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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-26556
OREGON TRAIL FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Oregon 91-1829481
- --------------------------------------------------------------------------
State or other jurisdiction of incorporation (I.R.S. Employer or
organization Identification Number)
2055 First Street, Baker City, Oregon 97814
- -------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 523-6327
-------------------
Securities registered pursuant to
Section 12(b) of the Act: None
-------------------
Securities registered pursuant to
Section 12(g) of the Act: Common Stock. Par value $.01 per share
--------------------------------------
(Title of Class)
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 report), and (2) has been subject to such
filing requirements for the past 90 days. YES [ X ] NO [ ]
As of July 31, 2001, there were issued and outstanding 3,344,545 shares of the
Registrant's Common Stock. The Registrant's voting common stock is traded
over-the-counter and is listed on the Nasdaq National Market under the symbol
"OTFC".
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
TABLE OF CONTENTS
Part I. Financial Information
Item I. Financial Statements (Unaudited) Page
Consolidated Balance Sheets 2
as of June 30, 2001 and March 31, 2001
Consolidated Statements of Income (For the Three 3
Months Ended June 30, 2001 and 2000)
Consolidated Statements of Shareholders' Equity
(For the Three Months Ended June 30, 2001 and for
the Year Ended March 31, 2001) 4
Consolidated Statements of Cash Flows (For the
Three Months Ended June 30, 2001 and 2000) 5 - 6
Notes to Consolidated Financial Statements 7 - 10
Item II. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 14
Item III. Quantitative and Qualitative Disclosures about
Market Risk 14
Part II. Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2001 and MARCH 31, 2001
(UNAUDITED)
(In thousands, except share data)
June 30 March 31
ASSETS 2001 2001
Cash and cash equivalents (including interest -------- --------
earning accounts of $11,514 and $8,626) $ 13,379 $ 10,581
Securities:
Available for sale, at fair value (amortized cost:
$70,284 and $88,812) 71,148 96,924
Loans receivable, net of allowance for loan
losses of $2,398 and $2,098 292,965 250,897
Accrued interest receivable 2,586 2,372
Premises and equipment, net 9,959 10,136
Stock in Federal Home Loan Bank of Seattle ("FHLB"),
at cost 6,009 4,651
Real estate owned and other repossessed assets 46 63
Other assets 13,363 13,257
-------- --------
TOTAL ASSETS $409,455 $388,881
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Interest-bearing $105,693 $106,206
Noninterest-bearing 20,817 19,678
Time certificates 123,842 127,893
-------- --------
Total deposits 250,352 253,777
Advances from FHLB 96,500 73,125
Accrued expenses and other liabilities 3,949 4,151
Advances from borrowers for taxes and insurance 46 22
-------- --------
Total liabilities 350,847 331,075
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock - $.01 par value; 1,000,000 shares
authorized; no shares issued or outstanding - -
Common stock, $.01 par value; 8,000,000 shares
authorized June 30, 2001, 4,694,875 issued,
3,339,717 outstanding; March 31, 2001, 4,694,875
issued, 3,325,717 outstanding; 36 36
Additional paid-in capital 31,063 30,972
Retained earnings (substantially restricted) 29,108 28,374
Unearned shares issued to the Employee Stock
Ownership Plan ("ESOP") (1,744) (1,878)
Unearned shares issued to the Management Recognition
and Development Plan ("MRDP") (439) (515)
Accumulated comprehensive income 584 817
-------- --------
Total shareholders' equity 58,608 57,806
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $409,455 $388,881
======== ========
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(2)
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
(In thousands, except per share data)
3 MOS ENDED 3 MOS ENDED
30-Jun-01 30-Jun-00
--------- ---------
INTEREST INCOME:
Interest and fees on loans receivable $5,633 $4,677
Securities:
Mortgage-backed and related securities 1,114 1,488
U.S. government and government agencies 410 604
Other interest and dividends 91 67
--------- ---------
Total interest income 7,248 6,836
INTEREST EXPENSE:
Deposits 2,531 2,410
FHLB of Seattle advances 1,254 1,224
--------- ---------
Total interest expense 3,785 3,634
Net interest income 3,463 3,202
Provision for loan losses 318 104
--------- ---------
Net interest income after provision for loan losses 3,145 3,098
NONINTEREST INCOME:
Service charges on deposit accounts 443 344
Loan servicing fees 130 103
Realized gain on securities 310 -
Other Income (expense) 136 (6)
--------- ---------
Total noninterest income 1,019 441
NONINTEREST EXPENSE:
Employee compensation and benefits 1,494 1,537
Supplies, postage, and telephone 216 216
Depreciation 219 165
Occupancy and equipment 175 204
FDIC insurance premium 12 12
Customer account 157 108
Advertising 29 66
Professional fees 342 101
Other 88 202
--------- ---------
Total noninterest expense 2,732 2,611
Income before income taxes 1,432 928
Provision for income taxes 358 316
--------- ---------
NET INCOME $1,074 $612
========= =========
Basic Earnings per share $0.32 $0.18
========= =========
Weighted Average Number of
Shares Outstanding 3,333,237 3,323,784
Diluted Earnings per share $0.31 $0.18
========= =========
Weighted Average Number of
Dilutive Shares 3,436,663 3,328,638
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(3)
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(In thousands)
30-Jun-01 30-Jun-00
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,074 $612
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 219 215
Compensation expense related to ESOP 224 129
Compensation expense related to MRDP 76 72
Amortization of deferred loan fees (60) (17)
Provision for loan losses 318 104
Amortization and accretion of premiums and discounts 166 50
on investments and loans purchased
FHLB dividends (91) (67)
Gain on sale of real estate owned (11) -
Loss on sale of premises and equipment 1 -
Changes in assets and liabilities:
Accrued interest receivable (214) (21)
Other assets (89) 291
Accrued expenses and other liabilities (56) (311)
------- -------
Net cash provided by operating activities 1,557 1,057
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations (29,181) (32,350)
Loan principal repayments 28,871 21,468
Loans purchased (42,685) (9,472)
Principal repayments of securities available for sale 4,098 2,062
Proceeds from sale of securities available for sale 21,814 -
Purchases of stock in FHLB (1,268) (468)
Purchases of premises and equipment (62) (928)
Proceeds from sales of premises and equipment 18 -
------- -------
Net cash used in investing activities (18,395) (19,688)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase(decrease) in deposits ($3,424) $8,658
Change in advances from borrowers for taxes and insurance 24 513
Change in borrowings from FHLB, gross 23,375 10,550
Payment of cash dividends (340) (269)
Stock options excercised 29 -
Stock repurchased and retired (28) -
------- -------
Net cash provided by financing activities 19,636 19,452
------- -------
Net increase in cash 2,798 822
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,581 9,261
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $13,379 $10,082
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and other borrowings $3,705 $3,577
Income taxes 305 -
Noncash investing activities:
Unrealized gain(loss) on securities available for sale,
net of tax (233) 188
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(5)
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND THE YEAR ENDED MARCH 31, 2001
(UNAUDITED)
(In thousands, except share data)
Unearned Unearned
Shares Issued Shares Issued
to Employee to Management Accumulated
Additional Stock Recognition and Other
Common Stock Paid-in Retained Ownership Development Comprehensive Comprehensive
Shares Amount Capital Earnings Trust Plan Income(Loss) Income(Loss) Total
------ ------ ------- -------- --------- ----------- ----------- ------------ -----
Balance, April
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
1, 2000 3,317,006 $36 $31,743 $27,759 ($2,415) ($740) $0 ($3,279) $53,104
Net income - - - 1,694 - - $1,694 - 1,694
Cash dividends
paid - - - (1,079) - - - - (1,079)
Stock repurchased
and retired (76,308) (1) (945) - - - - - (946)
Earned ESOP
shares 53,656 - 70 - 537 - - - 607
New MRDP shares
granted - - 42 - - (42) - - -
Earned MRDP
shares 25,811 - - - - 267 - - 267
Exercise of
stock options 5,592 1 62 - - - - - 63
Net unrealized gain
on securities
available for
sale of $5,584
(net of tax
expense of $3,319)
less reclassification
adjustment for net
losses included in
net income of $1,488
(net of tax benefit
of $766) 4,096 4,096 4,096
-----------
Comprehensive income - - - - - - $5,790 - -
Balance, March ------ ------ ------- -------- --------- ----------- ----------- ------------ -----
31, 2001 3,325,757 36 30,972 28,374 (1,878) (515) 817 57,806
Net income - - - 1,074 - - 1,074 - 1,074
Cash dividends paid - - - (340) - - - - (340)
Stock repurchased
and retired (1,800) (1) (27) - - - - - (28)
Earned ESOP
shares 13,414 - 90 - 134 - - - 224
Earned MRDP shares - - - - - 76 - - 76
Exercise of stock
options 2,346 1 28 - - - - - 29
Net unrealized loss
on securities
available for sale
of $66 (net of tax
benefit of $41) less
reclassification
adjustment for net gains
included in net income
of $192 (net of tax
expense of $118)
Unrealized loss on
securities available
for sale, net of tax - - - - - - (233) (233) (233)
-----------
Comprehensive income - - - - - - $841 - -
Balance, June 30,---- ------ ------- -------- --------- ----------- =========== ----------- -----
2001 3,339,717 $36 $31,063 $29,108 ($1,744) ($439) $584 $58,608
========= ==== ======= ======= ====== ===== ==== =======
The accompanying notes are an integral part of these unaudited consolidated financial statements.
OREGON TRAIL FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair presentation
of Oregon Trail Financial Corp. and its subsidiary, Pioneer Bank, a Federal
Savings Bank (the "Bank") (together, the "Company") financial condition as of
June 30, 2001 and March 31, 2001, the results of its operations for the three
months ended June 30, 2001 and 2000, and the cash flows for the three months
ended June 30, 2001 and 2000. All adjustments are of a normal recurring
nature. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
year ended March 31, 2001. The results of operations for the three months
ended June 30, 2001 are not necessarily indicative of the results which may be
expected for the entire fiscal year.
2. COMPREHENSIVE INCOME
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" requires all items that are required to be recognized
under accounting standards as components of comprehensive income to be
reported in a financial statement that is displayed in equal prominence with
the other financial statements and to disclose as a part of shareholders'
equity accumulated comprehensive income. Comprehensive income is defined as
the change in equity during a period from transactions and other events from
nonowner sources. Comprehensive income is the total of net income and other
comprehensive income, which for the Company is comprised entirely of
unrealized gains and losses on securities available for sale, net of tax.
3. ALLOWANCE FOR LOAN LOSSES
Activity in allowance for loan losses is summarized as follows for the year
ended March 31, 2001 and for the three months ended June 30, 2001:
June 30, 2001 March 31, 2001
(in thousands) (in thousands)
-------------- ---------------
Balance, beginning of
period $ 2,098 $ 1,396
Charge-offs (28) (111)
Recoveries 10 19
Provision for loan losses 318 794
------- -------
Balance, end of period $ 2,398 $ 2,098
======= =======
(7)
4. ADVANCES FROM FEDERAL HOME LOAN BANK
Borrowings at June 30, 2001 consisted of 18 term advances varying in length
from two days to 346 months totaling $96.5 million from the FHLB of Seattle.
The advances are collateralized in aggregate as provided for in the Advances
Security and Deposit Agreement with the FHLB by certain mortgages or deeds of
trust, government agency securities and cash on deposit with the FHLB.
Scheduled maturities of advances from the FHLB were as follows at June 30,
2001:
Due in less than one year:
- -------------------------
Amount Range of Interest Weighted Average
Rates Interest Rate
- ---------------------------------------------------------
$52,000,000 3.74% - 5.62% 4.30%
Due within one to five years:
- ----------------------------
Amount Range of Interest Weighted Average
Rates Interest Rate
- ---------------------------------------------------------
$29,500,000 5.20% - 7.22% 6.46%
Due in greater than five years:
- ------------------------------
Amount Range of Interest Weighted Average
Rates Interest Rate
- ---------------------------------------------------------
$15,000,000 7.03% - 7.12% 7.08%
5. EARNINGS PER SHARE
Shares held by the Company's ESOP that are committed for release are
considered common stock equivalents and are included in weighted average
shares outstanding (denominator) for the calculation of basic and diluted
Earnings Per Share ("EPS"). Diluted EPS is computed using the treasury stock
method, giving effect to potential additional common shares that were
outstanding during the period. Potential dilutive common shares include
shares awarded but not released under the Company's MRDP and stock options
granted under the Stock Option Plan. Following is a summary of the effect of
dilutive securities in weighted average number of shares (denominator) for the
basic and diluted EPS calculations. There are no resulting adjustments to net
earnings.
(8)
For the Three Months ended June 30,
2001 2000
Weighted average common shares
outstanding - basic 3,333,237 3,323,784
Effect of Dilutive Securities on
Number of Shares:
MRDP shares 13,916 4,854
Stock Options 89,510 0
Total Dilutive Securities 103,426 4,854
Weighted average common shares
outstanding - with dilution 3,436,663 3,328,638
For the three months ended June 30, 2000 options to purchase 280,996 shares of
stock were excluded from dilutive shares as they had an antidilutive effect on
the calculation.
6. REGULATORY CAPITAL
The Company is not subject to separate regulatory capital requirements.
During the quarter ended June 30, 2001, Pioneer Bank upstreamed $14 million to
Oregon Trail Financial Corp. The following table illustrates the Bank's
compliance with currently applicable regulatory capital requirements at June
30, 2001 and March 31, 2001.
As of June 30, 2001:
Actual For Capital Categorized as "Well
In Thousands) Adequacy Capitalized" Under Prompt
Purposes Corrective Action Provision
(In Thousands) (In Thousands)
------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
<s> <c> <c> <c> <c> <c> <c>
As of June 30, 2001:
Total Capital:
(To Risk Weighted Assets) $ 38,351 14.9% $ 20,635 8.0% $ 25,794 10.0%
Tier I Capital:
(To Risk Weighted Assets) 35,953 13.9 N/A N/A 15,476 6.0
Tier I Capital:
(To Tangible Assets) 35,953 8.8 16,328 4.0 20,410 5.0
Tangible Capital:
(To Tangible Assets) 35,953 8.8 6,123 1.5 N/A N/A
(9)
As of March 31,
Actual For Capital Categorized as "Well
In Thousands) Adequacy Capitalized" Under Prompt
Purposes Corrective Action Provision
(In Thousands) (In Thousands)
------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
<s> <c> <c> <c> <c> <c> <c>
As of March 31, 2001:
Total Capital:
(To Risk Weighted Assets) $50,646 22.3% $ 18,203 8.0% $ 22,754 10.0%
Tier I Capital:
(To Risk Weighted Assets) 48,548 21.3 N/A N/A 13,652 6.0
Tier I Capital:
(To Tangible Assets) 48,548 12.5 15,490 4.0 19,362 5.0
Tangible Capital:
(To Tangible Assets) 48,548 12.5 5,809 1.5 N/A N/A
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations". The
statement discontinues the use of the pooling of interest method of accounting
for business combinations. The statement is effective for all business
combinations initiated after June 30, 2001. Management has completed an
evaluation of the effects of this statement and does not believe that it will
have a material effect on the Company's consolidated financial statements.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets". The statement will require
discontinuing the amortization of goodwill and other intangible assets with
indefinite useful lives. Instead, these assets will be tested periodically
for impairment and written down to their fair market value as necessary. This
statement is effective for fiscal years beginning after December 15, 2001,
however, early adoption is allowed for companies that have not issued first
quarter financial statements as of July 1, 2001. The Company plans to adopt
the provisions of this statement on April 1, 2002, and is currently evaluating
the effect on the Company's consolidated financial statements.
(10)
ITEM II.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Safe Harbor Clause. This report contains certain "forward-looking
statements". The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this statement for the express purpose of availing itself of the
protection of such safe harbor with respect to all of such forward-looking
statements. These forward-looking statements, which are included in
Management's Discussion and Analysis, describe future plans or strategies and
include the Company's expectations of future financial results. The words
"believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements. The Company's ability to
predict results or the effect of future plans or strategies is inherently
uncertain. Factors which could affect actual results include interest rate
trends, the general economic climate in the Company's market area and the
country as a whole, loan delinquency rates, and changes in federal and state
regulation. These factors should be considered in evaluating the
forward-looking statements, and undue reliance should not be placed on such
statements.
General
The Company, an Oregon corporation, was organized on June 9, 1997 for the
purpose of becoming the holding company for the Bank upon the Bank's
conversion from a federal mutual to a federal stock savings bank
("Conversion"). The Conversion was completed on October 3, 1997. At June 30,
2001, the Company had total assets of $409.5 million, total deposits of $250.4
million and shareholders' equity of $58.6 million. The Company is not
currently engaged in any business activity other than holding the stock of the
Bank. Accordingly, the information set forth in this report, including
financial statements and related data, relates primarily to the Bank. All
references to the Company herein include the Bank where applicable.
The Bank was organized in 1901. It is regulated by the OTS and its deposits
are insured up to applicable limits under the Savings Association Insurance
Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
The Bank is a member of the FHLB of Seattle, conducting its business through
nine office facilities, with the headquarters located in Baker City, Oregon.
The primary market areas of the Bank are the counties of Wallowa, Union,
Baker, Malheur, Harney, Grant and Umatilla in Eastern Oregon.
The Bank is a community oriented financial institution whose principal
business is attracting retail deposits from the general public and using these
funds to originate one-to-four family residential mortgage loans, consumer and
commercial loans within its primary market area. At June 30, 2001,
one-to-four family residential mortgage loans totaled $136.8 million, or
46.33% of total loans receivable. Beginning in 1996, the Bank began
supplementing its traditional lending activities with commercial business
loans, agricultural loans and the purchase of dealer-originated automobile
contracts. As a result of these activities at June 30, 2001 the Company had
agricultural loans of $18.3 million, commercial business loans of $25.6
million, commercial real estate loans of $56.1 million, agricultural real
estate loans of $3.6 million, and automobile loans of $27.1 million (including
$22.0 million of purchased dealer-originated contracts).
(11)
Net interest income, which is the difference between interest and dividend
income on interest-earning assets, primarily loans and investment securities,
and interest expense on interest-bearing deposits and borrowings, is the major
source of income for the Company. Because the Company depends primarily on
net interest income for its earnings, the focus of management is to create and
implement strategies that will provide stable, positive spreads between the
yield on interest-earning assets and the cost of interest-bearing liabilities.
Such strategies include increasing the origination of commercial and
agricultural loans with rates that are adjustable. Commercial (including both
commercial real estate and commercial business) and agricultural loans
(including agricultural real estate) outstanding totaled $42.7 million and
$19.6 million, respectively, at March 31, 2001 and increased to $81.8 million
and $21.9 million, respectively, at June 30, 2001. To a lesser degree, the
net earnings of the Company rely on the level of its non-interest income. The
Company is focusing on growing its fee income and controlling its non-interest
expense.
Changes in Financial Condition
At June 30, 2001, the consolidated assets of the Company totaled $409.5
million, an increase of $20.6 million, from $388.9 million at March 31, 2001.
Growth in assets reflects strong loan growth partially offset by fixed-income
security reductions. Net loans increased $42.1 million to $293.0 million at
June 30, 2001 compared to June 30, 2000, while securities decreased $25.8 to
$71.1 million over the same period. The increase in assets was generally
funded by a $23.4 million increase in borrowings as well as increased deposits
and equity.
Nonperforming assets, consisting of non-accruing loans, real estate owned and
other repossessed assets, increased $17,000 from $118,000 at March 31, 2001 to
$135,000 at June 30, 2001. Nonperforming assets were .03% of total assets
both at June 30, 2001 and at March 31, 2001. The allowance for loan losses
was 2,694% of nonperforming loans at June 30, 2001, compared to 3,815% at
March 31, 2001.
Deposits decreased $3.4 million from $253.8 million at March 31, 2001 to
$250.4 million at June 30, 2001. The Company had $96.5 million in advances
from the FHLB at June 30, 2001 compared to $73.1 million at March 31, 2001.
Results of Operations
Comparison of Three Months Ended June 30, 2001 and 2000
General. Net interest income increased $261,000 to $3.5 million for the
three-month period ended June 30, 2001from $3.2 million for the same period in
the prior year. Interest income increased $412,000 to $7.2 million for the
three month period ended June 30, 2001 from $6.8 million for the same period
in 2000, while interest expense increased $151,000 to $3.8 million for the
three month period ended June 30, 2001 from $3.6 million for the same period
in 2000. Non-interest income increased $578,000 to $1.0 million for the three
month period ended June 30, 2001 from $441,000 for the same period in 2000,
and the provision for loan losses increased $214,000 to $318,000 for the three
month period ended June 30, 2001 from $104,000 for the same period in 2000.
Non-interest expense increased $121,000 to $2.7 million from $2.6 million, and
income taxes increased $42,000 from $316,000 for the three month period ended
June 30, 2000 to $358,000 for the same period in 2001. This resulted in net
income increasing by $462,000 to $1.1 million for the three months ended June
30, 2001 compared to $612,000 for the same period in 2000.
(12)
Interest Income. The increase of $412,000 in interest income was generated by
an additional $13.5 million in average interest earning assets for the three
months ended June 30, 2001 compared to the same period in 2000. The increase
in average interest earning assets included an increase in the average loan
portfolio of $42.0 million, partially offset by a decrease in low-yielding
fixed-income securities.
Interest Expense. Interest expense on savings deposits increased by $121,000
to $2.5 million from $2.4 million for the three months ended June 30, 2001
compared to the same period in 2000. Average deposits increased by $10.6
million for the same period. Interest expense on FHLB advances increased
$30,000 to $1.3 million for the three months ended June 30, 2001 from $1.2
million for the same period in 2000. Average advances increased by $9.2
million for the three months ended June 30, 2001 compared to the same period
in the prior year.
Provision for Loan Losses. The provision for loan losses was $318,000 during
the three months ended June 30, 2001 compared to $104,000 for the three-month
period ended June 30, 2000. The provision was increased primarily in response
to portfolio growth, especially in commercial loans.
Non-Interest Income. Non-interest income increased $578,000 to $1.0 million
for the three months ended June 30, 2001 from $441,000 for the same period in
the prior year. Income from deposit accounts increased $99,000 to $443,000
for the three months ended June 30, 2001 from $344,000 for the same period in
the prior year due to strong growth in deposit and service charge fees. The
Company also recognized a $310,000 gain on the sale of interest rate
sensitive fixed-income securities.
Non-Interest Expense. Non-interest expense increased $121,000 to $2.7 million
for the three months ended June 30, 2001, from $2.6 million for the comparable
period in 2000. This includes an increase in professional fees of $241,000,
largely related to an activist shareholder.
Income Taxes. The provision for income taxes increased $42,000 for the three
months ended June 30, 2001 compared with the same period in the prior year.
The Company's effective tax rate decreased to 25% from 34% for the three
months ended June 30, 2001 compared with the same period in the prior year.
The decrease was partly attributable to loans made which provide the Company
with tax credits rather than interest income, and in part attributable to
investments which produce interest income which is not taxable, such as
municipal securities.
(13)
The following table provides additional data on the Company's operating
performance:
Quarters Ended
Average balances (in thousands) June 30
------------------------------- -----------------
2001 2000
---- ----
Cash and interest earning deposits $ 8,809 $ 7,912
Investment Securities 95,102 124,362
Loans 271,591 229,662
FHLB Stock 5,194 4,130
-------- --------
Total average interest-earning assets 380,696 366,066
Non interest-earning assets 20,719 10,001
-------- --------
Total average assets 401,415 376,067
Deposits 250,682 240,067
Advances from FHLB 89,090 79,847
-------- --------
Total average interest-bearing liabilities 339,772 319,914
Non interest-bearing liabilities 4,298 3,384
-------- --------
Total average liabilities 344,070 323,298
Equity 57,345 52,769
-------- --------
Total average liabilities and equity $401,415 $376,067
======== ========
ITem No. III
Quantitative and Qualitative Disclosures about Market Risk
During the quarter ended June 30, 2001, there was no material change in the
market risk disclosures included in the Company's Form 10-K for the year ended
March 31, 2001.
(14)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Periodically, there have been various claims and lawsuits involving
the Bank, mainly as a defendant, such as claims to enforce liens,
condemnation proceedings on properties in which the Bank holds
security interests, claims involving the making and servicing of
real property loans and other issues incident to the Bank's
business. The Bank is not a party to any pending legal proceedings
that it believes would have a material adverse effect on the
financial condition or operations of the Bank.
The Company is a party to legal proceedings involving a dissident
shareholder. Stilwell Associates, L.P. has filed four separate
suits or proceedings against the Company and/or individual
directors. The first was a mandamus proceeding in Baker County,
Oregon to require the Company to produce additional information
about its shareholders under Oregon's shareholder inspection
statute. The initial proceeding was dismissed on technical grounds,
and the court ordered Stilwell Associates, L.P. to pay the Company's
costs and attorney fees because of improper conduct. A second
mandamus proceeding was then commenced. The court recently ruled
that the additional document requests do fall within the state
shareholder inspection statute, and ordered the Company to produce
the documents and to pay Stilwell Associates, L.P.'s attorney fees.
The Company has produced the documents and will not appeal the
court's ruling.
Stilwell Associates, L. P. has also brought a state action in
Multnomah County, Oregon against Charles Henry Rouse to remove him
from the Company's board of directors. Stilwell Associates, L.P.
alleges that Mr. Rouse violated the board's residency requirements.
Mr. Rouse's motion for summary judgment against Stilwell Associates,
L.P. was filed on August 14, 2001 and will be argued on September
12, 2001. The third action is a purported derivative suit brought
in federal court in Portland, Oregon against both the Company and
director Edward H. Elms. Stilwell Associates, L.P. alleges that Mr.
Elms perjured himself in a deposition given in Mr. Rouse's case
because his testimony allegedly did not match that of the other
Company directors, and that Mr. Elms should be removed from the
board of directors. The Company and Mr. Elms moved to dismiss the
case against them. Stilwell Associates, L.P. responded with a motion
to amend its claims. Both motions will be heard on August 23, 2001.
The Company and Mr. Elms denied the claims against them and filed
counterclaims and third-party claims against Joseph Stilwell,
Stilwell Associates, L.P., Stilwell Value LLC and Stilwell Value
Partners II, L.P. (the "Stilwell Value Group") alleging that the
Stilwell Value Group made false and misleading statements under
federal securities laws in its Schedule 13D filings with the
Securities and Exchange Commission. The Stilwell Value Group moved
to dismiss the counterclaims and third-party claims or, in the
alternative, for summary judgment on these claims. The alternative
motions will also be heard on August 23, 2001.
Pursuant to the Company's Articles of Incorporation and Bylaws and
in accordance with Oregon law, the Company is providing defense
costs for both directors in these actions. The Company believes the
likelihood of incurring any material loss contingency" in connection
with these matters is remote; continuing defense costs may, however,
adversely affect net income in proceeding periods.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
(15)
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the
first quarter of the fiscal year ended March 31, 2002.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
3(a) Articles of Incorporation of the Registrant (1)
3(b) Bylaws of the Registrant (1)
3(c) Amendment to Bylaws of the Registrant (2)
10(a) Amended Employment Agreement with Berniel Maughan (3)
10(b) Amended Employment Agreement with Zane F. Lockwood (3)
10(c) Amended Employee Severance Compensation Plan (4)
10(d) Pioneer Bank, a Federal Savings Bank Employee Stock Ownership
Plan (4)
10(e) Pioneer Bank, a Federal Savings Bank 401(k) Plan (1)
10(f) Pioneer Bank Director Emeritus Plan (1)
10(g) 1998 Stock Option Plan (5)
10(h) 1998 Management Recognition and Development Plan (5)
- ---------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (333-30051), as amended.
(2) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended December 31, 2000.
(3) Incorporated by reference to the Registrant's Form 10-Q/A for the quarter
ended December 31, 2000.
(4) Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended June 30, 2000.
(5) Incorporated by reference to the Registrant's Definitive Proxy Statement
for the 1998 Annual Meeting of Shareholders.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended June 30,
2001.
(16)
SIGNATURES
Pursuant to 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.
OREGON TRAIL FINANCIAL CORP.
/s/Berniel L. Maughan
Date: August 13, 2001 By: ----------------------------------
Berniel L. Maughan, President and
Chief Executive Officer
/s/Jon McCreary
Date: August 13, 2001 By: ----------------------------------
Jon McCreary, Chief Financial
Officer
(17)