards
during 1996 was $193,000. The unamortized cost of the RRP awards at
September 30, 1996 was $1,206,000.
(Continued)
37
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(11) Federal Deposit Insurance Premiums
----------------------------------
The deposits of the Association are presently insured by the Savings
Association Insurance Fund (SAIF), which together with the Bank
Insurance Fund (BIF), are the two insurance funds administered by the
FDIC. In the third quarter of 1995, the FDIC lowered the premium
schedule for BIF-insured institutions in anticipation of the BIF
achieving its statutory reserve ratio. The reduced premium created a
significant disparity in deposit insurance expense, causing a
competitive advantage for BIF members. Legislation enacted on
September 30, 1996 provided for a one-time special assessment of .657%
of the Association's SAIF insured deposits at March 31, 1995. The
purpose of the assessment is to bring the SAIF to its statutory
reserve ratio. Based on the above formula, the Association's SAIF
assessment of $800,000 was recorded in the 1996 consolidated financial
statements. Although the special one-time assessment significantly
increased noninterest expense for the year, the anticipated reduction
in the premium schedule will reduce the Association's federal
insurance premiums for future periods.
(12) Regulatory Capital Requirements
-------------------------------
The Association is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken,
could have a direct material effect on the Association's consolidated
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Association
must meet specific capital guidelines that involve quantitative
measures of the Association's assets, liabilities and certain off-
balance sheet items as calculated under regulatory accounting
practices. The Association's capital amounts and classification are
also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios (set
forth in the table below) of risk-based capital, as defined in the
regulations, to risk-weighted assets, as defined, and of tangible and
core capital, as defined, to total assets, as defined. Management
believes, as of September 30, 1996, that the Association meets all
capital adequacy requirements to which it is subject.
As of August 31, 1996, the most recent notification from the Office of
Thrift Supervision (OTS) categorized the Association as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Association must
maintain minimum total risk-based, tangible and core capital ratios as
set forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's
category.
(Continued)
38
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Tangible Core Risk-based
-------- ---- ----------
Regulatory capital $ 32,928,000 32,928,000 33,161,000
Minimum capital requirement 2,612,000 5,224,000 9,386,000
---------- ---------- ----------
Regulatory capital in excess of
minimum capital requirements $ 30,316,000 27,704,000 23,775,000
========== ========== ==========
Minimum capital requirement 1.5% 3.0 8.0
=== === ===
The Association's regulatory capital 18.9% 18.9 28.3
==== ==== ====
(13) Fair Value of Financial Instruments
-----------------------------------
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," and
SFAS No. 119, "Disclosures About Derivative Financial Instruments and
Fair Value of Financial Instruments," require disclosure of estimated
fair values of financial instruments, both assets and liabilities
recognized and not recognized in the consolidated financial
statements. Fair value estimates have been made as of September 30,
1996 based on then current economic conditions, risk characteristics
of the various financial instruments and other subjective factors.
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to
estimate that value:
Cash and Cash Equivalents and Certificates of Deposit
-----------------------------------------------------
The carrying amounts approximate fair value because of the short
maturity of these instruments.
Investment Securities and Mortgage-backed Securities
----------------------------------------------------
The fair values of investment securities and mortgage-backed
securities are estimated based on published bid prices or bid
quotations received from securities dealers.
Certificates of Deposit in Other Financial Institutions
-------------------------------------------------------
The fair values of certificates of deposit are estimated based on the
static discounted cash flow approach using rates currently offered for
deposits of similar remaining maturities.
Loans Receivable
----------------
The fair values of loans receivable are estimated using the option-
based approach. Cash flows consist of scheduled principal, interest
and prepaid principal. Loans with similar characteristics were
aggregated for purposes of these calculations.
(Continued)
39
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Accrued Interest
----------------
The carrying amount of accrued interest is assumed to be its carrying
value because of the short-term nature of these items.
Stock in the FHLB
-----------------
The carrying amount of such stock is estimated to approximate fair
value.
Deposits
--------
The fair values of deposits with no stated maturity are deemed to be
equivalent to amounts payable on demand. The fair values of
certificates of deposit are estimated based on the static discounted
cash flow approach using rates currently offered for deposits of
similar remaining maturities.
FHLB Advances
-------------
The fair values of FHLB advances are estimated based on discounted
values of contractual cash flows using the rates currently available
to the Association for advances of similar remaining maturities. The
carrying amount of the advances under the line of credit approximates
fair value due to the short maturity.
Fair value estimates of the Association's financial instruments as of
September 30, 1996 are set forth below:
Carrying Estimated
amount fair value
------ ----------
Cash and cash equivalents and
certificates of deposit $ 6,283,000 6,283,000
=========== ===========
Investment securities $ 18,297,000 18,249,000
=========== ===========
Mortgage-backed securities $ 13,000 13,000
=========== ===========
Loans receivable, net of loans in $ 154,444,000 156,620,000
process =========== ===========
Accrued interest receivable $ 1,296,000 1,296,000
=========== ===========
Stock in the FHLB $ 1,259,000 1,259,000
=========== ===========
Deposits:
Money market and NOW deposits $ 12,788,000 12,788,000
Passbook accounts 11,179,000 11,179,000
Certificate accounts 99,141,000 98,951,000
----------- -----------
Total deposits $ 123,108,000 122,918,000
=========== ===========
FHLB Advances $ 12,250,000 12,152,000
=========== ===========
Accrued interest payable $ 141,000 141,000
=========== ===========
(Continued)
40
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Limitations
-----------
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instruments. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the Association's
entire holdings of a particular financial instrument. Because no
market exists for a significant portion of the Association's financial
instruments, fair value estimates are based on judgments regarding
future loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates. Fair value estimates are based on existing balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities
that are not considered financial instruments.
(14) Parent Company Condensed Financial Statements
---------------------------------------------
Condensed Balance Sheets
September 30, 1996 and 1995
1996 1995
---- ----
Cash and cash equivalents $ 2,630,000 2,324,000
Investment securities held-to-maturity 9,443,000 11,370,000
Investment in Association 32,928,000 32,913,000
ESOP loan receivable 1,937,000 2,179,000
Other 97,000 201,000
----------- ----------
Total assets $47,035,000 48,987,000
=========== ==========
Dividends payable $ 199,000 212,000
Other liabilities 21,000 48,000
----------- ----------
Total liabilities 220,000 260,000
Stockholders' equity 46,815,000 48,727,000
----------- ----------
Total liabilities and stockholders'
equity $47,035,000 48,987,000
=========== ==========
Condensed Income Statements
Year ended September 30, 1996 and
Period from inception (December 19, 1994) to September 30, 1995
Dividend income $2,248,000 925,000
Interest income 969,000 508,000
Expense (510,000) (147,000)
---------- ---------
Income before equity in undistributed
earnings of Association 2,707,000 1,286,000
Equity in undistributed (loss)
earnings of the Association (597,000) 215,000
---------- ---------
Net income $2,110,000 1,501,000
========== =========
(Continued)
41
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
Condensed Statements of Cash Flows
Year ended September 30, 1996 and
Period from inception (December 19, 1994) to September 30, 1995
1996 1995
---- ----
Cash provided by operations:
Net earnings $ 2,110,000 1,501,000
Amortization (31,000) (44,000)
Change in other assets 104,000 (186,000)
Change in other liabilities (30,000) 48,000
Undistributed earnings of
subsidiary, net 597,000 (215,000)
----------- -----------
Cash provided by operations 2,750,000 1,104,000
----------- -----------
Cash used by investing activities:
Purchase of investment securities
held-to-maturity (2,042,000) (12,325,000)
Proceeds from ESOP note receivable 241,000 243,000
Purchase of investment in subsidiary - (14,724,000)
Maturities of investment securities
held-to-maturity 4,000,000 1,000,000
----------- -----------
Cash used in investing activities 2,199,000 (25,806,000)
----------- -----------
Cash provided by financing activities:
Proceeds from stock offering, net of
conversion costs - 27,026,000
Purchase of treasury stock (3,881,000) -
Dividends paid (762,00) -
----------- -----------
Cash provided by financing
activities (4,643,000) 27,026,000
----------- -----------
Net increase in cash $ 306,000 2,324,000
=========== ===========
Cash and cash equivalents at
beginning of period $ 2,324,000 -
=========== ===========
Cash and cash equivalents at end of
period $ 2,630,000 2,324,000
=========== ===========
Dividends paid by the Company are primarily provided through Association
dividends paid to the Company. At September 30, 1996, the Company
had declared dividends of $199,000 which had not been paid as of
year-end. During 1996, the Association paid dividends of $2,248,000
to the Company.
42
CAMERON FINANCIAL CORPORATION
-----------------------------
STOCKHOLDER INFORMATION
-----------------------
Annual Meeting
- --------------
The Annual Meeting of Stockholders will be held at 4:00 p.m., Cameron, Missouri
time on January 27, 1997, at the American Legion Hall located on U.S. Highway 69
at the south edge of Cameron, Missouri 64429.
Stock Listing
- -------------
Cameron Financial Corporation common stock is traded on the National Association
of Securities Dealers, Inc. National Market under the symbol "CMRN."
Price Range of Common Stock
- ---------------------------
The per share price range of the common stock for each quarter since conversion
was as follows:
Fiscal Year 1995 High Low Dividends
---------------- ---- --- ---------
Third Quarter $12.13 $10.50 $ -
Fourth Quarter $15.50 $11.38 $.07
Fiscal Year 1996
----------------
First Quarter $14.75 $13.50 $.07
Second Quarter $15.25 $13.75 $.07
Third Quarter $14.50 $13.50 $.07
Fourth Quarter $15.25 $13.50 $.07
A $.07 per share dividend was declared by the Board of Directors on September
17, 1996, payable October 28, 1996 to stockholders of record on October 11,
1996. The stock price information set forth in the table above was provided by
the National Association of Securities Dealers, Inc., Automated Quotation
System.
At December 13, 1996, there were 2,849,280 shares of Cameron Financial
Corporation common stock issued and outstanding (including unallocated ESOP
shares) and there were 546 registered holders of record.
Shareholders and General Inquiries Transfer Agent
- ---------------------------------- --------------
David G. Just, President Registrar and Transfer Co.
Cameron Financial Corporation 10 Commerce Drive
123 East Third Street Cranford, New Jersey 07016
Cameron, Missouri 64429
(816) 632-2154
Annual and Other Reports
- ------------------------
A copy of Cameron Financial Corporation's Annual Report on Form 10-K for the
year ended September 30, 1996, as filed with the Securities and Exchange
Commission, may be obtained without charge by contacting David G. Just,
President and Chief Executive Officer, Cameron Financial Corporation, 123 East
Third Street, Cameron, Missouri 64429.
43
CAMERON FINANCIAL CORPORATION
-----------------------------
CORPORATE INFORMATION
---------------------
Company and Association Address
- -------------------------------
123 East Third Street Telephone: (816) 632-2154
Cameron, Missouri 64429 Fax: (816) 632-2157
Directors of the Board
- ----------------------
Herschel Pickett George E. Hill
Chairman of Cameron Financial Retired Western Auto Associate Store
Corporation, and owner
The Cameron Savings and Loan
Association, F.A., and retired Harold D. Lee
CEO of The Cameron Savings & Owner, Lee Auto & Tractor
Loan Association, F.A. NAPA Dealership
David G. Just Jon N. Crouch
President of Cameron Financial Manager, Cameron Memorial Airport
Corporation and Owner, Crouch Aviation
The Cameron Savings & Loan Retired Frontier and Continental
Association, F.A. Airlines Captain
Kennith R. Baker William F. Barker, DDS
Agent, State Farm Insurance Owner, Barker Dental Clinic
Cameron Financial Corporation Executive Officers
- ------------------------------------------------
David G. Just Ronald W. Hill
President and Chief Executive Officer Vice President and Treasurer
The Cameron Savings & Loan Association, F.A. Executive Officers
- ---------------------------------------------------------------
David G. Just Ronald W. Hill
President and Chief Executive Officer Vice President and Treasurer
Stephen D. Hayward Earl T. Frazier
Director of Lending Manager, Liberty Loan Production
Office
Independent Auditors Special Counsel
- -------------------- ---------------
KPMG Peat Marwick LLP Luse, Lehman, Gorman,
1000 Walnut, Suite 1600 Pomerenk & Schick, PC
Post Office Box 13127 5335 Wisconsin Avenue, N.W.
Kansas City, Missouri 64199 Suite 400
Washington, D.C. 20015
44