SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2000
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 March 31, 2000
- ---------------------------- -----------------------------
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 March 31,
2000 (Unaudited) and June 30, 1999...................................................... 2
Consolidated Statements of Income for the Three and Nine months
ended March 31, 2000 and 1999 (Unaudited)............................................... 3
Consolidated Statements of Comprehensive Income for the Three
and Nine months ended March 31, 2000 and 1999 (Unaudited)............................... 4
Consolidated Statements of Changes in Stockholders' Equity
for the Nine months ended March 31, 2000 (Unaudited).................................... 5
Consolidated Statements of Cash Flows for the Nine months
ended March 31, 2000 and 1999 (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
March 31, June 30,
2000 1999
----------- -----------
(Unaudited)
(In Thousands)
ASSETS
Cash on hand and noninterest-earning deposits $ 724 $ 551
Interest-earning deposits in other institutions 930 1,325
Investment securities:
Securities available-for-sale at fair value 8,648 10,104
Securities held-to-maturity at amortized cost 30 30
Mortgage-backed and related securities
available-for-sale, at fair value 17,123 21,134
Loans receivable, net 33,014 34,129
Accrued interest receivable 412 564
Investment required by law:
FHLB and FRB stock, at cost 1,321 1,771
Premises and equipment 376 368
Other assets 175 34
---------- -----------
Total assets $ 62,753 $ 70,010
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 35,463 $ 35,539
Federal Home Loan Bank advances 19,601 26,674
Advances from borrowers for taxes and insurance 20 31
Income taxes payable (110) (31)
Accrued expenses and other liabilities 149 213
---------- -----------
Total liabilities 55,123 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 March 31, 2000
and at June 30, 1999 6 6
Additional paid-in capital 5,585 5,575
Retained earnings, substantially restricted 4,578 4,309
Less:
Common stock acquired by the ESOP (280) (315)
Treasury stock, 118,504 shares at March 31, 2000
and 118,504 at June 30, 1999, at cost (1,822) (1,822)
Accumulated other comprehensive income (437) (169)
---------- -----------
Total stockholders' equity 7,630 7,584
---------- -----------
Total liabilities and stockholders' equity $ 62,753 $ 70,010
========== ===========
See accompanying Notes to Unaudited Consolidated Financial Statements
2
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
(In thousands (In thousands
except share data) except share data)
Interest income:
Loans receivable $ 676 $ 708 $ 2,006 $ 2,152
Investment securities 158 140 496 388
Mortgage-backed and related securities 279 356 837 1,215
Other interest-earning assets 2 14 12 46
-------- -------- -------- --------
Total interest income 1,115 1,218 3,351 3,801
-------- -------- -------- --------
Interest expense:
Deposits 381 381 1,133 1,176
FHLB Advances 313 382 996 1,275
-------- -------- -------- --------
Total interest expense 694 763 2,129 2,451
-------- -------- -------- --------
Net interest income 421 455 1,222 1,350
Provision for loan losses 31 19 40 259
-------- -------- -------- --------
Net interest income after provision for loan losses 390 436 1,182 1,091
-------- -------- -------- --------
Noninterest income:
Fees and service charges 51 48 158 152
Gain on sales of mortgage-backed securities - - 9 28
Other 15 14 42 45
-------- -------- -------- --------
Total noninterest income 66 62 209 225
-------- -------- -------- --------
Noninterest expense:
Compensation and benefits 169 182 479 502
Occupancy and equipment 34 31 93 96
SAIF deposit insurance premiums 4 5 14 15
Loss on sales of mortgage-backed securities - - 4 4
Other 88 82 283 249
-------- -------- -------- --------
Total noninterest expense 295 300 873 866
-------- -------- -------- --------
Income before income taxes 161 198 518 450
Income tax expense 48 72 178 178
-------- -------- -------- --------
Net income $ 113 $ 126 $ 340 $ 272
======== ======== ======== ========
Earnings per share:
Basic $ .25 $ .29 $ .77 $ .59
======== ======== ======== ========
Weighted average number of
shares outstanding:
Basic 444,862 439,606 443,673 464,805
See accompanying Notes to Unaudited Consolidated Financial Statements
3
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Nine Months
Ended Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
(In thousands) (In thousands)
Net income $ 113 $ 126 $ 340 $ 272
Other comprehensive income (loss),
net of income tax:
Unrealized gain (loss) on securities:
Unrealized holding gains (losses)
arising during the period 48 (75) (267) (126)
Less reclassification adjustment for
gains included in net income - - (1) -
----- ----- ----- -----
Other comprehensive income 48 (75) (268) (126)
----- ----- ----- -----
Comprehensive income $ 161 $ 51 $ 72 $ 146
===== ===== ===== =====
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)
Nine Months Ended
- ------------------
March 31, 2000
--------------
Balance at June 30, 1999 $ 6 $ 5,575 $ 4,309 $ (1,822) $ (315) $ (169) $ 7,584
Additions (deductions) for the nine
months ended March 31, 2000
Net income - - 340 - - - 340
Dividends declared - - (71) - - - (71)
Reduction of ESOP obligation - - - - 35 - 35
Compensation expense related to ESOP - 10 - - - - 10
Purchase of treasury stock - - - - - - -
Unrealized gain on securities
available-for-sale, net of deferred
Income tax of $138,000 - - - - - (268) (268)
------ ------- ------- -------- ------ -------- -------
Balance, March 31, 2000 $ 6 $ 5,585 $ 4,578 $ (1,822) $ (280) $ (437) $ 7,630
====== ======= ======= ======== ====== ======== =======
See accompanying Notes to Unaudited Consolidated Financial Statements
5
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
2000 1999
----------- -----------
(In thousands)
Cash flow from operating activities:
Net income (loss) $ 340 $ 272
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Net loss (gain) on sale of investments (5) (24)
Depreciation 45 44
Provision for loan loss 40 259
Amortization of premiums and discounts 81 112
Compensation expense related to ESOP 45 57
Decrease (increase) in interest receivable 152 18
Decrease (increase) in other assets (141) 5
Increase (decrease) in income tax payable (79) (35)
Increase (decrease) in other liabilities (64) (120)
----------- -----------
Net cash provided by operating activities 414 588
----------- -----------
Cash flow from investing activities:
Loans purchased (250) (229)
(Increase) decrease in loans, net 1,325 1,187
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 - 1,875
Purchase of available-for-sale investment securities (37) (8,452)
Purchase of available-for-sale mortgage-backed
and related securities - (5,701)
Principal collected on repayments and maturities of
available-for-sale mortgage-backed and related securities 4,169 10,082
Sale (purchase) of FHLB and FRB stock 450 (132)
Purchase of equipment (53) (9)
----------- -----------
Net cash provided by investing activities 6,595 1,996
----------- -----------
Cash flows from financing activities:
Dividends paid (71) (71)
Net increase (decrease) in deposits (76) 623
Net increase (decrease) in advances from
borrowers for taxes and insurance (11) (9)
Proceeds from FHLB advances 184,800 40,578
Principal payments on FHLB advances (191,873) (41,863)
Purchase of treasury stock - (1,822)
----------- -----------
Net cash provided (used) by financing activities (7,231) (2,564)
----------- -----------
Increase (decrease) in cash and cash equivalents (222) 20
Cash and cash equivalents at beginning of period 1,876 3,541
----------- -----------
Cash and cash equivalents at end of period $ 1,654 $ 3,561
=========== ===========
6
IFB HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
2000 1999
----------- -----------
(In Thousands)
Supplemental cash flow disclosures:
Cash paid for:
Interest $ 1,334 $ 1,754
=========== ===========
Income Taxes $ 145 $ 150
=========== ===========
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 nine month periods ended March 31, 2000 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 nine
months ended March 31, 2000. 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 $294,302 ($194,164 principal) to the Holding
Company. The $279,846 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 weighted-
average number of common shares outstanding during the period
(denominator).
8
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 March 31, 2000, 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 $1.0
million at March 31, 2000, represent amounts which the Bank plans
to fund within the normal commitment period of thirty to ninety
days. As of March 31, 2000, 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 March 31, 2000.
(6) Recent Accounting Developments
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 No. 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.
(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.
9
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 March 31, 2000, 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 March 31, 2000 and June 30, 1999, cash and cash equivalents
totaled $1.7 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 March 31, 2000, the Bank had outstanding loan commitments of
$1.0 million. 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 March 31, 2000 were $15.4 million. Management believes that
a significant portion of such deposits will remain with the Bank.
In March of 2000 the Board of Directors of Investors Federal
Bank, N.A. approved an extensive remodeling plan of the Bank's main facility in
Chilicothe. The remodeling project includes the construction of a new lobby and
teller area, vault and additional access to the second floor of the facility. In
addition to the new areas, all customer contact areas of the building will be
remodeled and modernized. We anticipate that the remodeled facility will
increase the efficiency of the staff and assist in the promotion and marketing
of additional bank products and services. We have estimated a construction
period of 180 days with construction starting prior to June 1, 2000. Costs of
the project are budgeted at $600,000 including fixtures and equipment, although
there can be no assurance that the ultimate cost of the project will not exceed
the budgeted amount. Funds needed to pay for the project will come from cash
flows of normal operations of 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 March 31, 2000, the Bank
exceeded both of the capital requirements. The Bank's capital ratios were:
10.41% leverage capital and 23.89% risk-based capital. The Bank had "Tier 1
capital" of $6.5 million at March 31, 2000 and risk-based capital of $6.9
million.
Financial Condition
Total assets decreased $7.3 million, or 10.4%, to $62.8 million
at March 31, 2000, from $70.0 million at June 30, 1999. Investment securities
decreased $1.5 million, or 14.9% from $10.1 million at June 30, 1999, to $8.6
million at March 31, 2000. FHLB and FRB stock decreased $450,000, or 25.4%, from
$1.8 million at June 30, 1999, to $1.3 million at March 31, 2000. Mortgage-
backed and related securities decreased $4.0 million, or 19.0%, from $21.1
million at June 30, 1999, to $17.1 million at March 31, 2000. Loans receivable
decreased $1.1 million, or 3.2%, from $34.1 million at June 30, 1999, to $33.0
million at March 31, 2000. Interest-earning deposits in other institutions
decreased $395,000, or 30.4%, from $1.3 million at June 30, 1999, to $930,000 at
March 31, 2000. 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 $7.3 million, or 11.7%, from $62.4
million at June 30, 1999, to $55.1 million at March 31, 2000. The decrease was
primarily the result of the decrease in FHLB advances of $7.1 million or 26.6%,
from $26.7 million at June 30, 1999, to $19.6 million at March 31, 2000.
Proceeds from mortgage backed and related security payments were used to pay
down the advances.
There was no significant change in total equity. Total equity was
$7.6 million at June 30, 1999 and March 31, 2000. Unrealized loss on securities
available-for-sale, net of deferred income tax increased $268,000 for the nine
months ended March 31, 2000. In addition, net income for the nine months ended
March 31, 2000 was $340,000.
12
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 were
$356,000 at June 30, 1999 and March 31, 2000.
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 March 31, 2000, 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
At At
March 31, June 30,
2000 1999
------- ------
(In thousands)
Non-accrual mortgage loans
delinquent more than 90 days $ 326 $ 318
Non-accrual other loans
delinquent more than 90 days 30 38
--------- ---------
Total non-performing loans $ 356 $ 356
Real estate owned and in-
substance foreclosed loans,
net of allowance - -
--------- ---------
Total non-performing assets $ 356 $ 356
========= =========
Non-performing loans to
total loans 1.06% 1.03%
========= =========
Non-performing assets to
total assets 0.57% 0.51%
========= =========
Allowance for loan losses
to non-performing loans 119.10% 111.80%
========= =========
14
Results of Operations
Comparisons of interim results in this section are between the
three month periods ended March 31, 2000, and March 31, 1999 and between the
nine month periods then ended.
General
Unaudited diluted earnings per share were $0.25 for the three
month period ended March 31, 2000 compared to $0.29 for the three month period
ended March 31, 1999, a decrease of $0.04 per share or 13.8%. Unaudited diluted
earnings per share were $0.77 for the nine month period ended March 31, 2000
compared to $0.59 for the nine month period ended March 31, 1999, an increase of
$0.18 per share or 30.5%. Net income for the quarter ended March 31, 2000 was
$113,000, a decrease of $13,000, or 10.3%, from the $126,000 net income for the
quarter ended March 31, 1999. The decrease was due primarily to the decrease in
net interest income and the increase in provision for loan losses for the three
month period ended March 31, 2000 as compared to the same period ended March 31,
1999. Net income for the nine months ended March 31, 2000, was $340,000, an
increase of $68,000, or 25.0% from the $272,000 net income for the comparable
period ended March 31, 1999. The increase was due primarily to the decrease in
the provision for loan losses.
Interest Income
Interest income for the quarter ended March 31, 2000, was $1.1
million, a decrease of $103,000 or 8.6%, compared to $1.2 million for the
quarter ended March 31, 1999. Interest income for the nine months ended March
31, 2000, was $3.4 million , a decrease of $450,000, or 11.8%, compared to $3.8
million for the nine months ended March 31, 1999. Interest on loans receivable
decreased $32,000, or 4.5%, from $708,000 for the quarter ended March 31, 1999,
to $676,000 for the quarter ended March 31, 2000. Interest on loans receivable
decreased $146,000, or 6.6%, from $2.2 million for the nine months ended March
31, 1999, to $2.0 million for the nine months ended March 31, 2000. Interest on
investment securities increased $18,000, or 12.9%, from $140,000 for the three
months ended March 31, 1999, to $158,000 for the three months ended March 31,
2000. Interest on investment securities increased $108,000, or 27.8% from
$388,000 for the nine months ended March 31, 1999, to $496,000 for the nine
months ended March 31, 2000. Interest on mortgage-backed and related securities
decreased $77,000, or 21.6%, from $356,000 for the quarter ended March 31, 1999,
to $279,000 for the quarter ended March 31, 2000. Interest on mortgage-backed
and related securities decreased $378,000, or 31.5%, from $1.2 million for the
nine months ended March 31, 1999, to $837,000 for the nine months ended March
31, 2000. The decreases are primarily the result of the decreases in the average
balances of investment securities, mortgage-backed and related securities and
loans receivable outstanding during the three and nine months periods ended
March 31, 2000, as compared to the three and nine month periods ended March 31,
1999.
Interest Expense
Interest expense for the quarter ended March 31, 2000 was
$694,000 as compared to $763,000 for the quarter ended March 31, 1999, a
decrease of $69,000, or 9.0%. Interest expense for the nine months ended March
31, 2000, was $2.1 million as compared to $2.5 million for the nine months ended
March 31, 1999, a decrease of $322,000, or 12.9%. Interest on advances from FHLB
was $313,000 for the three months ended March 31, 2000, as compared to $382,000
for the same period ended March 31, 1999, a decrease of $69,000 or 18.1%.
Interest on advances decreased $279,000, or 21.5%, from $1.3 million for the
nine months ended March 31, 1999 to $996,000 for the nine months ended March 31,
2000. The decrease was due primarily to a decrease in the average balance of
advances outstanding during the three and nine month periods ended March 31,
2000, as compared to the three and nine month periods ended March 31, 1999.
Interest on deposits remained stable at $381,000 for the three month period
ended March 31, 2000 and for the same period ended March 31, 1999. Interest on
deposits was $1.1 million for the nine months ended March 31, 2000, as compared
to $1.2 million for the same period ended March 31, 1999, a decrease of $43,000,
or 3.6%. The decrease was due to a decrease in the average balance of deposits
outstanding during the nine month period ended March 31, 2000, as compared to
the nine month period ended March 31, 1999.
15
Net Interest Income
Net interest income before provisions for loan losses was
$421,000 for the quarter ended March 31, 2000, as compared to $455,000 for the
quarter ended March 31, 1999, a decrease of $34,000, or 7.5%. Net interest
income before provisions for loan losses was $1.2 million for the nine months
ended March 31, 2000, a decrease of $128,000, or 9.1%, as compared to $1.4
million for the nine months ended March 31, 1999.
Provision for Loan Losses
The provision for loan losses increased $12,000, or 63.2%, for
the three months ended March 31, 2000, as compared to the three months ended
March 31, 1999. The provision for loan losses decreased $219,000 or 84.6%, for
the nine months ended March 31, 2000, as compared to the nine months ended March
31, 1999. 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 for the nine months ended March 31, 2000.
Noninterest Income
Noninterest income was $66,000 for the quarter ended March 31,
2000, as compared to $62,000 for the quarter ended March 31, 1999, an increase
of $4,000, or 6.5%. Noninterest income was $209,000 for the nine months ended
March 31, 2000, as compared to $225,000 for the nine months ended March 31,
1999, a decrease of $16,000, or 7.1%. For the nine months ended March 31, 1999,
gain on sales of mortgage-backed securities was $28,000 as compared to $9,000
for the nine months ended March 31, 2000, a decrease of $19,000, or 67.9%. In
addition, other noninterest income increased $1,000, or 7.1%, from $14,000 for
the quarter ended March 31, 1999, to $15,000 for the quarter ended March 31,
2000. For the nine months ended March 31, 2000, other noninterest income was
$42,000 as compared to $45,000 for the nine months ended March 31, 1999, a
decrease of $3,000, or 6.7%. The decrease in noninterest income was due
primarily to a decrease in gain on sales of mortgage-backed securities during
the nine months ended March 31, 2000, as compared to the nine months ended March
31, 1999.
Noninterest Expense
Noninterest expense was $295,000 for the quarter ended March 31,
2000, a decrease of $5,000, or 1.7%, compared to $300,000 for the quarter ended
March 31, 1999. For the nine months ended March 31, 2000, noninterest expense
was $873,000 compared to $866,000 for the nine months ended March 31, 1999, an
increase of $7,000, or 0.8%. Compensation and benefits expense decreased
$13,000, or 7.1%, from $182,000 for the quarter ended March 31, 1999, to
$169,000 for the quarter ended March 31, 2000. For the nine months ended March
31, 2000, compensation and benefits expense was $479,000 as compared to $502,000
for the same period ended March 31, 1999, a decrease of $23,000, or 4.6%. The
decrease in compensation expense is primarily due to a temporary decrease in
staff. Other noninterest expense increased $6,000, or 7.3%, from $82,000 for the
quarter ended March 31, 1999, to $88,000 for the quarter ended March 31, 2000.
Other noninterest expense increased $34,000, or 13.7%, from $249,000 for the
nine months ended March 31, 1999, to $283,000 for the nine months ended March
31, 2000. 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 nine month period ended
March 31, 2000.
16
Income Tax
The provision for income taxes decreased $24,000, or 33.3%, from
$72,000 for the quarter ended March 31, 1999, to $48,000 for the quarter ended
March 31, 2000. The provision for income taxes remained stable at $178,000 for
the nine months ended March 31, 1999 and for the same period ended March 31,
2000. The decrease is due to a decrease in income for the three months ended
March 31, 2000, as compared to the three months ended March 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
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"). Please refer to the September 30, 1999
Form 10-QSB for more information.
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 May 11, 2000 /s/ Douglas W. Ayers
--------------------------------------
Douglas W. Ayers, President
(Chief Executive Officer and Director)
Dated May 11, 2000 /s/ Larry Johnson
--------------------------------------
Larry Johnson
(Senior Executive Vice President
and Director)
19