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, 1999
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 May 7, 1999
Common stock, .01 par value 2,082,579
CAMERON FINANCIAL CORPORATION
Contents
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
Consolidated Balance Sheets at March 31, 1999,
unaudited, and September 30, 1998 3
Consolidated Statements of Earnings for the Three
Months and Six Months Ended March 31, 1999 and
1998, unaudited 4
Consolidated Statements of Equity for the
Six Months Ended March 31, 1999, unaudited 5
Consolidated Statements of Cash Flows for
the Six Months Ended March 31, 1999 and
1998, unaudited 6
Notes to Unaudited Consolidated Financial
Statements 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-18
PART II - OTHER INFORMATION 19
Signatures 20
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Dollars in thousands)
March 31, September
1999 1998
Assets (unaudited)
Cash and cash equivalents $4,810 $7,719
Investment securities held-to-maturity (estimated fair
value of $16,509,000 at March 31 and $16,467,000 at
September 30) 16,591 16,302
Mortgage-backed securities held-to-maturity 6 7
Loans receivable, net 198,554 184,605
Accrued interest receivable:
Loans and mortgage-backed securities 1,322 1,346
Investment securities 243 229
Office property and equipment, net 7,763 7,861
Stock in Federal Home Loan Bank(FHLB) of Des Moines, at cost 2,312 2,013
Deferred income taxes 153 155
Other assets 1,459 1,284
Total assets $233,213 $221,521
Liabilities and Stockholders' Equity
Liabilities:
Savings deposits 142,628 136,622
Advances from FHLB 46,229 37,250
Advance payments for taxes and insurance 1,143 1,903
Accrued interest on savings deposits 183 180
Accrued expenses and other liabilities 2,795 1,901
Income taxes payable 270 192
Total liabilities 193,248 178,048
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 30,119 30,058
Retained earnings, substantially restricted 27,032 26,220
Less:
Unearned employee benefits (1,751) (1,947)
Treasury stock, at cost- 944,349 shares at March 31, 1999
and 646,196 at September 30, 1998 (15,465) (10,888)
Total stockholders' equity 39,965 43,473
Total liabilities and stockholders' equity $233,213 $221,521
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,
1999 1998 1999 1998
(Dollars in thousands, except share data)
Interest income:
Loans 4,021 $3,940 $7,946 $7,763
Investment securities 231 232 466 450
Certificates of deposit
and other 78 128 174 276
Total interest incom 4,330 4,300 8,586 8,489
Interest expense:
Savings deposits 1,802 1,770 3,643 3,556
Borrowed money 576 559 1,135 1,071
Total interest expense 2,378 2,329 4,778 4,627
Net interest income 1,952 1,971 3,808 3,862
Provision for loan losses (144) 21 (111) 104
Net interest income after
provision forloan losses 2,096 1,950 3,919 3,758
Noninterest income:
Loan fees and service charges 82 54 174 103
Gain on sale of investments 0 0 5 0
Other income 30 32 68 57
Total noninterest income 112 86 247 160
Noninterest expense:
Compensation, payroll taxes
and fringe benefits 677 636 1,362 1,242
Occupancy expense 200 153 377 311
Data processing 63 47 124 97
Federal insurance premiums 21 21 41 41
Advertising 41 22 78 57
Loss on real estate owned 5 3 2 10
Other operating expenses 198 187 417 342
Total noninterest expense 1,205 1,069 2,401 2,100
Earnings before income taxes 1,003 967 1,765 1,818
Income taxes 375 357 672 673
Net earnings $628 $610 $1,093 $1,145
Basic earnings per share $0.30 $0.24 $0.50 $0.48
Diluted earnings per share $0.30 $0.24 $0.50 $0.47
Basic average
shares outstanding 2,069,044 2,548,679 2,172,791 2,406,844
Common stock
equivalents-stock options 0 16,695 6,271 46,556
Diluted average shares
outstanding 2,069,044 2,565,374 2,179,062 2,453,400
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, 1999
(Unaudited)
(Dollars in Thousands)
Additional Unearned Total
Common paid-in Retained employee Treasury stockholders'
Stock capital earnings benefits stock equity
Balance at September 30, 1998 $30 $30,058 $26,220 ($1,947) ($10,888) $43,473
Net earnings - - 1,093 - - $1,093
Amortization of RRP - - - 160 (61) 99
Additional RRP award - (13) - (88) 101 -
Allocation of ESOP shares - 74 - 124 - 198
Dividends declared - - (281) - - (281)
Purchase 298,153 shares of
treasury stock - - - - (4,617) (4,617)
Balance at March 31, 1999 $30 $30,119 $27,032 ($1,751) ($15,465) $39,965
See accompanying Notes to Unaudited Consolidated Financial Statements.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six Months Ended March 31,
(Unaudited)
1999 1998
(Dollars in Thousands)
Cash flows from operating activities:
Net earnings $1,093 $1,145
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 219 153
Provision for loan losses (111) 104
Provision for losses on real estate owned 1 -
Amortization of RRP and allocation of ESOP shares 297 356
Deferred income taxes 2 (79)
Loss on sales of real estate owned 2 1
Amortization of deferred loan fees (251) (258)
Proceeds from sales of loans held for sale 3,290 4,635
Origination of loans held for sale (2,893) (4,407)
Gain on sale of loans held for sale (36) (41)
Changes in assets and liabilities:
Accrued interest receivable 10 (46)
Other assets (175) (19)
Accrued interest payable 3 4
Accrued expenses and other liabilities 908 (345)
Current income taxes payable 78 91
Net cash provided by operating activities $2,437 $1,294
Cash flows from investing activities:
Net increase in loans receivable (13,967) (5,769)
Mortgage-backed securities principal payments 1 2
Maturity of investment securities
held to maturity 8,214 6,547
Purchase of investment securities
held to maturity (8,499) (6,496)
Purchase of FHLB stock (299) (251)
Net proceeds from sale of real estate owned 17 254
Additions and improvements to real estate owned (1) (8)
Purchase of office properties and equipment (125) (808)
Cash used in investing activities ($14,659) ($6,529)
Cash flows from financing activities:
Proceeds from issuance of common stock - 73
Net increase in NOW passbook and
money market deposit accounts 4,736 2,946
Net increase in certificate accounts 1,270 2,403
Net decrease in advance payments by
borrowers for taxes and insurance (760) (948)
Proceeds from Federal Home Loan Bank advances 12,000 8,000
Repayment of FHLB advances (3,021) (5,000)
Dividends paid (295) (337)
Purchase of Treasury stock (4,617) -
Net cash provided by
financing activities 9,313 7,137
Net (decrease) increase in cash (2,909) 1,902
Cash and cash equivalents at beginning of period 7,719 10,509
Cash and cash equivalents at end of period $4,810 $12,411
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $609 $662
Cash paid during the period for interest, net
of capitalized interest $4,775 $4,623
Supplemental schedule of noncash investing and financing activities:
Conversion of loans to real estate owned $157 $358
Conversion of real estate owned to loans $137 $111
Dividend declared and payable $137 $168
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 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, 1998, such information and footnotes
have not been duplicated herein; however, the September 30, 1998 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, 1999 are not necessarily indicative of results that may be
expected for the entire fiscal year ending September 30, 1999. The
September 30, 1998 balance sheet information has been derived from the
consolidated balance sheet as of that date.
(2) Comprehensive income and segment reporting.
Effective for the quarter ended December 31, 1998, the Company adopted the
provisions of SFAS No. 130, "Reporting Comprehensive Income" and SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information."
SFAS No. 130 requires the classification of other comprehensive income by
their nature in the consolidated financial statements and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the
consolidated statement of stockholder's equity. Since adoption, the Company
has had no components of comprehensive income other than net income. SFAS
No. 131 requires financial and descriptive reporting about their reportable
operating segments. Operating segments are components of an enterprise
about which separate financial information is available that is evaluated
regularly by management. The Company has only one segment.
(3) Impact of Accounting Standards.
The Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", in June
1998. SFAS No. 133 established accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. This
statement is effective for all fiscal quarters beginning after June 15,
1999. Management believes adoption of SFAS No. 133 will not have a material
effect on the Company's financial position or results of operation, nor will
adoption require additional capital resources.
CAMERON FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to
various factors which could cause actual results to differ materially from
these estimates. These factors include, but are not limited to, general
economic conditions, changes in interest rates, deposit flows, loan demand,
real estate values, and competition; changes in accounting principles,
policies or guidelines; changes in legislation or regulation; and other
economic, competitive, governmental regulatory, and technical factors
affecting the Company's operations, pricing, products and services.
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,
1999 to its fiscal year end September 30, 1998, and the results of
operations for the three and six months ended March 31, 1999 with the three
and six months ended March 31, 1998. 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, and three full service branch
offices located in Liberty, Clay County, Maryville, Nodaway County, and
Mound City, Holt County. 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 5.3%, or $11,692,000, to $233,213,000 at March 31,
1999 from $221,521,000 at September 30, 1998. Loans receivable, net,
increased 7.6%, or $13,949,000, to $198,554,000 at March 31, 1999 from
$184,605,000 at September 30, 1998. Cash, investment securities and
certificates of deposits in other financial institutions decreased 10.9%,
or $2,620,000, to $21,401,000 at March 31, 1999 from $24,021,000 at
September 30, 1998. Deposits increased 4.4%, or $6,006,000, to
$142,628,000 at March 31, 1999 from $136,622,000 at September 30, 1998.
Advances from the Federal Home Loan Bank increased 24.1%, or $8,979,000,
to $46,229,000 at March 31, 1999 from $37,250,000 at September 30, 1998.
Stockholders' equity decreased 8.1%, or $3,508,000 to $39,965,000 at March
31, 1999 from $43,473,000 at September 30, 1998, as a result of the
Company's stock repurchase programs. On March 19, 1999 the Company
announced its intention to repurchase up to 5% of its outstanding shares,
totaling 109,619 shares, in the open market over the next 12 months. Those
shares were repurchased in March 1999. The total cost of the shares was
$1,536,000. On December 31, 1998, the Company completed a 10% stock
repurchase of 243,373 shares at a cost of $3,980,000.
The following table sets forth certain information regarding the
composition of the Association's loan portfolio.
March 31, September 30,
1999 1998
One- to four family $149,631,000 $134,416,000
Multifamily 2,848,000 2,943,000
Commercial real estate 4,393,000 3,243,000
Land 7,385,000 7,805,000
Development 7,456,000 3,254,000
Construction (1) 36,023,000 45,654,000
Consumer loans 10,962,000 9,241,000
Total Loans Receivable 218,698,000 206,556,000
Less:
Deferred loan fees, net 586,000 700,000
Loans in process 18,153,000 19,730,000
Allowance for loan losses 1,405,000 1,521,000
Net Loans Receivable $198,554,000 $184,605,000
(1) Speculative construction $22,274,000 $30,304,000
Contract and permanent
construction $13,749,000 $15,350,000
Total $36,023,000 $45,654,000
During the six months ended March 31, 1999, permanent 1-4 family loans
increased $15,215,000, or 11.3%, to $149,631,000; development loans
increased $4,202,000, or 129.1%, to $7,456,000; and consumer loans
increased $1,721,000, or 18.6%, to $10,962,000; and construction loans
decreased $9,631,000, or 21.1%, to $36,023,000. During that time period,
speculative construction loans decreased $8,030,000, or 26.5%, while
contract and construction-permanent loans decreased $1,601,000.
Deposits were $142,628,000 at March 31, 1999, an increase of $6,006,000,
or 4.4% from $136,662,000 at September 30, 1998. The majority of the
growth is attributed to the opening of the new branch office in Liberty in
August 1998. Competition from other financial and non-financial entities
will continue to impact deposit growth. The Association offers competitive
interest rates on its deposit products.
During the quarter ended March 31, 1999, the Association borrowed an
additional $12,000,000 from the Federal Home Loan Bank and repaid maturing
advances of $3,021,000. There was no FHLB advance activity in the quarter
ended December 31, 1998.
At March 31, 1999, FHLB advances and certificates of deposit were 24.5%
and 58.5% of interest-bearing liabilities, respectively. At September 30,
1998, they were 21.4% and 62.9%, respectively.
RESULTS OF OPERATIONS
Net Earnings: Basic and diluted earnings per share increased $0.06, to
$0.30 for the quarter ended March 31, 1999, compared to $0.24 for the
quarter ended March 31, 1998. Net earnings increased $18,000, or 3.0%, to
$628,000 for the quarter ended March 31, 1999, compared to $610,000 for the
quarter ended March 31, 1998. Basic and diluted earnings per share
increased $0.02 and $0.03, respectively, to $0.50 for the six months ended
March 31, 1999 compared to $0.48 basic earnings per share and $0.47 diluted
earnings per share for the six months ended March 31, 1998. Net earnings
decreased $52,000 to $1,093,000 for the six months ended March 31, 1999,
compared with $1,145,000 for the six months ended March 31, 1998. 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 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 decreased $19,000, or 1.0%, to
$1,952,000 for the quarter ended March 31, 1999, compared to $1,971,000 for
the quarter ended March 31, 1998. Net interest income decreased $54,000 or
1.4% to $3,808,000 for the six months ended March 31, 1999, compared to
$3,862,000 for the six months ended March 31, 1998. The net interest
margin decreased to 3.55% for the six months ended March 31, 1999 compared
to 3.77% for the six months ended March 31, 1998. Interest earning assets
averaged 118.63% of interest bearing liabilities for the six months ended
March 31, 1999 compared to 122.68% for the same period in 1998. The
average spread between interest earning assets and interest bearing
liabilities decreased to 2.71% for the six months ended March 31, 1999,
compared to 2.74% for the same period in 1998.
Interest Income: Interest income increased by $30,000, or 0.7%, to
$4,330,000 for the quarter ended March 31, 1999, from $4,300,000 for the
quarter ended March 31, 1998. Interest income increased by $97,000, or
1.1%, to $8,586,000 for the six months ended March 31, 1999, from
$8,489,000 for the six months ended March 31, 1998. The increases were
primarily due to increased balances of interest earning assets.
Interest Expense: Interest expense increased $49,000, or 2.1%, to
$2,378,000 for the quarter ended March 31, 1999, from $2,329,000 for the
same period in 1998. For the six-month period ended March 31, 1999,
interest expense increased $151,000, or 3.3% to $4,778,000 from $4,627,000
for the prior period. The increases were primarily a result of increases
of average balances in savings deposits and FHLB advances.
Provision for Loan Losses: The provision for loan losses was a negative
$144,000 for the quarter ended March 31, 1999, compared to a positive
$21,000 for the same period in 1998. The provision for loan losses was a
negative $111,000 for the six month period ended March 31, 1999, compared
to a positive $104,000 for the same period in 1998. 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 $8,00,0000, or 26.5%, to $22,300,000 at March 31, 1999
from $30,3000,000 at September 30, 1998. As of March 31, 1999, the
allowance for loan losses was $1,405,000, or 0.71% of net loans receivable
and 158.76% of total nonperforming loans. While management believes that
it uses the best information available to determine the allowance for loan
losses, unforeseen market conditions could result in adjustments to the
allowance for loan losses, and net earnings could be significantly
affected, if circumstances differ substantially from the assumptions used
in making the final determination. Future additions to the Association's
allowance will be the result of periodic loan, property and collateral
reviews and thus cannot be predicted in advance. Charge-offs were $5,000
and $4,000 for the six-month periods ended March 31, 1999 and 1998,
respectively.
A reconciliation of the Association's allowance for loan losses is
summarized as follows:
Six Months Ended March 31,
1999 1998
Balance at beginning
of period $1,521,000 $1,624,000
Provision (111,000) 104,000
Charge-offs (5,000) (4,000)
Recoveries - -
Balance at end of period $1,405,000 $1,724,000
Non-interest Income: Non-interest income increased 30.2% to $112,000 for
the quarter ended March 31, 1999 from $86,000 for the same period in 1998.
Loan fees and deposit service charges increased $28,000 to $82,000 for the
three months ended March 31, 1999 compared to $54,000 for the same period
in 1998. Other income decreased $2,000 to $30,000 in the quarter ended
March 31, 1999 compared to $28,000 for the same period in 1998. Non-
interest income increased 54.4% to $247,000 for the six months ended March
31, 1999 from $160,000 for the six months ended March 31, 1998. Loan fees
and deposit service charges increased $71,000 to $174,000 for the six
months ended March 31, 1999 compared to $103,000 for the same period in
1998. Other income increased $11,000 to $68,000 during the six months
ended March 31, 1999 compared to the six months ended March 31, 1998. 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
decreased in the quarter ended March 31, 1999 primarily due to decreased
profit on the sale of loans as a result of fewer loan sales. Profits on the
sale of loans were $12,000 and $23,000 for the quarters ended March 31,
1999 and 1998 respectively. Brokerage commissions from the Association's
service corporation were $13,000 for the quarter ended March 31, 1999. The
brokerage office opened in September 1998. Commissions from the service
corporation's insurance agency were $4,000 and $6,000 for the quarters
ended March 31, 1999 and 1998 respectively. Other income increased in the
six months ended March 31, 1999, compared to the prior period primarily due
to increased brokerage commissions. They were $18,000 for the current
period. Profit on the sale of loans were $36,000 and $42,000 for the six
months ended March 31, 1999 and 1998 respectively.
Non-interest Expense: Non-interest expense increased $136,000 to
$1,205,000 for the quarter ended March 31, 1999 from $1,069,000 for the
same period in 1998. Personnel expenses increased $41,000 to $677,000 for
the quarter ended March 31, 1999 compared to $636,000 for the same period
in 1998. Cash compensation increased $97,000 for the current quarter.
Payroll taxes and other benefits increased $9,000 for the current quarter.
The Association had 67 full-time equivalent employees at March 31, 1999
compared to 58 at March 31, 1998. Most of the staffing increase was due
to the opening of the new branch office in Liberty. ESOP expenses
decreased $42,000 in the quarter ended March 31, 1999 compared to the prior
period due to lower average prices of the Company's common stock in the
current quarter.
Occupancy expense increased $47,000 to $200,000 for the quarter ended March
31, 1999 compared to $153,000 for the quarter ended March 31, 1998. The
increase was due to increased real estate taxes and depreciation on the new
branch office building opened in August 1998 and increased expenses for
office equipment, computer upgrades and increased depreciation expense.
Advertising expenses increased $19,000 to $41,000 for the quarter ended
March 31, 1999 compared to $22,000 for the same period in 1998 due to
increased advertising for a new senior's club and increased advertising for
the new branch office in Liberty. Other operating expenses increased
$11,000 to $198,000 for the quarter ended March 31, 1999 compared to the
quarter ended March 31, 1998. In the current quarter, postage increased
$9,000, data processing related expenses increased $8,000, telephone
expenses increased $11,000 and insurance and deposit account supplies
increased $5,000 each. Professional fees decreased $23,000 due primarily
to one time charges in prior periods.
Non-interest expense increased $301,000 for the six months ended March 31,
1999 compared to the six months ended March 31, 1998. Personnel expenses
increased $120,000 for the current period. Cash compensation increased
$190,000 due primarily to more employees. Payroll taxes and other benefits
increased $35,000 due to more employees. ESOP expense decreased in the
current period by $71,000 due to lower average prices of the Company's
common stock in the current period. Occupancy expenses increased $66,000
to $377,000 for the six month period ended March 31, 1999 compared to
$311,000 for the same period in 1998, due to increased real estate taxes
and depreciation on the new branch office building and increased expenses
for office equipment, computer upgrades and increased depreciation expense.
Data processing expenses increased $27,000 to $124,000 for the six months
ended March 31, 1999 compared to $97,000 for the prior year. The increase
was primarily due to more accounts being processed and increased charges
in conjunction with the Association's upcoming conversion to a new core
processing system. Advertising expenses increased $21,000 to $78,000 for
the six months ended March 31, 1999 compared to $57,000 for the same period
in 1998. The increase was primarily due to increased advertising for the
new Liberty branch and the new senior's program. Other operating expenses
increased $75,000 to $417,000 for the six months ended March 31, 1999
compared to $342,000 for the prior year. Telephone expenses increased
$16,000; training expenses increased $12,000 and deposit account supply
expenses increased $8,000; Loan expenses increased $9,000, postage expense
increased $13,000 and insurance expense increased $11,000.
Income Taxes: Income tax expense increased $18,000 to $375,000 for the
quarter ended March 31, 1999, compared to $357,000 for the same period in
1998. The effective tax rate was 37.4% and 36.9% for the quarters ended
March 31, 1999 and 1998, respectively. Income tax expense decreased $1,000
to $672,000 for the six months ended March 31, 1999, compared to $673,000
for the six months ended March 31, 1998. The effective tax rate was 38.1%
and 37.0% for the six months periods ended March 31, 1999 and 1998,
respectively.
Asset and Liability Management - Interest Rate Sensitivity
At March 31, 1999, the Company's total interest-bearing liabilities
maturing or repricing within one year exceeded interest-earning assets
maturing or repricing in the same period by $21.7 million, representing a
cumulative negative one-year gap ratio of 9.3% to total assets. At
September 30, 1998, the negative gap was $1.2 million. The change is
primarily due to the decrease in the average term of liabilities and the
increase in average term of assets. The decrease in the average term of
liabilities is primarily due to increased balances in money market deposit
accounts and other transaction accounts which have no stated maturity and
a preference by customers for shorter term certificates of deposit. The
increase in the average term of assets is primarily due to the amount of
adjustable mortgage loans with time periods between three and five years
prior to the start of annual adjustments. During the six months ended
March 31, 1999, the Association had originated $25.1 million of adjustable
mortgage loans, primarily with either three or five years until the first
adjustment, and $10.6 million of fixed rate mortgage loans with terms
exceeding 15 years. As previously stated, speculative construction loans,
which generally have a term of one year, have decreased $8.0 million in the
six months ended March 31, 1999.
The Year 2000 Issue
The Association has an ongoing program designed to ensure that its
operational and financial systems will not be adversely affected by Year
2000 software failures, due to processing errors arising from calculations
using the Year 2000 date. Should the Company's mission critical systems
fail in the Year 2000, the Company would have difficulty in processing
transactions for loan and deposit customers, which could cause significant
damage to the Company's important customer relationships.
The Association has completed assessment of its mission critical computer
hardware Year 2000 compliance and testing of such hardware operating
systems is complete. The Association has two mission critical software
areas: the hardware operating system and the core (loan and deposit)
processing system. The hardware operating system currently in use is
acknowledged as Year 2000 compliant. A contract has been signed for a Year
2000 compliant core processing system. The software has been installed and
Year 2000 testing will soon begin. Year 2000 testing should be completed
prior to the scheduled conversion in early June 1999.
The Association is requiring its computer systems and software vendors to
represent that the products are, or will be, Year 2000 compliant. Major
suppliers and vendors have been requested to provide the Association with
their progress in becoming Year 2000 compliant. Responses and progress of
vendors is being monitored.
The Association has an ongoing program to inform customers of the Year 2000
problem and the progress the Association is making in becoming Year 2000
compliant. The Association has reviewed customer relationships and does
not believe potential Year 2000 problems of customers will have a material
effect on the Association. The Association has developed a cash and
currency plan to ensure that the Association has adequate funds on hand to
meet cash requirements of customers during late 1999 and early 2000.
In the quarter ended March 31, 1999, Year 2000 costs did not exceed
$30,000. Additional costs of Year 2000 compliance are not expected to
exceed $50,000 in fiscal 1999. This estimate to become Year 2000 compliant
is exclusive of the estimated $425,000 necessary to purchase the new core
processing system and related hardware.
Contingency plans are being developed for mission critical and non-mission
critical items. Most of the contingency plans involve development of
manual procedures or use of alternate systems. Testing schedules for
contingency plans are being established.
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,
1999 1998
(Dollars in Thousands)
Non-Accruing Loans:
One- to four-family $177 $721
Multi-family -- --
Commercial -- 34
Land -- --
Construction 536 1,044
Consumer -- --
Total non-accuring loans 713 1,799
Accruing loans delinquent 90 days or more(1)
One- to four-family 102 870
Multi-family -- 7
Commercial -- --
Land 63 --
Construction -- 450
Consumer 7 10
Total accruing loans delinquent
90 days or more 172 1,337
Total non-performing loans 885 3,136
Foreclosed Assets:
One- to four-family -- --
Multi-family -- --
Commercial -- --
Land -- --
Construction -- --
Consumer 21 19
Total foreclosed assets 21 19
Total non-performing assets $906 $3,155
Total classified assets $11,041 $11,803
Total non-performing loans as a
percentage of loans receivable 0.40% 1.52%
Total non-performing assets as a
percentage of total assets 0.39% 1.42%
Non-performing loans decreased $2,251,000, or 71.8% to $885,000 at March
31, 1999 from $3,136,000 at September 30, 1998. The majority of the
decrease was due to fewer delinquent construction loans and fewer
delinquent one- to four-family loans. Classified assets decreased 6.5% to
$11,041,000 at March 31, 1999 from $11,803,000 at September 30, 1998,
primarily because of the decrease in speculative construction loans that
were not paid off in their initial one year term.
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, 1999:
Actual Required Excess
Amount/Percent Amount/Percent Amount/Percent
(Dollars in Thousands)
Tangible Capital $35,330 15.46% $3,428 1.50% $31,902 13.96%
Core Leverage
Capital 35,330 15.46% 9,141 4.00% 26,189 11.46%
Risk-Based
Capital 36,735 23.70% 12,398 8.00% 24,337 15.70%
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, 1999 and
September 30, 1998 were 10.75% and 15.00%, 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 $12.0 million and repaid
$3.0 million in the quarter ended March 31, 1999. Two new advances, for
a total of $6.0 million, have fixed interest rates and final maturities of
ten years with quarterly call provisions after five years. Two new
advances, also for $6.0 million, have fixed interest rates and are to be
amortized over a 15 year term. Each of the amortizing advances can be
repaid with no penalty after five years. Rates on the advances ranged from
4.83% to 6.10%. Certificates of deposits were 77.5% of total savings and
58.5% of total interest-bearing liabilities at March 31, 1999 compared to
80.0% and 62.9% respectively at September 30, 1998.
On September 17, 1998, the Company announced a 10% stock repurchase
program. By December 31, 1998 a total of 243,373 shares were repurchased
at a cost of $3,980,000, completing that buyback. On March 19, 1999, the
Company announced a 5% stock repurchase program. By March 31, 1999, a
total of 109,619 shares were repurchased at a cost of $1,536,000,
completing that buyback.
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 25, 1999. Mr Jon N. Crouch and Mr. William F.
Barker were each elected as directors for three year terms
as follows: Mr. Crouch had 1,957,179 shares for, 41,261
shares withheld and no broker non-votes; Mr. Barker had
1,954,379 shares for, 44,061 shares withheld and no broker
non-votes. The following Directors' terms of office
continued after the meeting: David G. Just, William J.
Heavner, Harold D. Lee, Kennith R. Baker and Dennis E.
Marshall.
The stockholders approved the ratification of the
appointment of KPMG LLP as the Company's auditors by a vote
of 1,979,185 shares for, 16,455 shares against, 2,800
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 12, 1999 /s/ David G. Just
David G. Just, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: May 12, 1999 /s/ Ronald W. Hill
Ronald W. Hill, Vice-President &
Treasurer (Principal Financial &
Accounting Officer)