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, 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
class of common stock as of the latest practicable date.
Class Outstanding at August 7, 1998
Common stock, .01 par value 2,433,732
CAMERON FINANCIAL CORPORATION
Contents
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
Consolidated Balance Sheets at June 30, 1998,
unaudited, and September 30, 1997 3
Consolidated Statements of Earnings for the Three
Months and Nine Months Ended June 30, 1998 and
1997, unaudited 4
Consolidated Statements of Equity for the
Nine Months Ended June 30, 1998, unaudited 5
Consolidated Statements of Cash Flows for
the Nine Months Ended June 30, 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 18
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Dollars in thousands)
June 30, September 30,
1998 1997
Assets (unaudited)
Cash and cash equivalents $10,214 $10,509
Investment securities held-to-maturity (estimated fair
value of $17,402,000 at June 30 and $13,911,000 at
September 30) 17,342 13,872
Mortgage-backed securities held-to-maturity 7 10
Loans receivable, net 180,277 176,790
Accrued interest receivable:
Loans and mortgage-backed securities 1,319 1,268
Investment securities 261 150
Office property and equipment, net 7,421 6,406
Stock in Federal Home Loan Bank(FHLB) of Des Moines, at cost 2,013 1,762
Deferred income taxes 605 536
Other assets 1,325 1,201
Total assets $220,784 $212,504
Liabilities and Stockholders' Equity
Liabilities:
Savings deposits 133,560 128,771
Advances from FHLB 40,250 35,250
Advance payments for taxes and insurance 1,334 1,772
Accrued interest on savings deposits 142 137
Accrued expenses and other liabilities 1,235 1,506
Income taxes payable 407 401
Total liabilities 176,928 167,837
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 30,004 29,804
Retained earnings, substantially restricted 25,890 24,567
Less:
Unearned employee benefits (2,080) (2,524)
Treasury stock, at cost- 593,196 shares at June 30, 1998
and 464,850 at September 30, 1997 (9,988) (7,210)
Total stockholders' equity 43,856 44,667
Total liabilities and stockholders' equity $220,784 $212,504
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,
1998 1997 1998 1997
(Dollars in thousands, except share data)
Interest income:
Loans $3,919 $3,716 $11,682 $10,668
Investment securities 241 245 691 762
Mortgage-backed securities 1 - 1 1
Certificates of deposit and other 159 98 435 332
Total interest income 4,320 4,059 12,809 11,763
Interest expense:
Savings deposits 1,783 1,622 5,339 4,850
Borrowed money 592 458 1,663 1,054
Total interest expense 2,375 2,080 7,002 5,904
Net interest income 1,945 1,979 5,807 5,859
Provision for loan losses (121) 93 (17) 362
Net interest income after
provision for loan losses 2,066 1,886 5,824 5,497
Noninterest income:
Loan fees and service charges 67 38 170 119
Other income 24 7 81 34
Total noninterest income 91 45 251 153
Noninterest expense:
Compensation, payroll taxes and
fringe benefits 639 562 1,881 1,597
Occupancy expense 143 110 454 248
Data processing 44 43 141 125
Federal insurance premiums 20 21 61 97
Advertising 34 50 91 105
Loss on real estate owned - - 10 -
Other operating expenses 205 147 547 477
Total noninterest expense 1,085 933 3,185 2,649
Earnings before income taxes 1,072 998 2,890 3,001
Income taxes 400 361 1,073 1,134
Net earnings $672 $637 $1,817 $1,867
Basic earnings per share $0.28 $0.26 $0.76 $0.72
Diluted earnings per share $0.28 $0.25 $0.74 $0.71
Basic average shares outstanding 2,365,097 2,484,329 2,397,272 2,590,949
Common stock equivalents-stock options 52,375 35,579 49,335 35,517
Diluted average shares outstanding 2,417,472 2,519,908 2,446,607 2,626,466
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, 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 - - 1,817 - - $1,817
Amortization of RRP - - - 242 (90) 152
Allocation of ESOP shares - 205 - 202 - 407
Exercise of stock options - (5) - - 78 73
Dividends declared - - (494) - - (494)
Purchase 128,127 shares of
treasury stock - - - - (2,766) (2,766)
Balance at June 30, 1998 $30 $30,004 $25,890 ($2,080) ($9,988) $43,856
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)
1998 1997
Cash flows from operating activities:
Net earnings $1,817 $1,867
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 224 62
Provision for loan losses (17) 362
Provision for losses on real estate owned - 3
Amortization of RRP and allocation of ESOP shares 559 549
Deferred income taxes (69) 167
Gain (loss) on sales of real estate owned 1 (4)
Amortization of deferred loan fees (402) (344)
Proceeds from sales of loans held for sale 6,337 822
Origination of loans held for sale (5,813) (816)
Gain on sale of loans held for sale (58) (6)
Changes in assets and liabilities:
Accrued interest receivable (162) (233)
Other assets (124) (74)
Accrued interest payable 5 (19)
Accrued expenses and other liabilities (261) (836)
Current income taxes payable 6 (54)
Cash provided by operating activities $2,043 $1,446
Cash flows from investing activities:
Net increase in loans receivable (3,781) (20,267)
Mortgage-backed securities principal payments 3 3
Maturity of investment securities
held to maturity 7,047 4,410
Purchase of investment securities
held to maturity (10,496) (1,000)
Purchase of FHLB stock (251) (503)
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 (1,268) (3,591)
Proceeds from sale of office property 8 -
Cash used in investing activities ($8,492)($20,925)
Cash flows from financing activities:
Proceeds from issuance of common stock 73 -
Net increase (decrease) in NOW passbook and
money market deposit accounts 3,584 (1,170)
Net increase in certificate accounts 1,205 2,880
Net decrease in advance payments by
borrowers for taxes and insurance (438) (349)
Proceeds from FHLB advances 15,000 25,000
Repayment of FHLB advances (10,000) (2,000)
Dividends paid (504) (546)
Purchase of Treasury stock (2,766) (3,563)
Net cash provided by
financing activities 6,154 20,252
Net increase (decrease) increase in cash (295) 773
Cash and cash equivalents at beginning of period 10,509 6,283
Cash and cash equivalents at end of period $10,214 $7,056
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $1,141 $1,021
Cash paid during the period for interest, net
of capitalized interest $6,996 $5,765
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 $159 $172
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Preparation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accountingprinciples (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 nine month period
ended June 30, 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 1, 1998. The only component the Company expects
to have is unrealized gain\loss on available for sale securities.
(2) 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 June 30,
1998 to its fiscal year end September 30, 1997, and the results of operations
for the three and nine months ended June 30, 1998 with the three and nine months
ended June 30, 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 December1994, 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 Liberty branch office is scheduled to open on August 17, 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 and construction lending, 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 3.9%, or $8,280,000, to $220,784,000 at June 30,
1998 from $212,504,000 at September 30, 1997. Loans receivable, net,
increased 2.0%, or $3,487,000, to $180,277,000 at June 30, 1998 from
$176,790,000 at September 30, 1997. Cash, investment securities and
certificates of deposits in other financial institutions increased 13.0%,
or $3,175,000, to $27,556,000 at June 30, 1998 from $24,381,000 at September 30,
1997. Office property and equipment increased $1,015,000 to
$7,421,000 at June 30, 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 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 will occur in August 1998 with funds
provided by normal operations. Deposits increased 3.7%, or $4,789,000, to
$133,560,000 at June 30, 1998 from $128,771,000 at September 30, 1997.
Advances from the Federal Home Loan Bank increased 14.2%, or $5,000,000,
to $40,250,000 at June 30, 1998 from $35,250,000 at September 30, 1997.
Stockholders' equity decreased 1.8%, or $811,000 to $43,856,000 at June 30,
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. A total of 128,127 shares were repurchased in May 1998. The total
cost of the shares was $2,778,000.
The following table sets forth certain information regarding the
composition of the Association's loan portfolio.
June 30, September 30,
1998 1997
One- to four family $127,121,000 $123,856,000
Multifamily 3,084,000 4,226,000
Commercial real estate 3,091,000 3,403,000
Land 7,026,000 6,000,000
Development 4,079,000 2,257,000
Construction (1) 47,696,000 51,447,000
Consumer loans 9,102,000 8,709,000
Total Loans Receivable 201,199,000 199,898,000
Less:
Deferred loan fees, net 732,000 805,000
Loans in process 18,606,000 20,679,000
Allowance for loan losses 1,584,000 1,624,000
Net Loans Receivable $180,277,000 $176,790,000
(1) Speculative construction $33,655,000 $40,200,000
Contract and permanent
construction $14,041,000 $11,200,000
Total $47,696,000 $51,400,000
During the nine months ended June 30, 1998, development loans increased by
$1,765,000 to $4,079,000, and permanent 1-4 family loans increased
$3,265,000 to $127,121,000. Construction loans decreased $3,751,000 to
$47,696,000. During that time period, speculative construction loans
decreased $6,646,000 while contract and construction-permanent loans
increased $2,895,000.
Deposits were $133,560,000 at June 30, 1998, an increase of $4,789,000, or
3.7% from $128,771,000 at September 30, 1997. 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.
In the quarter ended June 30, 1998, the Association borrowed an additional
$7,000,000 from the Federal Home Loan Bank and repaid a maturing advance
of $5,000,000. For the nine months ended June 30, 1998, the Association
has repaid $10,000,000 in maturing advances and borrowed a total of
$15,000,000 in new funds.
At June 30, 1998 FHLB advances and certificates of deposit were 23.2% and
62.0% 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 $0.28 for the
quarter ended June 30, 1998, compared to the quarter ended June 30, 1997.
Diluted earnings per share increased $0.3, to $0.28 for the quarter ended
June 30, 1998, compared to the quarter ended June 30, 1997. Net earnings
increased $35,000, or 5.5%, to $672,000 for the quarter ended June 30,
1998, compared with $637,000 for the quarter ended June 30, 1997. Net
earnings decreased $50,000, or 2.7%, to $1,817,000, or $0.76 per basic
share, for the nine months ended June 30, 1998, compared with $1,867,000,
or $0.72 per basic share for the nine months ended June 30, 1997. Diluted
earnings per share increased $0.03 to $0.74 for the nine months ended June
30, 1998, compared to the same period in 1997. For the quarterly period,
the increases in interest income and non-interest income and a decrease in
the provision for loan losses offset increases in interest expense, non-
interest expenses and the provision for income taxes. For the nine-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 decreased $34,000, or 1.7%, to
$1,945,000 for the quarter ended June 30, 1998, compared with $1,979,000
for the quarter ended June 30, 1997. Net interest income decreased $52,000
or 0.9% to $5,807,000 for the nine months ended June 30, 1998, compared
with $5,859,000 for the nine months ended June 30, 1997. The net interest
margin decreased to 3.74% for the nine months ended June 30, 1998 compared
to 4.14% for the nine months ended June 30, 1997. Interest earning assets
averaged 122.30% of interest bearing liabilities for the nine months ended
June 30, 1998 compared with 127.82% for the same period in 1997. The
average spread between interest earning assets and interest bearing liabilities
decreased to 2.63% for the nine months ended June 30, 1998, compared with 2.70%
for the same period in 1997.
Interest Income: Interest income increased by $261,000, or 6.4%, for the
quarter ended June 30, 1998, to $4,320,000 from $4,059,000 for the quarter
ended June 30, 1997. Interest income increased by $1,046,000, or 8.9%, for
the nine months ended June 30, 1998, to $12,809,000 from $11,763,000 for
the nine months ended June 30, 1997. The increases were primarily due to
increased balances of interest earning assets.
Interest Expense: Interest expense increased $295,000, or 14.2%, to
$2,375,000 for the quarter ended June 30, 1998, compared to $2,080,000 for
the same period in 1997. For the nine-month period ended June 30, 1998,
interest expense increased $1,098,000, or 18.6% to $7,002,000 from $5,904,000
for the prior period. The increases were primarily a result of
increases in savings deposits and increases in FHLB advances and increases
in rates.
Provision for Loan Losses: The provision for loan losses was a negative
$121,000 for the quarter ended June 30, 1998, compared to a positive
$93,000 for the same period in 1997. The provision for loan losses was a
negative $17,000 for the nine month period ended June 30, 1998, compared
to a positive $362,000 for the same period in 1997. The decreases were 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 $6.6 million, or 16.5%, to $33.7 million at June 30, 1998
from $40.3 million at September 30, 1997. The Board of Directors of the
Association reviews the inventory of unsold speculatively constructed homes
in the Association's market area from information provided monthly by the
Multiple Listing Service. As this inventory began to increase, speculative
lending was reduced, resulting in a lower speculative construction portfolio.
However, due to the slowdown in new home sales, the inventory of unsold product
over one year has increased. As of June 30, 1998, the allowance for loan losses
was $1,584,000, or 0.88% of net loans receivable and 67.92% of total
nonperforming loans. Charge-offs were $23,000 and $12,000 for the nine-month
periods ended June 30, 1998 and 1997, respectively.
A reconciliation of the Association's allowance for loan losses is
summarized as follows:
Nine Months Ended June 30
1997 1996
Balance at beginning
of period $1,624,000 $1,353,000
Provision (17,000) 362,000
Charge-offs (23,000) (12,000)
Recoveries - -
Balance at end of period $1,584,000 $1,703,000
Non-interest Income: Non-interest income increased to $91,000 for the
quarter ended June 30, 1998 from $45,000 for the same period in 1997. Loan
fees and deposit service charges increased $29,000 to $67,000 for the three
months ended June 30, 1998 compared to the same period in 1997. Other
income increased $17,000 to $24,000 in the quarter ended June 30, 1998
compared to the same period in 1997. Non-interest income increased to
$251,000 for the nine months ended June 30, 1998 from $153,000 for the nine
months ended June 30, 1997. Loan fees and deposit service charges
increased $51,000 to $170,000 for the nine months ended June 30, 1998
compared to the same period in 1997. Other income increased $47,000 to
$81,000 during the nine months ended June 30, 1998 compared to the nine
months ended June 30, 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.
Non-interest Expense: Non-interest expense increased $152,000 to
$1,085,000 for the quarter ended June 30, 1998 from $933,000 for the same
period in 1997. Personnel expenses increased $77,000 for the quarter ended
June 30, 1998 compared to the same period in 1997. Cash compensation
increased $55,000 for the current quarter. Payroll taxes and other
benefits increased $24,000 for the current quarter. The Association had
66 full-time equivalent employees at June 30, 1998 compared to 52 at June
30, 1997. Most of the staffing increase was due to the opening of the new
home office in Cameron. ESOP expenses increased $22,000 in the quarter
ended June 30, 1998 compared to the prior period due to higher average
prices of the Company's common stock in the current quarter.
Occupancy expense increased $33,000 to $143,000 for the quarter ended June
30, 1998 compared to the quarter ended June 30, 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 decreased $1,000 for the quarter ended June 30,
1998 compared to the prior period. Advertising expenses decreased $16,000
to $34,000 for the quarter ended June 30, 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
$58,000 to $205,000 for the quarter ended June 30, 1998 compared to the
quarter ended June 30, 1997. In the current quarter, training expenses
increased $10,000, postage increased $9,000, accounting expenses increased
$8,000, data processing related expenses increased $8,000, telephone
expenses increased $5,000 and insurance and deposit account supplies
increased $4,000 each.
Non-interest expense increased $536,000 for the nine months ended June 30,
1998 compared to the nine months ended June 30, 1997. Personnel expenses
increased $284,000 for the current period. Cash compensation increased
$187,000 due primarily to more employees. Payroll taxes and other benefits
increased $57,000 due to more employees. ESOP expense increased in the
current period by $68,000 due to higher average prices of the Company's
common stock in the current period. Occupancy expenses increased $206,000
to $454,000 for the nine month period ended June 30, 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 premiums decreased $36,000 to $61,000 for the nine months ended
June 30, 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 decreased $14,000 to $91,000 for the nine months ended June 30,
1998 compared to the same period in 1997. Other operating expenses
increased $70,000 to $547,000 for the nine months ended June 30, 1998
compared to the prior year. Telephone expenses increased $17,000;
accounting, training and deposit account supply expenses increased $9,000
each; loan expenses and charitable contributions increased $8,000 each.
Income Taxes: Income tax expense increased $39,000 to $400,000 for the
quarter ended June 30, 1998, compared to $361,000 for the same period in
1997. The effective tax rate was 37.3% and 36.2% for the quarters ended
June 30, 1998 and 1997, respectively. Income tax expense decreased $61,000
to $1,073,000 for the nine months ended June 30, 1998, compared to
$1,134,000 for the nine months ended June 30, 1997. The effective tax rate
was 37.1% and 37.8% for the nine months periods ended June 30, 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 nine months
ended June 30, 1998 compared to the year ended September 30, 1997.
At June 30, 1998, the Company had a cumulative positive one-year gap of
$5.8 million, or 2.63%, 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. The Association had
determined that the existing data processing system in use did not have the
capabilities to support products the Association wanted to offer, such as
PC banking and internet services. As a result, the Association submitted
requests for proposals to numerous data processors. The responses have
been reviewed and the Association is currently evaluating the proposals.
A conversion to a different data processing system is expected in 1999.
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 either is or will be Year 2000 compliant by
December 31, 1998.
This will allow time for the testing for compliance. The Year 2000 Policy,
work plan and testing plan have been approved by the Board of Directors.
Testing of in-house software and hardware has commenced. Although it is
difficult to estimate the final costs involved, they are not expected to
exceed $200,000.
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.
June 30, September 30,
1998 1997
(Dollars in Thousands)
Non-Accruing Loans:
One- to four-family $645 $262
Multi-family -- --
Commercial 70 --
Land -- --
Construction 143 110
Consumer -- --
Total non-accuring loans 858 372
Accruing loans delinquent 90 days or more(1)
One- to four-family 524 708
Multi-family -- --
Commercial -- --
Land -- --
Construction 919 --
Consumer 31 88
Total accruing loans delinquent
90 days or more 1,474 796
Total non-performing loans 2,332 1,168
Foreclosed Assets:
One- to four-family -- --
Multi-family -- --
Commercial -- --
Land -- --
Construction -- --
Consumer 16 12
Total foreclosed assets 16 12
Total non-performing assets $2,348 $1,180
Total classified assets $13,490 $10,754
Total non-performing loans as a
percentage of loans receivable 1.16% 0.58%
Total non-performing assets as a
percentage of total assets 1.06% 0.56%
Non-performing loans increased $1,164,000, or 99.7% to $2,332,000 at June
30, 1998 from $1,168,000 at September 30, 1997. The majority of the
increase was due to seven delinquent constructions loans with a balance of
$919,000 at June 30, 1998. In July 1998, four of those loans were paid off
and two more were current as to interest. Classified assets increased
25.44% to $13,490,000 at June 30, 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 June 30, 1998
$7.6 million were in that category compared to $5.9 million at September
30, 1997. Sixteen speculative construction loans, including the seven
above, were delinquent more than thirty days interest at June 30, 1998.
In July 1998, seven of the sixteen were paid off and six more were current
as to interest.
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, 1998:
Actual Required Excess
Amount/Percent Amount/Percent Amount/Percent
(Dollars in Thousands)
Tangible $35,345 16.45% $3,222 1.50% $32,123 14.95%
Core Leverage
Capital 35,345 16.45% 8,593 4.00% 26,752 12.45%
Risk-Based
Capital 36,925 25.41% 11,623 8.00% 25,302 17.41%
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 June 30, 1998 and
September 30, 1997 were 18.30% 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 $7.0 million and repaid $5.0
million in the quarter ended June 30, 1998. 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 80.7% of total savings and 62.0% of
total interest-bearing liabilities at June 30, 1998 compared to 82.7% and
64.9% respectively at September 30, 1997.
Office property and equipment has increased $1,015,000 in the nine months
ended June 30, 1998. During that period, the Association paid the final
bills for the construction of its new home office building in Cameron and
also substantially completed construction of the new branch office building
in Liberty. The Association is scheduled to open the new branch on August
17, 1998.
As of May 27, 1998, the Company had purchased the 128,127 shares to be
repurchased in the 5% stock buyback announced in April, 1998. The cost of
the shares was $2.78 million.
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
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: August 13, 1998 /s/ David G. Just
David G. Just, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: August 13, 1998 /s/ Ronald W. Hill
Ronald W. Hill, Vice-President &
Treasurer (Principal Financial &
Accounting Officer)