SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-21687
IFB HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 43-1760023
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification Number)
522 Washington Street, Chillicothe, Missouri 64601
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (660) 646-3733
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (x) No ( )
Indicate the number of shares outstanding of each of the issuer's common stock
as of the latest practicable date.
Class Outstanding at December 31, 1999
- ------------------------------- --------------------------------
Common stock, $.01 par value 474,019
IFB HOLDINGS, INC.
FORM 10-QSB
Index
Part I. Financial Information
- -----------------------------
Item 1 Financial Statements Page
----
Consolidated Statements of Financial Condition as of December 31,
1999 (Unaudited) and June 30, 1999.................................... 2
Consolidated Statements of Income for the Three and Six months
ended December 31, 1999 and 1998 (Unaudited).......................... 3
Consolidated Statements of Comprehensive Income for the Three
and Six months ended December 31, 1999 and 1998 (Unaudited)........... 4
Consolidated Statements of Changes in Stockholders' Equity
for the Six months ended December 31, 1999 (unaudited)................ 5
Consolidated Statements of Cash Flows for the Six months
ended December 31, 1999 and 1998 (Unaudited).......................... 6
Notes to Unaudited Consolidated Financial Statements.................. 8
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 11
Part II. Other Information
- ----------------------------
Item 1 Legal Proceedings..................................................... 18
Item 2 Changes in Securities................................................. 18
Item 3 Default upon Senior Securities........................................ 18
Item 4 Submission of Matters to a Vote of Security Holders................... 18
Item 5 Other Information..................................................... 18
Item 6 Exhibits and Reports on Form 8-K...................................... 18
Signature Page ................................................................. 19
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
At At
December 31, June 30,
1999 1999
----------- ----------
(Unaudited)
(In Thousands)
ASSETS
Cash on hand and noninterest-earning deposits $ 1,018 $ 551
Interest-earning deposits in other institutions 922 1,325
Investment securities:
Securities available-for-sale at fair value 8,792 10,104
Securities held-to-maturity at amortized cost 30 30
Mortgage-backed and related securities
available-for-sale, at fair value 18,201 21,134
Loans receivable, net 32,482 34,129
Accrued interest receivable 466 564
Investment required by law:
FHLB and FRB stock, at cost 1,321 1,771
Premises and equipment 374 368
Other assets 40 34
-------- --------
Total assets $ 63,646 $ 70,010
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 34,560 $ 35,539
Federal Home Loan Bank advances 21,650 26,674
Advances from borrowers for taxes and insurance 7 31
Income taxes payable (131) (31)
Accrued expenses and other liabilities 136 213
-------- --------
Total liabilities 56,192 62,426
-------- --------
Preferred stock, $.01 par value;
authorized 100,000 shares; none outstanding -- --
Common stock, $.01 par value; authorized 900,000
shares, issued 592,523 shares at December 31, 1999
and at June 30, 1999 6 6
Additional paid-in capital 5,582 5,575
Retained earnings, substantially restricted 4,465 4,309
Less:
Common stock acquired by the ESOP (292) (315)
Treasury stock, 118,504 shares at December 31, 1999
and 118,504 at June 30, 1999, at cost (1,822) (1,822)
Accumulated other comprehensive income (485) (169)
-------- --------
Total stockholders' equity 7,454 7,584
-------- --------
Total liabilities and stockholders' equity $ 63,646 $ 70,010
======== ========
See accompanying Notes to Unaudited Consolidated Financial Statements
2
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
(In thousands (In thousands
except share data) except share data)
Interest income:
Loans receivable $ 662 $ 711 $ 1,330 $ 1,444
Investment securities 163 135 338 248
Mortgage-backed and related securities 289 408 558 859
Other interest-earning assets 4 12 10 32
-------- -------- -------- --------
Total interest income 1,118 1,266 2,236 2,583
-------- -------- -------- --------
Interest expense:
Deposits 373 394 752 795
FHLB Advances 352 417 683 893
-------- -------- -------- --------
Total interest expense 725 811 1,435 1,688
-------- -------- -------- --------
Net interest income 393 455 801 895
Provision for loan losses 9 147 9 240
-------- -------- -------- --------
Net interest income after provision for loan losses 384 308 792 655
-------- -------- -------- --------
Noninterest income:
Fees and service charges 53 51 107 104
Gain on sales of mortgage-backed securities -- 19 9 28
Other 12 18 27 31
-------- -------- -------- --------
Total noninterest income 65 88 143 163
-------- -------- -------- --------
Noninterest expense:
Compensation and benefits 152 145 310 320
Occupancy and equipment 30 30 59 65
SAIF deposit insurance premiums 5 5 10 10
Loss on sales of mortgage-backed securities -- 4 4 4
Other 109 92 195 167
-------- -------- -------- --------
Total noninterest expense 296 276 578 566
-------- -------- -------- --------
Income before income taxes 153 120 357 252
Income tax expense 52 56 130 106
-------- -------- -------- --------
Net income $ 101 $ 64 $ 227 $ 146
======== ======== ======== ========
Earnings per share:
Basic $ .23 $ .15 $ .51 $ .31
======== ======== ======== ========
Weighted average number of
shares outstanding:
Basic 443,677 438,421 443,084 477,131
See accompanying Notes to Unaudited Consolidated Financial Statements
3
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Six Months
Ended Ended
December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
(In thousands) (In thousands)
Net income $ 101 $ 64 $ 227 $ 146
Other comprehensive income (loss),
net of income tax:
Unrealized gain (loss) on securities:
Unrealized holding gains (losses)
arising during the period (93) (20) (315) (51)
Less reclassification adjustment for
gains included in net income (1) -- 1 --
----- ----- ----- -----
Other comprehensive income (94) (20) (315) (51)
----- ----- ----- -----
Comprehensive income $ 7 $ 44 $ (89) $ 95
===== ===== ===== =====
4
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Common Accumulated
Additional Stock Other
Common Paid-In Retained Treasury Acquired Comprehensive
Stock Capital Earnings Stock by ESOP Income Total
----- ------- -------- ----- ------- ------ -----
(In thousands)
Six Months Ended
- -----------------
December 31, 1999
-----------------
Balance at June 30, 1999 $ 6 $ 5,575 $ 4,309 $(1,822) $ (315) $ (169) $ 7,584
Additions (deductions) for
the six months ended
December 31, 1999
Net income -- -- 227 -- -- -- 227
Dividends declared -- -- (71) -- -- -- (71)
Reduction of ESOP
obligation -- -- -- -- 23 -- 23
Compensation Expense
related to ESOP -- 7 -- -- -- -- 7
Purchase of Treasury Stock -- -- -- -- -- -- --
Unrealized gain on
securities available-for-
sale, net of deferred
Income tax of $163,000 -- -- -- -- -- (316) (316)
------- ------- ------- ------- ------- ------- -------
Balance, December 31, 1999 $ 6 $ 5,582 $ 4,465 $(1,822) $ (292) $ (485) $ 7,454
======= ======= ======= ======= ======= ======= =======
See accompanying Notes to Unaudited Consolidated Financial Statements
5
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31,
1999 1998
---- ----
(In thousands)
Cash flow from operating activities:
Net income (loss) $ 227 $ 146
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Net loss (gain) on sale of investments (5) (28)
Depreciation 29 29
Provision for loan loss 9 240
Amortization of premiums and discounts 40 59
Compensation expense related to ESOP 30 41
Decrease (increase) in interest receivable 98 14
Decrease (increase) in other assets (6) 11
Increase (decrease) in income tax payable (100) (54)
Increase (decrease) in other liabilities (77) 43
--------- ---------
Net cash provided by operating activities 245 501
--------- ---------
Cash flow from investing activities:
Loans purchased -- (229)
(Increase) decrease in loans, net 1,638 1,215
Proceeds from sales of available-for-sale mortgage-backed and
related securities -- 1,361
Proceeds from sales of available-for-sale investment securities 991 2,014
Proceeds from maturities/calls of investment securities -- 1,660
Purchase of available-for-sale investment securities (26) (6,535)
Purchase of available-for-sale mortgage-backed
and related securities -- (2,702)
Principal collected on repayments and maturities of
available-for-sale mortgage-backed and related securities 2,899 7,308
Sale (Purchase) of FHLB and FRB stock 450 (132)
Purchase of equipment (35) (8)
--------- ---------
Net cash provided (used) by investing activities 5,917 3,952
--------- ---------
Cash flows from financing activities:
Dividends paid (71) (71)
Net increase (decrease) in deposits (979) 438
Net increase (decrease) in advances from
borrowers for taxes and insurance (24) (27)
Proceeds from FHLB advances 133,800 28,378
Principal payments on FHLB advances (138,824) (32,821)
Purchase of treasury stock -- (1,822)
--------- ---------
Net cash provided (used) by financing activities (6,098) (5,925)
--------- ---------
Increase (decrease) in cash and cash equivalents 64 (1,472)
Cash and cash equivalents at beginning of period 1,876 3,541
--------- ---------
Cash and cash equivalents at end of period $ 1,940 $ 2, 069
========= =========
6
IFB HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31,
1999 1998
---- ----
(In Thousands)
Supplemental cash flow disclosures:
Cash paid for:
Interest $ 933 $1,165
====== ======
Income Taxes $ 122 $ 122
====== ======
Noncash activity:
Loans transferred to real estate owned $ -- $ --
====== ======
See accompanying Notes to Unaudited Consolidated Financial Statements
7
IFB HOLDINGS, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
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-QSB
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete 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 and six
month periods ended December 31, 1999 are not necessarily indicative of
results that may be expected for the entire fiscal year ending June 30,
2000.
The unaudited consolidated financial statements include the accounts of IFB
Holdings, Inc. (the "Holding Company") and its wholly-owned subsidiary,
Investors Federal Bank, National Association, (the "Bank"), and the Bank's
wholly-owned subsidiary, Investors Federal Service Corporation for the six
months ended December 31, 1999. Material intercompany accounts and
transactions have been eliminated in consolidation.
(2) Conversion to Stock Ownership and National Bank
The Board of Directors of the Bank, on September 23, 1996, unanimously
adopted a Plan of Conversion pursuant to which the Bank converted from a
federally chartered mutual savings bank to a federally chartered stock
savings bank, with the concurrent formation of the Holding Company. The
Holding Company, on December 30, 1996, sold 592,523 shares of common stock
at $10.00 per share during the subscription offering. The proceeds from the
conversion, after recognizing conversion expenses and underwriting costs of
approximately $403,000, were $5,522,000 and are recorded as common stock
and additional paid in capital on the accompanying unaudited consolidated
statement of financial condition. The Holding Company utilized
approximately $2,762,000 of the net proceeds to purchase all of the capital
stock of the Bank.
On January 30, 1997, the Bank changed its charter from a federally
chartered savings bank to a national bank.
The Bank has established for eligible employees an Employee Stock Ownership
Plan ("ESOP") in connection with the conversion. The ESOP borrowed $474,010
from the Holding Company and purchased 47,401 common shares issued in the
conversion. The Bank is making the scheduled discretionary cash
contributions to the ESOP sufficient to service the amount borrowed. To
date, the Bank has made payments of $276,155 ($182,313 principal) to the
Holding Company. The $291,697 ESOP obligation ($474,010 in stock issued by
the Holding Company on December 30, 1996 less the principal payments made
by the Bank) is reflected in the accompanying consolidated financial
statements as a charge to unearned compensation and a credit to common
stock and paid-in capital. The unamortized balance of unearned compensation
is shown as a deduction of stockholders' equity. The unpaid balance of the
ESOP loan is eliminated in consolidation.
(3) Earnings Per Share
Earnings per share (EPS) computations follow SFAS No. 128 which is
effective for financial statements issued for periods ending after December
15, 1997. Basic EPS have been determined by dividing net income for the
period (numerator) by the
8
weighted-average number of common shares outstanding during the period
(denominator). Weighted-average common shares include allocated ESOP
shares. Unallocated ESOP shares are not used in basic EPS calculations.
(4) Stock Repurchase Program
During the quarter ended September 30, 1998, the Company repurchased
118,125 shares of its common stock. The Company repurchased an additional
379 shares of its common stock during the quarter ended December 31, 1998.
As of December 31,1999, IFB Holdings, Inc. has repurchased a total of
118,504 shares of its common stock.
(5) Commitments and Contingencies
Commitments to originate and purchase mortgage loans of $644,000 at
December 31, 1999, represent amounts which the Bank plans to fund within
the normal commitment period of thirty to ninety days. As of December 31,
1999, the Bank had no commitments to purchase mortgage-backed securities,
CMOs or investment securities. The Bank had no commitments outstanding to
sell mortgage loans, mortgage-backed securities, CMOs or investment
securities at December 31, 1999.
(6) Recent Accounting Developments
SFAS No. 130 "Reporting Comprehensive Income," was adopted July 1, 1998.
This statement provides accounting and reporting standards to report a
measure of all changes in equity of an enterprise that results from
recognized transactions and economic events of the period. The major
component of comprehensive income for the Company will be unrealized gains
and losses on certain investments in debt and equity securities.
SFAS No. 133, " Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) 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. If certain conditions are met, a
derivative may be specifically designated as (a) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash
flows of a forecasted transaction, or (c) hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm
commitment, an available-for-sale security, or a foreign-currency-
denominated forecasted transaction. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000, as amended
by SFAS No. 137.
Management believes adoption of SFAS Nos. 130 and 133 does not, or will
not, have a material effect on the financial position or results of
operations, nor will adoption require additional capital resources.
The foregoing does not constitute a comprehensive summary of all material
changes or developments affecting the manner in which the Company keeps
its books and records and performs its financial accounting
responsibilities. It is intended only as a summary of some of the recent
pronouncements made by the FASB which are of particular interest to
financial institutions.
9
(7) Director and Employee Plans
The Company's Board of Directors has approved a stock option and incentive
plan and a recognition and retention plan (RRP) which were approved by the
Company's shareholders at the Annual meeting in November, 1997.
Stock Option and Incentive Plan
-------------------------------
The plan will be implemented for the benefit of directors, officers and
employees of the Company and its affiliates. The maximum number of shares
to be issued from authorized but not currently outstanding shares under the
plan is 59,252 or 10% of the total shares issued in the conversion. The
exercise price of the options shall not be less than the common stock
market value at the date the options are granted.
Recognition and Retention Plan
------------------------------
The RRP would award shares authorized but not currently outstanding to
directors and to employees in key management positions in order to provide
them with a proprietary interest in the Company in a manner designed to
encourage such employees to remain with the Company. The maximum number of
shares authorized under the plan is 23,700 or 4% of the total shares issued
in the conversion.
Under the terms of the stock option and incentive plan, the effective date
of the plan was January 1, 1998. The term of the plan would be ten years.
The future impact of the plan would be to increase (1) the number of
outstanding shares of common stock, and (2) compensation expense, and
decrease (1) net income per share, and (2) book value per share. It is not
possible to quantify the effect on the financial position or results of
operations from implementing the plan at this time.
As of December 31, 1999, no stock options or RRP award shares had been
granted.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
IFB Holdings, Inc. was organized, as a Delaware corporation, in October
1996 at the direction of the Bank's Board of Directors to acquire all of the
capital stock that the Bank issued upon its conversion from mutual to stock form
of ownership. The business of the Holding Company consists primarily of the
business of the Bank. There are no current arrangements, understandings or
agreements to expand its business activities or make any business acquisitions.
Investors Federal Bank, National Association was originally founded in 1934
as a federally chartered savings and loan association located in Chillicothe,
Missouri under the name Chillicothe Federal Savings and Loan Association. In
1974, the Bank changed its name to Investors Federal Savings and Loan
Association, and in 1988 the Bank changed its name to Investors Federal Bank and
Savings Association. On December 30, 1996, the Bank completed a conversion from
mutual to stock ownership. On January 30, 1997, the Bank changed its charter to
a national bank charter and its name to Investors Federal Bank, National
Association. Its deposits are insured up to the maximum allowable amount by the
Federal Deposit Insurance Corporation (the "FDIC"). The Bank serves Livingston,
Caldwell, and Daviess Counties, Missouri. The Bank conducts business through its
main office and two branches located in Hamilton and Gallatin, Missouri.
The Bank's business strategy is to operate as a well-capitalized,
profitable and independent community financial institution dedicated to home-
mortgage lending and to providing quality service to its customers. The Bank
intends to implement this strategy by (I) closely monitoring the needs of its
customers and providing quality service; (ii) maintaining asset quality; (iii)
utilizing investments in mortgage-backed securities and other investment
securities to invest excess funds and to increase net interest income; (iv)
maintaining capital in excess of the regulatory requirements; (v) attempting to
increase the Bank's earnings; and (vi) managing interest rate risk by attempting
to match asset and liability maturities and rates.
The earnings of the Bank depend primarily on its net interest income, which
is the difference between interest earned on its loans and investments and the
interest paid on its interest-bearing liabilities, consisting of deposits and
FHLB advances. The Bank, like other financial institutions, is subject to
interest-rate risk to the degree that its interest-earning assets mature or
reprice at different times, or on different bases, than its interest-bearing
liabilities. The Bank's operating results are also affected by the amount of its
noninterest income, including gain on the sales of investments, service charges,
and other income. Non-interest expense consists primarily of employee
compensation, occupancy expenses, FDIC insurance premiums and other general and
administrative expenses. The Bank's operating results are significantly affected
by general economic and competitive conditions, in particular, the changes in
market interest rates, government policies and actions by regulatory
authorities.
This Quarterly Report on Form 10-QSB 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
competition; changes in accounting principles, policies, or guidelines; changes
in legislation or regulation; and other economic, competitive, governmental,
regulatory, and technological factors affecting the Company's operations,
pricing, products and services.
Year 2000 Issue
The Bank has not experienced any problems relating to the year 2000,
however the Bank will continue to monitor the situation.
11
Liquidity and Capital Resources
The Company's most liquid assets are cash and cash equivalents, which
includes short-term investments. The levels of these assets are dependent on the
Bank's lending, investing, operating, and deposit activities during any given
period. At December 31, 1999 and June 30, 1999, cash and cash equivalents
totaled $1.9 million and $1.9 million, respectively.
The Bank's primary sources of funds are deposits, FHLB advances, repayments
on loans, the maturity of investment securities and income from operations.
While maturity and scheduled amortization of loans and investment securities are
predictable sources of funds, deposit inflows and mortgage prepayments are
greatly influenced by local conditions, general interest rates and regulatory
changes.
The primary investment activity of the Bank is the origination and purchase
of mortgage loans. Another investment activity of the Bank is the investment of
funds in U.S. agency bonds, mortgage-backed securities, collateralized mortgage
obligations and FHLB overnight funds. During periods when the Bank's loan demand
is limited, the Bank may purchase short-term investment securities to obtain a
higher yield than otherwise available.
At December 31, 1999, the Bank had outstanding loan commitments of
$644,000. The Bank anticipates it will have sufficient funds available to meet
its commitments. Certificates of deposit that were scheduled to mature in one
year or less at December 31, 1999 were $14.4 million. Management believes that a
significant portion of such deposits will remain with the Bank.
Under federal law, the Bank is required to meet certain leverage and
risk-based capital requirements. The leverage ratio requires a minimum ratio of
"Tier 1 capital" to adjusted total assets. At December 31, 1999, the Bank
exceeded both of the capital requirements. The Bank's capital ratios were: 9.93%
leverage capital and 23.00% risk-based capital. The Bank had "Tier 1 capital" of
$6.4 million at December 31, 1999 and risk-based capital of $6.8 million.
12
Financial Condition
Total assets decreased $6.4 million, or 9.1%, to $63.6 million at December
31, 1999, from $70.0 million at June 30, 1999. Investment securities decreased
$1.3 million, or 12.9% from $10.1 million at June 30, 1999, to $8.8 million at
December 31, 1999. FHLB and FRB stock decreased $450,000, or 25.4%, from $1.8
million at June 30, 1999, to $1.3 million at December 31, 1999. Mortgage-backed
and related securities decreased $2.9 million, or 13.7%, from $21.1 million at
June 30, 1999, to $18.2 million at December 31, 1999. Loans receivable decreased
$1.6 million, or 4.7%, from $34.1 million at June 30, 1999, to $32.5 million at
December 31, 1999. Interest-earning deposits in other institutions decreased
$403,000, or 30.4%, from $1.3 million at June 30, 1999, to $922,000 at December
31, 1999. The decrease in assets is consistent with the Board's decision to
reduce the level of FHLB borrowings. As securities continue to mature and pay
down, the funds will be used to repay borrowings. It is expected that the asset
size of the Bank will continue to decrease.
Total liabilities decreased $6.2 million, or 9.9%, from $62.4 million at
June 30, 1999, to $56.2 million at December 31, 1999. The decrease was primarily
the result of the decrease in FHLB advances of $5.0 million or 18.7%, from $26.7
million at June 30, 1999, to $21.7 million at December 31, 1999. Proceeds from
mortgage backed and related security payments were used to pay down the
advances. In addition, deposits decreased $979,000 or 2.8%, from $35.5 million
at June 30, 1999, to $34.6 million at December 31, 1999.
Total equity decreased $130,000, or 1.7 %, from $7.6 million at June 30,
1999 to $7.5 million at December 31, 1999. Unrealized loss on securities
available-for-sale, net of deferred income tax increased $316,000 for the six
months ended December 31, 1999. In addition, net income for the six months ended
December 31, 1999 was $227,000.
Asset Quality
The Bank regularly reviews interest earning assets to determine proper
valuation. Management's monitoring of the asset portfolio includes reviews of
historical loss experience, known and inherent risks in the portfolio, the value
of any underlying collateral, prospective economic conditions and the regulatory
environment. The Bank's non-accrual loans increased from $356,000 at June 30,
1999 to $372,000 at December 31, 1999.
The table on the following page sets forth information regarding the Bank's
non-accrual loans and foreclosed real estate at the dates indicated. The Bank
discontinues accruing interest on delinquent loans no later than ninety days
past due. At December 31, 1999, the Bank had no restructured loans within the
meaning of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 15.
13
IFB HOLDINGS, INC.
Asset Quality
December 31, June 30,
1999 1999
---- ----
(In thousands)
Non-accrual mortgage loans
delinquent more than 90 days $ 310 $ 318
Non-accrual other loans
delinquent more than 90 days 62 38
------ ------
Total non-performing loans $ 372 $ 356
Real estate owned and in-
substance foreclosed loans,
net of allowance - -
------ ------
Total non-performing assets $ 372 $ 356
====== ======
Non-performing loans to
total loans 1.13% 1.03%
====== ======
Non-performing assets to
total assets 0.58% 0.51%
====== ======
Allowance for loan losses
to non-performing loans 106.72% 111.80%
====== ======
14
Results of Operations
Comparisons of interim results in this section are between the three month
periods ended December 31, 1999, and December 31, 1998 and between the six month
periods then ended.
General
Net income for the quarter ended December 31, 1999 was $101,000, an
increase of $37,000 from the $64,000 net income for the quarter ended December
31, 1998. Net income for the six months ended December 31, 1999, was $227,000,
an increase of $81,000, or 55.5% from the $146,000 net income for the comparable
period ended December 31, 1998. The increase was due primarily to the decreases
in interest expense and provision for loan losses. In addition, interest income
decreased for the three and six month periods ended December 31, 1999, as
compared to the three and six month periods ended December 31, 1998.
Interest Income
Interest income for the quarter ended December 31, 1999, was $1.1 million,
a decrease of $148,000 or 11.7%, compared to $1.3 million for the quarter ended
December 31, 1998. Interest income for the six months ended December 31, 1999,
was $2.2 million , a decrease of $347,000, or 13.4% compared to $2.6 million for
the six months ended December 31, 1998. Interest on loans receivable decreased
$49,000, or 6.9%, from $711,000 for the quarter ended December 31, 1998, to
$662,000 for the quarter ended December 31, 1999. Interest on loans receivable
decreased $114,000, or 7.9%, from $1.4 million for the six months ended December
31, 1998, to $1.3 million for the six months ended December 31, 1999. Interest
on investment securities increased $28,000, or 20.7%, from $135,000 for the
three months ended December 31, 1998, to $163,000 for the three months ended
December 31, 1999. Interest on investment securities increased $90,000, or 36.3%
from $248,000 for the six months ended December 31, 1998, to $338,000 for the
six months ended December 31, 1999. Interest on mortgage-backed and related
securities decreased $119,000, or 29.2%, from $408,000 for the quarter ended
December 31, 1998, to $289,000 for the quarter ended December 31, 1999. Interest
on mortgage-backed and related securities decreased $301,000, or 35.0%, from
$859,000 for the six months ended December 31, 1998, to $558,000 for the six
months ended December 31, 1999. The decreases are primarily the result of the
decreases in the average balances of mortgage-backed and related securities and
loans receivable outstanding during the three and six month periods ended
December 31, 1999, as compared to the quarter ended December 31, 1998. The
decrease in interest income on investment securities is primarily the result of
a decrease in the average balance of investment securities outstanding during
the three and six month periods ended December 31, 1999, as compared to the
three and six month periods ended December 31, 1998.
Interest Expense
Interest expense for the quarter ended December 31, 1999 was $725,000 as
compared to $811,000 for the quarter ended December 31, 1998, a decrease of
$86,000, or 10.6%. Interest expense for the six months ended December 31, 1999,
was $1.4 million as compared to $1.7 million for the six months ended December
31, 1998, a decrease of $253,000, or 15.0%. Interest on advances from FHLB was
$352,000 for the three months ended December 31, 1999, as compared to $417,000
for the same period ended December 31, 1998, a decrease of $65,000 or 15.6%.
Interest on advances decreased $210,000, or 23.5%, from $893,000 for the six
months ended December 31, 1998 to $683,000 for the six months ended December 31,
1999. The decrease was due primarily to a decrease in the average balance of
advances outstanding during the three and six month periods ended December 31,
1999, as compared to the three and six month periods ended December 31, 1998.
Interest on deposits was $373,000 for the three month period ended December 31,
1999, as compared to $394,000 for the same period ended December 31, 1998, a
decrease of $21,000, or 5.3%. Interest on deposits was $752,000 for the six
months ended December 31, 1999, as compared to $795,000 for the same period
ended December 31, 1998, a decrease of $43,000, or 5.4%. The decrease was due to
a decrease in the average balance of deposits outstanding during the three and
six month periods ended December 31, 1999, as
15
compared to the three and six month periods ended December 31, 1998.
Net Interest Income
Net interest income before provisions for loan losses was $393,000 for the
quarter ended December 31, 1999, as compared to $455,000 for the quarter ended
December 31, 1998, a decrease of $62,000, or 13.6%. Net interest income before
provisions for loan losses was $801,000 for the six months ended December 31,
1999, a decrease of $94,000, or 10.5%, as compared to $895,000 for the six
months ended December 31, 1998.
Provision for Loan Losses
The provision for loan losses decreased $138,000 for the three months ended
December 31, 1999, as compared to the three months ended December 31, 1998. The
provision for loan losses decreased $231,000 for the six months ended December
31, 1999, as compared to the six months ended December 31, 1998. Provisions were
made during the quarter ended September 30, 1998 due to FHA Title 1 Home loans
with inadequate FHA reserves. These loans were sold during the quarter ended
September 30, 1999, resulting in a decrease to provision for loan losses.
Noninterest Income
Noninterest income was $65,000 for the quarter ended December 31, 1999, as
compared to $88,000 for the quarter ended December 31, 1998, a decrease of
$23,000, or 26.1%. Noninterest income was $143,000 for the six months ended
December 31, 1999, as compared to $163,000 for the six months ended December 31,
1998, a decrease of $20,000, or 12.3%. For the six months ended December 31,
1998, gain on sales of mortgage-backed securities was $28,000 as compared to
$9,000 for the six months ended December 31, 1999, a decrease of $19,000, or
67.9%. In addition, other noninterest income decreased $6,000, or 33.3%, from
$18,000 for the quarter ended December 31, 1998, to $12,000 for the quarter
ended December 31, 1999. For the six months ended December 31, 1999, other
noninterest income was $27,000 as compared to $31,000 for the six months ended
December 31, 1998, a decrease of $4,000, or 12.9%. The decrease in noninterest
income was due primarily to a decrease in gain on sales of mortgage-backed
securities during the six months ended December 31, 1999, as compared to the six
months ended December 31, 1998.
Noninterest Expense
Noninterest expense was $296,000 for the quarter ended December 31, 1999,
an increase of $20,000, or 7.2%, compared to $276,000 for the quarter ended
December 31, 1998. For the six months ended December 31, 1999, noninterest
expense was $578,000 compared to $566,000 for the six months ended December 31,
1998, an increase of $12,000, or 2.1%. Compensation and benefits expense
increased $7,000, or 4.8%, from $145,000 for the quarter ended December 31,
1998, to $152,000 for the quarter ended December 31, 1999. For the six months
ended December 31, 1999, compensation and benefits expense was $310,000 as
compared to $320,000 for the same period ended December 31, 1998, a decrease of
$10,000, or 3.1%. Other noninterest expense increased $17,000, or 18.5%, from
$92,000 for the quarter ended December 31, 1998, to $109,000 for the quarter
ended December 31, 1999. Other noninterest expense increased $28,000, or 16.8%,
from $167,000 for the six months ended Decmember 31, 1998, to $195,000 for the
six months ended December 31, 1999. The increase in other noninterest expense is
due primarily to the increase in legal, printing and filing fees associated with
meeting the requirements of being a publicly traded company. In addition,
charged off service fee income and postage expense increased for the six month
period ended December 31, 1999.
Income Tax
The provision for income taxes decreased $4,000, or 7.1%, from $56,000 for
the quarter ended December 31, 1998, to $52,000 for the quarter ended December
31, 1999. The provision for income taxes increased $24,000, or 22.6%, from
$106,000 for the six months ended December 31, 1998,
16
to $130,000 for the six months ended December 31, 1999. The increase is due to
an increase in income for the six months ended December 31, 1999.
17
IFB HOLDINGS, INC.
Part II -- Other Information
Item 1 Legal Proceedings
The Holding Company and the Bank are not involved in any pending legal
proceedings other than legal proceedings incident to the business of
the Holding Company and the Bank, which involve amounts in the
aggregate which management believes are immaterial to the financial
condition and results of operations of the Holding Company and the
Bank.
Item 2 Changes in Securities
Not applicable.
Item 3 Default upon Senior Securities
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
Investors Federal Bank has named Douglas W. Ayers as its new President
and Chief Executive Officer beginning November 8, 1999. Mr Ayers
brings over 20 years of banking and business experience to the
organization, having been Community President for a Brookfield,
Missouri financial institution for the past seven years.
On July 22, 1999, the Bank entered into a Memorandum of Understanding
(the "MOU") with the Office of the Comptroller of the Currency (the
"OCC"), whereby the Bank agreed to take certain actions in response to
concerns raised by the OCC. The Bank agreed, within 90 days after the
date of the MOU, to appoint a new chief executive officer, and to have
that chief executive officer prepare a report to the board of
directors regarding the Bank's management structure. The appointment
of the new chief executive officer was subject to the review and
possible disapproval of the OCC. The Bank submitted a form of
notification to the OCC, and the Bank has received a letter from the
OCC stating that the OCC is aware of no basis to disapprove the
appointment of Mr. Ayers.
The Board is pleased with its selection of Mr. Ayers to lead the
organization. A formal Strategic Plan will be prepared to ensure that
clear objectives are established for achievement. Mr. Ayers' banking
experience will aid in expanding services and products to the Bank's
existing customers. A more complete offering of products and services
will be used to attract new customers.
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibits; Statement re: Computation of Per Share
Earnings-Exhibit 11
Financial Data Schedule-Exhibit 27
(B) Reports on Form 8-K; No reports on Form 8-K have been filed during
the quarter for which this report is filed.
18
IFB HOLDINGS, INC.
Signatures
Pursuant to the requirement 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.
IFB Holdings, Inc.
--------------------------------------
(Registrant)
Dated February 11, 2000 /s/ Douglas W. Ayers
--------------------------------------
Douglas W. Ayers, President
(Chief Executive Officer and Director)
Dated February 11, 2000 /s/ Larry Johnson
--------------------------------------
Larry Johnson
(Senior Executive Vice President
and Director)
19