1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
Commission File Number 0-21298
ST. FRANCIS CAPITAL CORPORATION
-------------------------------
(Exact name of Registrant as Specified in its Charter)
WISCONSIN 39-1747461
- ----------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
13400 BISHOPS LANE, SUITE 350, BROOKFIELD, WISCONSIN 53005-6203
---------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(262) 787-8700
--------------
(Registrant's Telephone Number, Including Area Code)
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.
(1) Yes x No
--------- ----------
(2) Yes x No
--------- ----------
The number of shares outstanding of the issuer's common stock, $.01 par
value per share, was 9,402,121 at January 31, 2001.
Page 1 of 29 pages
2
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited):
Consolidated Statements of Financial Condition...................................................... 3
Consolidated Statements of Income................................................................... 4
Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income................. 5
Consolidated Statements of Cash Flows............................................................... 6
Notes to Unaudited Consolidated Financial Statements................................................ 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............... 18
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.......................................... 28
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings................................................................................... 28
ITEM 2. Changes In Securities and Use of Proceeds........................................................... 28
ITEM 3. Defaults Upon Senior Securities..................................................................... 28
ITEM 4. Submission of Matters to a Vote of Security Holders................................................. 28
ITEM 5. Other Information................................................................................... 28
ITEM 6. Exhibits and Reports on Form 8-K.................................................................... 28
SIGNATURES.................................................................................................... 29
2
3
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited)
- --------------------------------------------------------------------------------
December 31, September 30,
2000 2000
----------- -----------
(In thousands, except share data)
ASSETS
Cash and due from banks ........................................................ $ 40,053 $ 33,777
Federal funds sold and overnight deposits ...................................... 2,015 970
----------- -----------
Cash and cash equivalents ...................................................... 42,068 34,747
----------- -----------
Assets available for sale, at fair value:
Debt and equity securities ................................................. 215,091 213,848
Mortgage-backed and related securities ..................................... 762,410 777,918
Mortgage loans held for sale, at lower of cost or market ....................... 6,099 8,066
Securities held to maturity, at amortized cost:
Debt securities (fair value of $522 at September 30, 2000) ................. -- 510
Mortgage-backed and related securities (fair values of $24,844
and $26,479, respectively) ................................................. 25,109 27,088
Loans receivable, net .......................................................... 1,326,015 1,297,302
Federal Home Loan Bank stock, at cost .......................................... 31,001 30,418
Accrued interest receivable .................................................... 15,819 14,171
Foreclosed properties .......................................................... 196 241
Real estate held for investment ................................................ 26,979 27,145
Premises and equipment, net .................................................... 29,555 30,283
Other assets ................................................................... 27,348 31,346
----------- -----------
Total assets ................................................................... $ 2,507,690 $ 2,493,083
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits ....................................................................... $ 1,476,860 $ 1,471,881
Short term borrowings .......................................................... 789,441 758,581
Long term borrowings ........................................................... 76,056 106,095
Advances from borrowers for taxes and insurance ................................ 841 10,667
Accrued interest payable and other liabilities ................................. 20,162 14,936
----------- -----------
Total liabilities .............................................................. 2,363,360 2,362,160
----------- -----------
Commitments and contingencies .................................................. -- --
Shareholders' equity:
Preferred stock $.01 par value: Authorized, 6,000,000 shares;
None issued ................................................................ -- --
Common stock $.01 par value: Authorized 24,000,000 shares;
Issued, 14,579,240 shares;
Outstanding, 9,402,121 and 9,437,197 shares, respectively .................. 146 146
Additional paid-in-capital ..................................................... 88,799 88,799
Accumulated other comprehensive loss ........................................... (8,373) (18,923)
Treasury stock at cost (5,177,119 and 5,142,043 shares, respectively) .......... (69,985) (69,498)
Retained earnings, substantially restricted .................................... 133,743 130,399
----------- -----------
Total shareholders' equity ..................................................... 144,330 130,923
----------- -----------
Total liabilities and shareholders' equity ..................................... $ 2,507,690 $ 2,493,083
=========== ===========
See accompanying Notes to Unaudited Consolidated Financial Statements
3
4
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
- --------------------------------------------------------------------------------
Three months ended
December 31,
---------------------------
2000 1999
-------- --------
(In thousands, except per share data)
INTEREST AND DIVIDEND INCOME:
Loans ............................................................... $ 27,277 $ 23,643
Mortgage-backed and related securities............................... 13,681 14,910
Debt and equity securities........................................... 3,342 3,306
Federal funds sold and overnight deposits............................ 38 17
Federal Home Loan Bank stock......................................... 623 605
Trading account securities........................................... -- 27
-------- --------
Total interest and dividend income........................................ 44,961 42,508
-------- --------
INTEREST EXPENSE:
Deposits............................................................. 19,168 17,057
Advance and other borrowings......................................... 13,335 11,288
-------- --------
Total interest expense.................................................... 32,503 28,345
-------- --------
Net interest income before provision for loan losses...................... 12,458 14,163
Provision for loan losses................................................. 603 500
-------- --------
Net interest income....................................................... 11,855 13,663
-------- --------
OTHER OPERATING INCOME (EXPENSE), NET:
Loan servicing and loan related fees.................................. 682 575
Depository fees and service charges................................... 1,347 1,239
Securities gains (losses)............................................. 277 (16)
Gain on sales of loans................................................ 613 128
Insurance annuity and brokerage commissions........................... 288 344
Gain (loss) on foreclosed properties.................................. (11) 7
Income from real estate held for investment........................... 753 769
Other income.......................................................... 209 118
-------- --------
Total other operating income, net ........................................ 4,158 3,164
-------- --------
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and other employee benefits ............................ 4,941 10,228
Occupancy expenses, including depreciation .......................... 1,088 1,024
Furniture and equipment, including depreciation ..................... 1,070 1,038
Real estate held for investment expenses ............................ 759 786
Other general and administrative expenses ........................... 2,402 2,240
-------- --------
Total general and administrative expenses ................................ 10,260 15,316
-------- --------
Income before income tax expense and cumulative effect of change in
accounting principle ................................................ 5,753 1,511
-------- --------
Income tax expense ....................................................... 1,384 1,305
-------- --------
Income before cumulative effect of change in accounting principle ........ $ 4,369 $ 206
Cumulative effect of a change in accounting for derivative instruments and
hedging activities (net of income taxes of $55) .................... (84) --
-------- --------
Net income ............................................................... $ 4,285 $ 206
======== ========
Basic earnings per share:
Before cumulative effect of change in accounting principle ........... $ 0.46 $ 0.02
Cumulative effect of change in accounting principle .................. (0.01) --
-------- --------
$ 0.45 $ 0.02
======== ========
Diluted earnings per share:
Before cumulative effect of change in accounting principle ........... $ 0.46 $ 0.02
Cumulative effect of change in accounting principle .................. (0.01) --
-------- --------
$ 0.45 $ 0.02
======== ========
See accompanying Notes to Unaudited Consolidated Financial Statements
4
5
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity and
Comprehensive Income
(Unaudited)
- --------------------------------------------------------------------------------
Shares of
Common Additional Unearned
Stock Common Paid-In ESOP Retained
Outstanding Stock Capital Compensation Earnings
-----------------------------------------------------------------------
(In thousands, except Shares of Common Stock Outstanding and per share data)
Three months ended December 31, 1999
Balance at September 30, 1999 ......... 10,156,770 $ 146 $ 82,426 $ (2,260) $ 123,193
Net income ............................ -- -- -- -- 206
Change in unrealized loss on securities
available for sale ............... -- -- -- -- --
Reclassification adjustment for losses
realized in net income ........... -- -- -- -- --
Incomes taxes ......................... -- -- -- -- --
Comprehensive loss ....................
Cash dividend - $0.09 per share ....... -- -- -- -- (915)
Purchase of treasury stock ............ (28,967) -- -- -- --
Exercise of stock options, net ........ 19,854 -- -- -- (112)
Amortization of unearned compensation . -- -- 4,011 1,279 --
---------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 .......... 10,147,657 $ 146 $ 86,437 $ (981) $ 122,372
========== =========== =========== =========== ===========
Three months ended December 31, 2000
Balance at September 30, 2000 ......... 9,437,197 $ 146 $ 88,799 $ -- $ 130,399
Net income ............................ -- -- -- -- 4,285
Change in unrealized gain on securities
available for sale ............... -- -- -- -- --
Reclassification adjustment for gains
realized in net income ........... -- -- -- -- --
Incomes taxes ......................... -- -- -- -- --
Comprehensive income ..................
Cash dividend - $0.10 per share ....... -- -- -- -- (941)
Purchase of treasury stock ............ (35,076) -- -- -- --
---------- ----------- ----------- ----------- -----------
Balance at December 31, 2000 .......... 9,402,121 $ 146 $ 88,799 $ -- $ 133,743
========== =========== =========== =========== ===========
Accumulated
Other
Comprehensive
Income/ Treasury
(Loss) Stock Total
--------------------------------------------
(In thousands, except Shares of Common Stock
Outstanding and per share data)
Three months ended December 31, 1999
Balance at September 30, 1999 ......... $ (13,057) $ (58,934) $ 131,514
Net income ............................ -- -- 206
Change in unrealized loss on securities
available for sale ............... (7,541) -- (7,541)
Reclassification adjustment for losses
realized in net income ........... 16 -- 16
Incomes taxes ......................... 2,842 -- 2,841
-----------
Comprehensive loss .................... (4,477)
Cash dividend - $0.09 per share ....... -- -- (915)
Purchase of treasury stock ............ -- (536) (536)
Exercise of stock options, net ........ -- 265 153
Amortization of unearned compensation . -- -- 5,290
----------- ----------- -----------
Balance at December 31, 1999 .......... $ (17,740) $ (59,205) $ 131,029
=========== =========== ===========
Three months ended December 31, 2000
Balance at September 30, 2000 ......... $ (18,923) $ (69,498) $ 130,923
Net income ............................ -- -- 4,285
Change in unrealized gain on securities
available for sale ............... 16,668 -- 16,668
Reclassification adjustment for gains
realized in net income ........... (277) -- (277)
Incomes taxes ......................... (5,841) -- (5,841)
-----------
Comprehensive income .................. 14,835
Cash dividend - $0.10 per share ....... -- -- (941)
Purchase of treasury stock ............ -- (487) (487)
----------- ----------- -----------
Balance at December 31, 2000 .......... $ (8,373) $ (69,985) $ 144,330
=========== =========== ===========
See accompanying Notes to Unaudited Consolidated Financial Statements
5
6
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flow
(Unaudited)
- --------------------------------------------------------------------------------
Three months ended
December 31,
----------------------
2000 1999
-------- --------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................................... $ 4,285 $ 206
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses ..................................................... 603 500
Depreciation, accretion and amortization ...................................... 1,718 2,114
Deferred income taxes ......................................................... (3,286) 1,209
Securities (gains) losses ..................................................... (277) 16
Originations of loans held for sale ........................................... (44,484) (9,092)
Proceeds from sales of loans held for sale .................................... 47,064 15,007
ESOP expense .................................................................. -- 5,290
Gain on sale of loans ......................................................... (613) (128)
Other, net .................................................................... 1,785 2,436
-------- --------
Net cash provided by operating activities ........................................... 6,795 17,558
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal repayments on mortgage-backed and related securities held to maturity.. 1,979 5,195
Proceeds from sales of mortgage-backed securities available for sale ............ 6,282 12,001
Principal repayments on mortgage-backed securities available for sale ........... 21,164 36,494
Proceeds from sales of debt and equity securities available for sale ............ 1,766 1,644
Proceeds from maturities of debt and equity securities available for sale ....... 1,975 2,635
Purchases of Federal Home Loan Bank stock ....................................... (583) (1,495)
Purchase of loans ............................................................... (26,076) (14,985)
Increase in loans, net of loans held for sale ................................... (2,637) (96,650)
Increase in real estate held for investment ..................................... (168) (513)
Purchases of premises and equipment, net ........................................ (49) (402)
-------- --------
Net cash provided (used) in investing activities .................................... 3,653 (56,076)
-------- --------
See accompanying Notes to Unaudited Consolidated Financial Statements
6
7
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flow, cont.
(Unaudited)
- --------------------------------------------------------------------------------
Three months ended
December 31,
----------------------
2000 1999
-------- --------
(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits ................................................. 7,306 60,806
Proceeds from advances and other borrowings .............................. 248,261 436,178
Repayments on advances and other borrowings .............................. (269,335) (419,842)
Increase (decrease) in securities sold under agreements to repurchase .... 21,895 (13,561)
Decrease in advances from borrowers for taxes and insurance .............. (9,826) (7,966)
Dividends paid ........................................................... (941) (915)
Stock option transactions ................................................ -- 153
Purchase of treasury stock ............................................... (487) (536)
--------- ---------
Net cash provided (used) by financing activities ............................. (3,127) 54,317
--------- ---------
Increase in cash and cash equivalents ........................................ 7,321 15,799
Cash and cash equivalents:
Beginning of period .................................................... 34,747 32,562
--------- ---------
End of period .......................................................... $ 42,068 $ 48,361
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ............................................................... $ 29,821 $ 26,173
Income taxes ........................................................... 3,001 --
Supplemental schedule of noncash investing and financing activities:
The following summarizes significant noncash investing and financing
activities:
Mortgage loans secured as mortgage-backed securities ................... $ -- $ 6,568
Transfer from loans to foreclosed properties ........................... -- 367
Transfer of mortgage loans to mortgage loans held for sale ............. 9,269 3,041
See accompanying Notes to Unaudited Consolidated Financial Statements
7
8
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
(1) Principles of Consolidation
The consolidated financial statements include the accounts and balances
of St. Francis Capital Corporation (the "Company"), its wholly-owned
subsidiary, St. Francis Bank, F.S.B. (the "Bank"), and the Bank's
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(2) Basis of Presentation
The accompanying interim consolidated financial statements are
unaudited and do not include information or footnotes necessary for a
complete presentation of financial condition, results of operations or
cash flows in accordance with generally accepted accounting principles.
However, in the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of the
consolidated financial statements have been included. Operating results
for the three month period ended December 31, 2000 are not necessarily
indicative of the results which may be expected for the entire year
ending September 30, 2001. For further information refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended September 30,
2000.
Certain previously reported balances have been reclassified to conform
with the 2001 presentation.
(3) Commitments and Contingencies
The Company is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to
extend credit and involve, to varying degrees, elements of credit and
interest rate risk in excess of the amounts recognized in the
consolidated financial statements. The contractual or notional amounts
of those instruments reflect the extent of involvement the Company has
in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for the commitments to
extend credit is represented by the contractual notional amount of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for instruments that
are reflected in the consolidated financial statements.
The contractual or notional amounts of off-balance sheet financial
instruments are as follows:
Contractual or Notional Amount(s)
December 31, September 30,
2000 2000
------------- -------------
(In thousands)
Commitments to extend credit:
Fixed-rate loans..................................... $ 7,742 $ 4,790
Variable-rate loans.................................. 28,018 42,293
Mortgage loans sold with recourse........................ 25,645 28,148
Guarantees under IRB issues.............................. 32,570 32,582
Interest rate swap agreements (notional amount).......... 390,000 400,000
Unused and open-ended lines of credit:
Consumer.............................................. 203,484 199,515
Commercial............................................. 60,650 60,408
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates of 45 days
or less or other termination clauses and may require a fee. Fixed rate
loan commitments as of December 31, 2000 have interest rates ranging
from 7.125% to 9.5%. Because some commitments expire without being
drawn upon, the total commitment amounts do not necessarily represent
cash requirements. The Company evaluates the creditworthiness of each
customer on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Company upon extension of credit is based on
8
9
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
management's credit evaluation of the counterparty. The Company
generally extends credit on a secured basis. Collateral obtained
consists primarily of one- to four-family residences and other
residential and commercial real estate.
Loans sold with recourse represent one- to four-family mortgage loans
that are sold to secondary market agencies, primarily Federal National
Mortgage Association ("FNMA"), with the servicing of these loans being
retained by the Company. The Company's exposure on loans sold with
recourse is the same as if the loans remained in the Company's loan
portfolio. The Company receives a larger servicing spread on those
loans being serviced than it would if the loans had been sold without
recourse.
The Company has entered into agreements whereby, for an initial and
annual fee, it will guarantee payment on letters of credit backing
industrial revenue bond issues ("IRB"). The IRBs are issued by
municipalities to finance real estate owned by a third party. Potential
loss on a guarantee is the notional amount of the guarantee less the
value of the real estate collateral. At December 31, 2000, appraised
values of the real estate collateral exceeded the amount of the
guarantees.
Interest rate swap agreements generally involve the exchange of fixed
and variable rate interest rate payments without the exchange of the
underlying notional amount on which the interest rate payments are
calculated. The notional amounts of these agreements represent the
amounts on which interest payments are exchanged between the
counterparties. The notional amounts do not represent direct credit
exposures. The Company is exposed to credit-related losses in the event
of nonperformance by the counterparties on interest rate payments, but
does not expect any counterparty to fail to meet their obligations. The
fixed pay-floating receive agreements were entered into as hedges on
the interest rates on debt securities. The fixed receive-floating pay
agreements were entered into as hedges of the interest rates on fixed
rate certificates of deposit. Interest receivable or payable on
interest rate swaps is recognized using the accrual method. The use of
interest rate swaps enables the Company to synthetically alter the
repricing characteristics of designated interest-bearing assets and
liabilities.
At December 31, 2000, the Company had a $10 million fixed pay-floating
receive agreement with a maturity date of 2001. The agreement has a
fixed interest rate of 7.05% and a variable interest rate of 7.56%. At
December 31, 2000, the Company had $380 million in fixed
receive-floating pay agreements with maturity dates ranging from 2001
to 2009 and call dates ranging from 2000 to 2001. The agreements have
fixed interest rates ranging from 5.85% to 7.13% and variable interest
rates ranging from 5.58% to 6.69%.
The unused and open consumer lines of credit are conditional
commitments issued by the Company for extensions of credit such as home
equity, auto, credit card, or other similar consumer-type financing.
Furthermore, the unused and open commercial lines of credit are also
conditional commitments issued by the Company for extensions of credit
such as working capital, agricultural production, equipment or other
similar commercial type financing. The credit risk involved in
extending these lines of credit is essentially the same as that
involved in extending loan facilities to customers. Collateral held for
these commitments may include, but may not be limited to, real estate,
investment securities, equipment, accounts receivable, inventory and
Company deposits.
9
10
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
(4) Securities
The Company's securities available for sale and held to maturity at
December 31, 2000 were as follows:
SECURITIES AVAILABLE FOR SALE
----------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains (Losses) Value
------------ ------------ ------------- -------------
(In thousands)
DEBT AND EQUITY SECURITIES:
U. S. Treasury obligations and obligations of
U.S. Government Agencies................ $ 216,163 $ 22 $ (1,694) $ 214,491
State and municipal obligations.............. 510 12 - 522
Marketable equity securities................. 78 - - 78
------------ ------------ ------------- -------------
TOTAL DEBT AND EQUITY SECURITIES............. $ 216,751 $ 34 $ (1,694) $ 215,091
============ ============ ============= =============
MORTGAGE-BACKED & RELATED SECURITIES:
Participation certificates:
FHLMC..................................... $ 685 $ 4 $ - $ 689
FNMA...................................... 28,961 - (287) 28,674
Private issue............................. 41,719 90 (710) 41,099
REMICs:
FHLMC..................................... 125,908 99 (3,296) 122,711
FNMA...................................... 24,780 7 (303) 24,484
Private issue............................. 552,997 161 (8,441) 544,717
CMO residual................................. 36 - - 36
------------ ------------ ------------- -------------
TOTAL MORTGAGE-BACKED AND RELATED
SECURITIES............................. $ 775,086 $ 361 $(13,037) $ 762,410
============ ============ ============= =============
SECURITIES HELD TO MATURITY
----------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains (Losses) Value
------------ ------------ ------------- -------------
(In thousands)
MORTGAGE-BACKED & RELATED SECURITIES:
REMICs:
Private issue............................. $ 25,109 $ - $ (265) $ 24,844
------------ ------------ ------------- -------------
TOTAL MORTGAGE-BACKED AND RELATED
SECURITIES............................. $ 25,109 $ - $ (265) $ 24,844
============ ============ ============= =============
During the three month periods ended December 31, 2000 and 1999, gross
proceeds from the sale of securities available for sale totaled
approximately $8.0 million and $13.6 million, respectively. The gross
realized gains on such sales totaled approximately $122,000 and $30,000
for the three month periods ended December 31, 2000 and 1999,
respectively. The gross realized losses on such sales totaled
approximately zero and $54,000 for the three month periods ended
December 31, 2000 and 1999, respectively.
At December 31, 2000, $481.5 million of mortgage-related securities
were pledged as collateral for Federal Home Loan Bank ("FHLB")
advances.
10
11
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
(5) Loans
Loans receivable are summarized as follows:
December 31, September 30,
2000 2000
-----------------------------------------------------------------------------------------------------------
(In thousands)
First mortgage - one- to four-family................................ $ 406,131 $ 404,505
First mortgage - residential construction........................... 62,354 62,260
First mortgage - multi-family....................................... 125,130 130,002
Commercial real estate.............................................. 326,938 306,778
Home equity......................................................... 198,627 188,349
Commercial and agriculture.......................................... 152,812 152,526
Consumer secured by real estate..................................... 80,283 80,881
Interim financing and consumer loans................................ 13,827 13,307
Indirect auto....................................................... 26,930 30,722
Education........................................................... 1,841 1,615
--------------- ----------------
Total gross loans............................................... 1,394,873 1,370,945
--------------- ----------------
Less:
Loans in process................................................ 51,257 54,679
Unearned insurance premiums..................................... 183 194
Deferred loan and guarantee fees................................ (122) (359)
Purchased loan discount......................................... 629 659
Allowance for loan losses....................................... 10,812 10,404
--------------- ----------------
Total deductions................................................ 62,759 65,577
--------------- ----------------
Total loans receivable.............................................. 1,332,114 1,305,368
Less: First mortgage loans held for sale........................... 6,099 8,066
--------------- ----------------
Loans receivable, net............................................... $ 1,326,015 $ 1,297,302
=============== ================
11
12
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
(6) Allowance For Loan Losses
Activity in the allowance for loan losses is summarized as follows:
Three months ended
December 31,
----------------------------------
2000 1999
--------------- ----------------
(In thousands)
Beginning Balance.................................................... $ 10,404 $ 9,356
Charge-offs:
Real estate - mortgage............................................. (27) (34)
Commercial loans................................................... (93) -
Home equity loans.................................................. (35) (30)
Consumer........................................................... (50) (51)
--------------- ----------------
Total charge-offs.................................................... (205) (115)
--------------- ----------------
Recoveries:
Real estate - mortgage............................................. - -
Commercial loans................................................... 2 -
Home equity loans.................................................. - 10
Consumer........................................................... 8 13
--------------- ----------------
Total recoveries..................................................... 10 23
--------------- ----------------
Net charge-offs...................................................... (195) (92)
--------------- ----------------
Provision............................................................ 603 500
--------------- ----------------
Ending balance....................................................... $ 10,812 $ 9,764
=============== ================
(7) Earnings Per Share
Basic earnings per share of common stock for the three month periods
ended December 31, 2000 and 1999, have been determined by dividing net
income for the period by the weighted average number of shares of
common stock outstanding during the period. Diluted earnings per share
of common stock for the three month periods ended December 31, 2000 and
1999, have been determined by dividing net income for the period by the
weighted average number of shares of common stock outstanding during
the period adjusted for the dilutive effect of outstanding stock
options. Book value per share of common stock at December 31, 2000 and
September 30, 2000, have been determined by dividing total
shareholders' equity by the number of shares of common stock
outstanding during the period adjusted for the dilutive effect of
outstanding stock options at the respective dates. Stock options are
regarded as potential common stock and are, therefore, considered in
per share calculations if not considered to be antidilutive. Total
shares outstanding for the three month period ended December 31, 1999
for earnings per share calculation purposes have been reduced by the
Employee Stock Ownership Plan ("ESOP") shares that had not been
released. The Company incurred an additional expense in the three month
period ended December 31, 1999 related to the voluntary acceleration of
loan principal owed to the Company's ESOP, which accounted for a charge
to diluted earnings per share of approximately $0.43.
12
13
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
The computation of earnings per common share is as follows:
Three months ended
December 31,
---------------------------------
2000 1999
------------- ------------
Income before cumulative effect of change in
accounting principle .............................................. $ 4,369,000 $ 206,000
Cumulative effect of change in accounting principle ................... (84,000) --
------------- ------------
Net income for the period ............................................. $ 4,285,000 $ 206,000
============= ============
Common shares issued .................................................. 14,579,240 14,579,240
Weighted average treasury shares ...................................... 5,165,991 4,421,958
Weighted average unallocated ESOP shares .............................. -- 306,957
------------- ------------
Weighted average common shares
outstanding during the period ..................................... 9,413,249 9,850,325
Effect of dilutive stock options outstanding .......................... 79,366 368,420
------------- ------------
Diluted weighted average common shares
outstanding during the period ..................................... 9,492,615 10,218,745
============= ============
Basic earnings per share:
Before cumulative effect of change in accounting principle ........ $ 0.46 $ 0.02
Cumulative effect of change in accounting principle ............... (0.01) --
------------- ------------
$ 0.45 $ 0.02
============= ============
Diluted earnings per share:
Before cumulative effect of change in accounting principle ........ $ 0.46 $ 0.02
Cumulative effect of change in accounting principle ............... (0.01) --
------------- ------------
$ 0.45 $ 0.02
============= ============
The computation of book value per common share is as follows:
December 31, September 30,
2000 2000
------------- -------------
Common shares outstanding at the end of the period ..................... 9,402,121 9,437,197
Incremental shares relating to dilutive stock
options outstanding at the end of the period ........................ 76,856 136,313
------------- ------------
9,478,977 9,573,510
============= ============
Total shareholders' equity at the end of the period .................... $ 144,330,000 $130,923,000
Book value per common share ............................................ $ 15.23 $ 13.68
13
14
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
(8) Stock Option Plans
The Company has adopted stock option plans for the benefit of directors
and officers of the Company. The option exercise price cannot be less
than the fair value of the underlying common stock as of the date of
the option grant, and the maximum term cannot exceed ten years. Stock
options awarded to directors may be exercised at any time or on a
cumulative basis over varying time periods, provided the optionee
remains a director of the Company. The stock options awarded to
officers are exercisable on a cumulative basis over varying time
periods, depending on the individual option grant terms, which may
include provisions for acceleration of vesting periods.
At December 31, 2000, 7,200 shares were reserved for future grants.
Further information concerning the options is as follows:
Three months ended December 31,
--------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------
Average Average
Exercise Exercise
Options Price Options Price
--------------------------------------------------------------------
Outstanding at beginning of period........ 1,700,148 $15.78 1,565,682 $15.70
Granted................................... - - 5,000 22.00
Canceled.................................. (2,400) 21.31 - -
Exercised................................. - - (19,854) 7.67
-------------- ---------------- ------------- -----------------
Outstanding at end of period.............. 1,697,748 $15.77 1,550,828 $15.83
============== ================ ============= =================
Options exercisable....................... 819,625 $5.00 - 22.00 731,341 $5.00 - 19.38
============== ================ ============= =================
(9) Income Taxes
Actual income tax expense differs from the "expected" income tax
expense computed by applying the statutory Federal corporate tax rate
to income before income tax expense, as follows:
------------------------------------------------------------------------------------------------------
Three months ended
December 31,
------------------------------------------------------------------------------------------------------
2000 1999
------------------------------------------------------------------------------------------------------
(In thousands)
Federal income tax expense at statutory rate of 35%.................. $ 1,965 $ 529
State income taxes, net of Federal income tax benefit................ 2 11
Tax exempt interest.................................................. (26) (31)
Non-deductible compensation.......................................... - 1,404
Acquisition intangible amortization.................................. 57 54
Affordable housing credits........................................... (652) (650)
Other, net........................................................... 38 (12)
------------- -------------
$ 1,384 $ 1,305
============= =============
Included in other assets is a deferred tax asset of $4.2 million and
$7.1 million at December 31, 2000 and September 30, 2000.
14
15
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
(10) Derivative and Hedging Activities
Effective October 1, 2000, the Company adopted Financial Accounting
Statement 133, "Accounting for Derivative Instruments and Hedging
Activities", which establishes new rules for the recognition and
measurement of derivatives and hedging activities. The Company utilizes
derivative hedging instruments in the course of its asset/liability
management. The hedging instruments primarily used by the Company are
interest rate swap agreements which are used to convert fixed-rate
payments or receipts to variable-rate payments or receipts and thus
hedge the Company's fair market value of the item being hedged. The
items being hedged generally expose the Company to variability in fair
value in rising or declining interest rate environments. In converting
the fixed payment or receipt to a variable payment or receipt, the
interest rate swaps effectively reduce the variability of the fair
market value of the items being hedged.
The Company utilizes interest rate swaps to hedge the fair value of
several financial instruments on the balance sheet including brokered
certificates of deposit ("CD's"), retail certificates of deposit and
investment securities. Hedges on brokered CD's account for the large
majority of the Company's hedging activity, with hedges on other items
being relatively nominal. The interest rate swaps that hedge brokered
CD's are matched with the CD as to final maturity, interest payment
dates and call features. The interest rate swaps are a floating
pay-fixed receive instrument and as such, they convert the fixed rate
payment on the brokered CD's to a floating rate and thus hedge the fair
value of the brokered CD's from changes in interest rates.
The Company measures the effectiveness of its' hedges on a periodic
basis. Any difference between the fair value change of the hedge versus
the fair value change of the hedged item is considered to be the
"ineffective" portion of the hedge. The ineffective portion of the
hedge is recorded as an increase or decrease in the related income
statement classification of the item being hedged. For example, the
ineffectiveness of a brokered CD hedge would be recorded as an
adjustment to interest expense on deposits. If the ineffectiveness of a
hedge exceeds certain levels as described in the accounting standard,
the derivative would no longer be eligible for hedge treatment and
future changes in fair value of the hedge would be recorded on the
income statement.
The Company's commitments to originate mortgage loans held-for-sale is
considered a derivative under the accounting standards. As such, the
change in fair value of such commitments, are recorded as an adjustment
to the gains on the sale of loans. Since most loan commitments are sold
forward by the Company, the change in fair value on loan commitments is
expected to be minimal.
As of the adoption date of Statement 133, the Company had two interest
rate swap agreements that were not considered hedges under the
accounting standard. Both agreements were terminated during the quarter
ended December 31, 2000. The fair value of the agreements as of October
1, 2000 is included in the cumulative effect of an accounting change
and the change in fair value during the quarter is included in
securities gains (losses) in the income statement.
Under Statement 133, the Company was allowed a one-time opportunity to
reclassify investment assets from held-to-maturity to available-for
sale. The Company reclassified all municipal securities held upon the
adoption of FAS 133 as available-for-sale. The amortized cost and fair
vale of the securities transferred was $510,000 and $522,000.
Upon adoption of Statement 133, the Company recorded the cumulative
effect of an accounting change in an amount equal to the accounting
effects of the statement as of the beginning of the fiscal year. The
cumulative effect, net of taxes, was a decrease in net income of
$84,000.
During the quarter ended December 31, 2000, the Company recorded the
effects of the ineffectiveness of any hedge transaction or the change
in fair value on non-hedge derivatives as part of the income statement
line item pertaining to each item. The after-tax effect of the changes
was an increase in net income of $78,000. The individual changes in
value resulted in an increase of $124,000 in interest income on debt
and equity securities, an increase of $103,000 in interest expense on
deposits, an increase of $112,000 in securities gains (losses), a
decrease of $4,000 in gain on sale of loans and an increase of $51,000
in income tax expense.
15
16
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
(11) Current Accounting Developments
The FASB issued SFAS No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities"--a replacement
of FASB Statement No. 125. This statement provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. Those standards are based on consistent
application of a financial-components approach that focuses on control.
Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control
has been surrendered, and derecognizes liabilities when extinguished.
This Statement provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are
secured borrowings. This Statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001. This Statement is effective for
recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal years
ending after December 15, 2000. This Statement is to be applied
prospectively with certain exceptions. Therefore, earlier or
retroactive application of this Statement is not permitted. Adoption of
this standard is not expected to materially effect the results of
operations or financial position of the Company.
(12) Segment Information
The Company's operations include four strategic business segments:
Retail Banking, Commercial Banking, Mortgage Banking and Investments.
Financial performance is primarily based on the individual segments'
direct contribution to Company net income. The segments do not include
the operations of the Company as a holding company, nor the operations
of the Bank's operating subsidiaries. Capital is not allocated to the
segments and thus net interest income related to the free funding
associated with capital is not included in the individual segments. The
Company only charges the segments with direct expenses. Costs
associated with administrative and centralized back-office support
areas of the Bank are not allocated to the segments. Income taxes are
allocated to the segments based on the Bank's effective tax rate prior
to the consolidation with its affordable housing subsidiary.
The Retail Banking segment consists of the Bank's retail deposits,
branch and ATM network, consumer lending operations, annuity and
brokerage services and call center. The segment includes a much higher
level of interest-bearing liabilities than earning assets. The Company
views this segment as a significant funding vehicle for the other
lending segments. The Company's transfer pricing model has the effect
of viewing this segment as a comparison to the cost of wholesale funds.
The Commercial Banking segment consists of the Bank's commercial,
commercial real estate and multifamily lending operations. It also
includes the lending aspects of the Company's affordable housing
subsidiary.
The Mortgage Banking segment consists of the Bank's single-family
mortgage lending operation. Single-family lending consists of three
primary operations: portfolio lending, lending for sale in the
secondary market and loan servicing.
The Investment segment consists of the Company's portfolio of
mortgage-backed and related securities, its debt and equity securities
and other short-term investments. This segment also includes the
Company's wholesale sources of funding including FHLB advances,
brokered certificates of deposits, reverse repurchase agreements and
federal funds purchased.
16
17
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements, continued
----------------------------------------- -------------- -------------- --------------- -------------- ---------------
BUSINESS SEGMENTS Retail Commercial Mortgage Total
Banking Banking Banking Investments Segments
----------------------------------------- -------------- -------------- --------------- -------------- ---------------
(In thousands)
THREE MONTHS ENDED DECEMBER 31, 2000 $ 6,473 $ 3,370 $ 1,674 $ 528 $ 12,045
Net interest income ..................... 221 261 120 -- 603
Provision for loan losses ............... 1,819 275 689 141 2,925
Other operating income .................. 5,227 649 839 230 6,945
General and administrative expenses ..... 632 608 313 98 1,650
Income taxes ............................ -------- -------- ----------- ----------- ----------
$ 2,212 $ 2,127 $ 1,092 $ 342 $ 5,773
Segment profit .......................... ======== ======== =========== =========== ==========
$319,172 $583,451 $ 434,085 $ 1,070,910 $2,407,618
Segment average assets .................. ======== ======== =========== =========== ==========
THREE MONTHS ENDED DECEMBER 31, 1999 $ 5,828 $ 3,625 $ 1,774 $ 2,042 $ 13,269
Net interest income ..................... 197 237 66 -- 500
Provision for loan losses ............... 1,755 175 395 (20) 2,305
Other operating income .................. 5,156 831 997 189 7,173
General and administrative expenses ..... 752 923 373 619 2,667
Income taxes ............................ -------- -------- ----------- ----------- ----------
$ 1,478 $ 1,809 $ 733 $ 1,214 $ 5,234
Segment profit .......................... ======== ======== =========== =========== ==========
Segment average assets .................. $309,853 $517,113 $ 368,880 $ 1,197,636 $2,393,482
======== ======== =========== =========== ==========
RECONCILEMENT OF SEGMENT INFORMATION TO FINANCIAL STATEMENTS
Three months ended December 31,
2000 1999
------------------------------------------------------------------------------------- --------------- ----------------
NET INTEREST INCOME AND OTHER OPERATING INCOME
Total for segments............................................................... $ 14,970 $ 15,574
Unallocated transfer pricing credit (primarily on capital)....................... 1,340 1,469
Income from affordable housing subsidiary........................................ 753 769
Holding company interest expense................................................. (725) (317)
Elimination of intercompany interest income...................................... (278) (285)
Other............................................................................ 556 117
--------------- ----------------
Consolidated total revenue....................................................... $ 16,616 $ 17,327
=============== ================
PROFIT
Total for segments............................................................... $ 5,773 $ 5,234
Unallocated transfer pricing credit (primarily on capital)....................... 804 881
Unallocated administrative and centralized support costs (a)..................... (1,275) (1,447)
Holding company net loss......................................................... (543) (230)
Elimination of intercompany interest income...................................... (167) (171)
Affordable housing tax credits................................................... 652 650
Additional ESOP expense not allocated to segments................................ - (4,385)
Other............................................................................ (959) (326)
--------------- ----------------
Consolidated net income.......................................................... $ 4,285 $ 206
=============== ================
AVERAGE ASSETS
Total for segments............................................................... $ 2,407,618 $ 2,393,482
Elimination of intercompany loans................................................ (13,338) (13,426)
Other assets not allocated....................................................... 96,053 138,428
--------------- ----------------
Consolidated average assets...................................................... $ 2,490,333 $ 2,518,484
=============== ================
----------------------
(a) After-tax effect of $2.4 million and $2.1 million of general and
administrative expenses for the three month periods ended December
31, 2000 and 1999, respectively.
17
18
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD-LOOKING STATEMENTS
This Report contains certain forward looking statements with respect to the
financial condition, results of operation and business of St. Francis Capital
Corporation (the "Company"). The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made, and to advise readers that various factors could affect the
Company's financial performance and could cause actual results for future
periods to differ materially from those anticipated or projected. Such factors
include, but are not limited to: (i) general market rates, (ii) general economic
conditions, (iii) legislative/regulatory changes, (iv) monetary and fiscal
policies of the U.S. Treasury and Federal Reserve, (v) changes in the quality or
composition of the Company's loan and investment portfolios, (vi) demand for
loan products, (vii) deposit flows, (viii) competition, (ix) demand for
financial services in the Company's markets, and (x) changes in accounting
principles, policies or guidelines.
The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.
FINANCIAL CONDITION
The Company's total assets increased $14.6 million to $2.51 billion at December
31, 2000 from $2.49 billion at September 30, 2000. The primary area of growth
was an increase of $26.7 million increase in loans receivable, including loans
held for sale, offset by a decline of $15.5 million in mortgage-backed and
related securities available for sale. Funding the increase in assets was an
increase in deposits of $5.0 million. Due to a combination of earnings for the
quarter and improvement in the Company's unrealized market value on its'
available for sale securities portfolio, total capital increased to $144.3
million at December 31, 2000 compared with $130.9 million at September 30, 2000.
The Company's ratio of shareholders' equity to total assets was 5.76% at
December 31, 2000, compared to 5.25% at September 30, 2000. The Company's fully
dilutive book value per share was $15.23 at December 31, 2000, compared to
$13.68 at September 30, 2000.
The restructuring of the balance sheet continues to be one of the strategic
initiatives of the Company. As has been the case over the past six quarters, the
Company continues to reduce the size of its mortgage-backed securities and
investment securities portfolios as repayments occur. Funds received from these
repayments will be used to grow and diversify the Company's loan portfolio and
to reduce the Company's wholesale debt. This restructuring is part of a
long-range plan to make the Company's balance sheet composition more
representative of "community banks" with a greater percentage of assets coming
from our loan portfolio vs. investments. This restructuring is expected to
improve margins due to the generally higher interest rates on loan assets.
Loans receivable, including mortgage loans held for sale, increased $26.7
million to $1.33 billion at December 31, 2000 from $1.31 billion at September
30, 2000. In addition to the Company's efforts to grow its loan portfolio, the
Company has continued to diversify its loan portfolio and as a result, the
increase included increases in commercial real estate and home equity lending.
For the three month period ended December 31, 2000, the Company originated
approximately $143.3 million in loans, as compared to $182.6 million for the
same period in the prior year. Of the $143.3 million in loans originated, $20.6
million were in commercial loans, $44.8 million were in consumer and interim
financing loans and $77.9 million were in first mortgage loans. Despite the
decrease in originations, the loan portfolio continues to grow due to a decline
in repayments of principal. For the three month period ended December 31, 2000,
the Company purchased $26.1 million of one- to four-family loans, as compared to
$15.5 million for the same period in the prior year.
Mortgage-backed and related securities, including securities available for sale,
decreased $17.5 million to $787.5 million at December 31, 2000 from $805.0
million at September 30, 2000. The Company has not purchased mortgage-backed
securities during the current fiscal year. As noted above, in connection with
the balance sheet restructuring program, in fiscal 2000, the Company began
reducing the size of its mortgage-backed securities portfolios which management
anticipates will continue to be an ongoing strategic initiative of the Company
in fiscal 2001. As part of this effort, the Company has reduced the size of the
mortgage-backed securities and investment securities portfolios and used the
funds generated from the repayment of principal to fund the growth in the
Company's loan portfolio.
Deposits increased $5.0 million to $1.477 billion at December 31, 2000 from
$1.472 billion at September 30, 2000. The increase in deposits was due primarily
to increases of $10.1 million in certificates of deposit and $4.9 million in
money market demand account deposits offset by decreases of $4.2 million in
checking accounts and $5.8 million in passbook accounts. At December 31, 2000,
the Company had approximately $332.7 million in brokered certificates of deposit
compared with $341.3 million at
18
19
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Item 2: Management's Discussion and Analysis, continued
September 30, 2000. The brokered deposits generally consist of terms from three
months to ten years and include certificates that are callable at the option of
the Company. As part of a continuing strategy, the Company continues to offer
deposit products that compete more effectively with money market funds and other
non-financial deposit products. Such accounts have generally changed the
Company's traditional mix of deposit accounts to one that is more adjustable to
current interest rates such as the money market demand account. This has
resulted in passbook and certificate of deposit accounts representing a lower
percentage of the Company's total deposit portfolio. The level of deposit flows
during any given period is heavily influenced by factors such as the general
level of interest rates as well as alternative yields that investors may obtain
on competing instruments, such as money market mutual funds. The Company
believes that the likelihood for retention of brokered certificates of deposit
is more a function of the rate paid on such accounts, as compared to retail
deposits which may be established due to branch location or other undefined
reasons.
Advances and other borrowings decreased by $821,000 to $865.5 million at
December 31, 2000 from $864.7 million at September 30, 2000. Short term
borrowings increased $30.9 million to $789.4 million at December 31, 2000,
compared to $758.6 million at September 30, 2000. At December 31, 2000, $425.0
million of the short term borrowings were callable FHLB advances with maturities
from five to ten years and are callable by the FHLB during the next fiscal year
and quarterly thereafter. Long term borrowings decreased $30.0 million to $76.1
million at December 31, 2000, compared to $106.1 million at September 30, 2000.
At December 31, 2000, the Company had an additional borrowing capacity of $63.4
million available from the FHLB.
At December 31, 2000, the Company had $390.0 million in interest rate swaps
outstanding compared with $400.0 million at September 30, 2000. The swaps are
designed to offset the changing interest payments of some of the Company's
brokered certificates. Fixed receive-floating pay swaps totaled $380.0 million
at December 31, 2000 and were entered into to hedge interest rates on fixed rate
certificates of deposits. Fixed receive-floating pay swaps will provide for a
lower interest expense (or interest income) in a falling rate environment while
adding to interest expense in a rising rate environment. Fixed pay-floating
receive swaps totaled $10.0 million at December 31, 2000 and were entered into
as hedges on the interest rates on investment securities. Fixed pay-floating
receive swaps will provide for a lower interest expense (or interest income) in
a rising rate environment while adding to interest expense in a falling rate
environment. During the three month period ended December 31, 2000, the Company
recorded a net reduction of interest expense of $200,000 as a result of the
Company's interest rate swap agreements compared with a net reduction of
$611,000 for the three month period ended December 31, 1999.
RESULTS OF OPERATIONS
NET INCOME. Net income for the three month period ended December 31, 2000 was
$4.3 million compared with $206,000 for the three month period ended December
31, 1999. The prior year results included an after-tax effect of $4.4 million
due to the voluntary acceleration of loan principal repayment to the Company's
Employee Stock Ownership Plan ("ESOP"). The ESOP loan was repaid in full, and
the ongoing expense eliminated. The current period included a reduction in net
income of $84,000 for the cumulative effect of a change in accounting principle
resulting from the adoption of Financial Accounting Statement Number 133,
"Accounting for Derivative Instruments and Hedging Activities." Net income for
the three month period ended December 31, 2000 increased primarily due to the
ESOP expense in the prior period and due to increases in other operating income
offset by a decrease in net interest income.
The following table shows the return on average assets and return on average
equity ratios for each period:
Three months ended
December 31,
---------------------------------------
2000 1999
------------------ -----------------
Return on average assets........................................... 0.68% 0.03%
Return on average equity........................................... 12.59% 0.62%
NET INTEREST INCOME. Net interest income before provision for loan losses
decreased $1.7 million or 12.0% to $12.5 million for the three month period
ended December 31, 2000 compared to $14.2 million for the same period in the
prior year. The decrease in net interest income for the three month period ended
December 31, 2000 was primarily due to a decrease in the net interest margin to
2.06% from 2.35% in the prior year, partially offset by an increase of $3.5
million in average earning assets. The decrease in net interest margin is
largely attributable to the generally higher interest rate environment during
most of calendar year 2000 compared with the prior year.
19
20
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Item 2: Management's Discussion and Analysis, continued
The recent decline in market interest rates is expected to positively impact the
Company's net interest margin over the course of the fiscal year. While
decreases in market rates have a delayed effect on the Company's net interest
margin (as it takes time for assets and liabilities to reprice), management
currently anticipates that the Company's net interest income will improve over
the remainder of the fiscal year.
Total interest income increased $2.5 million or 5.8% to $45.0 million for the
three month period ended December 31, 2000 compared to $42.5 million at December
31, 1999. The increase in interest income was primarily the result of increases
in interest on loans partially offset by decreases in interest on
mortgage-backed and related securities. The increase in interest income on loans
was the result of an increase in the average balance of loans to $1.33 billion
from $1.18 billion for the three month periods ended December 31, 2000 and 1999,
respectively, in conjunction with an increase in the average yield on loans to
8.15% from 7.95% for the same periods. The increase in the average balance of
loans is due primarily to the Company's recent efforts to grow and diversify its
loan portfolio, and in particular, emphasize commercial, consumer and home
equity lending. The decrease in interest income on mortgage-backed and related
securities was due to a decrease in the average balance of such securities to
$820.0 million from $952.4 million for the three month period ended December 31,
2000 and 1999, respectively, partially offset by an increase in the average
yield on such securities to 6.62% from 6.23% for the same periods.
Total interest expense increased $4.2 million or 14.7% to $32.5 million for the
three month period ended December 31, 2000, compared to $28.3 million for the
three month period ended December 31, 1999. The increase in interest expense was
the result of increases in the cost of deposits and advances and other
borrowings partially offset by decreases in the average balances. The average
cost of deposits increased to 5.46% from 4.71% for the three month periods ended
December 31, 2000 and 1999, respectively. The average balances of deposits
decreased to $1.39 billion for the three month period ended December 31, 2000,
as compared to $1.44 billion for the same period in the prior year. See
"Financial Condition" for a further discussion of the Company's deposit base.
The average balance of advances and other borrowings increased to $858.9 million
for the three month period ended December 31, 2000, as compared to $841.8
million for the same period in the prior year. The average cost of advances and
other borrowings increased to 6.16% for the three month period ended December
31, 2000 from 5.33% for the same period in the prior year. The borrowings are
primarily adjustable-rate FHLB advances, reverse repurchase agreements and
Federal Funds purchased which have repriced to reflect the changes in rate
levels associated with the respective borrowing rate indexes from the same
period in the prior year.
The following table sets forth information regarding: (1) average assets and
liabilities, (2) average yield on assets and average cost on liabilities, (3)
net interest margin, (4) net interest rate spread, and (5) the ratio of earning
assets to interest-bearing liabilities for the three month period ended December
31, 2000 and 1999, respectively. Tax-exempt investments are not material and the
tax-equivalent method of presentation is not included in the schedule.
20
21
ST. FRANCIS CAPITAL CORPORATION & SUBSIDIARY
Item 2: Management's Discussion and Analysis, continued
THREE MONTHS ENDED DECEMBER 31,
--------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
----------------------------------- -----------------------------------
(Dollars in thousands)
ASSETS
Federal funds sold and overnight deposits $ 2,385 $ 38 6.32 % $ 1,482 $ 17 4.56
Trading account securities.................. - - - 1,197 27 8.97
Debt and equity securities.................. 217,257 3,342 6.10 224,648 3,306 5.85
Mortgage-backed and related securities...... 819,963 13,681 6.62 952,370 14,910 6.23
Loans:
First mortgage............................ 855,902 16,959 7.86 748,045 14,482 7.70
Home equity............................... 194,162 4,489 9.17 161,553 3,450 8.50
Consumer ................................. 124,439 2,706 8.63 148,084 3,119 8.38
Commercial and agricultural............... 152,528 3,123 8.12 124,704 2,592 8.27
------------------------ ------------------------
Total loans........................... 1,327,031 27,277 8.15 1,182,386 23,643 7.95
Federal Home Loan Bank stock................ 30,981 623 7.98 32,013 605 7.52
------------------------ ------------------------
Total earning assets.................. 2,397,617 44,961 7.44 2,394,096 42,508 7.06
----------- -----------
Valuation allowances........................ (37,096) (31,764)
Cash and due from banks..................... 27,584 37,603
Other assets................................ 102,228 118,549
------------- -------------
Total assets.......................... $ 2,490,333 $ 2,518,484
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW accounts ............................. $ 78,403 120 0.61 $ 76,388 135 0.70
Money market demand accounts.............. 374,677 4,944 5.24 362,721 3,980 4.37
Passbook.................................. 89,689 442 1.96 113,145 631 2.22
Certificates of deposit................... 849,044 13,662 6.38 889,770 12,311 5.50
------------------------ ------------------------
Total interest-bearing deposits.............. 1,391,813 19,168 5.46 1,442,024 17,057 4.71
Advances and other borrowings................ 858,915 13,329 6.16 841,751 11,282 5.33
Advances from borrowers for taxes and 9,305 6 0.26 7,991 6 0.30
insurance....................................
------------------------ ------------------------
Total interest-bearing liabilities.... 2,260,033 32,503 5.71 2,291,766 28,345 4.92
----------- -----------
Non interest-bearing deposits................ 78,156 78,534
Other liabilities............................ 17,121 15,793
Shareholders' equity......................... 135,023 132,391
------------- -------------
Total liabilities and shareholders' equity... $ 2,490,333 $ 2,518,484
============= =============
Net interest income.......................... $ 12,458 $ 14,163
=========== ===========
Net yield on interest-earning assets......... 2.35
2.06
Interest rate spread......................... 2.14
1.73
Ratio of earning assets to interest-bearing 104.47
liabilities.................................. 106.09
21
22
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Item 2: Management's Discussion and Analysis, continued
PROVISION FOR LOAN LOSSES. The following table summarizes the allowance for loan
losses for each period:
Three months ended
December 31,
2000 1999
------------------ -------------------
(Dollars in thousands)
Beginning balance...................................... $ 10,404 $ 9,356
Provision for loan losses.............................. 603 500
Charge-offs............................................ (205) (115)
Recoveries............................................. 10 23
------------------ -------------------
Ending balance......................................... $ 10,812 $ 9,764
================== ===================
Ratio of allowance for loan losses to gross loans
receivable at the end of the period............... 0.78% 0.74%
Ratio of allowance for loan losses to total non-
performing loans at the end of the period......... 75.18% 285.66%
Ratio of net charge-offs to average gross loans
(annualized)...................................... 0.06% 0.03%
Management believes that the allowance for loan losses is adequate to provide
for probable losses as of December 31, 2000, based upon its current evaluation
of loan delinquencies, non-performing loans, charge-off trends, economic
conditions and other factors. Such evaluation, which includes a review of all
loans on which full collectibility may not be reasonably assured, considers,
among other matters, the estimated net realizable value of the underlying
collateral, economic conditions, historical loan loss experience and other
factors that warrant recognition in providing for an accurate provision for loan
losses. For the three month period ended December 31, 2000, the provision for
loan losses was $603,000 compared to $500,000 for the same period in the prior
year. The Company's loan portfolio is becoming increasingly more diversified
than in previous years. The Company has and continues to expect to increase its
commercial, consumer and commercial real estate loan portfolios which are
generally presumed to have more risk than standard single-family mortgage loans.
Charge-offs for the three month period ended December 31, 2000 were $205,000
compared to $115,000 for the three month period ended December 31, 1999. The
Company believes that the allowance for loan losses is adequate to provide for
anticipated probable losses based upon current known conditions.
OTHER OPERATING INCOME. Other operating income increased by $1.0 million to $4.2
million for the three month period ended December 31, 2000, compared to the same
period in the prior year. The following table shows the percentage of other
operating income to average assets for each period:
Three months ended
December 31,
2000 1999
----------------- ----------------
(Dollars in thousands)
Other operating income................................... $ 4,158 $ 3,164
Percent of average assets (annualized)................... 0.66% 0.50%
The increase for the three month period ended December 31, 2000 was due
primarily to increases in gains on the sale of loans, securities gains and
increases in other fees. Gains on the sale of mortgage loans increased to
$613,000 for the three month period ended December 31, 2000 compared to gains of
$128,000 for the same period in the prior year. The Company's volume of mortgage
loan sales were $46.4 million for the three month period ended December 31,
2000, compared to $14.9 million for the same period in the prior year. The
Company sells a significant amount of its residential mortgage loans to
secondary marketing agencies. Depending on factors such as interest rates,
levels of borrower refinancing and competitive factors in the Company's primary
market area, the amount of mortgage loans ultimately sold can vary
significantly.
22
23
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased by $5.1 million or 33.0% to $10.3 million for the three month period
ended December 31, 2000, compared to the same period in the prior year. The
following table shows the percentage of general and administrative expenses to
average assets for each period:
Three months ended
December 31,
2000 1999
----------------- ------------------
(Dollars in thousands)
General and administrative expenses...................... $ 10,260 $ 15,316
Percent of average assets (annualized)................... 1.63% 2.42%
The decrease in general and administrative expenses is primarily due to
additional ESOP expense of $4.9 million recognized in the prior year due to
accelerated payments made to retire the Company's ESOP debt. Excluding the
effect of the additional ESOP expense, the Company experienced a decline of
$201,000 in general and administrative expenses in the 2000 period compared to
the 1999 period.
INCOME TAX EXPENSE. Income tax expense increased to $1.4 million for the three
month period ended December 31, 2000, compared to $1.3 million for the same
period in the prior year. The effective tax rate for the three month period
ended December 31, 2000 was 24.06% compared with 86.37% for the three month
period ended December 31, 1999. The decrease in the effective tax rate is due
primarily to the fact that the majority of the ESOP expense incurred in the
prior year was non-deductible for tax purposes.
ASSET QUALITY
Total non-performing assets were $14.6 million, or 0.58% of total assets at
December 31, 2000, compared with $13.2 million, or 0.53% of total assets at
September 30, 2000. Non-performing assets include loans which have been placed
on nonaccrual status and property upon which a judgment of foreclosure has been
entered but prior to the foreclosure sale, as well as property acquired as a
result of foreclosure.
Non-performing assets are summarized as follows:
December 31, September 30,
2000 2000
----------------- -----------------
(Dollars in thousands)
Non-performing loans.............................. $ 14,382 $ 12,977
Foreclosed properties............................. 196 241
----------------- -----------------
Non-performing assets............................. $ 14,578 $ 13,218
================= =================
Non-performing loans to gross loans............... 1.03% 0.95%
Non-performing assets to total assets............. 0.58% 0.53%
Except as disclosed above, there are no material loans about which management is
aware that there exists serious doubts as to the ability of the borrower to
comply with the loan terms. Non-performing assets includes a single $10.0
million commercial loan credit to a company in the food industry that was added
to non-accrual status during the quarter ended September 30, 2000. The Company
participates in that credit with other financial institutions. The participating
bank group has signed an agreement with the borrower forbearing interest and
principal payments until February 12, 2001. Management has taken the current
known status about this credit into account in establishing its allowance for
loan losses and in the level of provision taken during the three month period
ended December 31, 2000.
23
24
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Item 2: Management's Discussion and Analysis, continued
Impaired loans totaled $11.8 million at December 31, 2000 compared to $12.1
million at September 30, 2000. These loans had associated impairment reserves of
$1.5 million and $1.6 million at December 31, 2000 and September 30, 2000,
respectively. For the three month period ended December 31, 2000, the average
balance of impaired loans was $11.9 million compared to $6.4 million for the
year ended September 30, 2000. Interest income on impaired loans for the three
month periods ended December 31, 2000 and 1999 was $30,000 and zero,
respectively.
ASSET/LIABILITY MANAGEMENT
Asset and liability management is an ongoing process of managing asset and
liability maturities to control the interest rate risk of the Company.
Management controls this risk through pricing of assets and liabilities and
maintaining specific levels of maturities. In recent periods, management's
strategy has been to (1) sell substantially all new originations of long-term,
fixed-rate, single-family mortgage loans in the secondary market, (2) invest in
various adjustable-rate and short-term mortgage-backed and related securities,
(3) invest in adjustable-rate, single-family mortgage loans, and (4) increase
its investments in consumer and commercial loans with generally shorter interest
rate characteristics. Although management believes that its asset/liability
management strategies have reduced the potential effects of changes in interest
rates on its operations, increases in interest rates may adversely affect the
Company's results of operations because interest-bearing liabilities will
reprice more quickly than interest-earning assets.
At December 31, 2000, the Company's estimated cumulative one-year gap between
assets and liabilities was a negative 16.65% of total assets. A negative gap
occurs when a greater dollar amount of interest-bearing liabilities are
repricing or maturing than interest earning assets. The negative gap position is
due primarily to the short term effect of the amount of fixed rate puttable FHLB
advances coming due within the next year which the Company plans to extend as
they come due. The Company's three-year cumulative gap as of December 31, 2000
was a negative 11.13% of total assets. With a negative gap position, during
periods of rising interest rates it is expected that the cost of the Company's
interest-bearing liabilities will rise more quickly than the yield on its
interest-earning assets, which will have a negative effect on its net interest
income. Although the opposite effect on net interest income would occur in
periods of falling interest rates, the Company could experience substantial
prepayments of its fixed-rate mortgage loans and mortgage-backed and related
securities in periods of falling interest rates, which would result in the
reinvestment of such proceeds at market rates which are lower than current
rates.
24
25
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Item 2: Management's Discussion and Analysis, continued
The following table summarizes the Company's gap position as of December 31,
2000.
More than More than
Within Four to One Year Three
Three Twelve to Three Years to Over Five
Months Months Years Five Years Years Total
----------------------------------------------------------------------------------
(Dollars in thousands)
INTEREST-EARNING ASSETS: (1)
Loans: (2)
Residential....................... $ 30,212 $ 79,224 $ 207,132 $ 74,117 $ 42,518 $ 433,203
Commercial........................ 116,215 114,791 154,695 122,654 62,903 571,258
Consumer.......................... 131,811 21,814 45,140 92,680 30,109 321,554
Mortgage-backed and related
securities........................ 2,633 7,753 9,163 5,481 79 25,109
Assets available for sale:
Mortgage loans.................... 6,099 - - - - 6,099
Fixed rate mortgage related....... 27,002 95,417 189,893 102,979 29,324 444,615
Variable rate mortgage related.... 317,795 - - - - 317,795
Investment securities............. 60,533 64,243 78,061 12,254 - 215,091
Trading account securities............. - - - - - -
Other assets........................... 33,016 - - - - 33,016
Impact of interest rate swaps.......... 10,000 (10,000) - - - -
----------------------------------------------------------------------------------
Total............................. $ 735,316 $ 373,242 $ 684,084 $ 410,165 $ 164,933 $2,367,740
==================================================================================
INTEREST-BEARING LIABILITIES:
Deposits: (3)
NOW accounts...................... $ 7,049 $ 21,146 $ 31,548 $ 14,162 $ 11,740 $ 85,645
Passbook savings accounts......... 3,288 9,864 18,408 12,249 41,974 85,783
Money market deposit accounts..... 92,616 277,849 3,043 1,095 616 375,219
Certificates of deposit........... 187,686 194,148 154,594 144,185 173,291 853,904
Borrowings (4)......................... 364,443 25,000 376,054 100,000 - 865,497
Impact of interest rate swaps.......... 370,000 (27,000) (38,000) (125,000) (180,000) -
----------------------------------------------------------------------------------
Total............................. $1,025,082 $ 501,007 $ 545,647 $ 146,691 $ 47,621 $2,266,048
==================================================================================
Excess (deficiency) of
interest-earning
assets over interest-bearing
liabilities............................ $ (289,766) $(127,765) $(138,437) $ 263,474 $ 117,312 $ 101,692
==================================================================================
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities........... $ (289,766) $(417,531) $(279,094) $ (15,620) $ 101,692
====================================================================
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities as
a percent of total assets.............. (11.56%) (16.65%) (11.13%) (0.62%) 4.06%
====================================================================
- --------------------------------------------------------------------------------
(1) Adjustable and floating rate assets are included in the period in which
interest rates are next scheduled to adjust rather than in the period in
which they are due, and fixed rate assets are included in the periods in
which they are scheduled to be repaid based on scheduled amortization, in
each case adjusted to take into account estimated prepayments utilizing the
Company's historical prepayment statistics, modified for forecasted
statistics using the Public Securities Association model of prepayments.
For fixed rate mortgage loans and mortgage-backed and related securities,
annual prepayment rates ranging from 8% to 30%, based on the loan coupon
rate, were used.
(2) Balances have been reduced for undisbursed loan proceeds, unearned
insurance premiums, deferred loan fees, purchased loan discounts and
allowances for loan losses, which aggregated $62.8 million at December 31,
2000.
(3) Although the Company's negotiable order of withdrawal ("NOW") accounts,
passbook savings accounts and money market deposit accounts generally are
subject to immediate withdrawal, management considers a certain portion of
such accounts to be core deposits having significantly longer effective
maturities based on the Company's retention of such deposits in changing
interest rate environments. NOW accounts, passbook savings accounts and
money market deposit accounts are assumed to be withdrawn at annual rates
of 33%, 10% and 98%, respectively, of the declining balance of such
accounts during the period shown. The withdrawal rates used are higher than
the Company's historical rates, but are considered by management to be more
indicative of expected withdrawal rates in a rising interest rate
environment. If all the Company's NOW accounts, passbook savings accounts
and money market deposit accounts had been assumed to be repricing within
one year, the one-year cumulative deficiency of interest-earning assets to
interest-bearing liabilities would have been $552.4 million or 22.0% of
total assets.
(4) Fixed rate puttable FHLB advances are included in the period of their
modified duration rather than in the period in which they are due.
Borrowings includes fixed rate puttable FHLB advances of $25 million
maturing in four to twelve months.
25
26
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Item 2: Management's Discussion and Analysis, continued
Assumptions regarding withdrawals and prepayments are based on historical
experience, and management believes such assumptions are reasonable, although
actual withdrawals and repayments of assets and liabilities may vary
substantially. Certain shortcomings are inherent in the method of analysis
presented in the gap table. For example, although certain assets and liabilities
may have similar maturities to repricing, they may react in different degrees to
changes in market interest rates. Also, the interest rates on other types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as adjustable-rate loans and
mortgage-backed and related securities, have features which restrict changes in
interest rates both on a short-term basis and over the life of the asset.
Further, in the event of an actual change in interest rates, actual prepayment
and early withdrawal levels could deviate significantly from those assumed in
calculating the data in the table.
LIQUIDITY AND CAPITAL RESOURCES
The Company's most liquid assets are cash and cash equivalents, which include
investments in highly liquid, short-term investments. The level of these assets
is dependent on the Company's operating, financing and investing activities
during any given period. Cash and cash equivalents totaled $42.1 million and
$34.7 million as of December 31, 2000 and September 30, 2000, respectively.
The Company's primary sources of funds are deposits, including brokered
certificates of deposit, borrowings from the FHLB and proceeds from principal
and interest payments on loans and mortgage-backed and related securities.
Although maturities and scheduled amortization of loans are predictable sources
of funds, deposit flows, prepayments on mortgage loans and mortgage-backed and
related securities are influenced significantly by general interest rates,
economic conditions and competition. Additionally, the Bank is limited by the
FHLB to borrowing up to 35% of its assets. At December 31, 2000, the Company had
additional borrowing capacity of $63.4 million available from the FHLB.
Under federal and state laws and regulations, the Company and its wholly-owned
subsidiary are required to meet certain tangible, core and risk-based capital
requirements. Tangible capital generally consists of shareholders' equity minus
certain intangible assets. Core capital generally consists of tangible capital
plus qualifying intangible assets. The risk-based capital requirements presently
address credit risk related to both recorded and off-balance sheet commitments
and obligations.
The Bank is required to follow Office of Thrift Supervision ("OTS") capital
regulations which require savings institutions to meet two capital standards:
(i) "tier 1 core capital" in an amount not less than 4% of adjusted total assets
and (ii) "risk-based capital" of at least 8% of risk-weighted assets.
The following table summarizes the Bank's capital ratios at the dates indicated:
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------- ------------------------ ------------------------
Amount Ratio Amount Ratio Amount Ratio
- --------------------------------- --------- ----------- ------------- --------- ------------ ---------
(Dollars in thousands)
As of December 31, 2000:
Tangible capital.............. $ 172,411 6.89% >$ 100,068 > 4.0% >$125,085 > 5.0%
- - - -
Core capital ................. 172,411 6.89% > 100,068 > 4.0% > 125,085 > 5.0%
- - - -
Tier 1 risk-based capital..... 172,411 10.95% > 62,977 > 4.0% > 94,466 > 6.0%
- - - -
Risk-based capital............ 182,795 11.61% > 125,954 > 8.0% > 157,443 >10.0%
- - - -
As of September 30, 2000:
Tangible capital.............. $ 169,261 6.78% > $99,893 > 4.0% >$124,866 > 5.0%
- - - -
Core capital ................. 169,261 6.78% > 99,893 > 4.0% > 124,866 > 5.0%
- - - -
Tier 1 risk-based capital..... 169,261 10.92% > 61,995 > 4.0% > 92,993 > 6.0%
- - - -
Risk-based capital............ 179,330 11.57% > 123,991 > 8.0% > 154,989 >10.0%
- - - -
The capital of the Company and the Bank exceed all regulatory capital
requirements.
26
27
ST. FRANCIS CAPITAL CORPORATION AND SUBSIDIARY
Item 2: Management's Discussion and Analysis, continued
The following table sets forth the amounts of estimated cash flows for the
various interest-earning assets and interest-bearing liabilities outstanding at
December 31, 2000.
More than More than More than More than
Within One Year Two Years Three Years Four Years Over
One Year to Two Years to Three Years To Four Years to Five Years Five Years
------------------ ------------------ ----------------- ------------------- ---------------- ---------------
Interest earning assets (Dollars in millions)
Loans:
Residential....... $ 4.1 9.40% $ 1.1 8.32% $ 3.4 8.06% $ 3.2 7.36% $ 20.7 7.30% $ 400.8 7.58%
Commercial........ 97.0 8.81% 30.8 8.95% 43.7 8.20% 34.9 8.43% 59.3 8.09% 312.2 7.91%
Consumer.......... 20.7 8.57% 36.4 9.44% 119.7 8.81% 80.7 8.36% 30.1 9.08% 33.4 9.63%
Mortgage-backed
securities:
Fixed rate........ 132.8 6.32% 99.8 6.33% 99.8 6.41% 54.2 6.44% 54.2 6.38% 28.9 6.40%
Adjustable rate... 57.2 7.13% 44.5 7.13% 41.3 7.13% 38.1 7.13% 35.0 7.13% 101.7 7.13%
Debt and equity
securities......... 124.8 5.86% 39.0 5.86% 39.0 5.86% 6.1 5.86% 6.1 5.86% - -
Other............... 33.0 8.00% - - - - - - - - - -
--------- ---------- ---------- ---------- --------- ---------
Total interest
earning assets..... $ 469.6 7.07% $251.6 7.18% $346.9 7.52% $ 217.2 7.59% $ 205.4 7.47% $ 877.0 7.68%
========= ========== ========== ========== ========= =========
Interest bearing liabilities
Deposits:
NOW accounts...... $ 28.2 0.50% $ 15.8 0.50% $ 15.8 0.50% $ 7.1 0.50% $ 7.1 0.50% $ 11.5 0.50%
Passbooks......... 13.2 0.75% 9.2 0.75% 9.2 0.75% 6.1 0.75% 6.1 0.75% 42.0 0.75%
Money market...... 370.5 5.22% 1.5 5.22% 1.5 5.22% 0.5 5.22% 0.5 5.22% 0.6 5.22%
Certificates...... 381.8 6.08% 127.3 6.55% 27.3 6.07% 86.1 6.27% 58.1 6.26% 173.5 6.57%
Borrowings
Fixed rate........ 267.9 6.53% 170.0 4.99% 230.0 5.98% 75.0 5.95% - - - -
Adjustable rate... 122.6 6.54% - - - - - - - - - -
--------- ---------- ---------- ---------- --------- ---------
Total interest
bearing
liabilities........ $1,184.2 5.77% $323.8 5.26% $ 283.8 5.51% $ 174.8 5.70% $ 71.8 5.22% $ 227.6 5.19%
========= ========== ========== ========== ========= =========
Fair
Value
Total Market
------------------- ----------
Interest earning assets (Dollars in millions)
Loans:
Residential....... $ 433.3 7.59% $ 435.4
Commercial........ 577.9 8.19% 580.1
Consumer.......... 321.0 8.86% 324.1
Mortgage-backed
securities:
Fixed rate........ 469.7 6.37% 464.6
Adjustable rate... 317.8 7.13% 310.2
Debt and equity
securities......... 215.0 5.86% 212.9
Other............... 33.0 8.00% 33.5
-------- --------
Total interest
earning assets..... $2,367.7 7.45% $2,360.8
======== ========
Interest bearing liabilities
Deposits:
NOW accounts...... $ 85.5 0.50% $ 72.8
Passbooks......... 85.5 0.75% 68.9
Money market...... 375.1 5.22% 373.8
Certificates...... 854.1 6.28% 853.5
Borrowings
Fixed rate........ 742.9 5.95% 752.0
Adjustable rate... 122.6 6.54% 122.6
-------- --------
Total interest
bearing
liabilities....... $2,266.0 5.58% $2,243.6
======== ========
27
28
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required herein pursuant to Item 305 of Regulation
S-K is contained in the section captioned "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
is incorporated herein by reference.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank is involved in any pending legal
proceedings involving amounts in the aggregate which management
believes are material to the financial condition and results of
operations of the Company and the Bank.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on January 24, 2001.
Only shareholders of record at the close of business on December
1, 2000 (the "Voting Record Date") were entitled to vote at the
annual meeting. On the Voting Record Date, there were 9,402,121
shares of common stock outstanding, and 8,523,022 shares present
at the meeting by the holders thereof in person or by proxy, which
constituted a quorum. The following is a summary of the matters
voted upon at the meeting.
NUMBER OF VOTES
--------------------------------------------------------------
BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
--- -------- ----------- ---------
NOMINEES FOR DIRECTOR FOR
THREE-YEAR TERM EXPIRING IN 2003
Edward W. Mentzer 8,031,875 491,147 - -
Julia H. Taylor 8,028,225 494,797 - -
RATIFICATION OF APPOINTMENT OF
KPMG LLP AS AUDITORS 8,369,609 107,514 45,899 -
ITEM 5. OTHER INFORMATION
On January 22, 2001, the Company announced the declaration of a
dividend of $0.10 per share on the Company's common stock for the
quarter ended December 31, 2000. The dividend is payable on
February 20, 2001 to shareholders of record as of February 12,
2001. This will be the 22nd consecutive cash dividend payment
since the Company became publicly-held in June 1993.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Articles of Incorporation of Registrant, as Amended
11.1 Statement Regarding Computation of Earnings Per
Share (See Footnote 7 in "Notes to Unaudited
Consolidated Financial Statements")
(b) No reports on Form 8-K were filed during the quarter for which
this report was filed.
28
29
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ST. FRANCIS CAPITAL CORPORATION
Dated: February 14, 2001 By: /s/ Jon D. Sorenson
------------------- -----------------------------
Jon D. Sorenson
Chief Financial Officer
29