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OFFICE OF THRIFT SUPERVISION
WASHINGTON, D.C. 20552
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FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
OTS Docket Number 1272
LEEDS FEDERAL SAVINGS BANK
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(Exact name of registrant at specified in its charger)
UNITED STATES 52-1865050
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
1101 MAIDEN CHOICE LANE, BALTIMORE, MARYLAND 21229
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(Address of principal executive offices)
Registrant's telephone number, including area code: 410-242-1234
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Former name, former address and former fiscal year, if changed since last report
Indicated by a check 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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: There were
5,182,104 shares of the Registrant's common stock outstanding as of September
30, 1997 which reflects 3-for-2 common stock split declared October 22, 1997.
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LEEDS FEDERAL SAVINGS BANK
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of September 30, 1997
(unaudited), and June 30, 1997 1
Consolidated Statements of Income (unaudited) for the three months
ended September 30, 1997 and 1996 2
Consolidated Statements of Cash Flows (unaudited) for the three months
ended September 30, 1997 and 1996 3
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION 8
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEEDS FEDERAL SAVINGS BANK
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEP 30, JUNE 30,
1997 1997
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(UNAUDITED) (AUDITED)
ASSETS
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Cash:
On hand and due from banks $3,174,527 2,158,453
Interest-bearing deposits 11,280,265 11,172,475
Short Term Investments 1,946,873 2,722,336
Secured short-term loans to commercial banks 4,911,553 9,735,532
Securities purchased under agreements to resell 6,633,375 5,517,903
Investment securities, net (held to maturity) 41,744,288 43,614,562
Investment securities, net (available for sale) 9,207,387 8,162,419
Mortgage backed securities, net (held to maturity) 20,987,319 22,294,337
Loans receivable, net 178,686,439 174,877,796
Investment in Federal Home Loan Bank of Atlanta stock, at cost 2,377,200 2,377,200
Property and equipment, net 881,719 863,823
Cash surrender value of life insurance 3,186,859 3,153,193
Prepaid expenses and other assets 367,812 309,808
Ground rents owned, at cost 39,500 39,500
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285,425,116 286,999,337
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Savings accounts 233,708,206 232,590,009
Borrowed Funds-Employee Stock Ownership Plan 624,000 648,000
Advance payments by borrowers for taxes, insurance and ground
rents 1,098,321 4,804,060
Federal and state income taxes:
Currently Payable 518,910 335,841
Deferred 1,085,035 1,062,219
Accrued expenses and other liabilities 901,457 817,871
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Total Liabilities 237,935,929 240,258,000
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Stockholders' Equity:
Common Stock $1 par value:
20,000,000 shares authorized:
issued and outstanding 5,182,104 shares * 5,182,104 5,182,104
Additional paid in capital * 8,985,690 8,948,112
Employee stock ownership plan (564,690) (591,300)
Management recognition plan (43,080) (60,141)
Retained income, substantially restricted 32,484,742 31,854,434
Unrealized gains on securities available for sale, net 1,444,421 1,408,128
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Total Stockholders' Equity 47,489,187 46,741,337
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$285,425,116 286,999,337
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*reflects 3-for-2 common stock split declared October 22, 1997,
described in Note 3.
See accompanying notes to consolidated financial statements
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LEEDS FEDERAL SAVINGS BANK
Consolidated Statements of Income
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30
1997 1996
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Interest Income:
First mortgage and other loans $3,326,637 $2,961,070
Mortgage-backed securities 397,178 505,483
Investment securities and short term investments 1,305,982 1,326,317
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Total interest income 5,029,797 4,792,870
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Interest expense:
Savings accounts 2,973,703 2,885,781
Other 14,735 16,341
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Total interest expense 2,988,438 2,902,122
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Net interest income 2,041,359 1,890,748
Provision for loan losses 2,840 21,141
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Net interest income after provision for loan losses 2,038,519 1,869,607
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Noninterest income:
Service fees and charges 37,726 35,743
Other 33,996 33,812
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Total noninterest income 71,722 69,555
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Noninterest expense:
Compensation and employee benefits 431,121 357,625
Occupancy 49,565 52,944
SAIF deposit insurance premiums 55,154 1,526,221
Advertising 56,124 35,686
Other 151,788 152,601
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Total noninterest expense 743,752 2,125,077
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Income (loss) before provision for benefit of income
taxes 1,366,489 (185,915)
Provision for (benefit of) income taxes: 501,931 (77,820)
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Net Income (Loss) $864,558 $(108,095)
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Net income (loss) per share of common stock*
Basic $ .17 $(.02)
Fully-diluted $ .17 $(.02)
* reflects 3-for-2 common stock split declared October 22,
1997, described in note 3
See accompanying notes to consolidated financial statements
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LEEDS FEDERAL SAVINGS BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1997 and 1996
(UNAUDITED)
1997 1996
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Cash flows from operating activities:
Net Income (loss) $884,558 (108,095)
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of loan fees, premiums and discounts, net (11,660) (24,639)
Provision for loan losses 2,840 21,141
Accretion of premiums(discounts) on investments securities and
mortgage-backed securities, net (3,274) (10,372)
Depreciation 35,784 31,411
Non-cash compensation under stock based benefit plans 81,249 68,146
Increase in accrued interest receiveable on
mortgage-backed securities and loans receiveable (59,231) (90,883)
Increase (decrease) in income taxes currently payable 183,069 (120,335)
Increase in accrued expenses and other liabilities 83,586 1,442,100
Increase in unearned loan fees 25,731 86,793
(Decrease) increase in prepaid expenses and other assets (58,004) 20,866
Amortization of net unrealized holding loss (-0-) (3,999)
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Net cash provided by operating activities 1,144,648 1,312,134
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Cash flows from investing activities:
Purchase of investment securities held for maturity (1,784,506) (1,100,000)
Purchase of available for sale securities (975,000) -0-
Maturity of investment securities held for maturity 3,668,293 2,233,327
Loan repayments (disbursements), net (3,789,205) (6,463,668)
Mortgage-backed securities principal repayments 1,308,802 1,806,371
Purchases of property and equipment (53,680) (25,232)
Sale of ground rents owned -0- 1,600
Investment in life insurance (33,666) (33,665)
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Net cash used in investment activities (1,658,962) (3,581,267)
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LEEDS FEDERAL SAVINGS BANK
CONSOLIDATED STATEMSNTS OF CASH FLOWS
Three months ended September 30, 1997 and 1996
(UNAUDITED)
1997 1996
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Cash flows from financing activities:
Net increase in savings accounts 1,118,197 3,434,102
Decrease in advance payments by borrowers for taxes insurance
and ground rents (3,705,739) (3,567,088)
Proceeds from exercised options -0- 83,545
Dividends paid (234,250) (195,269)
Repayment of Borrowed Funds (24,000) (24,000)
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Net cash used in financing activities (2,845,792) (268,710)
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Net decrease in cash and cash equivalents (3,306,106) (2,537,843)
Cash and cash equivalents at beginning of period 31,306,699 25,921,657
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Cash and cash equivalents at end of period $27,946,593 23,383,814
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Non Cash Transactions - Increase in net unrealized gains on securities
available for sale, net of income tax effect. 36,293 204,365
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See accompanying notes to financial statements.
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LEEDS FEDERAL SAVINGS BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements include all adjustments,
consisting of normal recurring adjustments, which, in the opinion of management
are necessary for a fair presentation of financial position and results of
operations. The financial statements have been prepared using the accounting
policies described in the June 30, 1997 Annual Financial Statements. The
results of operations for the three months ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the entire year.
(2) Reclassification of Prior Year's Statements.
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
(3) Net Income Per share of Common Stock
On October 22, 1997, the Board of Directors authorized a three-for-two
common stock split in the form of a stock dividend, distributable November 19,
1997, to stockholders of record on November 5, 1997. All per share amounts
herein have adjusted for the comon stock split.
Basic and fully diluted net income per share of common stock for the three
months ended September 30, 1997, have been computed based on the weighted
average number of shares of common stock and common stock equivalents
outstanding of 5,181,227 and 5,190,943 shares respectively. In all such
calculations, it is assumed that all dilutive stock options are exercised at
the later of the beginning of the year or the date of the grant, and the
proceeds used to purchase shares of common stock.
(4) Dividends on Common Stock
On September 17, 1997, the Bank declared a quarterly cash dividend of $.19
per share. The dividends were payable to stockholders of record as of October
1, 1997 and were paid on October 22, 1997. Leeds Federal Bankshares, M.H.C.
(the 1MHC) , which owns 2,200,000 shares of stock in the Bank, waived receipt
of its quarterly dividend, thereby reducing the actual dividend payout to
approximately $234,000. The dollar amount of dividends waived by the MHC is
considered as a restriction on the retained earnings of the Bank. The amount of
any dividend waived by the MHC shall be available for declarations a dividend
solely to the MHC. At September 30, 1997, the cumulative amount of such waived
dividends was $4,547,400.
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LEEDS FEDERAL SAVINGS BANK
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from June 30, 1997 to September 30,
1997
Cash on hand and due from banks, interest bearing deposits, other
liquid investments and investment securities totaled approximately $81.3
million, a decrease of approximately $4.2 million, or 4.9%, from June 30, 1997
levels. The decrease in cash items resulted principally from allocating the
funds to increases in loans receivable. Mortgage-backed securities totaled
$21.0 million, a decrease of $1.3 million, due to repayments of principal.
Loans receivable totaled $178.7 million, an increase of $3.8 million, or 2.2%,
reflecting increased lending activity.
Deposits increased approximately $1.1 million, to a total of $233.7
million at September 30, 1997. Such increase was primarily attributable to the
general market interest rate trends. The Bank has offered savings rates that
are competitive with other banks. However, it has not relied on brokered funds
or negotiated jumbo certificates to maintain deposit levels.
The Bank is subject to capital standards which generally require the
maintenance of regulatory capital sufficient to meet each of three tests,
hereinafter described as the tangible capital requirement, the core capital
requirement and the risk-based capital requirement. At September 30, 1997, the
Bank had tangible capital of $46.0 million, or 16.3% of total adjusted assets,
which was $41.8 million in excess of the requirement of minimum tangible
capital of $4.2 million, or 1.5% of total adjusted assets; core capital of
$46.0 million, or 16.3% of total adjusted assets, which was $37.5 million in
excess of the requirement of minimum core capital of $8.5 million, or 3.0% of
total adjusted assets; and risk-based capital of $46.6 million, or 35.3% of
risk weighted assets, which was $36.0 million in excess of the requirement of a
minimum risk-based capital of 8% of risk weighted assets.
Comparison of Operating Results for Three Month Periods Ended September 30,
1997 and 1996
General
The Bank's net income for the three months ended September 30, 1997,
totaled $865,000, an increase of $124,000, or 16.7% as compared to $741,000 for
the three months ended September 30, 1996, before the one-time pretax
assessment of $1.4 million to recapitalize the Savings Associations Insurance
Fund (SAIF). Such increase was due principally to an increase in net interest
income. After recognition of the SAIF assessment during the quarter ended
September 30, 1997, the Bank incurred a loss for the quarter of $108,000.
Net Interest Income
Interest income on loans increased by $366,000, or 12.2%, to $3.3
million for the three months ended September 30, 1997, compared to $3.0 million
for the three months ended September 30, 1996, as a result of total average
loans increasing $20.0 million to $176.0 million for the current quarter
compared to $156.0 for the same quarter last year. The increase in average
loans reflected increased loan demand. Yield on average loans remained
relatively unchanged at 7.6%. Funds principally from an increase in average
saving deposits and a decrease in mortgage-backed securities were used to fund
the increase in average loans. Interest income on mortgage-backed securities
decreased by $108,000 due principally to a decrease in average balance of
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mortgage-backed securities to $21.7 million from $28.1 million. Average yield
on mortgage backed securities remained increased to 7.3%, from 7.2%. The
decreases in average balance of mortgage securities was attributable to
principal repayments.
Interest income on investment securities, certificates of deposit, and
short-term investments ("Investments") remained relatively unchanged at $1.3
million for the three months ended September 30, 1997, and 1996. Average yield
of investments decreased to 6.3%, from 6.5%. The decrease in average yields
was the result of a general market decrease in interest rates on short term
investments.
Total interest expense increased by approximately $86,000, during the
quarter ended September 30, 1997 to $3.0 million from $2.9 million for the
quarter ended September 30, 1996. This increase was the result of an increase
in average balances outstanding to $233.9 million from $224.4 million offset by
a decrease in the average rate paid on deposits to 5.1% from 5.2%. The
increase in average balances was a result of general market conditions.
As a result of the foregoing changes, interest income increased by a
greater amount as compared to interest expense resulting in an increase in net
interest income of $151,000, or 7.9%, to $2.0 million during the three months
ended September 30, 1997, as compared to $1.9 million during the three months
ended September 30, 1996.
Provision for Loan Losses
The Bank provided $3,000 for loan losses for the three months ended
September 30, 1997, and $21,000 during the three month period ended September
30,1996.
Noninterest Income
Noninterest income increased by approximately $2,000 to $72,000 during
the three months ended September 30, 1997, as compared to $70,000 during the
three months ended September 30, 1996. The increase was primarily the result
of increases in service fees and charges.
Noninterest Expense
Noninterest expense for the three months ended September 30, 1997,
increased by approximately $2,000, to $744,000 (before the one-time SAIF
assessment) compared to the three months ended September 30, 1996. The SAIF
assessment at September 30, 1996, pretax, totaled $1.4 million. After taxes,
the net effect to the Bank was a decrease of income totaling approximately
$849,000.
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PART II. OTHER INFORMATION
LEGAL PROCEEDINGS
The Bank is not involved in any litigation, or is it aware of any pending
litigation, other than legal proceedings incidental to the Bank's business. In
the opinion of management, no material loss is expected from any such pending
claims or lawsuits.
CHANGES IN SECURITIES
Notes To Financial Statements are incorporated by reference concerning
discussion of waiver of dividends by Leeds Federal Bankshares, M.H.C.
EXHIBITS AND REPORT ON FORM 8-K
No Form 8-K reports were filed during the quarter.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
LEEDS FEDERAL SAVINGS BANK
Date: November 12 , 1997 By: /s/ GORDON E. CLARK
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Gordon E. Clark
President and Chief Executive Officer
Date: November 12 , 1997 By: /s/ KATHLEEN TRUMPLER
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Kathleen Trumpler
Treasurer and Chief Financial Officer