1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ------- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ------- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- --------
Commission File Number 1-13824
CITISAVE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-1289214
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
665 Florida Street, Baton Rouge, Louisiana 70801
(Address of principal executive offices)
Registrant's telephone number, including area code: (504)383-4102
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Shares of common stock, par value $.01 per share, outstanding as of June 30,
1996: 964,707
2
CitiSave Financial Corporation
Form 10-QSB
Quarter Ended June 30, 1996
PART I - FINANCIAL INFORMATION
Interim Financial Information required by Rule 10-01 of Regulation S-X and Item
303 of Regulation S-B is included in this Form 10-QSB as referenced below:
Item 1 - Financial Statements Page
Consolidated Statements of Financial Condition at
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Income For the Three and Six Months
Ended June 30, 1996 and 1995 4
Consolidated Statements of Stockholders' Equity for
the Six Months Ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows For the Six
Months Ended June 30, 1996 and 1995 6 - 7
Notes to Consolidated Financial Statements 8 - 12
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 19
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 20
Item 2 - Changes in Securities 20
Item 3 - Defaults Upon Senior Securities 20
Item 4 - Submission of Matters to a Vote of Security Holders 20
Item 5 - Other Information 21
Item 6 - Exhibits and Reports on Form 8-K 21
Signatures 22
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CitiSave Financial Corporation
Consolidated Statements of Financial Condition
as of June 30, 1996 and December 1995
(UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31,
1996 1995
-------------------------------------
ASSETS: (In Thousands)
Cash and Cash Equivalents $ 1,278 $ 1,022
Interest-Bearing Deposits in Other Institutions 1,667 2,914
------------------------------------
Total Cash and Cash Equivalents 2,945 3,936
Federal Funds Sold 350 5,000
Securities:
Investment Securities held to maturity 23,800 22,521
(Market Value $23,509, and $22,525)
Mortgage-Backed Securities held to maturity 2,344 2,565
(Market Value $2,337, and $2,575)
Federal Home Loan Bank Stock 369 358
------------------------------------
Total Securities 26,513 25,444
Insurance Accounts Receivable 149 56
Loans Held for Sale 413 0
Real Estate Owned 64 39
Loans Receivable 43,402 41,792
Less: Allowance for Loan Losses (71) (82)
------------------------------------
Total Loans Receivable 43,331 41,710
Accrued Interest Receivable 625 531
Premises and Equipment 1,627 1,369
Other Assets 103 116
Costs in Excess of Net Assets of Business Acquired 8 17
------------------------------------
Total Assets $ 76,128 $ 78,218
=====================================
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits $ 61,752 $ 62,514
Accounts Payable 331 243
Advances from Borrowers for Taxes & Insurance 175 94
Federal Income Taxes:
Current 12 16
Deferred 160 160
Accrued Expenses & Other Liabilities 926 854
------------------------------------
Total Liabilities 63,356 63,881
Minority Interest in Subsidiary 34 37
Stockholders' Equity:
Stockholders' Equity:
Common Stock, $.01 Par Value; Authorized
10,000,000 Shares, 964,707 Issued Shares 10 10
Paid-in Capital in Excess of Par 7,235 9,144
Retained Earnings 6,187 5,879
------------------------------------
13,432 15,033
Less: Unearned ESOP Shares (694) (733)
------------------------------------
Total Stockholders' Equity 12,738 14,300
------------------------------------
Total Liabilities & Stockholders Equity $76,128 $ 78,218
====================================
The accompanying notes are an integral part of these financial statements.
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CitiSave Financial Corporation
Consolidated Statements of Income
For the Three and Six Months Ended June 30, 1996 and June 30, 1995
(UNAUDITED) (UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
------------------------------ ----------------------------
(In Thousands, Except Per Share Data)
Interest Income:
Loans $ 916 $ 832 $ 1,836 $ 1,610
Investment Securities 355 320 664 659
Mortgage-Backed Securities 39 44 80 87
Other Interest-earning Assets 79 42 206 67
--------------------- ---------------------
Total Interest Income 1,389 1,238 2,786 2,423
--------------------- ---------------------
Interest Expense:
Deposits 635 632 1,277 1,197
Other Interest-bearing Liabilities 0 4 0 4
--------------------- ---------------------
Total Interest Expense 635 636 1,277 1,201
--------------------- ---------------------
Net Interest Income Before Provision
for Loan Losses 754 602 1,509 1,222
Provision for Loan Losses 8 5 15 10
--------------------- ---------------------
Net Interest Income After Provision 746 597 1,494 1,212
--------------------- ---------------------
Noninterest Income:
Insurance Agency Commissions 190 162 391 354
Rent Income 1 1 3 3
Loan Fees and Service Charges 82 84 162 168
Gain on Sales of Loans 28 6 53 7
Other 4 2 10 8
--------------------- ---------------------
Total Noninterest Income 305 255 619 540
--------------------- ---------------------
Noninterest Expense:
Compensation and Benefits 387 378 793 752
Occupancy and Equipment Exp 82 92 168 181
Federal Insurance Premium 38 36 76 72
Net Real Estate Owned Exp (1) (1) (1) (1)
Other 213 116 377 228
Goodwill Amortization 4 4 8 8
--------------------- ---------------------
Total Noninterest Expense 723 625 1,421 1,240
--------------------- ---------------------
Income Before Provision for Taxes &
Minority Interest 328 228 692 512
Income Taxes 109 72 224 159
--------------------- ---------------------
Net Income Before Minority Interest 219 156 468 353
Minority Interest in Subsidiary 12 7 26 21
--------------------- ---------------------
Net Income $ 207 $ 149 $ 442 $ 332
===================== =====================
Per Share:
Net Income - Note 4 $ 0.23 $ NA $ 0.50 NA
Dividends-Note 4 0.075 NA 0.15 NA
Special Distribution-Note 4 2.00 NA 2.00 NA
The accompanying notes are an integral part of these financial statements.
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CitiSave Financial Corporation and Subsidiary
Consolidated Statements of Stockholders' Equity
For the Six Months Ended June 30, 1996 and 1995
(Unaudited) (Unaudited)
June 30, June 30,
1996 1995
-------------------------------------------
(In Thousands)
Common Stock:
Balance-Beginning of Period $ 10 $ 0
--------------------------------------
Balance-End of Period 10 0
======================================
Paid-In Capital in Excess of Par:
Balance-Beginning of Period $ 9,144 $ 0
Special Distribution-Note 4 (1,929) 0
ESOP Shares Released for Allocation 20 0
--------------------------------------
Balnce-End of Period 7,235 0
======================================
Retained Earnings:
Balance-Beginning of Period $ 5,879 $ 5,178
Net Income 442 332
Cash Dividends (134) 0
--------------------------------------
Balance-End of Period 6,187 5,510
======================================
Unearned ESOP Shares:
Balance-Beginning of Period $ (733) $ 0
Shares Released for Allocation-Note 4 39 0
--------------------------------------
Balance-End of Period (694) 0
======================================
Total Shareholders' Equity $ 12,738 $ 5,510
======================================
The accompanying notes are an integral part of these financial statements.
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CitiSave Financial Corporation and Subsidiary
Consolidated Statement of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
(Unaudited) (Unaudited)
June 30, June 30,
1996 1995
---------------------------------
(In Thousands)
Cash Flow from Operating Activities:
Net Income $ 442 $ 332
Adjustments to Reconcile Net Income
to Net Cash Provided by (Used in)
Operating Activities:
Provision for (Recovery of) Loan and
Foreclosed Real Estate Losses (19) 10
Provision for Depreciation and Amortization 48 55
Other 0 0
Increase (Decrease) in Minority Interest, Net (3) (4)
Stock Dividends on Federal Home Loan Bank Stock (11) (5)
Loans Originated for Sale (4,124) (566)
Sale of Loans 3,711 301
Amortization (Accretion) of Securities
Premiums (Discounts) (24) (110)
Changes in Assets and Liabilities:
(Increase) Decrease in Insurance
Accounts Receivable (93) 53
(Increase) Decrease in Accrued Interest Receivable (94) 26
(Increase) Decrease in Other Assets 13 (333)
Increase (Decrease) in Accounts Payable 88 (40)
Increase (Decrease) in Income Taxes Payable (4) (48)
Increase (Decrease) in Accrued
Expenses and Other Liabilities 72 (150)
---------------------------------
Net Cash Provided by (Used in) Operating Activities 2 (479)
---------------------------------
Cash Flows from Investing Activities:
Proceeds from Sale of Premises and Equipment 48 0
Purchase of Premises and Equipment (356) (89)
Maturities of Investment Securities 10,690 9,250
Purchase of Investment Securities (11,945) (2,976)
Maturities of Mortgage-Backed Securities 221 143
Net (Increase) Decrease in Federal Funds Sold 4 ,650 (5,200)
Net (Increase) Decrease in Loans (1,610) (3,357)
Net Proceeds from Sales of Foreclosed Real Estate 58 0
Foreclosure Added (64) 0
---------------------------------
Net Cash Provided by (Used in) Investing Activities 1,692 (2,229)
---------------------------------
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Cash Flows from Financing Activities:
ESOP 59 0
Dividends (134) 0
Special Distribution (1,929)
Net Increase (Decrease) in Demand
Accounts, Ready Cash Accounts and
Passbook Savings Accounts (259) (1,863)
Net Increase (Decrease) in
Certificates of Deposit (503) 2,180
Net Increase (Decrease) in Advances from Borrowers
for Taxes and Insurance 81 60
Escrow Collected Related to Issuance of Stock ------ 8,876
---------------------------------
Net Cash Provided by (Used in) Investing Activities (2,685) 9,253
---------------------------------
Increase (Decrease) in Cash and Cash Equivalents (991) 6,545
Cash and Cash Equivalents-Beginning of Period 3,936 1,045
---------------------------------
Cash and Cash Equivalents-End of Period $ 2,945 $ 7,590
=================================
Supplemental Disclosures of Cash Flow Information
Cash Payments for:
Interest Paid to Depositors $ 1,277 $ 1,201
=================================
Income Taxes 180 159
=================================
Supplemental Schedules of Noncash Investing
and Financing Activities:
Transfers from Loans to Real Estate
Acquired through Foreclosure 93 0
=================================
Loans to Facilitate the Sale of Real Estate Owned 0 102
=================================
The accompanying notes are an integral part of these financial statements.
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CitiSave Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
Note 1 - Basis of Presentation -
The accompanying consolidated financial statements for the period
ended June 30, 1996 include the accounts of CitiSave Financial Corporation and
its wholly owned subsidiary, Citizens Savings Association, F.A. (Citizens).
Citizens Savings Association, F. A. has been consolidated with its wholly owned
subsidiary, 665 Florida Street Corp. 665 Florida Street Corp. has been
consolidated with Roberts and Eastland (a Louisiana partnership), of which it
owns an 80% interest. Currently, the business and management of CitiSave
Financial Corporation is primarily the business and management of the
Association. The consolidated financial statements for all periods prior to
July 14, 1995 include the accounts of Citizens Savings and Loan Association and
its wholly owned subsidiary 665 Florida Street Corp. (formerly CitiSave
Financial Corporation), which owns an 80% interest in and is consolidated with
Roberts and Eastland. Roberts and Eastland is an insurance agency whose
operations consist primarily of commissions and related expenses from the sale
of insurance policies for various insurance companies. All significant
intercompany transactions and balances have been eliminated in the
consolidation. The minority interest's share of the net income of Roberts and
Eastland has been properly reflected in these financial statements.
The accompanying unaudited financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all adjustments (consisting only of
normal recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the financial statements have been included.
Note 2 - Reorganization and Change of Corporate Form -
In July 1995, Citizens Savings and Loan Association completed its
reorganization into a federally chartered stock savings and loan association
whereby Citizens Savings and Loan Association (i) converted its charter to a
federal stock savings and loan association known as Citizens Savings
Association, F.A., and (ii) concurrently issued all of its outstanding capital
stock to the newly formed holding company, CitiSave Financial Corporation (the
Company). As part of the Reorganization, which was accounted for in a manner
similar to a pooling of interests method of accounting, the Company issued
964,707 shares of common stock, 77,177 shares of which were acquired by its
Employee Stock Ownership Plan, and the Association issued 1,000 shares of $.01
par value common stock to the Company.
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Note 3 - Employee Stock Ownership Plan -
The Company sponsors a leveraged employee stock ownership plan (ESOP)
that covers all employees who have at least one year of service with the
Company. The ESOP shares initially were pledged as collateral for its debt.
The debt is being repaid based on a ten-year amortization and the shares are
being released for allocation to active employees annually over the ten-year
period. The shares pledged as collateral are deducted from stockholders'
equity as unearned ESOP shares in the accompanying balance sheets.
As shares are released from collateral, the Company reports
compensation expense equal to the current market price of the shares.
Dividends on allocated ESOP shares are recorded as a reduction of retained
earnings; dividends on unallocated ESOP shares are recorded as a reduction of
unearned ESOP shares. ESOP compensation expense was $59,000 for the six months
ended June 30, 1996.
Note 4 - Dividends and Earnings Per Share -
During the six-month period ended June 30, 1996, the Company declared
dividends of $0.075 per share to be paid to shareholders of record on March 15,
1996 and June 15, 1996. The dividends were paid to shareholders on March 31,
1996 and June 28, 1996. The Company also declared a special return of
capital-cash distribution of $2.00 per share paid to shareholders of record on
June 15, 1996. The distribution was paid on June 28, 1996.
This special distribution was authorized by a favorable private letter
ruling received from the Internal Revenue Service whereby the portion of the
distribution which exceeds the amount of the current or accumulated earnings
and profits of CitiSave Financial Corporation for 1996, the taxable year of the
distribution, is not a dividend, and will be applied against and reduce the
shareholders' adjusted basis in the stock of CitiSave Financial Corporation.
On an interim basis, this distribution has been recorded as a reduction in
Paid-In Capital. Its final disposition will be determined at December 31,
1996.
The Company had earnings per share of $0.23 for the period from April
1, 1996 through June 30, 1996. The weighted average shares outstanding for
this quarter was 893,365 shares. For the six-month period from January 1, 1996
through June 30, 1996, the Company earned $0.50 per share based on the weighted
average shares outstanding of 892,396.
The weighted average shares outstanding calculation was based on the
issuance of 964,707 shares less unallocated ESOP shares held in the collateral
account in each period. 1,938 ESOP shares were released from the collateral
account on March 31, 1996, and another 1,938 shares were released from the
collateral account on June 30, 1996. The allocation to ESOP participants is
done on an annual basis.
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Note 5 - Recent Developments -
In August 1995, the FDIC established a new assessment rate schedule
for financial institutions which are members of the Bank Insurance Fund ("BIF")
of the FDIC with a premium range of .04% to .31% of deposits, while retaining
the existing assessment rate of .23% to .31% of deposits applicable to
SAIF-insured institutions. In announcing this premium reduction for
BIF-insured institutions retroactive to May 1995, the FDIC noted that the
premium differential may have adverse competitive consequences for SAIF
members, including lesser earnings as compared to BIF-insured institutions.
On November 14, 1995, the FDIC approved a final rule regarding deposit
insurance premiums. The final rule reduces deposit insurance premiums for BIF
member institutions to zero basis points (subject to a $2,000 minimum) for
institutions in the lowest risk category, while holding deposit insurance
premiums for SAIF members at their current levels (23 basis points for
institutions in the lowest risk category). The reduction was effective with
respect to the semiannual premium assessment beginning January 1, 1996.
Accordingly, in the absence of further legislative action, SAIF members such as
Citizens will be competitively disadvantaged as compared to commercial banks by
the resulting premium differential.
While the outcome of the proposed legislation cannot be predicted with
certainty, it is likely that some kind of legislative or regulatory action will
be undertaken that will impact Citizens' insured deposits. Based on June 30,
1995 deposits, a one-time special assessment of 85 basis points (which has been
included in different legislative proposals) would result in Citizens paying
approximately $544,000, gross of related tax benefits, if any. In addition,
the enactment of such legislation may have the effect of immediately reducing
the capital of SAIF-member institutions by the amount of the special
assessment. Nevertheless, management does not believe that this one-time
charge to Citizens, if incurred, will have a material adverse effect on the
Company's consolidated financial condition.
In light of the different proposals currently under consideration and
the uncertainty of the legislative process generally, management cannot predict
whether legislation reducing SAIF premiums and/or imposing a special one-time
assessment will be adopted, or if adopted, the amount of the assessment, if
any, that would be imposed on Citizens.
Note 6 - Subsequent Events
A special stockholders' meeting was held on July 23, 1996 for the
purpose of approving the following stock benefit plans:
1) 1996 Key Employee Stock Compensation Program
2) 1996 Directors' Stock Option Plan
3) 1996 Management Recognition Plan for Officers and Trust
At that meeting, all of the above proposals were adopted and approved by the
stockholders.
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1996 Key Employee Stock Compensation Program
This program was designed to attract and retain qualified personnel in
key positions, provide key employees with a proprietary interest in the Company
as an incentive to contribute to the success of the Company and reward key
employees for outstanding performance and the attainment of targeted goals. An
aggregate of 67,529 shares of authorized but unissued Common Stock of the
Company has been reserved for future issuance under the Program. A total of
60,567 stock options were granted at July 23, 1996. These grants represented
89.7% of the total stock options approved. The exercise price for the key
employee stock options was set at $13.875 per share on the date of the
stockholder approval. These stock options are exercisable at anytime following
the date the options were granted until ten years after the grant date.
1996 Directors' Stock Option Plan
In order to attract and retain qualified directors for the Company and
the Association, the Board of Directors and stockholders of the Company have
adopted the 1996 Directors' Stock Option Plan. An aggregate of 28,941 shares
of authorized but unissued Common Stock of the Company has been reserved for
issuance under the Directors' Option Plan. On July 23, 1996, there were eight
non-employee directors who were each granted 3,255 options. The exercise price
for the stock options was set at $13.875 per share on the date of the
stockholder approval. The directors' options will be exercisable at any time
on or after six months following the date the options were granted until ten
years after the date of the grant.
1996 Management Recognition Plan for Officers and Trust
The objective of this plan is to enable the Company to provide
officers and key employees with a proprietary interest in the Company as
compensation for their contributions to the Company and its subsidiaries and as
an incentive to contribute to the Company's future success. The approval of
the stockholders allowed the Company to acquire 38,588 shares of Common Stock
on behalf of the Officers' MRP in the open market on August 1, 1996 at $13.875
per share. The 32,847 shares of Common Stock granted pursuant to the Officers'
MRP are in the form of restricted stock payable over a five year period at a
rate of 20% per year, on each annual anniversary of the date the award was
granted. The Company will recognize compensation expense as shares of Common
Stock granted under this plan vest. The amount of compensation expense
recognized is based upon the fair market value of the Common Stock at the date
of grant to recipients ($13.875 per share).
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Note 7- Allowance for Loan Losses
The following is a summary of the activity in the allowance for loan losses.
(Unaudited)
Six Months Ended
June 30, 1996 June 30, 1995
------------- -------------
(In Thousands)
Balance at Beginning of Period 82 139
Provision for Loan Losses 15 10
(Recovery of Loan Losses) 5
Charged-Off Loans (31) (7)
-- ---
Balance at End of Period 71 142
-- ---
The Association had non-performing loans contractually past due 90 days or
more totaling approximately $ 113,000 and $98,000 at June 30, 1996 and 1995
respectively. Impairment of loans having recorded investments of $113,000 at
June 30, 1996 has been recognized in conformity with FASB Statement No. 114 as
amended by FASB Statement No. 118. The total allowance for loan losses related
to these loans was $22,607. The allowance for loan loss of $71,000 as of June
30, 1996 was .16% of the total loan portfolio and was 62.8% of the
non-performing loan balance.
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CitiSave Financial Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the consolidated financial condition
of CitiSave Financial Corporation and Subsidiary at June 30, 1996 to December
31, 1995 and the results of operations for the three and six months ended June
30, 1996 with the same periods in 1995. Currently, the business and management
of CitiSave Financial Corporation is primarily the business and management of
the Association. This discussion should be read in conjunction with the
interim consolidated financial statements and footnotes included herein.
Changes in Financial Condition
Total assets decreased $2.1 million or 2.7% from $78.2 million at
December 31, 1995 to $76.1 million at June 30, 1996. The decrease in assets is
primarily due to decreases in total cash and cash equivalents and in federal
funds sold, offset by an increase in the securities portfolio and an increase
in loans receivable at June 30, 1996. The decrease in total assets was
primarily due to the $1.9 million special distribution paid on June 28, 1996.
Interest-earning assets in other institutions decreased from $2.9
million at December 31, 1995 to $1.7 million at June 30, 1996, as the excess
liquidity was used to invest in higher yielding assets such as securities and
loans. Federal funds sold decreased 93.0% from $5.0 million at December 31,
1995 to $350,000 at June 30, 1996.
The securities portfolio increased 4.2% from $25.4 million at December
31, 1995 to $26.5 million at June 30, 1996, as the amount of investment
securities purchased exceeded the amount maturing.
Due to an increasingly strong loan demand in the Association's market
area and increased marketing efforts on the part of the Association, the loan
portfolio and the loans held for sale have increased over the past six months.
The net loan portfolio increased $1.6 million or 3.9% from $41.7 million at
December 31, 1995 to $43.3 million at June 30, 1996. In addition, loans held
for sale were $413,000 at June 30, 1996. These increases were primarily
single-family mortgage loans funded through the decrease in the federal funds
sold and decrease in deposits.
The premises and equipment of the Company increased by $258,000 as the
Company continued construction of a new full service branch office. All
regulatory and local authorities have approved these plans, and the Company
anticipates completion of construction by the end of 1996. An estimated final
cost of $575,000 is expected for the building.
Total deposits have decreased $762,000 or 1.2% to $61.8 million at June
30, 1996 from $62.5 million at December 31, 1995.
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Total stockholders' equity decreased by $1.6 million during the past six
months. Net income of $442,000 and the release of ESOP shares totaling $59,000
increased equity during the period. These increases were offset by cash
dividends to stockholders during the quarter of $134,000 and a special cash
distribution of $2 per share or $1.9 million. This special distribution was
authorized by a favorable private letter ruling received from the Internal
Revenue Service, whereby the portion of the distribution which exceeds the
amount of the current or accumulated earnings and profits of the Company for
1996 is not a dividend, and will be applied against and reduce the
shareholders' adjusted basis in the stock of the Company. On an interim basis,
this distribution has been recorded as a reduction in Paid-In Capital. Its
final disposition will be determined at December 31, 1996. Stockholders'
equity at June 30, 1996 totaled $12.7 million compared to $14.3 million at
December 31, 1995.
Regulatory Capital
As of June 30, 1996, the Association's unaudited regulatory capital
requirements are as indicated in the following table:
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
------- ------- ---------
(Dollars In Thousands)
GAAP Capital $ 10,296 $ 10,296 $10,296
Nonallowable Capital:
Costs in Excess of Net Assets
of Business Acquired (8) (8) (8)
Additional Capital Items:
General Valuation Allowances --- --- 56
------- ------- ------
Regulatory Capital Computed - 10,288 10,288 10,344
Minimum Capital Requirement 1,125 2,249 2,711
------- ------- ------
Regulatory Capital Excess $ 9,163 $ 8,039 $ 7,633
======== ======= =======
Regulatory Capital as a Percentage 13.72% 13.72% 30.52%
Minimum Capital Required
as a Percentage 1.50% 3.00% 8.00%
------- ------- ------
Regulatory Capital as a
Percentage in Excess
of Requirements 12.22% 10.72% 22.52%
======= ====== =======
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Based on the above capital ratios, the Association meets the criteria
for a "well capitalized" institution at June 30, 1996. The Association's
management believes that under the current regulations, the Association will
continue to meet its minimum capital requirements in the foreseeable future.
However, events beyond the control of the Association, such as increased
interest rates or a downturn in the economy of the Association's area, could
adversely affect future earnings and consequently, the ability of the
Association to continue to exceed its future minimum capital requirements.
Results of Operations
Net income increased by $110,000 or 33.1% for the six months ending
June 30, 1996 compared to the same six-month period of 1995. The increase is
primarily attributable to the increase in net interest income after provision
for loan losses of $282,000 or 23.3%. Non-interest income increased $79,000 or
14.6%. The increase in non-interest income was primarily attributable to an
increase of $47,000 in gain on sale of loans. This is due to the increasingly
strong loan demand in the Association's market area.
The increase in non-interest income was offset by an increase in total
non-interest expense of $181,000 or 14.7%. In this category, compensation and
benefits increased by $41,000 or 5.5%, which was primarily the result of
contributing $59,000 to the ESOP, offset by a decrease in retirement expense
of $19,000 for the Association's defined benefit plan which is being terminated
in the current year because it was replaced by the ESOP. Other non-interest
expense increased $149,000, primarily due to increased legal, accounting and
printing expenses relating to preparing and filing the Annual Report and other
SEC filings along with expenses the Company incurred related to its first
annual stockholders' meeting in April and a special stockholders' meeting
regarding its stock benefit plans in July 1996. In addition, since the Company
is now a stock organization, La. Shares Tax and La. Franchise Tax have
increased by a total of $41,000 during the six-month period ending June 30,
1996. The Association has also increased its advertising in order to increase
name recognition and product awareness. The increase in income taxes of
$65,000 or 40.9% is due to an increase in pre-tax income.
For the three months ended June 30, 1996 compared to the three months
ended June 30, 1995, net income increased $58,000 from $149,000 to $207,000
which is primarily due to the net interest income after provision for loan loss
increase of $149,000 or 25.0%.
Net Interest Income
The primary source of earnings is net interest income, which is the
difference between income generated from interest-earning assets and interest
expense from interest-bearing liabilities. The primary factors that affect net
interest income are changes in the volume and type of interest-earning assets
and interest-bearing liabilities, along with changes in market rates. Net
interest income before provision for loan losses for the first six months of
1996 was $1.5 million, an increase of $287,000 or 23.5% over the same period
of 1995.
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This increase was primarily due to the increase in the loan portfolio of the
Association and other interest-earning assets. Interest on other
interest-earning assets for the six months increased $139,000 over the same
period of 1995. Both increases are a result of the net proceeds of the stock
conversion being invested. Interest rate spread is the yield of
interest-earning assets minus the costs of interest-bearing liabilities. The
Association's average interest rate spread for the six months ended June 30,
1996 was 3.16% compared to 3.31% for the same period in 1995. Net interest
margin represents net interest income as a percent of average interest-earning
assets. Net interest margin was 4.01% for the six months ended June 30, 1996
as compared to the 3.65% for six months ended June 30, 1995.
The table of Average Balance Sheets and Interest Rate Analysis for the
six months period ended June 30, 1996 and 1995 on page 17 and the corresponding
table of Rate/Volume Analysis on page 18 detail the effect the change in
average balances and the change in interest rates had on net interest income
during the respective periods.
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17
CitiSave Financial Corporation
Average Balance Sheets and Interest Rate Analysis
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
Six Months Ended June 30, 1996
---------------------------------
Average
Average Yield/
Balance Interest Rate
---------------------------------
(Dollars In Thousands)
Interest-Earning Assets:
Loans Receivable $ 42,882 $ 1,836 8.56 %
Investment Securities 21,115 664 6.29
Mortgage-Backed Securities 2,459 80 6.51
Other Interest-Earning Assets 8,786 206 4.69
-------- --------- ----------
Total Interest-Earning Assets 75,242 2,786 7.41
--------- ----------
Noninterest Earning Assets 3,283
--------
Total Assets $ 78,525
=======
Interest-Bearing Liabilities:
Passbook, NOW and Money Market Accounts $ 18,420 192 2.08
Certificates 41,672 1,085 5.21
Other Interest-Bearing Liabilities 0 0
---------- --------- ------
Total Interest-Bearing Liabilities 60,092 1,277 4.25
--------- ------
Noninterest-Bearing Liabilities 3,968
---------
Total Liabilities 64,060
Stockholders' Equity 14,465
---------
Total Liabilities and Stockholders' Equity $ 78,525
=========
Net Interest-Earning Assets $ 15,150
=========
Net Interest Income; Average Interest Rate Spread $ 1,509 3.16 %
========= =========
Net Interest Margin 4.01 %
=========
Average Interest-Earning Assets to
Average Interest-Bearing Liabilities 125.21 %
==========
(Unaudited)
Six Months Ended June 30, 1995
-----------------------------------
Average
Average Yield/
Balance Interest Rate
----------------------------------
(Dollars In Thousands)
Interest-Earning Assets:
Loans Receivable $ 36,288 $ 1,610 8.87 %
Investment Securities 24,786 669 5.40
Mortgage-Backed Securities 2,786 87 6.25
Other Interest-Earning Assets 3,094 57 3.68
--------- ------- ----------
Total Interest-Earning Assets 66,954 2,423 7.24
------- ----------
Noninterest Earning Assets 3,573
---------
Total Assets $ 70,527
=========
Interest-Bearing Liabilities:
Passbook, NOW and Money Market Accounts $ 17,603 196 2.23
Certificates 42,344 1,001 4.73
Other Interest-Bearing Liabilities 1,239 4 0.65
-------- ------- -------
Total Interest-Bearing Liabilities 61,186 1,201 3.93
------- -------
Noninterest-Bearing Liabilities 3,964
--------
Total Liabilities 65,150
Stockholders' Equity 5,377
--------
Total Liabilities and Stockholders' Equity $ 70,527
=========
Net Interest-Earning Assets $ 5,768
=========
Net Interest Income; Average Interest Rate Spread $ 1,222 3.31 %
========= =========
Net Interest Margin 3.65 %
=========
Average Interest-Earning Assets to
Average Interest-Bearing Liabilities 109.43 %
==========
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18
CitiSave Financial Corporation
Rate/Volume Analysis
For the Six Months Ended June 30, 1996 vs. June 30, 1995
(Unaudited)
--------------------------------------------------------
Increase (Decrease) Total
Due To Increase
--------------------------------
Rate Volume (Decrease)
--------------------------------------------------------
(In Thousands)
Interest-Earning Assets:
Loans Receivable $ -58 $ 284 $ 226
Investment Securities 102 -107 -5
Mortgage-Backed Securities 4 -11 -7
Other Interest-Earning Assets 17 132 149
--------------------------------------------------------
Total Interest-Earning Assets 65 298 363
--------------------------------------------------------
Interest-Bearing Liabilities:
Passbook, NOW & Money
Market Accounts -13 9 -4
Certificates of Deposit 100 -16 84
Other ---- -4 -4
--------------------------------------------------------
Total Interest-Bearing Liabilities 87 -11 76
--------------------------------------------------------
Increase (Decrease) in Net Interest Income -22 309 287
========================================================
Provision for Loan Losses
For the six months ended June 30, 1996, the Association recorded a
provision for loan losses in the amount of $15,000 compared to $10,000 for the
six months ended June 30, 1995. The allowance for loan losses is maintained at
a level which, in management's judgment, is adequate to absorb credit losses
inherent in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans, and economic conditions. Allowances for
impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased by a
provision for loan losses, which is charged to expense, and reduced by
charge-offs, net of recoveries. The allowance for loan loss was $71,000 at
June 30, 1996 or .16% of the total loan portfolio. The allowance for loan loss
as a percentage of non-performing loans at June 30, 1996 was 62.8%.
- 18 -
19
Liquidity
The Association is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of U.S.
Government, federal agency and other investments having maturities of five
years or less. Current OTS regulations require that a savings institution
maintain liquid assets of not less than 5% of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less, of
which short-term liquid assets must consist of not less than 1%. At June 30,
1996, the Association's liquidity was 40.0% or $22.3 million in excess of the
minimum OTS requirement.
- 19 -
20
CitiSave Financial Corporation
Form 10-QSB
Quarter Ended June 30, 1996
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities:
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders.
a) The annual meeting of stockholders was held on April 17, 1996.
b) The following directors were elected for terms of three years
expiring in 1999:
Dr. Ernest D. Bateman, Jr.
Howard L. Harvill
Frank D. McArthur, II
Directors Whose Terms Expire in 1997:
S. Pendery Gibbens, Jr.
Dr. Clarence B. Hackett
Wayne P. Hirschey
Directors Whose Terms Expire in 1998:
Lee F. Nettles
Ferd B. Kramer, Jr.
Charlotte H. Smith
c) There were a total of 964,707 shares which could have been
voted at this meeting, and 881,474 votes were represented at
the meeting in person or by proxy. On proposal 1 to elect the
slate of three directors, the results were as follows:
872,229 votes for these nominees, 9,245 votes withholding
authority and 83,233 shares not voting. On proposal 2, the
ratification of the appointment of Hannis T. Bourgeois &
Company, L.L.P. as the Company's independent auditors for the
year ending December 31, 1996, the results were as follows:
869,132 votes for this proposal, 4,400 votes against this
proposal, 7,942 votes abstaining and 83,233 shares not voting.
Of the total votes cast, 90.4% voted for Proposal 1 and 90.1%
voted for Proposal 2. There were no broker non-votes on these
proposals.
- 20 -
21
Item 5 - Other Information
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
a) Exhibits:
The following exhibit is filed herewith:
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule
b) Reports:
No reports on Form 8-K were filed by the
Registrant during the quarter ended June 30, 1996.
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22
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CITISAVE FINANCIAL CORPORATION
Registrant
Date: August 7, 1996 /s/Lee F. Nettles
------------------------------ ----------------------------
Lee F. Nettles
Chairman of the Board,
President and Chief Executive Officer
Date: August 7, 1996 /s/J. Larry Bellard
------------------------------ --------------------------
J. Larry Bellard
Sr. Vice-President and Controller
-22-