SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ___________ to ____________
Commission File Number 0-25516
CAMERON FINANCIAL CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 43-1702410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
123 East Third Street, Cameron, Missouri 64429
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (816) 632-
2154
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at August 5, 1996
Common stock, .01 par value 2,850,180
CAMERON FINANCIAL CORPORATION
Contents
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
Consolidated Balance Sheets at June 30, 1996,
unaudited, and September 30, 1995 3
Consolidated Statements of Earnings for the Three
Months and Nine Months Ended June 30, 1996 and
1995, unaudited 4
Consolidated Statements of Equity for the
Nine Months Ended June 30, 1996, unaudited 5
Consolidated Statements of Cash Flows for
the Nine Months Ended June 30, 1996 and
1995, unaudited 6-7
Notes to Consolidated Financial Statements 8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-16
PART II - OTHER INFORMATION 17
Signatures 18
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Dollars in Thousands)
June 30, September 30,
1996 1995
Assets (unaudited)
Cash and cash equivalents $2,494 $3,315
Certificates of deposit in other
financial institutions 625 8,611
Investment securities held-to-maturity (estimated fair
value of $18,722,000 at June 30 and $26,497,000 at
September 30) 18,819 26,473
Mortgage-backed securities held-to-maturity 14 17
Loans receivable, net 147,496 129,740
Accrued interest receivable:
Loans and mortgage-backed securities 994 847
Investment securities 299 397
Interest bearing deposits - 3
Real estate owned 94 --
Office property and equipment, net 2,257 699
Stock in Federal Home Loan Bank(FHLB) of Des Moines, at 1,259 1,235
Deferred income taxes 242 208
Other assets 1,248 1,532
Total assets $175,841 $173,077
Liabilities and Stockholders' Equity
Liabilities:
Savings deposits 123,243 121,280
Advances from FHLB 3,250 --
Advance payments for taxes and insurance 1,278 1,628
Accrued interest on savings 117 155
Accrued expenses and other liabilities 1,380 997
Income taxes payable 236 290
Total liabilities 129,504 124,350
Stockholders' Equity:
Serial preferred stock, $.01 par, 2,000,000
authorized, none issued or outstanding -- --
Common stock, $.01 par value, authorized 10,000,000
shares, 3,026,928 shares issued 30 30
Additional paid in capital 29,498 29,476
Retained earnings, substantially restricted 22,773 21,398
Less:
Treasury stock, at cost- 176,748 shares at March 31 (2,504) --
Common Stock acquired by the ESOP (2,177) (2,177)
Common Stock awarded by the Company's Recognition
and Retention Plan (1,283) --
Total stockholders' equity 46,337 48,727
Total liabilities and stockholders' equity $175,841 $173,077
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
(Dollars in thousands)
Interest income:
Loans $3,116 $2,727 $8,923 $7,698
Investment securities 297 385 1,037 800
Mortgage-backed securities - - 1 1
Certificates of deposit and other 56 192 338 433
Total interest income 3,469 3,304 10,299 8,932
Interest expense:
Savings deposits 1,599 1,605 4,850 4,668
Borrowed money 46 - 77 20
Total interest expense 1,645 1,605 4,927 4,688
Net interest income 1,824 1,699 5,372 4,244
Provision for loan losses 88 32 268 147
Net interest income after
provision for loan losses 1,736 1,667 5,104 4,097
Noninterest income:
Loan fees and service charges 36 25 99 96
Loss on sale of investment
securities - - - (53)
Other income 49 11 75 32
Total noninterest income 85 36 174 75
Noninterest expense:
Compensation, payroll taxes and
fringe benefits 429 359 1,202 1,036
Occupancy expense 52 43 151 139
Data processing 39 32 117 98
Federal insurance premiums 71 70 212 212
Advertising 20 22 58 52
Loss on real estate owned 1 2
Other operating expenses 132 88 457 268
Total noninterest expense 743 614 2,198 1,807
Earnings before income taxes 1,078 1,089 3,080 2,365
Income taxes 401 420 1,140 890
Net earnings $677 $669 $1,940 $1,475
Net earnings per share-primary and
fully diluted $0.26 $0.24 $0.70 $0.53
Average common shares outstanding 2,651,249 2,784,774 2,768,727 2,784,774
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended June 30, 1996
(Unaudited)
(Dollars in Thousands)
Common Common
Additional stock stock Total
Shares Common paid-in Retained Treasury held by held by Stockholders'
outstanding Stock capital earnings stock ESOP RRP Equity
Balance at
September 30, 1995 3,026,928 $30 29,476 21,398 - (2,177) - 48,727
Net earnings - - - 1,940 - - - 1,940
Adoption of
Recognition
and Retention plan 95,675 1 1,398 - - - (1,399) -
Amortization
of RRP - - - - - - 116 116
Purchase of
treasury stock (272,423) - - - (3,881) - - (3,881)
Treasury stock
retired - (1) - (1,376) - 1,377 - -
Dividends -
declared - - - (565) - - - (565)
Balance at
June 30, 1996 2,850,180 $30 29,498 22,773 (2,504 (2,177) (1,283) 46,337
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Nine Months Ended June 30,
(Unaudited)
(Dollars in Thousands)
1996 1995
Cash flows from operating activities:
Net earnings $1,940 $1,475
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 34 16
Amortization of RRP 116 -
Provision for loan losses 268 148
Deferred income taxes (34) (9)
Loss on sales of real estate owned - 1
Loss on sale of investment securities - 53
Stock dividend received from FHLB of Des Moines (24) -
Amortization of deferred loan fees (287) (227)
Proceeds from sales of loans held for sale 1,210 380
Origination of loans held for sale (1,116) (372)
Gain on sale of loans held for sale (12) (8)
Changes in assets and liabilities:
Accrued interest receivable (46) (279)
Other assets 284 11
Accrued interest payable (38) (5)
Accrued expenses and other liabilities 395 308
Current income taxes payable (54) 198
Cash provided by operating activities $2,636 $1,678
Cash flows from investing activities:
Net increase in loans receivable (17,031) (13,931)
Purchase of loans receivable (882) -
Mortgage-backed securities principal payments 3 3
Maturity of investment securities
held to maturity 11,723 1,054
Purchase of investment securities
held to maturity (4,041) (13,287)
Proceeds from sale of investment securities
available for sale - 1,810
Net decrease (increase) in certificates of
deposit in other financial institutions 7,986 1,721
Purchase of life insurance policies - (1,270)
Purchase of office properties and equipment (1,620) (46)
Cash used in investing activities (3,862) (23,946)
Cash flows from financing activities:
Proceeds from sale of common stock, net
of cost of issuance - 27,027
Net decrease in NOW, passbook and money market
market deposit accounts 117 (6,892)
Net increase in certificate accounts 1,846 3,414
Net decrease in advance payments by
borrowers for taxes and insurance (350) (247)
Proceeds from FHLB advances 3,250 2,500
Repayment of FHLB advances - (2,500)
Dividends paid (577) -
Purchase of Treasury stock (3,881) -
Net cash (used in) provided by
financing activities 405 23,301
Net (decrease) increase in cash (821) 1,033
Cash and cash equivalents at beginning of period 3,315 1,072
Cash and cash equivalents at end of period $2,494 $2,105
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $1,228 $671
Cash paid during the period for interest $4,887 $4,721
Supplemental schedule of noncash investing and financing activities:
Conversion of loans to real estate owned $94 $63
Conversion of real estate owned to loans $- $63
Dividend declared and payable on April 29, $184 $--
Issuance of earned ESOP shares $- $2,422
Award of RRP shares $1,399 $ --
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
(1) Cameron Financial Corporation
Cameron Financial Corporation (the "Company") was incorporated
under the laws of the State of Delaware for the purpose of
becoming the savings & loan holding company of The Cameron
Savings & Loan Association, FA (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 February 27,
1995, the Company commenced a Subscription and Community Offering
of its shares in connection with the conversion of the
Association (the "Offering"). The Offering was consummated and
the Company acquired the Association on March 31, 1995.
(2) Basis of Preparation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles (GAAP) for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. To
the extent that information and footnotes required by generally
accepted accounting principles for complete financial statements
are contained in or consistent with the audited financial
statements incorporated by reference in the Company's Annual
Report on Form 10-K for the year ended September 30, 1995, such
information and footnotes have not been duplicated herein. In
the opinion of management, all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation have
been included. The results of operations and other data for the
three month and nine month periods ended June 30, 1996 are not
necessarily indicative of results that may be expected for the
entire fiscal year ending September 30, 1996.
(3) Earnings Per Share
Earnings per share of common stock have been determined by
dividing net earnings for the period by the weighted average
number of shares of common stock and common stock equivalents
outstanding, less treasury shares and unallocated ESOP shares.
Stock options 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.
Earnings per share amounts for the three and nine month periods
ended June 30, 1995 are based upon the shares issued March 31,
1995, exclusive of the shares issued to the ESOP, as though those
shares were outstanding for the entire period. The computation
does not reflect the pro forma effects of the investment income
that would have been earned had the net proceeds from the
conversion been received at the beginning of the three or nine
month period.
(4) Employee Benefits
The shareholders of the Company, at the first annual
shareholders' meeting on January 29, 1996, approved the adoption
of a stock option plan and a recognition and retention plan
(RRP). Under the stock option plan, options to acquire 302,692
shares of the Company's common stock may be granted. Under the
RRP, common stock aggregating 121,077 shares may be awarded.
Following shareholder approval, stock options to acquire 186,323
shares of common for $14.56 per share and 95,675 shares of
restricted stock were awarded to certain Officers, Directors and
employees of the Company or the Association. The stock options
and restricted stock will vest over five years. The market value
of the restricted stock options will be amortized as compensation
expense over the vesting period. The unamortized cost is
reflected as a reduction of stockholders' equity.
(5) Adoption of New Financial Accounting Standard
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan," in May 1993 and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures," in October 1994. SFAS No. 114
requires that impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's
interest rate, at the loan's observable market price or at the
fair value of the loan's collateral. The Company adopted the
provisions of SFAS Nos. 114 and 118 on October 1, 1995. The
impact of these statements on the consolidated financial
statements of the Company was not material.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the financial condition of
Cameron Financial Corporation and its wholly owned subsidiary,
The Cameron Savings & Loan Association, F.A., at June 30, 1996 to
its fiscal year end September 30, 1995, and the results of
operations for the three and nine months ended June 30, 1996 with
the three and nine months ended June 30, 1995. This discussion
should be read in conjunction with the interim financial
statements and notes which are included herein.
GENERAL
Cameron Financial Corporation was organized as a Delaware
corporation in December 1994, at the direction of the
Association's Board of Directors, to acquire all of the capital
stock issued by the Association upon its conversion from the
mutual to stock form of ownership. The business of the Holding
Company consists primarily of the business of the Association.
The Cameron Savings & Loan Association, F.A., was originally
founded in April 1887 as a Missouri chartered savings and loan
association located in Cameron, Missouri. On November 28, 1994,
the Association members voted to convert the Association to a
Federal charter. The Association conducts its business through
its main office in Cameron, Clinton County, two full service
branch offices located in Maryville, Nodaway County, and Mound
City, Holt County, and a loan production office located in
Liberty, Clay County, Missouri. Deposits are insured by the
Federal Deposit Insurance Corporation (FDIC) to the maximum
allowable.
The Association's business strategy is to operate as a well-
capitalized, profitable and independent community savings
institution dedicated to home mortgage lending and, to a lesser
extent, consumer finance, funded primarily by retail deposits
from the Association's main and branch offices. The Association
has sought to implement this strategy by emphasizing residential
mortgage lending, developing a construction lending business,
maintaining asset quality, managing interest rate risk exposure,
maintaining an investment portfolio of high grade securities and
other investments, maintaining acceptable levels of profitability
and capital, and emphasizing customer service.
The net income of the Association is dependent primarily on its
net interest income, which is the difference between interest
earned on its loans and investments and the interest paid on
interest bearing liabilities. Net income is also affected by the
generation of non-interest income, which primarily consists of
fees and service charges. Net interest income is determined by
the difference between the yield earned on interest earning
assets and rates paid on interest bearing liabilities (interest
rate spread), and the relative amounts of interest earning assets
and interest bearing liabilities (net interest margin). The
interest rate spread is affected by the loan demand and deposit
flows. In addition, net income is affected by the level of
operating expenses and the establishment of loan loss reserves.
The operation of a financial institution is significantly
affected by prevailing economic conditions, competition, and the
monetary and fiscal policies of governmental agencies. Lending
activities are influenced by the demand for and supply of
housing, competition among lenders, the level of interest rates,
and the availability of funds. Deposit flows and cost of funds
are influenced by prevailing market rates of interest primarily
on competing investments, account maturities and the levels of
personal income and savings in the market area of the financial
institution.
FINANCIAL CONDITION
Total assets increased 1.6% to $175,841,000 at June 30, 1996 from
$173,077,000 at September 30, 1995. During March 1996, the
Company repurchased 272,423 shares of common stock, of which
176,748 are held in Treasury, and 95,675 shares were retired,
equal to the 95,675 shares awarded under the RRP. As a result of
the stock repurchase program and quarterly cash dividends of
$0.07 per share of common stock, stockholders' equity decreased
$2,390,000 or 4.9% to $46,337,000 at June 31, 1996 compared to
$48,727,000 at September 30, 1995. Cash, investment securities
and certificates of deposits in other financial institutions
decreased 42.9%, or $16,461,000 to $21,938,000 at June 30, 1996
from $38,399,000 at September 30, 1995. Net loans increased
13.7%, or $17,756,000, from September 30, 1995 to June 30, 1996.
Real estate loan and consumer loan growth in this time period was
$21,536,000 and $1,991,000 respectively. Office property and
equipment increased $1,558,000 to $2,257,000 at June 30, 1996
from $699,000 at September 30, 1995, as a result of construction
starting on the new home office building in Cameron. The total
cost of the new office is estimated at $4,250,000 and completion
is expected in early 1997.
The following table sets forth certain information regarding the
composition of the Association's loan portfolio.
June 30 September 30
1996 1995
One- to four family $104,606,000 $95,040,000
Multifamily 4,072,000 3,181,000
Commercial real estate 4,541,000 3,759,000
Land 5,075,000 3,094,000
Development 1,589,000 1,012,000
Construction (1) 40,695,000 32,956,000
Consumer loans 7,578,000 5,587,000
Total Loans Receivable 168,156,000 144,629,000
Less:
Deferred loan fees, net 751,000 642,000
Loans in process 18,651,000 13,253,000
Allowance for loan losses 1,258,000 994,000
Net Loans Receivable $147,496,000 $129,740,000
(1) Speculative construction $27,213,000 $22,707,000
Contract and permanent
construction $13,482,000 $10,249,000
Total $40,695,000 $32,956,000
During the nine months ended June 30, 1996, construction loans
increased by $7,739,000 to $40,695,000, and permanent 1-4 family
loans increased by $9,566,000 to $104,606,000.
Deposits were $123,243,000 at June 30, 1996, an increase of
$1,963,000, or 1.6% from $121,280,000 at September 30, 1995.
Competition from other financial and non-financial entities will
continue to impact savings growth. The Association offers
competitive interest rates on its deposit products.
The Association had no new borrowings during the quarter ended
June 30, 1996. The FHLB advances outstanding were $3,250,000 at
June 30, 1996 compared to none at September 30, 1995. The
Association borrowed $3,000,000 in FHLB advances during July 1996
to fund continued loan growth and provide additional liquidity.
RESULTS OF OPERATIONS
Net Earnings: Net earnings increased $8,000, or 1.2%, to
$677,000 for the quarter ended June 30, 1996, compared with
$669,000 for the quarter ended June 30, 1995. Net earnings
increased $465,000, or 31.5%, to $1,940,000 for the nine months
ended June 30, 1996, compared with $1,475,000 for the nine months
ended June 30, 1995. The increases in interest income and non-
interest income offset increases in interest expense, provisions
for loan losses, and non-interest expenses.
Net Interest Income: Net interest income increased $125,000, or
7.4%, to $1,824,000 for the quarter ended June 30, 1996, compared
with $1,699,000 for the quarter ended June 30, 1995. Net interest
income increased $1,128,000 or 26.6% to $5,372,000 for the nine
months ended June 30, 1996, compared with $4,244,000 for the nine
months ended June 30, 1995. The net interest margin for the
quarter ended June 30, 1996 was 4.31% compared to 4.10% for the
quarter ended June 30, 1995. The increase was a result of a
higher percent of interest-earning assets invested in loans for
the 1996 quarter compared to the 1995 quarter. The net interest
margin for the nine months ended June 30, 1996 was 4.22% compared
to 3.58% for the nine months ended June 30, 1995. The increase
was due to the increase in interest earning assets as a result of
the investment of proceeds from the stock conversion effective
March 31, 1995. The average spread between interest earning
assets and interest bearing liabilities increased to 2.77% for
the nine months ended June 30, 1996, compared with 2.57% for the
same period in 1995. Increased rates on loans and increased
investments in loans offset increased rates on certificates.
Interest Income: Interest income increased by $165,000, or 5.0%,
for the quarter ended June 30, 1996, to $3,469,000 from
$3,304,000 for the quarter ended June 30, 1995. Interest income
increased by $1,367,000, or 15.3%, for the nine months ended June
30, 1996, to $10,299,000 from $8,932,000 for the nine months
ended June 30, 1995.
Interest Expense: Interest expense increased $40,000, or 2.5%,
to $1,645,000 for the quarter ended June 30, 1996, compared to
$1,605,000 for the same period in 1995. The increase is a result
of increases in savings deposits of $3.6 million or 3.0% to
$123,243,000 at June 30, 1996 from $119,632,000 at June 30, 1995
and FHLB advances of $3,250,000 at June 30, 1996 and none at June
30, 1995. Increases in interest bearing liabilities were
partially offset by lower average rates in the quarter ended June
30, 1996 compared to the same quarter in 1995. Certificates of
deposit were 80.6% of total savings at June 30, 1996 compared to
80.4% at September 30, 1995. There was no new borrowing activity
with the Federal Home Loan Bank of Des Moines during the quarter
ended June 30, 1996. The Association borrowed $3,000,000 from the
FHLB in July 1996 to fund continued loan growth and provide
liquidity. Interest rates were from 6.18% to 7.01% with
maturities between one and three years. Interest expense
increased $239,000, or 5.1%, to $4,927,000 for the nine months
ended June 30, 1996, compared to $4,688,000 for the nine months
ended June 30, 1995. Interest bearing liabilities and average
interest rates paid both increased in the nine months ended June
30, 1996 compared to the same period in 1995.
Provision for Loan Losses: The provision for loan losses was
$88,000 for the quarter ended June 30, 1996, compared to $32,000
for the same period in 1995. The allowance for loan losses is
reviewed and adjusted monthly by management based on the
composition of the loan portfolio. Quarterly, the adequacy of
the allowance for loan losses is reviewed by the internal auditor
and reported to the Board of Directors. As of June 30, 1996, the
allowance for loan losses was $1,258,000, or .85% of net loans
receivable and 78.87% of total non-performing loans.
A reconciliation of the Association's allowance for loan losses
is summarized as follows:
Nine Months Ended June 30
1996 1995
Balance at beginning
of period $994,000 $876,000
Provision 268,000 147,000
Charge-offs (4,000) (1,000)
Recoveries -- --
Balance at end of period $1,258,000 $1,022,000
Noninterest Income: Noninterest income increased to $85,000 for
the quarter ended June 30, 1996 from $36,000 for the same period
in 1995. Loan fees and service charges increased $11,000 for the
three months ended June 30, 1996 compared to the same period in
1995, due primarily to a increase in the amount of late charge
income and checking account fees. Other income increased $38,000
in the quarter ended June 30, 1996 compared to the same period in
1995 due to a gain on the sale of the Association's data
processing provider which was previously owned by the
institutions using the services. Noninterest income increased to
$174,000 for the nine months ended June 30, 1996 from $75,000 for
the nine months ended June 30, 1995. The Association sold its
mutual fund investment for a loss of $53,000 in the nine months
ended June 30, 1995 with no corresponding activity in the nine
months ended June 30, 1996. Loan fees and service charges
increased $3,000 for the nine months ended June 30, 1996 compared
to the same period in 1995, due an increase in the amount of late
charge income and checking account fees. Other income increased
$43,000 during the nine months ended June 30, 1996 compared to
the nine months ended June 30, 1995 due to the gain mentioned
during the quarter ended June 30, 1996 and increased loan sales
in the secondary market for which the Association typically
recognizes a gain on sale.
Noninterest Expense: Noninterest expense increased $129,000 to
$743,000 for the quarter ended June 30, 1996 from $614,000 for
the same period in 1995. Personnel expenses increased $70,000 in
1996 compared to 1995. Cash compensation increased $35,000 for
the current quarter. Substantially all of the remaining increase
resulted from changes in benefit plans. An Employee Stock
Ownership Plan (ESOP) was established in connection with the
stock conversion on March 31, 1995. Accruals for ESOP expense
started in April 1995. Prior to that date, expense was estimated
on the previous pension plan in effect. ESOP expenses for the
quarter ended June 30, 1996 were $8,000 less than for the quarter
ended June 30, 1995. Current period ESOP accruals exceeded prior
period pension expenses. Quarterly expenses of $70,000
associated with the Recognition and Retention Plan (RRP) adopted
January 29, 1996 had no comparable expense in the prior period.
Increased loan originations in the quarter ended June 30, 1996
compared to the quarter ended June 30, 1995, resulted in $12,000
more costs being deferred in accordance with FAS 91 for the
current quarter. Accruals for employee bonuses were $23,000 in
the quarter ended June 30, 1995. There is no expense for the
current quarter as the bonus program previously in effect was
replaced with other benefit programs explained above. Other
operating expense increased $44,000 to $132,000. Most of the
increase was a result of additional expenses as a publicly-owned
stock institution, such as professional fees, franchise taxes,
annual meeting and proxy expenses.
Noninterest expense increased $391,000 for the nine months ended
June 30, 1996 compared to the nine months ended June 30, 1995.
Personnel expenses increased $166,000 for the current period.
Substantially all of that increase resulted from expenses
associated with the ESOP and RRP. Other operating expenses
increased $189,000 to $457,000 for the nine months ended June 30,
1996. As with the current quarter, most of the increase was a
result of expenses of a publicly-owned stock institution.
Income Taxes: Income tax expense decreased $19,000 to $401,000
for the quarter ended June 30, 1996, compared to $420,000 for the
same period in 1995, due to an decrease of $11,000 in pre-tax
income for the comparable periods. The effective tax rate was
37.2% and 38.6% for the quarters ended June 30, 1996 and 1995,
respectively. Income tax expense increased $250,000 to
$1,140,000 for the nine months ended June 30, 1996, compared to
$890,000 for the nine months ended June 30, 1995, due to an
increase of $715,000 in pre-tax income for the comparable
periods. The effective tax rate was 37.0% and 37.6% for the nine
months periods ended June 30, 1996 and 1995.
NON-PERFORMING ASSETS
The following table sets forth the amounts and categories of the
Association's non-performing assets. Loans are placed on non-
accrual status when the collection of principal and/or interest
is not probable; however, in no event is interest accrued on
loans for which interest is more than 90 days delinquent.
Foreclosed assets include assets acquired in settlement of loans.
March 3l, September 30,
1996 1995
(Dollars in Thousands)
Non-Accruing Loans:
One- to four-family $355 $349
Multi-family -- --
Commercial -- 5
Land -- --
Construction 198 206
Consumer -- --
Total non-accruing loans 553 560
Accruing loans delinquent 90 days or more
One- to four-family 955 716
Multi-family -- --
Commercial -- --
Land 9 --
Construction -- --
Consumer 78 59
Total accruing loans delinquent
90 days or more 1,042 775
Total non-performing loans 1,595 1,335
Foreclosed Assets:
One- to four-family 94 --
Multi-family -- --
Commercial -- --
Land -- --
Construction -- --
Consumer -- --
Total foreclosed assets 94 --
Total non-performing assets $1,689 $1,335
Total classified assets $7,883 $3,903
Total non-performing loans as a
percentage of loans receivable 0.95% 0.92%
Total non-performing assets as a
percentage of total assets 0.96% 0.77%
Classified assets increased 101.97% to $7,883,000 at June 30,
1996 from $3,903,000 at September 30, 1995, primarily because of
a change in the Association's policy regarding the classification
of assets. During the period, the Association began to classify
all speculative construction loans as special mention that were
not paid off in the initial one year term . This change in
policy resulted in an increase in special mention loans from $2.1
million at September 30, 1995 to $5.7 million at June 30, 1996.
Only two speculative construction loans were delinquent more than
thirty days interest at June 30, 1996.
CAPITAL RESOURCES
The Association is subject to three capital to asset requirements
in accordance with Office of Thrift Supervision regulations. The
following table is a summary of the Association's regulatory
capital requirements and actual capital as of June 30, 1996:
Actual Required Excess
Amount/Percent Amount/Percent Amount/Percent
(Dollars in Thousands)
Tangible $32,804 20.10% $2,448 1.50% $30,356 18.60%
Core Leverage
Capital 32,804 20.10% 4,897 3.00% 27,907 17.10%
Risk-Based
Capital 33,962 31.83% 8,537 8.00% 25,425 23.83%
LIQUIDITY
The Association's principal sources of funds are deposits,
principal and interest payments on loans, and investment
securities classified as held to maturity. While scheduled loan
repayments and maturing investments are relatively predictable,
deposit flows and early loan prepayments are more influenced by
interest rates, general economic conditions and competition.
Additional sources of funds may be obtained from the Federal Home
Loan Bank of Des Moines by utilizing numerous available products
to meet funding needs.
The Association is required to maintain minimum levels of liquid
assets as defined by regulations. The required percentage is
currently 5% of net withdrawable savings deposits and borrowings
payable on demand or in one year or less. The Association has
maintained its liquidity ratios at levels exceeding the minimum
requirement. The eligible liquidity ratios at June 30, 1996 and
September 30, 1995 were 5.52% and 18.63% respectively.
In light of the competition for deposits and demand for loans,
the Association may utilize the funding sources of the Federal
Home Loan Bank to meet demand in accordance with the
Association's growth plan. The wholesale funding sources may
allow the Association to obtain a lower cost of funding and
create a more efficient liability match to the respective assets
being funded. Certificates of deposit were 80.6% of total
savings at June 30, 1996 compared to 80.4% at September 30, 1995.
The Association did not borrow additional funds from the Federal
Home Loan Bank in the quarter ended June 30, 1996. Outstanding
advances total $3,250,000 at June 30, 1996. The Association
borrowed $3,000,000 from the FHLB during July 1996 to fund
continued loan growth and provide liquidity.
The Association has started construction of its new home office
building in Cameron. Office property and equipment has increased
$1,558,000 in the nine months ended June 30, 1996. Cost of the
new building is expected to be $4,250,000 with completion
expected in early 1997 with funds provided by normal operations.
The deposits of savings associations such as the Association are
presently insured by the Savings Association Insurance Fund (the
"SAIF"), which along with the Bank Insurance Fund (the "BIF"), is
one of the two insurance funds administered by the Federal
Deposit Insurance Corporation. Financial institutions which are
members of the BIF are experiencing substantially lower deposit
insurance premiums because the BIF has achieved its required
level of reserves while the SAIF has not yet achieved its
required level of reserves. A number of legislative proposals
are currently being considered to recapitalize the SAIF in order
to eliminate this disparity. One plan supported by the Treasury
Department, the FDIC, and the OTS provides for a one-time
assessment of .85% to .90% to be imposed on all SAIF insured
deposits as of March 31, 1995, and for BIF deposit insurance
premiums to be used to pay the FICO bond interest on a pro rata
basis together with SAIF premiums. The BIF and SAIF would be
merged into one fund as soon as practicable, but no later than
January 1, 1998.
There can be no assurance that any particular proposal will be
implemented or that premiums for either BIF of SAIF members will
not be adjusted in the future by the FDIC or by legislative
action. If the legislative proposal described above is enacted,
the Association will be assessed approximately $1 million.
Assuming this special assessment is tax deductible, the cost, net
of income tax benefits, will be approximately $650,000. Future
assessments would then be anticipated to be reduced to .04% to
.31% of eligible deposits, based on risk classification assigned
to the Association by FDIC.
Legislation recently passed by Congress contains a provision that
would repeal the tax bad-debt reserve currently available to
thrifts (including the percentage-of-taxable-income method) for
tax years beginning after December 31, 1995. If enacted, the
Association would have to change to the experience method of
computing its bad debt deduction. The legislation would require
a thrift to recapture the portion of its bad debt reserve that
exceeds the base year reserve (defined as the tax reserve as of
the last taxable year beginning before 1988). The amount of the
recapture would generally be taken into taxable income ratably
over a six year period.
At September 30, 1995 the Association's bad debt reserve exceeded
the base year reserve by $266,000. In accordance with SFAS No.
109 a deferred tax liability has been established for the tax
effect of this item. Management cannot predict whether the
pending legislation will be enacted, or if enacted, the final
form of such legislation and its ultimate impact on the
Association.
CAMERON FINANCIAL CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Holding Company and the Association are not involved
in any legal proceedings incident to the business of the
Holding Company and the Association, which involve
amounts in the aggregate which management believes are
material to the financial condition and results of
operation.
ITEM 2. Changes in Securities
Not Applicable
ITEM 3. Defaults upon Senior Securities
Not Applicable
ITEM 4. Submissions of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports of Form 8-K
None
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.
CAMERON FINANCIAL CORPORATION
Registrant
Date: August 8, 1996 /s/ David G. Just
David G. Just, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: August 8, 1996 /s/ Ronald W. Hill
Ronald W. Hill, Vice-President &
Treasurer (Principal Financial &
Accounting Officer)