FORM 10-QSB/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
OTS Docket number 06172
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Commission File Number 0-25486
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St. Landry Financial Corporation
--------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 72-1284436
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Post Office Box 72, Opelousas, Louisiana 70571-0072
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(Address of principal executive offices)
(Zip Code)
(318) 942-5748
--------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 of the Securities Exchange Act of 1934 during the past 12
months (or such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes No X
----- -----
State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date:
Common Stock, par value $.01 per share 459,093
- -------------------------------------- ------------------------------
Class (Outstanding at June 30, 1996)
Transitional Small Business Disclosure Format:
Yes No X
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ST. LANDRY FINANCIAL CORPORATION
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INDEX
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Page Number
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 1
Consolidated Statement of Financial Condition,
September 30, 1995 and June 30, 1996 2
Consolidated Statement of Operations, Quarters Ended
June 30, 1995 and 1996 3
Consolidated Statement of Operations, Nine Months Ended
June 30, 1995 and 1996 4
Consolidated Statement of Changes in Stockholder's Equity 5
Consolidated Statement of Cash Flows, Nine months Ended
June 30, 1995 and 1996 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes Upon Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
1
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1995 AND JUNE 30, 1996
SEPTEMBER 30, JUNE 30,
1995 1996
-------------- ----------------
ASSETS
------
Cash and cash equivalents $ 140,139 $ 97,941
Investment securities - available for sale 1,662,984 1,725,029
Investment securities - held to maturity 1,485,983 988,998
Mortgage-backed securities - available for sale 7,349,837 8,283,523
Mortgage-backed securities - held to maturity 3,895,944 3,179,962
Federal Home Loan Bank stock 413,300 437,800
Loans receivable, net 37,355,664 39,359,998
Accrued interest receivable 251,981 287,243
Foreclosed real estate, net of allowance 42,997 96,393
Premises and equipment 525,534 609,427
Other assets 81,894 31,962
----------- -----------
Total assets 53,206,257 55,098,276
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
- -----------
Deposits $43,142,857 $42,527,331
Advances from Federal Home Loan Bank 2,537,938 4,942,091
Advances by borrowers for taxes and insurance 106,822 93,998
Federal income taxes:
Currently payable 42,195
Deferred payable 68,694 96,837
Accrued expenses and other liabilities 177,070 185,743
----------- -----------
Total liabilities 46,033,381 47,888,195
----------- -----------
Stockholders' Equity:
- --------------------
Common stock, $.01 par value, 1,500,000 shares
authorized; 475,057 shares outstanding 4,591 4,591
Preferred stock, $.01 par value, 500,000 shares
authorized; 0 shares outstanding
Additional paid in capital 3,329,657 3,286,418
Unearned ESOP shares (264,552) (264,552)
Unearned Recognition and Retention Plan shares (247,914)
Retained Earnings 4,017,478 4,291,205
Net unrealized gain on available-for-sale securities 85,702 140,333
----------- -----------
Total stockholders' equity 7,172,876 7,210,081
----------- -----------
Total liabilities and stockholders' equity 53,206,257 55,098,276
=========== ===========
2
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF INCOME
QUARTER ENDED JUNE 30, 1995 AND 1996
JUNE 30, JUNE 30,
1995 1996
----------- ------------
INTEREST INCOME
- ---------------
Loans receivable
First mortgage loans $640,701 $ 752,425
Savings account loans 8,450 10,566
Consumer loans 2,834 26,193
Investment securities 52,631 45,241
Mortgage-backed securities 144,951 189,693
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Total interest income 849,567 1,024,118
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INTEREST EXPENSE
- ----------------
Deposits 457,167 488,661
Borrowed funds 6,846 72,245
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Total interest expense 464,013 560,906
-------- ----------
Net interest income 385,554 463,212
PROVISION FOR LOAN LOSSES 5,000
- ------------------------- -------- ----------
Net interest income after provision for loan losses 380,554 463,212
-------- ----------
NON-INTEREST INCOME
- -------------------
Service charges and other fees 8,046 6,963
Insurance commissions 4,033 5,013
REO operations 1,374
Other 135 614
-------- ----------
Total non-interest income 13,588 12,590
-------- ----------
NON-INTEREST EXPENSE
- --------------------
General and administrative
Compensation and benefits 14,8141 15,6373
Occupancy and equipment 28,397 32,673
Marketing and other professional services 21,973 29,424
Deposit insurance premium 24,460 25,297
Net loss (gain) on foreclosed real estate 0 615
Real estate owned expense 0 5,830
Other 30,677 34,600
-------- ----------
Total non-interest expense 253,648 284,812
-------- ----------
Income before income taxes 140,494 190,990
INCOME TAX EXPENSE 34,000 73,000
- ------------------ -------- ----------
NET INCOME 106,494 117,990
- ---------- ======== ==========
EARNINGS PER COMMON SHARE 0.23 0.29
- ------------------------- ======== ==========
See accompanying notes to unaudited consolidated financial statements
3
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF INCOME
NINE MONTHS ENDED JUNE 30, 1995 AND 1996
JUNE 30, JUNE 30,
1995 1996
------------ -------------
INTEREST INCOME
- ---------------
Loans receivable
First mortgage loans $1,869,348 $2,200,516
Savings account loans 23,473 30,179
Consumer loans 7,148 75,471
Investment securities 150,538 145,583
Mortgage-backed securities 424,087 544,563
---------- ----------
Total interest income 2,474,594 2,996,312
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INTEREST EXPENSE
- ----------------
Deposits 1,322,273 1,468,855
Borrowed funds 59,438 171,478
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Total interest expense 1,381,711 1,640,333
---------- ----------
Net interest income 1,092,883 1,355,979
PROVISION FOR LOAN LOSSES 30,000 25,000
- ------------------------- ---------- ----------
Net interest income after provision for loan losses 1,062,883 1,330,979
---------- ----------
NON-INTEREST INCOME
- -------------------
Service charges and other fees 18,862 14,594
Insurance commissions 16,405 16,848
REO operations 4,502
Other 475 1,190
---------- ----------
Total non-interest income 40,244 32,632
---------- ----------
NON-INTEREST EXPENSE
- --------------------
General and administrative
Compensation and benefits 461,100 511,378
Occupancy and equipment 90,184 92,203
Marketing and other professional services 54,071 88,347
Deposit insurance premium 73,761 75,376
Net loss (gain) on foreclosed real estate 4,242
Real estate owned expense 7,410
Other 95,195 121,009
---------- ----------
Total non-interest expense 774,311 899,965
---------- ----------
Income before income taxes 328,816 463,646
INCOME TAX EXPENSE 101,000 168,000
- ------------------ ---------- ----------
NET INCOME 227,816 295,646
- ---------- ========== ==========
EARNINGS PER COMMON SHARE 0.5 0.71
========== ==========
See accompanying notes to unaudited consolidated financial statements
4
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
JUNE 30, 1996
UNALLOCATED UNALLOCATED TOTAL
COMMON TREASURY RETAINED ESOP RRP UNREALIZED SHAREHOLDERS'
STOCK STOCK EARNINGS SHARES SHARES GAIN (L0SS) EQUITY
-------------------------------------------------------------------------------------------
Balance October 1, 1995 3,334,248 4,017,478 (264,552) 85,702 7,172,876
Net change in unrealized gain
(loss) on available-for-sale
securities 54,631 54,631
Adoption of Recognition and
Retention Plan 247 914 (247,914) 0
Purchase of 2,400 shares of
treasury stock on
March 27, 1996 (33,750) (33,750)
Purchase of 15,963 shares of
treasury stock on
April 24, 1996 (257,403) (257,403)
Retirement of treasury stock
to be used for Recognition
and Retention Plan (291,153) 291,153 0
Cash dividends paid on
June 17, 1996 (21,919) (21,919)
Net income for the nine months
ended June 30, 1996 295,646 295,646
------------------------------------------------------------------------------------------
Balance June 30, 1996 3,291,009 (0) 4,291,205 (264,552) (247,914) 140,333 7,210,081
==========================================================================================
5
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1995 AND 1996
JUNE 30, JUNE 30,
1995 1996
------------ -----------
CASH FLOW FROM OPERATING ACTIVITIES
- -----------------------------------
Net income $ 227,815 $ 295,646
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of premiums and discounts on loans and
mortgage-backed and related securities. 1,185 24,003
Stock dividend on FHLB Stock 4,800 6,600
Provision for loan losses 30,000 25,000
Deferred loan fees (184) (3,121)
Depreciation of premises and equipment 17,429 26,500
Net loss(gain) on sale of real estate owned 3,164
Net gain on fixed assets (135)
(Increase) decrease in accrued interest receivable (15,877) (35,262)
(Increase) decrease in other assets 57,421 49,932
Increase (decrease) in income taxes payable 42,195
Increase (decrease) in accrued expenses and other
liabilities (9,309) 8,673
----------- -----------
Net cash provided (used) by operating activities 313,145 443,330
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
- -----------------------------------
Loan originations net of principal repayments (3,117,135) (2,114,110)
Maturity of investment securities - held to maturity 500,000
Purchase of Federal Home Loan Bank stock (4,100) (31,100)
Purchase of mortgag-backed securities-available for sale (1,025 388) (2,106,334)
Principal repayments of mortgage-backed securities-available
for sale 623,049 1,173,506
Principal repayments of mortgage-backed securities-held
to maturity 507,967 718,783
Investment in foreclosed real estate (5,931)
Proceeds from sale of real estate 27,320
Purchases of premises and equipment (43,399) (110,393)
----------- -----------
Net cash provided (used) by investing activities (3,059,006) (1,948,259)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Net increase (decrease) in deposits (987,383) (615,526)
Increase (decrease) in advances from FHLB 523,700 2,404,153
Increase (decrease) in mortgage escrow funds 31,121 (12,824)
Proceeds from sale of common stock 3,027,629
Purchase of treasury stock (291,153)
Cash dividend paid (21,919)
----------- -----------
Net cash provided (used) by financing activities 2,595,067 1,462,731
----------- -----------
This statement continued on next page
6
ST LANDRY FINANCIAL CORPORATION
OPELOUSAS, LOUISIANA
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1995 AND 1996
NET INCREASE (DECREASE) IN CASH AND
- -----------------------------------
CASH EQUIVALENTS (150,794) (42,198)
----------------
CASH AND CASH EQUIVALENTS, beginning of period 181,275 140,139
- ---------------------------------------------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period 30,481 97,941
- ---------------------------------------- =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
- --------------------------------
INVESTING ACTIVITIES
--------------------
Loans originated to facilitate the sale of real estate
owned $ 0 $ 68,580
=========== ===========
Loan principal reductions resulting from foreclosures on
real estate owned 33,611 167,472
=========== ===========
SUPPLEMENTAL SCHEDULE OF INTEREST
- ---------------------------------
AND TAXES PAID
--------------
Interest paid $ 1,360,058 $ 1,634,618
=========== ===========
Taxes paid $ 91,240 $ 109,470
=========== ===========
See accompanying notes to unaudited consolidated financial statements
7
ST. LANDRY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
---------------------
The financial statements included in this report have been prepared by St.
Landry Financial Corporation (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission for interim reporting and
include all adjustments which are, in the opinion of management, necessary for
fair presentation. These financial statements have not been audited by an
independent accountant.
Certain information and note disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes presented in Form 10-KSB filed for the fiscal year ended
September 30, 1995. St. Landry Financial Corporation believes that the
disclosures are adequate to make the information presented not misleading. The
financial data and results of operations for the interim periods presented may
not necessarily reflect the results to be anticipated for the complete year.
NOTE 2--EARNINGS PER SHARE
------------------
For purpose of calculating earnings per common share the weighted average
number of shares outstanding, excluding unallocated ESOP shares and unallocated
Recognition and Retention Plan shares, was used. The weighted average number of
shares outstanding for the period ended June 30, 1995 was 422,366 (459,093 of
outstanding shares reduced by 36,727 unallocated ESOP shares). The weighted
average number of shares outstanding for the period ended June 30,1996 presented
was 413,580 (465,013 of the weighted average number of outstanding shares
reduced by 33,069 unallocated ESOP shares and 18,364 unallocated Recognition and
Retention Plan shares).
NOTE 3 --PROPOSED INDUSTRY RECAPITALIZATION OF SAIF AND ITS IMPACT ON SAIF
-----------------------------------------------------------------
INSURANCE PREMIUMS, INCLUDING POSSIBLE ONE-TIME ASSESSMENT FEE
--------------------------------------------------------------
Federal law requires that the FDIC maintain reserves at both the Savings
Association Insurance Fund ("SAIF") and the Bank Insurance Fund ("BIF") of at
least 1.25% of insured deposits. The reserves are funded through the payment of
insurance premiums by the insured institution members of each fund. The BIF
reached this level during 1995. Accordingly, effective January 1, 1996, the
FDIC reduced insurance premiums applicable to BIF-insured institutions to a
range of 0% to .27% of deposits (as compared to the current range of .23% to
.31% of deposits for SAIF-insured institutions) with an annual statutory minimum
payment of $2,000 while retaining the premiums applicable to SAIF members, such
as the Association, at their current levels until the SAIF reaches its required
reserve level. As a result, BIF
8
members generally pay lower premiums than SAIF members. While the magnitude of
the competitive advantage of BIF-insured institutions and its impact on the
Association's results of operations cannot be determined at this time, the
decrease in BIF premiums could place the Association at a material competitive
disadvantage. The Association currently qualifies for the minimum SAIF premium
level of .23% of deposits.
Proposed federal legislation provides for a one-time assessment of .80% to
.90% of insured deposits to be imposed on all SAIF-insured deposits, including
those held by commercial banks, and for BIF deposit insurance premiums to be
used to pay the Financing Corporation bond interest on a pro rata basis together
with SAIF premiums. The amount of such assessment would have been approximately
$393,000.
9
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------- -------------
RESULTS OF OPERATIONS
- ---------------------
GENERAL
The principle business of the Company is that of a community-oriented
financial intermediary attracting deposits from the general public and using
such deposits to originate one-to-four family residential loans, and to a lesser
extent, commercial real estate, one-to-four family construction, multi-family
and consumer loans. These funds have also been used to purchase mortgage-backed
securities, U.S. government and agency obligations and other permissible
securities.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on its loan and
investment portfolios and the interest paid on deposits and borrowings. Results
of operations are also dependent upon the Company's provision for loan losses,
the level of non-interest income, including fee income and service charges, and
the level of its non-interest expenses, including employee compensation,
occupancy expenses, federal insurance premiums and other general and
administrative expenses. The Company's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of
regulatory authorities.
The Company's cost of funds is influenced by interest rates on competing
investments and general market rates of interest. Lending activities are
influenced by the demand for real estate loans and other types of loans, which
is in turn affected by the interest rates at which such loans are made, general
economic conditions affecting loan demand, the availability of funds for lending
activities, and changes in real estate values.
FINANCIAL CONDITION
The Company's total assets were $53.2 million at September 30, 1995 as
compared to $55.1 million at June 30, 1996. The 4.0% increase in assets over
the nine month period is a direct result of loan originations exceeding
principal repayments.
Net loans receivable increased by $2.0 million from $37.4 million at
September 30, 1995 to $39.4 million at June 30, 1996. A portion of these
originations were funded with Federal Home Loan Bank advances. The increase was
due to an increase in originations, in conjunction with a decrease in principal
repayments.
Total investment securities decreased by $435,000 from $3.1 million at
September 30, 1995 to $2.7 million at June 30, 1996. The decrease is due to a
$500,000 maturity. Partially offsetting the decrease was an increase in the
unrealized gain in investment securities-available for sale totaling $62,000.
The additional increase was a $3,000 accretion of discounts paid on investment
securities. The total gain in stock in Federal Home Loan
10
Mortgage Corporation was $316,000 and the loss on stock in adjustable rate
mortgage portfolio was $6,000, which is included in investment securities-
available for sale.
The Association experienced a $217,000 increase in mortgage-backed
securities during the nine month period ending June 30, 1996. Unrealized losses
recorded in the mortgage-backed securities-available for sale portfolio amounted
to $117,000 and $97,000, for September 30, 1995 and June 30, 1996, respectively.
The loss declined by $20,000 over the nine month period. Additional mortgage-
backed securities were purchased totalling $2.1 million, during the period,
partially offset by principal repayments, amortization of premiums, and
accretion of discounts.
Deposits decreased by $616,000 from $43.1 million at September 30, 1995 to
$42.5 million at June 30, 1996. The decline was a result of competition from
mutual funds and other investment opportunities available to customers.
Federal Home Loan Bank advances increased by $2.4 million from $2.5 million
at September 30, 1995 to $4.9 million at June 30, 1996. Borrowing proceeds were
used to fund a portion of loan originations, supplement the decrease in
deposits, and purchase mortgage-backed securities.
Total stockholders' equity increased by $37,000 from $7,173,000 at
September 30, 1995 to $726,000 at June 30, 1996. Stockholders' equity increased
by $55,000, as a result of an after-tax net unrealized gain on investment
securities-available for sale and mortgage-backed securities-available for sale.
In addition to the unrealized gain reflected in equity, net income for the nine
month period increased total stockholders' equity by $296,000. Partially
offsetting the increases was a stock repurchase of 18,364 shares of St. Landry
Financial Corporation stock, at a total cost of $291,000. These shares were
retired for the use of the Recognition and Retention Plan. Also, a cash
dividend of $22,000 was paid during the quarter.
ASSET QUALITY
NON-PERFORMING LOANS AND INVESTMENTS IN REAL ESTATE
The table below sets forth the amounts and categories of non-performing
assets in the Company's loan portfolio, rounded to the thousands. Loans are
placed on non-accrual status when the collection of principal and/or interest
becomes doubtful. At the dates presented, the Company had no accruing loans
which were contractually past due 90 days or more and no troubled debt
restructuring (which involve forgiving a portion of interest or principal on any
loans or making loans at a rate materially less than that of market rates).
Foreclosed assets include assets acquired in settlement loans.
11
September 30, 1995 June 30, 1996
Non-Performing Assets
Non-accruing loans:
One-to four-family $ 581 $373
Consumer 19 7
TOTAL 600 380
Foreclosed assets:
one-to four-family 56 131
TOTAL NON-PERFORMING ASSETS 656 511
TOTAL AS A PERCENTAGE OF
TOTAL ASSETS 1.23% .93%
Non-performing assets decreased by $145,000 over the nine month period
ended June 30, 1996, due to a decline in non-accruing loans of $220,000. The
decline was partially offset by an increase in real estate owned of $75,000,
resulting from foreclosures on non-performing loans.
ALLOWANCE FOR LOSSES ON LOANS AND REAL ESTATE OWNED
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risk inherent in its loan
portfolio and changes in the nature and volume of its loan activity, including
those loans which are being specifically monitored by management. Such
evaluation, which includes a review of loans for which full collectibility may
not be reasonably assured, considers among other matters, the estimated fair
value of the underlying collateral, economic conditions, historical loan loss
experience and other factors that warrant recognition in providing for an
adequate loan loss allowance.
Real estate properties acquired through foreclosure are recorded at lower
of cost or fair value, less estimated disposition costs. If fair value at the
date of foreclosure is lower than the balance of the related loan, the
difference will be charged-off to the allowance for loan losses at the time of
transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on such property is established by a
charge to operations.
The Company's allowance for loan losses totaled $361,000 and $378,000, for
September 30, 1995 and June 30, 1996, respectively. Allowance for loan losses as
a percentage of net loans receivable equaled .97% at September 30, 1995 and .96%
at June 30, 1996.
12
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE QUARTERS ENDED JUNE 30, 1995 AND 1996
General. The Company had net income of $106,000 for the three months ended
June 30, 1995, as compared to $80,000 for the three months ended June 30, 1996.
The increase in net income was primarily due to an increase in net interest
income of $78,000 and a $5,000 decrease in provision for loan loss. The increase
in net interest income was partially offset by a $1,000 decrease in non-interest
income, an increase of $31,000 in non-interest expense, and an increase of
$39,000 in income tax expense.
Interest Income. Interest income increased by $174,000 from $850,000 for
the three months ended June 30, 1995 to $1,024,000 for the three months ended
June 30, 1996. The $12,000 increase was due primarily to the increase in loans
receivable and the increase in loan yield from 7.34% to 8.02% over the
comparative three month periods. Also, causing a substantial portion of the
increase in interest income was the increase in mortgage-backed securities over
the previous year.
Interest Expense. Interest expense increased by $97,000 from $464,000 for
the three months ended June 30, 1995 to $561,000 for the three months ended June
30, 1996. This was due primarily to the increased cost of funds. Cost of funds
increased because of increased Federal Home Loan Bank borrowings outstanding
during the three months that cost more than deposit accounts and the overall
increase in interest rates paid on deposits from the prior year. Total
interest-bearing liabilities increased from $45.7 million at June 30, 1995 to
$47.5 million at June 30, 1996. The weighted average cost of funds was 4.49%
and 4.72% at June 30, 1995 and 1996, respectively. Consequently, increased
interest-bearing liabilities, in conjunction with increased funding cost, caused
an incline of interest expense for the quarter ended June 30, 1996, as compared
to the quarter ended June 30, 1995.
Net Interest Income. The Company's net income is dependent upon net
interest income. Net interest income is the difference between the yield on
interest-earning assets and the cost of interest-bearing liabilities. Net
interest income increased by $78,000 from $386,000 for the three months ended
June 30, 1995 to $463,000 for the three months ended June 30, 1996. The
increase was due to an increase in earnings on interest-earning assets in excess
of the increase in cost of interest-bearing liabilities. Total interest-earning
assets increased, as well as, the overall yield on such assets.
Provision for Loan Losses. The provision for loan losses was $5,000 for
the three months ended June 30, 1995. Additional provision for loan losses was
not deemed necessary for the three months ended June 30, 1996. Non-performing
assets were $645,000 and $511,000 at June 30, 1995 and 1996, respectively. Non-
performing assets as a percentage of total assets were .99% and .93% at June 30,
1995 and 1996, respectively.
Management and the Board of Directors review the loan loss reserve monthly
to determine sufficiency. The allowance for loan losses is established through
a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity, including those loans which are being specifically monitored by
management. Such evaluation, which includes a review of loans for
13
which full collectibility may not be reasonably assured, considers among other
matters, the estimated fair value of the underlying collateral, economic
conditions, historical loan loss experience and other factors that warrant
recognition in providing for an adequate loan loss allowance.
Non-interest Income. Non-interest income decreased by $1,000 from $13,000
for the quarter ended June 30, 1995 to $12,000 for the quarter ended June 30,
1996. The composition of the decrease was $11,000 in service charges and other
fees, resulting from decreasing late charges, and a $1,000 decrease in REO
operations, due to expenses on REO acquisitions. The decreases were partially
offset by a $1,000 increase in insurance commission.
Non-interest Expense. Total non-interest expense increased by $31,000 from
$254,000 for the three months ended June 30, 1995 to $285,000 for the three
months ended June 30, 1996. An increase in employee compensation and benefits
of $8,000, due to increases in salaries and directors fees in the recent period.
There were also increases in occupancy and equipment of $4,000, marketing and
other professional services of $8,000, real estate owned of $6,000 and other
expenses of $4,000.
Income Tax Provision. Income tax expense increased by $39,000 for the
quarter ended June 30, 1996 as compared to the quarter ended June 30, 1995. The
increase was due to an increase in pre-tax income.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996
General. Net income totaled $228,000 and $296,000, respectively for the
nine months ended June 30, 1995 and 1996. The increase in net income of $68,000
was the result of an increase in net interest income of $263,000, in conjunction
with a $5,000 decrease in provision for loan losses. The increase in net
interest income was partially offset by a $7,000 decrease in non-interest
income, an increase in non-interest expense of $126,000 and an increase in
income tax expense of $67,000.
Interest Income. Total interest income increased by $522,000 from $2.5
million for the nine months ended June 30, 1995, as compared to 3.0 million the
nine months ended June 30, 1996. The increase resulted from the weighted
average yield on interest-earning assets increasing from 7.03% at June 30, 1995
to 7.61% at June 30, 1996 , due to higher market rates of interest and the
average balance of interest-earning assets, primarily the loan portfolio and
mortgage backed securities, increasing by 2.2 million.
Interest Expense. Total interest expense increased by $259,000, or 9% from
$1.4 million for the nine month period ended June 30, 1995, to $1.6 million for
the nine month period ended June 30, 1996. The weighted average cost of funds
was 4.23% at September 30, 1995 and 4.72% at March 31, 1996. This was due
primarily to higher prevailing rates of interest in the company's market. Cost
of funds also increased because of increased
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borrowings outstanding during the nine month period, which were used to fund
additional lending and the purchase of mortgage-backed securities. Federal Home
Loan Bank advances outstanding resulted in an increase of $112,000 in interest
expense on borrowed funds.
Net interest income. The Company's net income is dependent upon net
interest income. Net interest income is the difference between the yield on
interest-earning assets and the cost in interest-bearing liabilities. During
the nine months ended June 30, 1996, the Company's net interest income increased
by $263,000, or 24%. The increase in interest income of $522,000 was partially
offset by the increase in interest expense in the amount of $259,000.
Provision for Loan Losses. The provision for loan losses was $30,000 for
the nine months ended June 30, 1995, as compared to $25,000 for the nine months
ended June 30, 1996. The provision for loan losses is determined by management,
based on monthly reviews of problem assets.
Non-interest Income. Late charges and insurance commissions are the focus
of non-interest income for the Company. Non-interest income totaled $40,000 for
the nine months ended June 30, 1995, as compared to $33,000 for the nine months
ended June 30, 1996. The overall decrease of $7,000 was primarily due to a
decrease of $4,000 and $4,000 in service charges and REO operations,
respectively. Service charges and other fees decreased because of declining
late charge fees and REO operations income decrease because of cost incurred for
repairing REO acquisitions.
Non-interest Expense. Non-interest expense totaled $774,000 for the nine
months ended June 30, 1995 as compared to $900,000 for the nine months ended
June 30, 1996. The increase of $126,000, was partially caused by a $50,000
increase in compensation and benefits expense. Compensation and benefits
expense increased due to increases in director fees and salaries. Other
increased expenses were occupancy and equipment of $2,000, marketing and other
professional services, of $34,000, real estate owned expenses net loss on
foreclosed real estate of $4,000 of $7,000 and other expenses of $26,000.
Provision for Income Taxes. Income tax expense for the nine month period
ended June 30, 1995 was $101,000, as compared to $168,000 for the nine month
period ended June 30, 1996. The increase was due to an increase in pre-tax
income of the comparable time period. Pre-tax income was $329,000 and $464,000,
respectively, for the nine month periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, borrowings, principal
and interest payments on loans, mortgage-backed securities, and investment
securities. In the event that the Company should require funds beyond its
ability to generate them internally, additional sources of funds are available
through the use of FHLB advances. While scheduled loan repayments and maturing
investments are relatively predictable, deposit flows and early
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loan repayments are more influenced by interest rates, general economic
conditions and competition.
Federal regulations have required the Company to maintain minimum levels of
liquid assets. The required percentage has varied from time to time based upon
economic conditions and savings flows and is currently 5% of net withdrawable
savings deposits and borrowings payable on demand or in one year or less during
the preceding calendar month. Liquid assets for purposes of this ratio include
cash, certain time deposits, government agency and other securities and
obligations generally having remaining maturities of less than five years. The
Association's most liquid assets are cash and cash equivalents, short-term
investments and mortgage-backed and related securities. The levels of these
assets are dependent on the Company's operating, financing, lending and
investing activities during any given period. At September 30, 1995 and June
30, 1996 liquidity eligible assets totaled $4.8 million and $3.6 million,
respectively. At those same dates, the Association's liquidity ratios were
11.0% and 7.4%, respectively, all in excess of the 5% minimum regulatory
requirement. Management anticipates a somewhat lower liquidity ratio in future
periods, due to funding needs for outstanding loan commitments.
The Association uses its liquid resources principally to meet ongoing
commitments, to fund maturing certificates of deposit and deposit withdrawals,
to invest, to fund existing and future loan commitments, to maintain liquidity
and to meet operating expenses. At June 30, 1996, the Association had
outstanding commitments to extend credit which amounted to $$1.3 million.
Management believes that loan repayments and other sources of funds will be
adequate to meet the Association's foreseeable liquidity needs.
At June 30, 1996, the Company had $24.7 million in certificates of deposit
due within one year and $12.0 million in other deposits without specific
maturity. Based on past experience, management expects that most of the
deposits will be retained or replaced by new deposits.
CAPITAL
Federally insured savings associations, such as First Federal, are required
to maintain a minimum level of regulatory capital. The OTS has established
capital standards, including a tangible capital requirement, a leverage ratio
(or core capital) requirement and a risk-based capital requirement applicable to
such savings associations. These capital requirements must be generally as
stringent as the comparable capital requirements for national banks. The OTS is
also authorized to impose capital requirements in excess of these standards on
individual associations on a case-by-case basis.
The following table sets forth First Federal's compliance with each of its
capital requirements as of June 30, 1996 (dollars in thousands).
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Current Actual
Capital Association Capital
Requirement Capital Excess
Amount % Amount % Amount %
Tangible Capital 824 1.50% 5,844 10.38% 4,879 8.88%
Core Capital 1,649 3.00% 5,844 10.38% 4,055 7.38%
Risk-Based Capital 2,388 8.00% 6,032 20.20% 3,644 12.20%
Tangible and core capital figures are determined as a percentage of total
adjusted assets; risk-based capital figures are determined as a percentage of
risk-weighted assets in accordance with OTS regulations.
Total capital includes general loan loss reserves of $328,000.
The OTS and the Federal Deposit Insurance Corporation are authorized and,
under certain circumstances required, to take certain actions against
associations that fail to meet capital requirements. Effective December 19,
1992, the federal banking agencies, including OTS, have been given additional
enforcement authority over undercapitalized depository institutions. The OTS is
generally required to take action to restrict the activities of an
"undercapitalized association" (generally defined to be one with less than
either a 4% core ratio, a Tier 1 risked-based capital ratio or an 8% risk-based
capital ratio). Any such association must submit a capital restoration plan and
until such plan is approved by the OTS may not increase its assets, acquire
another institution, establish a branch or engage in any new activities, and
generally may not make capital distributions. The OTS is authorized to impose
the additional restrictions, discussed below, that are applicable to
significantly undercapitalized associations.
Any savings association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less than 3% or a risk-based capital ratio of less than 6%) must be subject
to one or more additional specified actions and operating restrictions mandated
by federal law. First Federal is considered a well capitalized institution based
upon its capital ratios at June 30, 1996.
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PART II--OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or the
Association is party to or of which any of their property is subject.
Occasionally, the Association is involved in legal proceedings incidental to its
business.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
Not Applicable
(b) Reports on Form 8-K
Not Applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
St. Landry Financial Corporation
(Registrant)
Date: August 9, 1996 /s/ Wayne Mck. Gilmore
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Wayne McK. Gilmore
President
Date: August 9, 1996 /s/ Kathryn Chelette
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Kathryn Chelette
Controller
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