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 March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) FOR 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)
1304 North Walnut 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
common stock as of the latest practicable date.
Class Outstanding at May 8, 1998
Common stock, .01 par value 2,561,059
CAMERON FINANCIAL CORPORATION
Contents
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
Consolidated Balance Sheets at March 31, 1998,
unaudited, and September 30, 1997 3
Consolidated Statements of Earnings for the Three
Months and Six Months Ended March 31, 1998 and
1997, unaudited 4
Consolidated Statements of Equity for the
Six Months Ended March 31, 1998, unaudited 5
Consolidated Statements of Cash Flows for
the Six Months Ended March 31, 1998 and
1997, unaudited 6
Notes to Unaudited Consolidated Financial
Statements 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-17
PART II - OTHER INFORMATION 18
Signatures 19
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Dollars in thousands)
March 31, September 30,
1998 1997
Assets (unaudited)
Cash and cash equivalents $12,411 $10,509
Investment securities held-to-maturity (estimated fair
value of $13,891,000 at March 31 and $13,911,000 at
September 30) 13,831 13,872
Mortgage-backed securities held-to-maturity 8 10
Loans receivable, net 182,279 176,790
Accrued interest receivable:
Loans and mortgage-backed securities 1,324 1,268
Investment securities 140 150
Office property and equipment, net 7,051 6,406
Stock in Federal Home Loan Bank(FHLB) of Des Moines, at cost 2,013 1,762
Deferred income taxes 615 536
Other assets 1,220 1,201
Total assets $220,892 $212,504
Liabilities and Stockholders' Equity
Liabilities:
Savings deposits 134,120 128,771
Advances from FHLB 38,250 35,250
Advance payments for taxes and insurance 824 1,772
Accrued interest on savings deposits 141 137
Accrued expenses and other liabilities 1,161 1,506
Income taxes payable 492 401
Total liabilities 174,988 167,837
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 29,933 29,804
Retained earnings, substantially restricted 25,375 24,567
Less:
Unearned employee benefits (2,226) (2,524)
Treasury stock, at cost- 464,169 shares at March 31, 1998
and 464,850 at September 30, 1997 (7,208) (7,210)
Total stockholders' equity 45,904 44,667
Total liabilities and stockholders' equity $220,892 $212,504
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
(unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
(Dollars in thousands, except share data)
Interest income:
Loans $3,940 $3,514 $7,763 $6,952
Investment securities 232 240 450 517
Mortgage-backed securities - 1 - 1
Certificates of deposit and other 128 109 276 234
Total interest income 4,300 3,864 8,489 7,704
Interest expense:
Savings deposits 1,770 1,589 3,556 3,228
Borrowed money 559 365 1,071 596
Total interest expense 2,329 1,954 4,627 3,824
Net interest income 1,971 1,910 3,862 3,880
Provision for loan losses 21 80 104 269
Net interest income after
provision for loan losses 1,950 1,830 3,758 3,611
Noninterest income:
Loan fees and service charges 54 41 103 81
Other income 32 21 57 27
Total noninterest income 86 62 160 108
Noninterest expense:
Compensation, payroll taxes and
fringe benefits 636 574 1,242 1,035
Occupancy expense 153 79 311 138
Data processing 47 42 97 82
Federal insurance premiums 21 20 41 76
Advertising 22 29 57 55
Loss on real estate owned 3 - 10 -
Other operating expenses 187 182 342 330
Total noninterest expense 1,069 926 2,100 1,716
Earnings before income taxes 967 966 1,818 2,003
Income taxes 357 380 673 773
Net earnings $610 $586 $1,145 $1,230
Basic earnings per share $0.25 $0.23 $0.48 $0.47
Diluted earnings per share $0.25 $0.23 $0.47 $0.46
Basic average shares outstanding 2,414,747 2,548,679 2,406,844 2,635,308
Common stock equivalents-stock options 45,019 16,695 46,556 16,695
Diluted average shares outstanding 2,459,766 2,565,374 2,453,400 2,652,003
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
For The Six Months Ended March 31, 1998
(Unaudited)
(Dollars in Thousands)
Additional Unearned Total
Common paid-in Retained employee Treasury stockholders'
Stock capital earnings benefits stock equity
Balance at September 30, 1997 $30 $29,804 $24,567 ($2,524) ($7,210) $44,667
Net earnings - - 1,145 - - $1,145
Amortization of RRP - - - 164 (76) 88
Allocation of ESOP shares - 134 - 134 - 268
Exercise of stock options - (5) - - 78 73
Dividends declared - - (337) - - (337)
Balance at March 31, 1998 $30 $29,933 $25,375 ($2,226) ($7,208) $45,904
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six Months Ended March 31,
(Unaudited)
1998 1997
Cash flows from operating activities:
Net earnings $1,145 $1,230
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 153 26
Provision for loan losses 104 269
Provision for losses on real estate owned - 3
Amortization of RRP and allocation of ESOP shares 356 362
Deferred income taxes (79) 210
Gain (loss) on sales of real estate owned 1 (4)
Amortization of deferred loan fees (258) (229)
Proceeds from sales of loans held for sale 4,635 646
Origination of loans held for sale (4,407) (641)
Gain on sale of loans held for sale (41) (5)
Changes in assets and liabilities:
Accrued interest receivable (46) 38
Other assets (19) (20)
Accrued interest payable 4 (2)
Accrued expenses and other liabilities (345) (971)
Current income taxes payable 91 2
Cash provided by operating activities $1,294 $914
Cash flows from investing activities:
Net increase in loans receivable (5,769) (13,156)
Mortgage-backed securities principal payments 2 2
Maturity of investment securities
held to maturity 6,547 4,410
Purchase of investment securities
held to maturity (6,496) (500)
Purchase of FHLB stock (251) (3)
Net proceeds from sale of real estate owned 254 27
Additions and improvements to real estate owned (8) (4)
Purchase of office properties and equipment (808) (3,048)
Cash used in investing activities ($6,529)($12,272)
Cash flows from financing activities:
Proceeds from issuance of common stock 73 -
Net increase (decrease) in NOW passbook and
money market deposit accounts 2,946 (330)
Net increase in certificate accounts 2,403 1,857
Net decrease in advance payments by
borrowers for taxes and insurance (948) (763)
Proceeds from FHLB advances 8,000 15,000
Repayment of FHLB advances (5,000) (2,000)
Dividends paid (337) (372)
Purchase of Treasury stock - (2,666)
Net cash provided by
financing activities 7,137 10,726
Net increase (decrease) increase in cash 1,902 (632)
Cash and cash equivalents at beginning of period 10,509 6,283
Cash and cash equivalents at end of period $12,411 $5,651
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $662 $385
Cash paid during the period for interest, net
of capitalized interest $4,623 $3,829
Supplemental schedule of noncash investing and financing activities:
Conversion of loans to real estate owned $358 -
Conversion of real estate owned to loans $111 $51
Dividend declared and payable $168 $174
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 incorporatedunder 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, 1997, such information and
footnotes have not been duplicated herein, however, the September 30, 1997
balance sheet is derived from audited financial statements. 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 six month period
ended March 31, 1998 are not necessarily indicative of results that may
be expected for the entire fiscal year ending September 30, 1998.
The Company plans to adopt the provisions of SFAS No. 130, "Comprehensive
Income," effective October 31, 1998. The only component the Company expects
to have is unrealized gain\loss on available for sale securities.
(3) Earnings Per Share
Effective for the quarter ended December 31, 1997, the Company adopted the
provisions of SFAS No. 128, "Earnings Per Share," (EPS) which replaces the
previous primary EPS with basic EPS. That presentation is also required for
prior periods. Basic earnings per share excludes dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then shared
in the earnings of the Company.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the financial condition of Cameron
Financial Corporation, the "Company", and its wholly owned subsidiary, The
Cameron Savings & Loan Association, F.A., the "Association", at March 31,
1998 to its fiscal year ended September 30, 1997, and the results of
operations for the three and six months ended March 31, 1998 with the three
and six months ended March 31, 1997. This discussion should be read in
conjunction with the interim financial statements and notes which are
included herein.
GENERAL
The Company 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 Company consists
primarily of the business of the Association.
The Association 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, Dekalb 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. OTS
approval has been received to open a full service branch office in Liberty.
The loan production office will be closed upon the opening of the branch
office. The office is expected to open in June or July, 1998. 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 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 4.0%, or $8,388,000, to $220,892,000 at March 31,
1998 from $212,504,000 at September 30, 1997. Loans receivable, net,
increased 3.1%, or $5,489,000, to $182,279,000 at March 31, 1998 from
$176,790,000 at September 30, 1997. Cash, investment securities and
certificates of deposits in other financial institutions increased 7.6%,
or $1,861,000 to $26,242,000 at March 31, 1998 from $24,381,000 at
September 30, 1997. Office property and equipment increased $645,000 to
$7,051,000 at March 31, 1998 from $6,406,000 at September 30, 1997, as a
result of payment of final bills on the new home office building in Cameron
and the start of construction of the new branch office in Liberty,
Missouri. Construction costs for the Liberty branch office are estimated
at $1.0 million. Completion of the office should occur in mid 1998 with
funds expected to be provided by normal operations. Deposits increased
4.2%, or $5,349,000, to $134,120,000 at March 31, 1998 from $128,771,000
at September 30, 1997. Advances from the Federal Home Loan Bank increased
8.5%, or $3,000,000, to $38,250,000 at March 31, 1998 from $35,250,000 at
September 30, 1997. Stockholders' equity increased 2.8%, or $1,237,000 to
$45,904,000 at March 31, 1998 from $44,667,000 at September 30, 1997. On
April 16, 1998 the Company announced its intention to repurchase up to 5%
of its outstanding shares, totaling approximately 128,000 shares, in the
open market over the next 12 months.
The following table sets forth certain information regarding the
composition of the Association's loan portfolio.
March 31, September 30,
1998 1997
One- to four family $125,784,000 $123,856,000
Multifamily 4,216,000 4,226,000
Commercial real estate 3,149,000 3,403,000
Land 6,073,000 6,000,000
Development 4,544,000 2,257,000
Construction (1) 50,521,000 51,447,000
Consumer loans 8,743,000 8,709,000
Total Loans Receivable 203,030,000 199,898,000
Less:
Deferred loan fees, net 764,000 805,000
Loans in process 18,263,000 20,679,000
Allowance for loan losses 1,724,000 1,624,000
Net Loans Receivable $182,279,000 $176,790,000
(1) Speculative construction $36,968,000 $40,200,000
Contract and permanent
construction $13,553,000 $11,200,000
Total $50,521,000 $51,400,000
During the six months ended March 31, 1998, development loans increased by
$2,230,000 to $4,544,000, and permanent 1-4 family loans increased
$1,928,000 to $125,784,000. Construction loans decreased $926,000 to
$50,521,000. During that time period, speculative construction loans
decreased $3,333,000 while contract and construction-permanent loans
increased $2,407,000.
Strong deposit growth has continued for the Association. Deposits were
$134,120,000 at March 31, 1998, an increase of $5,349,000, or 4.2% from
$128,771,000 at September 30, 1997. Deposits increased over $3,000,000
during the quarter ended March 31, 1998. That is the second largest
quarterly increase in deposits since the initial conversion to stock in
March 1995. The majority of the growth is attributed to the opening of the
new home office in June 1997. 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 borrowed an additional $8,000,000 from the Federal Home
Loan Bank during the quarter ended March 31, 1998. During that quarter,
$2,000,000 in maturing advances were repaid. In the quarter ended December
31, 1997, a maturing advance of $3,000,000 was repaid. The result is a net
increase in advances of $3,000,000 for the six months ended March 31, 1998.
In April 1998, the Association borrowed an additional $7,000,000 from the
Federal Home Loan Bank and repaid a maturing advance of $5,000,000.
At March 31, 1998 FHLB advances and certificates of deposit were 22.2% and
63.2% of interest-bearing liabilities respectively. At September 30, 1997,
they were 21.5% and 64.9% respectively.
RESULTS OF OPERATIONS
Net Earnings: Basic earnings per share increased $0.02, to $0.25 for the
quarter ended March 31, 1998, compared to the quarter ended March 31, 1997.
Net earnings increased $24,000, or 4.1%, to $610,000 for the quarter ended
March 31, 1998, compared with $586,000 for the quarter ended March 31,
1997. Net earnings decreased $85,000, or 6.9%, to $1,145,000, or $0.48 per
basic share, for the six months ended March 31, 1998, compared with $1,230,000,
or $0.47 per basic share for the six months ended March 31, 1997. For the
quarterly period, the increases in interest income and non-
interest income and decreases in the provision for loan losses and the
provision for income taxes offset increases in interest expense and non-
interest expenses. For the six-month period, increases in interest expense
and non-interest expense offset increases in interest income and non-
interest income and decreases in the provision for loan losses and provision
for income taxes.
Net Interest Income: Net interest income increased $61,000, or 3.2%, to
$1,971,000 for the quarter ended March 31, 1998, compared with $1,910,000
for the quarter ended March 31, 1997. Net interest income decreased $18,000
or 0.5% to $3,862,000 for the six months ended March 31, 1998, compared
with $3,880,000 for the six months ended March 31, 1997. The net interest
margin decreased to 3.77% for the six months ended March 31, 1998 compared
to 4.16% for the six months ended March 31, 1997. Interest earning assets
averaged 122.68% of interest bearing liabilities for the six months ended
March 31, 1998 compared with 129.24% for the same period in 1997. The
average spread between interest earning assets and interest bearing liabilities
increased to 2.74% for the six months ended March 31, 1998, compared with 2.70%
for the same period in 1997.
Interest Income: Interest income increased by $436,000, or 11.3%, for the
quarter ended March 31, 1998, to $4,300,000 from $3,864,000 for the quarter
ended March 31, 1997. Interest income increased by $785,000, or 10.2%, for
the six months ended March 31, 1998, to $8,489,000 from $7,704,000 for the
six months ended March 31, 1997. The increases were primarily due to
increased interest earning assets and slightly higher rates on those
assets.
Interest Expense: Interest expense increased $375,000, or 19.2%, to
$2,329,000 for the quarter ended March 31, 1998, compared to $1,954,000 for
the same period in 1997. For the six-month period ended March 31, 1998,
interest expense increased $803,000, or 21.0% to $4,627,000 from $3,824,000
for the prior period. The increases were primarily a result of increases
in savings deposits and increases in FHLB advances and slight increases in
rates.
Provision for Loan Losses: The provision for loan losses was $21,000 for
the quarter ended March 31, 1998, compared to $80,000 for the same period
in 1997. The provision for loan losses was $104,000 for the six month
period ended March 31, 1998, compared to $269,000 for the same period in
1997. The decreases were primarily due to the change in the mix or
composition of the portfolio. The allowance for loan losses is reviewed
and adjusted monthly by management based on the size and composition or mix
of the gross loan portfolio. Various percentages are applied to the
different types of loans in the portfolio with the highest requirement
assigned to the loans with the greatest inherent risk. The provision will
vary based on increases or decreases in the total loan portfolio and
changes in the composition or mix of the portfolio. Speculative construction
loans, which carry the highest risk factor, decreased $3.2
million, or 8.0%, to $37.0 million at March 31, 1998 from $40.2 million at
September 30, 1997. As of March 31, 1998, the allowance for loan losses
was $1,724,000, or 0.88% of net loans receivable and 96.47% of total
nonperforming loans. Charge-offs were $4,000 and $12,000 for the six-month
periods ended March 31, 1998 and 1997, respectively.
A reconciliation of the Association's allowance for loan losses is
summarized as follows:
Six Months Ended March 31
1998 1997
Balance at beginning
of period $1,624,000 $1,353,000
Provision 104,000 269,000
Charge-offs (4,000) (12,000)
Recoveries - -
Balance at end of period $1,724,000 $1,610,000
Noninterest Income: Noninterest income increased to $86,000 for the
quarter ended March 31, 1998 from $62,000 for the same period in 1997.
Loan fees and deposit service charges increased $13,000 for the three
months ended March 31, 1998 compared to the same period in 1997. Other
income increased $11,000 in the quarter ended March 31, 1998 compared to
the same period in 1997. Noninterest income increased to $160,000 for the
six months ended March 31, 1998 from $108,000 for the six months ended
March 31, 1997. Other income increased $30,000 during the six months ended
March 31, 1998 compared to the six months ended March 31, 1997. Loan fees
and deposit service charges increased in both periods primarily due to the
increased number of loans, increased deposit accounts with monthly charges
and income from ATM and debit card transactions. Other income increased
in both periods primarily due to increased profit on the sale of loans as
a result of more loan sales.
Noninterest Expense: Noninterest expense increased $143,000 to $1,069,000
for the quarter ended March 31, 1998 from $926,000 for the same period in
1997. Personnel expenses increased $62,000 for the quarter ended March 31,
1998 compared to the same period in 1997. Cash compensation increased
$56,000 for the current quarter. Payroll taxes and other benefits increased
$19,000 for the current quarter. The Association had 58 full-time equivalent
employees at March 31, 1998 compared to 53 at March 31, 1997. Most of the
staffing increase was due to the opening of the new home office in Cameron.
Increased loan originations in the quarter ended March
31, 1998 compared to the quarter ended March 31, 1997, resulted in $21,000
more costs deferred in accordance with FAS 91 for the current quarter.
ESOP expenses increased $18,000 in the quarter ended March 31, 1998
compared to the prior period due to higher average prices of the Company's
common stock in the current quarter.
Occupancy expense increased $74,000 to $153,000 for the quarter ended March
31, 1998 compared to the quarter ended March 31, 1997. The increase was
due to increased real estate taxes and depreciation on the new home office
building opened in June 1997 and increased expenses for office equipment,
computer upgrades and increased depreciation expense.
Federal insurance premiums increased for the quarter ended March 31, 1998
compared to the prior period due to increased savings deposits. Advertising
expenses decreased $7,000 to $22,000 for the quarter ended
March 31, 1998 compared to the same period in 1997 due to increased
advertising for the new deposit products introduced during the prior period
and promotional items for the opening of the new home office in June 1997.
Other operating expenses increased $5,000 to $187,000 for the quarter ended
March 31, 1998 compared to the quarter ended March 31, 1997. Increases in
telephone expense, deposit account supplies and charitable contributions
offset decreases in legal fees, office supplies and postage.
Noninterest expense increased $384,000 for the six months ended March 31,
1998 compared to the six months ended March 31, 1997. Personnel expenses
increased $207,000 for the current period. Cash compensation increased
$131,000 due primarily to more employees. Payroll taxes and other benefits
increased $32,000 due to more employees. Due to a decrease in loan originations
in the six month period ended March 31, 1998 compared to the
same period in 1996, $3,000 less in expenses were deferred in accordance
with FAS 91. ESOP expense increased in the current period by $46,000 due
to higher average prices of the Company's common stock in the current
period. Occupancy expenses increased $173,000 to $311,000 for the six
month period ended March 31, 1998 compared to the same period in 1997, due
to increased real estate taxes and depreciation on the new home office
building and increased expenses for office equipment, computer upgrades and
increased depreciation expense. Federal insurance premiumsdecreased
$35,000 to $41,000 for the six months ended March 31, 1998 compared
to the same period in 1997. The decrease was due to reduced SAIF premiums
effective January 1, 1997, as a result of the one-time assessment to
recapitalize SAIF in September 1996. Advertising expenses increased $2,000
to $55,000 for the six months ended March 31, 1998 compared to the same
period in 1997.
Income Taxes: Income tax expense decreased $23,000 to $357,000 for the
quarter ended March 31, 1998, compared to $380,000 for the same period in
1997. The effective tax rate was 36.9% and 39.3% for the quarters ended
March 31, 1998 and 1997, respectively. Income tax expense decreased
$100,000 to $673,000 for the six months ended March 31, 1998, compared to
$773,000 for the six months ended March 31, 1997. The effective tax rate
was 37.0% and 38.6% for the six months periods ended March 31, 1998 and
1997, respectively.
Asset and Liability Management - Interest Rate Sensitivity
There has not been a material change in the Association's interest rate
sensitivity position or market risk position in the quarter or six months
ended March 31, 1998 compared to the year ended September 30, 1997.
At March 31, 1998, the Company had a cumulative positive one-year gap of
$7.6 million, or 3.43%, compared to a negative $4.0 million, or 1.9%, at
September 30, 1997. The change is primarily due to high levels of loan
repayments with the proceeds currently invested in short term assets.
The Year 2000 Issue
The Company utilizes and is dependent upon data processing systems and
software to conduct its business. The data processing systems and software
include those developed and maintained by the Company's data processor and
purchased software run on in-house networks.
In 1997, the Company initiated a review and assessment of all hardware and
software to confirm it will function properly in the year 2000. The
majority of the vendors that have been contacted have indicated that their
hardware and\or software will be Year 2000 compliant by December 31, 1998.
This will allow time for the testing for compliance. While there may be
some expense incurred in the next two years, it is not expected to have a
material effect on the Company's consolidated financial statements.
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 31, September 30,
1998 1997
(Dollars in Thousands)
Non-Accruing Loans:
One- to four-family $608 $262
Multi-family -- --
Commercial -- --
Land -- --
Construction 135 110
Consumer -- --
Total non-accuring loans 743 372
Accruing loans delinquent 90 days or more(1)
One- to four-family 733 708
Multi-family -- --
Commercial -- --
Land -- --
Construction 282 --
Consumer 29 88
Total accruing loans delinquent
90 days or more 1,044 796
Total non-performing loans 1,787 1,168
Foreclosed Assets:
One- to four-family -- --
Multi-family -- --
Commercial -- --
Land -- --
Construction -- --
Consumer 13 12
Total foreclosed assets 13 12
Total non-performing assets $1,800 $1,180
Total classified assets $14,124 $10,754
Total non-performing loans as a
percentage of loans receivable 0.88% 0.58%
Total non-performing assets as a
percentage of total assets 0.81% 0.56%
Non-performing loans increased $619,000, or 53.0% to $1,787,000 at March
31, 1998 from $1,168,000 at September 30, 1997. Classified assets increased
31.34% to $14,124,000 at March 31, 1998 from $10,754,000 at
September 30, 1997, primarily because of the increase in speculative
construction loans that were not paid off in their initial one year term.
At March 31, 1998 $9.0 million were in that category compared to $5.9
million at September 30, 1997. Eleven speculative construction loans were
delinquent more than thirty days interest at March 31, 1998.
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 March 31, 1998:
Actual Required Excess
Amount/Percent Amount/Percent Amount/Percent
(Dollars in Thousands)
Tangible $34,555 16.28% $3,184 1.50% $31,371 14.78%
Core Leverage
Capital 34,555 16.28% 8,491 4.00% 26,064 12.28%
Risk-Based
Capital 36,255 24.81% 11,688 8.00% 24,567 16.81%
LIQUIDITY
The Association's principal sources of funds are deposits, advances from
the Federal Home Loan Bank of Des Moines, 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.
The Association is required to maintain minimum levels of liquid assets as
defined by regulations. The required percentage is currently 4% of net
withdrawable savings deposits, less withdrawable deposits maturing in more
than one year, 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 March 31, 1998 and
September 30, 1997 were 11.41% and 8.97% respectively.
In light of the competition for deposits and demand for loans, the
Association has utilized 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. The Association borrowed $8.0 million in the quarter
ended March 31, 1998. The advance has a maturity of ten years and a fixed
interest rate of 5.42%. It can be called by the Federal Home loan Bank
quarterly after a one year period. Advances of $2.0 million were repaid
during the quarter ended March 31, 1998. In April 1998, the Association
borrowed $7.0 million and repaid a maturing advance of $5.0 million. The
new advances have final maturities of ten years with quarterly call
provisions after either one, three or five years. Interest rates are fixed
at rates between 5.13% and 5.63%. Certificates of deposits were 81.2% of
total savings and 63.2% of total interest-costing liabilities at March 31,
1998 compared to 82.7% and 64.9% respectively at September 30, 1997.
Office property and equipment has increased $645,000 in the six months
ended March 31, 1998. The Association has completed construction of its
new home office building in Cameron and the Company has started construction of
the new office in Liberty.
As of May 8, 1998, the Company has purchased 33,100 of the 128,127 shares
to be repurchased in the 5% stock buyback announced in April, 1998. The
cost of the remaining 95,027 shares would be approximately $2.05 million
based on the current bid-asked range of Company stock.
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
The annual meeting of stockholders of the Company was held
on January 26, 1998. Mr. Harold D. Lee, Mr. Kennith R.
Baker and Mr. Dennis E. Marshall were each elected as
directors for three year terms as follows: Mr. Lee had
2,321,361 shares for, 29,218 shares withheld and no broker
non-votes; Mr. Baker had 2,313,913 shares for, 36,666
shares withheld and no broker non-votes; Mr. Marshall had
2,321,361 shares for, 29,218 shares withheld and no broker
non-votes. The following Directors' terms of office
continued after the meeting: David G. Just, Jon N. Crouch,
William F. Barker and William J. Heavner.
The stockholders approved the ratification of the
appointment of KPMG Peat Marwick, LLP as the company's
auditors by a vote of 2,331,674 shares for, 17,278 shares
against, 1,627 abstentions and no broker non-votes.
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports of Form 8-K
Financial Data Schedule; EX-27
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: May 13, 1998 /s/ David G. Just
David G. Just, President and
Chief Executive Officer (Duly
Authorized Officer)
Date: May 13, 1998 /s/ Ronald W. Hill
Ronald W. Hill, Vice-President &
Treasurer (Principal Financial &
Accounting Officer)