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, 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 March 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 March 31,
1999 (Unaudited) and June 30, 1998.................................. 2
Consolidated Statements of Income for the Three Months and Nine
Months ended March 31, 1999 and 1998 (Unaudited).................... 3
Consolidated Statements of Comprehensive Income for Three Months
and Nine Months ended March 31, 1999 and 1998 (Unaudited)........... 4
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months ended March 31, 1999 (unaudited)................ 5
Consolidated Statements of Cash Flows for the Nine Months
ended March 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................................................... 17
Item 2 Changes in Securities............................................... 17
Item 3 Default upon Senior Securities...................................... 17
Item 4 Submission of Matters to a Vote of Security Holders................. 17
Item 5 Other Information................................................... 17
Item 6 Exhibits and Reports on Form 8-K.................................... 17
Signature Page................................................................ 18
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
At At
March 31, June 30,
1999 1998
---------- ------
(Unaudited)
(In Thousands)
ASSETS
Cash on hand and noninterest-earning deposits $ 556 $ 546
Interest-earning deposits in other institutions 3,005 2,995
Investment securities:
Securities available-for-sale at fair value 9,654 4,911
Securities held-to-maturity at amortized cost 30 245
Mortgage-backed and related securities
available-for-sale, at fair value 23,574 29,495
Loans receivable, net 34,038 35,255
Accrued interest receivable 605 623
Investment required by law:
FHLB and FRB stock, at cost 1,770 1,638
Premises and equipment 382 417
Other assets 48 53
------- -------
Total assets $73,662 $76,178
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $35,878 $35,255
Federal Home Loan Bank advances 29,790 31,075
Advances from borrowers for taxes and insurance 19 28
Income taxes payable 179 214
Accrued expenses and other liabilities 174 294
------- -------
Total liabilities 66,040 66,866
------- -------
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, 1999
and at June 30, 1998 6 6
Additional paid-in capital 5,569 5,554
Retained earnings, substantially restricted 4,193 3,992
Less:
Common stock acquired by the ESOP (332) (374)
Treasury stock, 118,504 shares at March 31, 1999 (1,822) -
and 0 at June 30, 1998, at cost
Unrealized gain (loss) on securities available-for-sale
net of applicable deferred income taxes 8 134
------- -------
Total stockholders' equity 7,622 9,312
------- -------
Total liabilities and stockholders' equity $73,662 $76,178
======= =======
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,
1999 1998 1999 1998
---- ---- ---- ----
(In thousands (In thousands
except share data) except share data)
Interest income:
Loans receivable $ 708 $ 710 $ 2,152 $ 2,040
Investment securities 140 114 388 335
Mortgage-backed and related securities 356 409 1,215 1,120
Other interest-earning assets 14 18 46 44
----- ----- ----- -----
Total interest income 1,218 1,251 3,801 3,539
----- ----- ----- -----
Interest expense:
Deposits 381 400 1,176 1,200
FHLB Advances 382 359 1,275 948
----- ----- ----- -----
Total interest expense 763 759 2,451 2,148
----- ----- ----- -----
Net interest income 455 492 1,350 1,391
Provision for loan losses 19 2 259 66
----- ----- ----- -----
Net interest income after provision for loan losses 436 490 1,091 1,325
----- ----- ----- -----
Noninterest income:
Fees and service charges 48 49 152 158
Gain on sales of mortgage-backed securities - - 28 43
Other 14 12 45 28
----- ----- ----- -----
Total noninterest income 62 61 225 229
----- ----- ----- -----
Noninterest expense:
Compensation and benefits 182 178 502 515
Occupancy and equipment 31 31 96 83
SAIF deposit insurance premiums 5 5 15 16
(Loss) on sales of mortgage-backed securities - - (4) -
Other 82 69 249 228
----- ----- ----- -----
Total noninterest expense 300 283 866 842
----- ----- ----- -----
Income (loss) before income taxes 198 268 450 712
Income tax expense 72 105 178 285
----- ----- ----- -----
Net income $ 126 $ 163 $ 272 $ 427
===== ===== ===== =====
Earnings per share:
Basic $ .29 $ .29 $ .59 $ .77
===== ===== ===== =====
Weighted average number of
shares outstanding:
Basic $439,606 $552,665 $ 464,805 $551,480
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,
1999 1998 1999 1998
---- ---- ---- ----
(In thousands) (In thousands)
Net income $126 $163 $272 $427
Other comprehensive income (loss), net of tax:
Unrealized holding income (losses) arising during period (75) 29 (126) 142
----- ---- ----- ----
Comprehensive income $ 51 $192 $146 $569
===== ===== ===== =====
4
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
UNREALIZED
GAIN (LOSS)
SECURITIES
AVAILABLE-
FOR-SALE,
NET OF
APPLICABLE
ADDITIONAL STOCK DEFERRED
COMMON PAID-IN RETAINED TREASURY ACQUIRED INCOME
STOCK CAPITAL EARNINGS STOCK BY ESOP TAXES TOTAL
----- ------- -------- ----- ------- ----- -----
(In thousands)
Nine Months Ended
March 31, 1999
Balance at June 30, 1998 $ 6 $5,554 $3,992 $ 0 $(374) $ 134 $ 9,312
Additions (deductions) for
the nine months ended
March 31, 1999
Net income - - 272 - - - 272
Dividends declared - - (71) - - - (71)
Reduction of ESOP
obligation - - - - 42 - 42
Compensation Expense
related to ESOP - 15 - - - - 15
Purchase of Treasury Stock
(118,504 shares) - - - (1,822) - - (1,822)
Unrealized gain on
securities available-for-
sale, net of deferred
Income tax of $65,000 - - - - - (126) (126)
--- ------ ------ ------- ----- ------- -------
Balance, March 31, 1999 $ 6 $5,569 $4,193 $(1,822) $(332) $ 8 $ 7,622
=== ====== ====== ======= ===== ======= =======
See accompanying Notes to Unaudited Consolidated Financial Statements
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
1999 1998
---- ----
(In thousands)
Cash flow from operating activities:
Net income (loss) $ 272 $ 427
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Net loss (gain) on sale of investments (24) (43)
Depreciation 44 39
Provision for loan loss 259 66
Amortization of premiums and discounts 112 4
Compensation expense related to ESOP 57 51
Decrease (increase) in interest receivable 18 (127)
Decrease (increase) in other assets 5 17
Increase (decrease) in income tax payable (35) 123
Increase (decrease) in other liabilities (120) 32
-------- ---------
Net cash provided by operating activities 588 589
-------- ---------
Cash flow from investing activities:
Loans purchased (229) (3,956)
(Increase) decrease in loans, net 1,187 (298)
Proceeds from sales of available-for-sale mortgage-backed and
related securities 1,361 2,311
Proceeds from sales of available-for-sale investment securities 2,014 499
Proceeds from maturities/calls of investment securities 1,875 2,999
Purchase of available-for-sale investment securities (8,452) (2,601)
Purchase of available-for-sale mortgage-backed
and related securities (5,701) (13,523)
Principal collected on repayments and maturities of
available-for-sale mortgage-backed and related securities 10,082 3,326
Purchase of FHLB and FRB stock (132) (513)
Purchase of equipment (9) (106)
-------- ---------
Net cash provided (used) by investing activities 1,996 (11,862)
-------- ---------
Cash flows from financing activities:
Dividends paid (71) (75)
Net increase (decrease) in deposits 623 613
Net increase (decrease) in advances from
borrowers for taxes and insurance (9) (17)
Proceeds from FHLB advances 40,578 27,675
Principal payments on FHLB advances (41,863) (17,436)
Purchase of treasury stock (1,822) -
-------- ---------
Net cash provided (used) by financing activities (2,564) 10,760
-------- ---------
Increase (decrease) in cash and cash equivalents 20 (513)
Cash and cash equivalents at beginning of period 3,541 3,003
-------- ---------
Cash and cash equivalents at end of period $ 3,561 $ 2,490
======== =========
IFB HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
March 31,
1999 1998
---- ----
(In Thousands)
Supplemental cash flow disclosures:
Cash paid for:
Interest $1,754 $1,177
====== ======
Income Taxes $ 150 $ 246
====== ======
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, 1999 are not
necessarily indicative of results that may be expected for the
entire fiscal year ending June 30, 1999.
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, 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 $216,171 ($141,599 principal) to the Holding
Company. The $332,411 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, 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 $909,000
at March 31, 1999, represent amounts which the Bank plans to fund
within the normal commitment period of thirty to ninety days. As
of March 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
March 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 of
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, 1999.
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 Association 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 March 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
Like many financial institutions, the Bank relies upon computers for
the daily conduct of its business and for data processing generally. There is
concern among industry experts that on January 1, 2000 computers will be unable
to "read" the new year and there may be widespread computer malfunctions. The
Bank has formed a Year 2000 Committee to initiate and implement the Year 2000
11
project, including adoption and implementation of policies, documenting
readiness of the Bank to accommodate Year 2000 processing, and tracking and
testing progress towards full compliance and reporting to the Board of
Directors. Systems are prioritized by the committee as to mission critical or
non-mission critical. The main mission critical items consist of IBM hardware,
Precision Computer Systems software and Easy Systems teller machines. These
companies provide testing assistance in Y2K compliance. During the quarter ended
September 30, 1998, date testing was completed on the Precision Computer Systems
software with all dates rolling forward properly. A Y2K test package has been
purchased for baseline and other testing. An IBM patch-load tape was installed
on the IBM Risc 6000 computer during the quarter ended September 30, 1998. This
procedure successfully updated the computer to the latest level of IBM testing.
Precision Computer Systems is working with IBM on Y2K issues and will notify the
Bank if additional patch-load tapes are necessary. EZ Systems teller machines
were tested in non-production mode during the quarter ended September 30, 1998
and proved to be Year 2000 compliant. During the quarter ended March 31, 1999,
all testing was completed and the Bank updated contingency planning to meet
requirements.
The Bank's definition of Year 2000 compliant is that the system, when
used in accordance with all applicable instruction, is capable of correctly
processing, providing, and receiving data within and between the 20th and 21st
centuries, provided that all other systems that are used together with the
system properly exchange date data with the system.
The Bank does not expect costs to make their computer system Year 2000
compliant to materially affect operations.
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, 1999 and June 30, 1998, cash and cash equivalents totaled
$3.6 million and $3.5 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, 1999, the Bank had outstanding loan commitments of
$909,000. 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 March 31, 1999 were $14.3 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 March 31, 1999, the Bank exceeded
both of the capital requirements. The Bank's capital ratios were: 9.18% leverage
capital and 21.46% risk-based capital. The Bank had "Tier 1 capital" of $6.5
million at March 31, 1999 and risk-based capital of $6.9 million.
FINANCIAL CONDITION
Total assets decreased $2.5 million, or 3.3%, to $73.7 million at
March 31, 1999, from
12
$76.2 million at June 30, 1998. Investment securities increased $4.5 million, or
86.5% from $5.2 million at June 30, 1998, to $9.7 million at March 31, 1999.
FHLB and FRB stock increased $132,000, or 8.1%, from $1.6 million at June 30,
1998, to $1.8 million at March 31, 1999. Mortgage-backed and related securities
decreased $5.9 million, or 20%, from $29.5 million at June 30, 1998, to $23.6
million at March 31, 1999. Loans receivable decreased $1.3 million, or 3.7%,
from $35.3 million at June 30, 1998, to $34.0 million at March 31, 1999.
Interest-earning deposits in other institutions totaled $3.0 million at June 30,
1998 and at March 31, 1999.
Total liabilities decreased $826,000, or 1.3%, from $66.9 million at
June 30, 1998, to $66.0 million at March 31, 1999. The decrease was primarily
the result of the decrease in FHLB advances of $1.3 million or 4.2%, from $31.1
at June 30, 1998, to $29.8 million at March 31, 1999. Proceeds from the sales of
mortgage backed and related securities were used to pay down the advances. In
addition, deposits increased $623,000 or 1.8%, from $35.3 million at June 30,
1998, to $35.9 million at March 31, 1999.
Total equity decreased $1.7 million, or 18.7%, from $9.3 million at
June 30, 1998 to $7.6 million at March 31, 1999. The decrease was due primarily
to the purchase of $1.8 million of treasury stock during the nine months ended
March 31, 1999. Unrealized loss on securities available-for-sale, net of
deferred income tax decreased $126,000 for the nine months ended March 31, 1999.
In addition, net income for the nine months ended March 31, 1999 was $272,000.
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 decreased from $495,000 at June 30,
1998 to $245,000 at March 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 March 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
March 31, June 30,
1999 1998
---- ----
(In thousands)
Non-accrual mortgage loans
delinquent more than 90 days $ 188 $ 344
Non-accrual other loans
delinquent more than 90 days 57 151
----------- ----------
Total non-performing loans $ 245 $ 495
Real estate owned and in-
substance foreclosed loans,
net of allowance 0 0
----------- ----------
Total non-performing assets $ 245 $ 495
=========== ==========
Non-performing loans to
total loans .71% 1.39%
=========== ==========
Non-performing assets to
total assets .33% 0.65%
=========== ==========
Allowance for loan losses
to non-performing loans 182.45% 65.45%
=========== ==========
14
RESULTS OF OPERATIONS
Comparisons of interim results in this section are between the three
month periods ended March 31, 1999, and March 31, 1998 and between the nine
month periods then ended.
GENERAL
Net income for the quarter ended March 31, 1999 was $126,000, a
decrease of $37,000 from the $163,000 net income for the quarter ended March 31,
1998. The decrease was due primarily to the decreased net interest income and
higher non interest expense for the three month period ended March 31, 1999, as
compared to the three month period ended March 31, 1998. Net income for the nine
months ended March 31, 1999, was $272,000, a decrease of $155,000, or 36.3% from
the $427,000 net income for the comparable period ended March 31, 1998. The
decrease was due primarily to the increase of provision for loan losses during
the nine month period ended March 31, 1999.
INTEREST INCOME
Interest income for the quarter ended March 31, 1999, was $1.2
million, a decrease of $33,000, or 2.5%, compared to $1.3 million for the
quarter ended March 31, 1998. Interest income for the nine months ended March
31, 1999, was $3.8 million, an increase of $262,000 , or 7.5% as compared to
$3.5 million the nine months ended March 31, 1998. Interest on loans receivable
decreased $3,000, or .3%, from $711,000 for the quarter ended March 31, 1998, to
$708,000 for the quarter ended March 31, 1999. Interest on loans receivable
increased $112,000, or 5.5%, from $2.0 million for the nine months ended March
31, 1998, to $2.1 million for the nine months ended March 31, 1999. Interest on
investment securities increased $26,000, or 22.8%, from $114,000 for the three
months ended March 31, 1998, to $140,000 for the three months ended March 31,
1999. Interest on investment securities increased $53,000, or 15.8%, from
$335,000 for the nine months ended March 31, 1998, to $388,000 for the nine
months ended March 31, 1999. Interest on mortgage-backed and related securities
decreased $53,000, or 13.0%, from $409,000 for the quarter ended March 31, 1998,
to $356,000 for the quarter ended March 31, 1999. Interest on mortgage-backed
and related securities increased $95,000, or 8.5%, from $1.1 million for the
nine months ended March 31, 1998, to $1.2 million for the nine months ended
March 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 at March 31, 1999, as compared to March 31, 1998. The increase in
interest income on investment securities is primarily the result of an increase
in the average balance of investment securities outstanding at March 31, 1999,
as compared to March 31, 1998.
INTEREST EXPENSE
Interest expense for the quarter ended March 31, 1999 was $763,000 as
compared to $759,000 for the quarter ended March 31, 1998, an increase of
$4,000, or .5%. Interest expense for the nine months ended March 31, 1999, was
$2.5 million as compared to $2.2 million for the nine months ended March 31,
1998, an increase of $303,000 or 14.1%. Interest on advances from FHLB was
$382,000 for the three months ended March 31, 1999, as compared to $359,000 for
the same period ended March 31, 1998, an increase of $23,000 or 6.4%. Interest
on advances increased $327,000, or 34.5%, from $948,000 for the nine months
ended March 31, 1998 to $1.3 million for the nine months ended March 31, 1999.
The increase was due primarily to an increase in the average balance of advances
outstanding during the three and nine month periods ended March 31, 1999, as
compared to the three and nine month periods ended March 31, 1998. Interest on
deposits remained fairly stable for the three month period ended March 31, 1999,
as compared to March 31, 1998.
NET INTEREST INCOME
Net interest income before provisions for loan losses was $455,000 for
the quarter ended March 31, 1999, as compared to $492,000 for the quarter ended
March 31, 1998, a decrease of $37,000,
15
or 7.5%. Net interest income before provisions for loan losses was $1.3 million
for the nine months ended March 31, 1999, a decrease of $41,000, or 2.9%, as
compared to $1.4 million for the nine months ended March 31, 1998.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased $17,000 for the three months
ended March 31, 1999, as compared to the three months ended March 31, 1998. The
provision for loan losses increased $193,000 for the nine months ended March 31,
1999, as compared to the nine months ended March 31, 1998. During fiscal years
ending June 30, 1996 and 1997, the Bank purchased $1.4 million of FHA Title 1
Home Loans. As of March 31, 1999, the current book value is $637,000, reflecting
charge offs of seven loans totaling $140,000, scheduled repayments and
prepayments of principal. Recently, the Bank was notified by the servicer of the
loans that the reserve established by the servicer to cover uncollectible loans
may not be adequate. Therefore, management has been evaluating the loans. After
the delinquent reports were evaluated, a provision was recorded for $90,000 as
of September 30, 1998. After further evaluation, an additional provision was
recorded for $143,000 as of December 31, 1998.
NONINTEREST INCOME
Noninterest income was $62,000 for the quarter ended March 31, 1999 as
compared to $61,000 for the quarter ended March 31, 1998, an increase of $1,000,
or 1.6%. Noninterest income was $225,000 for the nine months ended March 31,
1999 as compared to $229,000 for the nine months ended March 31, 1998, a
decrease of $4,000, or 1.7%. The increase was a result of an increase in other
noninterest income from $12,000 for the quarter ended March 31, 1998, to $14,000
for the quarter ended March 31, 1999, an increase of $2,000, or 14.3%. For the
nine months ended March 31, 1998, gain on sales of mortgage backed securities
was $43,000 as compared to $28,000 for the nine months ended March 31, 1999, a
decrease of $15,000, or 34.9%. For the nine months ended March 31, 1999, other
noninterest income was $45, 000 as compared to $28,000 for the nine months ended
March 31, 1998, an increase of $17,000, or 60.7%. The decrease in noninterest
income was primarily due to a decrease in gain on sale of mortgage backed
securities.
NONINTEREST EXPENSE
Noninterest expense was $300,000 for the quarter ended March 31, 1999,
an increase of $17,000, or 6.0%, compared to $283,000 for the quarter ended
March 31, 1998. The increase for the quarter ended March 31, 1999 was primarily
due to an increase in other noninterest expense as compared to the same period
ended March 31, 1998. Other noninterest expense increased $13,000, or 18.8%,
from $69,000 for the quarter ended March 31, 1998, to $82,000 for the quarter
ended March 31, 1999. For the nine months ended March 31, 1999, other
noninterest expense was $249,000 as compared to $228,000 for the same period
ended March 31, 1998, an increase of $21,000, or 9.2%. For the nine months ended
March 31, 1999, noninterest expense was $866,000 as compared to $842,000 for the
nine months ended March 31, 1998, an increase of $24,000, or 2.9%. The increase
for the nine months ended March 31, 1999, was primarily due to the increase in
other noninterest expense for the nine months ended March 31, 1999.
INCOME TAX
The provision for income taxes decreased $33,000, or 31.4%, from
$105,000 for the quarter ended March 31, 1998, to $72,000 for the quarter ended
March 31, 1999. The provision for income taxes decreased $107,000, or 25.1%,
from $285,000 for the nine months ended March 31, 1998, to $178,000 for the nine
months ended March 31, 1999. The decrease is due to decreases in income for the
periods.
16
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
Earle S. Teegarden, Jr. retired as President and Chief Executive
Officer of Investors Federal Bank, N.A. effective April 30, 1999.
Larry Johnson, Senior Executive Vice President, was named Interim
Chief Executive Officer at the April 13, 1999 meeting of the
Board of Directors of Investors Federal Bank, N.A.
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.
17
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 12, 1999 /s/ Larry Johnson
---------------------------------
Larry Johnson
(Senior Executive Vice President
and Director)
Dated May 12, 1999 /s/ Mark D. Buntin
---------------------------------
Mark D. Buntin
(Principal Financial Officer)
18