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FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _________________
Commission file number: 0-21297
Foundation Bancorp, Inc.
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(Exact name of Registrant as specified in its charter)
Ohio
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(State or other jurisdiction of incorporation or organization)
31-1465239
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(I.R.S. Employer Identification Number)
25 Garfield Place, Cincinnati, Ohio 45202
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(Address of principal executive offices) (zip Code)
Registrant's telephone number, including area code: (513) 721-0120
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Common shares, no par value Outstanding at December 31, 2000: 462,875
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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FOUNDATION BANCORP, INC.
FORM 1O-QSB
QUARTER ENDED DECEMBER 31, 2000
Part l - Financial Information
Item 1 - Financial Statements
Interim financial information required by Regulation 210.10 - 01 of Regulation
S - X is included in this Form 10-QSB as referenced below:
Consolidated Statements of Financial Condition...........3
Consolidated Statements of Earnings......................4
Consolidated Statements of Cash Flows....................5
Notes to Consolidated Financial Statements...............6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............7
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FOUNDATION BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, June 30,
2000 2000
---------------- -------------
(Unaudited)
ASSETS
Cash and due from banks $ 294,611 $ 13,279
Interest-bearing deposits in other financial institutions 1,392,496 360,262
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Cash and cash equivalents 1,687,107 373,541
Investment securities-at amortized cost (approximate market value of $5,245,260
and $5,097,605 at December 31, 2000 and June 30, 2000, respectively) 5,250,000 5,250,000
Mortgage-backed securities-at cost (approximate market value of $3,707,899 and
$4,152,316 at December 31, 2000 and June 30, 2000, respectively) 3,798,639 4,355,022
Loans receivable-net 22,665,362 22,441,795
Office premises and equipment-at depreciated cost 272,311 281,405
Federal Home Loan Bank stock-at cost 382,700 368,800
Accrued interest receivable on loans 108,326 100,882
Accrued interest receivable on mortgage-backed securities 27,109 29,841
Accrued interest receivable on investments and interest-bearing deposits 73,151 73,151
Prepaid expenses and other assets 39,840 107,459
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TOTAL ASSETS $ 34,304,545 $33,381,896
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LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 26,353,425 $25,505,422
Advances from the Federal Home Loan Bank 475,498 518,652
Advances by borrowers for taxes, insurance and other 247,941 57,872
Other liabilities 38,166 123,330
Deferred federal income taxes 101,300 101,300
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TOTAL LIABILITIES 27,216,330 26,306,576
Shareholders' equity
Common shares-2,000,000 shares, no par value, authorized; 462,875 shares
issued and outstanding - -
Additional paid-in capital 4,399,494 4,398,922
Unallocated shares held by Employee Stock Ownership Plan (80,360) (150,873)
Retained earnings-substantially restricted 2,856,600 2,927,918
Shares acquired for restricted stock plan (87,519) (100,647)
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TOTAL SHAREHOLDERS' EQUITY 7,088,215 7,075,320
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 34,304,545 $33,381,896
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FOUNDATION BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Three months ended Six months ended
December 31, December 31,
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2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
Interest Income
Loans $454,087 $406,918 $ 903,010 $ 814,491
Mortgage-backed securities 59,072 69,841 124,758 139,221
Investment securities 98,962 96,878 197,793 192,821
Interest bearing deposits and other 13,487 15,492 19,344 39,577
-------- -------- ----------- -----------
Total interest income 625,608 589,129 1,244,905 1,186,110
Interest expense
Deposits 387,037 324,004 744,643 647,341
Borrowings 6,827 9,513 13,946 18,909
-------- -------- ----------- -----------
Total interest expense 393,864 333,517 758,589 666,250
Net interest income before provision for losses on loans 231,744 255,612 486,316 519,860
Provision for losses on loans - - - -
-------- -------- ----------- -----------
Net interest income after provision for losses on loans 231,744 255,612 486,316 519,860
Other operating income 11,627 16,171 25,812 29,660
General, administrative and other expense
Employee compensation and benefits 117,629 117,878 237,719 237,767
Occupancy and equipment 20,437 21,114 41,068 41,701
Federal deposit insurance premiums 1,386 3,807 2,688 7,598
Franchise taxes 19,142 19,996 38,284 39,993
Data processing 8,873 8,654 17,492 17,775
Other 35,695 31,876 71,763 66,536
-------- -------- ----------- -----------
Total general, administrative and other expenses 203,162 203,325 409,014 411,370
-------- -------- ----------- -----------
Income before income taxes 40,209 68,458 103,114 138,150
Provision for federal income taxes (13,671) (25,316) (35,569) (51,050)
-------- -------- ----------- -----------
Net earnings $ 26,538 $ 43,142 $ 67,545 $ 87,100
======== ======== =========== ===========
Primary and diluted earnings per share $0.06 $0.10 $0.15 $0.20
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FOUNDATION BANCORP, INC.
STATEMENT OF CASH FLOWS
Six months ended
December 31
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2000 1999
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(Unaudited) (Unaudited)
Cash flows from operating activities
Net income $ 67,545 $ 87,100
Adjustments to reconcile net income to net cash provided by operating
activities
Gain on sale of loans (2,464) (2,578)
Loss on sale of REO acquired in foreclosure - 3,954
Depreciation and amortization 9,750 9,775
Amortization of premiums and discounts on mortgage-backed securities 10,438 9,927
FHLB stock dividends (13,900) (12,300)
Amortization of deferred loan (fees) costs 178 (148)
Recognition & Retention Plan (RRP) allocation 24,128 23,200
ESOP expense 71,085 64,900
Deferred loan origination costs (4,574) (3,223)
Effects of changes in operating assets and liabilities
Accrued interest receivable (4,712) (45,551)
Prepaid expenses and other assets 67,619 59,312
Accrued expenses (85,164) (155,590)
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Net cash provided by operating activities 139,929 38,778
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Cash flows from investing activities
Repayments of mortgage-backed securities 545,945 436,870
Purchases of investment securities - held to maturity - (1,500,000)
Maturity of certificates of deposits - 714,144
Purchases of certificate of deposits - (4,746)
Loan disbursements (1,931,947) (2,683,337)
Loan principal repayments 1,569,499 2,421,225
Proceeds from sale of loans 145,741 213,953
Purchase of REO acquired in foreclosure - (50,000)
Proceeds from sale of REO acquired in foreclosure - 46,046
Purchases of property and equipment (656) -
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Net cash provided by (used in) investing activities 328,582 (405,845)
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Cash flows from financing activities
Net increase (decrease) in deposits 848,003 (585,962)
Repayment of FHLB advances (43,154) (40,877)
Net increase in advances by borrowers for taxes, insurance and other 190,069 174,698
Purchase of shares for restricted stock plan (11,000) -
Dividends paid (138,863) (231,437)
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Net cash used in financing activities 845,055 (683,578)
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Net increase (decrease) in cash and cash equivalents 1,313,566 (1,050,645)
Cash and cash equivalents at beginning of period 373,541 2,414,253
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Cash and cash equivalents at end of period $1,687,107 $1,363,608
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Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest expense $ 762,807 $ 662,539
Income taxes 0 $ 23,000
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FOUNDATION BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended
December 31, 2000 and 1999
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated 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
consolidated financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, in the
opinion of management, all adjustments (consisting only of normal recurring
accruals), which are necessary for a fair presentation of the consolidated
financial statements, have been included. The results of operations for the six
months ended December 31, 2000 and 1999 are not necessarily indicative of the
results that may be expected for an entire fiscal year.
2. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Foundation Bancorp, Inc. (the "Company") and its wholly owned subsidiary,
Foundation Savings Bank ("Foundation"). All significant intercompany items have
been eliminated.
3. EARNINGS PER SHARE
Basic earnings per share for the six month periods ended December 31,
2000 and 1999, were computed based on weighted average shares outstanding of
448,644 and 436,611, respectively, which gives effect to a reduction for the
14,231 and 19,651 unallocated shares held by the Foundation Bancorp, Inc.
Employee Stock Ownership Plan (the "ESOP") at such dates, respectively, in
accordance with Statement of Position 93-6 ("SOP 93-6") issued by the American
Institute of Certified Public Accountants.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM JUNE 30, 2000 TO
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DECEMBER 31, 2000
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At December 31, 2000, the Company's assets totaled $34.3 million, an
increase of $0.9 million, or 2.8%, from the $33.4 million total at June 30,
2000. Cash and cash equivalents increased $1.3 million, or 351.7%, the result of
an increase in deposits and the repayment of mortgage backed securities. Loans
receivable totaled $22.7 million at December 31, 2000, an increase of $0.2
million, or 1.0%, from the June 30, 2000 total. Investment securities totaled
$5.3 million at December 31, 2000, representing no change from the June 30, 2000
total. Mortgage-backed securities decreased $0.6 million, or 12.8%, resulting
from repayments.
Deposits totaled $26.4 million at December 31, 2000, an increase of
$0.8 million, or 3.3% from the June 30, 2000 total. Advances from the Federal
Home Loan Bank decreased $43,154, or 8.3%, from scheduled repayments. Advances
from borrowers for taxes, insurance and other increased $190,069, or 328.4%,
resulting from timing differences in the payment of real estate taxes. Other
liabilities decreased $85,164, or 69.1%, due to timing differences in the
payment of accounts payable. Shareholders' equity increased $12,895, or 0.2%,
from the June 30, 2000 total. A $.30 per share dividend totaling $138,862.50 was
paid to shareholders on August 25, 2000.
The Office of Thrift Supervision has two minimum regulatory capital
standards for savings associations. At December 31, 2000, Foundation's capital
substantially exceeded each of the requirements. The following is a summary of
Foundation's approximate regulatory capital position, in dollars and as a
percentage of regulatory assets, at December 31, 2000:
ACTUAL REQUIRED EXCESS
------ -------- ------
(Dollars in thousands)
Core capital $5,926 17.3% $1,372 4.0% $4,554 13.3%
Risk-based capital $6,069 39.1% $1,241 8.0% $4,828 31.1%
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COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 2000
- --------------------------------------------------------------------------
AND 1999
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General
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The Company recorded net earnings of $67,545 for the six months ended
December 31, 2000, a decrease of $19,555, or 22.5%, from the net earnings of
$87,100 recorded for the six months ended December 31, 1999. The decrease was
the result of a decrease in net interest income after provision for loan losses
of $33,544, or 6.5%, and a decrease in other operating income of $3,848, or
13.0%, partially offset by a decrease in general, administrative and other
expense of $2,356, or 0.6%, and a decrease in federal income taxes of $15,481,
or 30.3%.
Net Interest Income
- -------------------
Net interest income after the provision for losses on loans for the six
months ended December 31, 2000, decreased $33,544, or 6.5%, compared to the same
period of 1999. This was the result of an increase in total interest income of
$58,795, or 5.0%, offset by an increase in total interest expense of $92,339, or
13.9%. The increase in total interest income resulted from an increase in
interest earned on loans of $88,519, or 10.9%, resulting from a $2.0 million
increase in the loans receivable portfolio. Interest on mortgage-backed
securities decreased $14,463, or 10.4%, resulting from a lower portfolio balance
due to higher repayments and increased write-off of premiums. Interest on
interest-bearing deposits decreased $20,233, or 51.1%, resulting from lower
portfolio balances as funds were invested in higher yielding mortgage loans.
Interest income on investment securities increased $4,972, or 2.6%, resulting
from higher dividends on Federal Home Loan Bank stock. The increase in total
interest expense was primarily attributable to the increase in interest expense
on deposits of $97,302, or 15.0%, due to a higher weighted average rate on a
larger portfolio. During this one year period, the deposit portfolio increased
$1.1 million and the weighted average rate paid on deposits increased 89 basis
points. The deposit growth occurred primarily in certificates of deposit with
terms from 90 days to 24 months. Management pursued a strategy of pricing these
certificates at higher rates than longer term deposits in anticipation of a
lower interest rate climate.
Other Operating Income
- ----------------------
Other operating income totaled $25,812 for the six months ended December
31, 2000, a decrease of $3,848, or 13.0%, compared to the same period in 1999,
due primarily to a decrease in gains on sales of loans as loans originated in
the higher interest rate environment were kept for Foundation's portfolio.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense for the six months ended December
31, 2000 decreased $2,356, or 0.6%, compared to the same period of 1999. This
was due to the decrease in Federal deposit insurance premiums of $4,910, or
64.6%, the decrease in occupancy and equipment expenses of $633, or 1.5%, the
decrease in franchise taxes of $1,709, or 4.3%, and the decrease in data
processing fees of $283, or 1.6%, which were partially offset by an increase in
other expense of $5,227, or 7.9%. The increase on other expense was comprised
mainly of increased audit costs and a one-time charge of $2,500 resulting from
an armed robbery. The provision for federal income taxes decreased $15,481, or
30.3%, as the result of lower earnings.
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COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2000
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AND 1999
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General
- -------
The Company recorded net earnings of $26,538 for the three months ended
December 31, 2000, a decrease of $16,604, or 38.5%, from the net earnings of
$43,142 recorded for the three months ended December 31, 1999. The decrease was
primarily the result of a decrease in net interest income after provision for
loan losses of $23,868, or 9.3%, and a decrease in other income of $4,544, or
28.1%, partially offset by a decrease in the provision for federal income taxes
of $11,645, or 46.0%
Net Interest Income
- -------------------
Net interest income after provision for losses on loans for the three
months ended December 31, 2000, decreased $23,868, or 9.3%, compared to the same
period of 1999. This was the result of an increase in total interest income of
$36,479, or 6.2%, offset by an increase in total interest expense of $60,347, or
18.1%. Interest income on loans increased $47,169, or 11.6%, the result of an
increase in the loan portfolio, and interest on investment securities increased
$2,084, or 2.2%, the result of higher dividends on Federal Home Loan Bank stock.
These increases were partially offset by a decrease in interest on
mortgage-backed securities of $10,769, or 15.4%, and a decrease in interest on
interest bearing deposits of $2,005, or 12.9%, both the result of lower
outstanding portfolio balances. Interest expense on deposits increased $63,033,
or 19.5%, due to a higher weighted average rate on a larger portfolio. Interest
expense on borrowings decreased $2,686, or 28.2%, due a lower balance resulting
from scheduled repayments.
Other Operating Income
- ----------------------
Other operating income for the three months ended December 31, 2000
decreased $4,544, or 28.1%, compared to the same period of 1999, the result of
decreased gains on loan sales due to the increase in market rates on loans,
resulting in lower loan production.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense for the three months ended
December 31, 2000 decreased $163, or 0.1%, compared to the same period of 1999.
This was the result of an increase in data processing fees of $219, or 2.5% and
an increase in other expense of $3,819, or 12.0%, primarily the result of a one
time charge of $2,500 resulting from an armed robbery. These increases were
offset by a decrease in federal deposit insurance premiums of $2,421, or 63.6%,
a decrease in occupancy and equipment expenses of $677, or 3.2%, a decrease in
franchise taxes of $854, or 4.3% and a decrease in employee compensation and
benefits of $249, or 0.2%. Federal income taxes decreased $11,645, or 46.0% due
to lower net income before taxes.
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FOUNDATION BANCORP, INC.
10-QSB
PART II
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OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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Not applicable
ITEM 2. CHANGES IN SECURITIES
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Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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At the 2000 Annual Meeting of the Corporation's shareholders, held on
October 24, 2000 (the "Annual Meeting"), the following matters were
voted upon:
1) Election of directors:
For Against
Ruth C. Emden 370,606 10,100
Paul L. Silverglade 370,606 10,100
Ivan J. Silverman 370,606 10,100
2) Ratification of the appointment of Clark, Schaefer, Hackett & Co.
as independent auditors of the Corporation for the fiscal year
ended June 30, 2001.
For: 373,306 Against: 2,350 Abstain: 5,050
ITEM 5. OTHER INFORMATION
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None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibit 27. Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
quarter ended December 31, 2000.
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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 on its behalf by the
undersigned thereunto duly authorized.
/s/ Laird L. Lazelle
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Date: February 9, 2001 Laird L. Lazelle
President
/s/ Dianne K. Rabe
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Date: February 9, 2001 Dianne K. Rabe
Treasurer
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