SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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 September 30, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-22790
STATEFED FINANCIAL CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 42-1410788
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(State of other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) or Number)
519 Sixth Avenue, Des Moines, Iowa 50309
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(Address of principal executive offices)
(515) 282-0236
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(Issuer's telephone number)
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 |_|
State the number of Shares outstanding of each of the issuer's classes of
common equity, as the latest date:
As of November 8, 2000, there were 1,526,600 shares of the Registrant's
common stock issued and outstanding.
STATEFED FINANCIAL CORPORATION
Form 10-QSB
Index
Financial Information Page No.
Item 1. Consolidated Financial Statements:
Consolidated Statements of Financial Condition
as of September 30, 2000 and June 30, 2000 3
Consolidated Statements of Income for
the Three Months Ending September 30, 2000
and September 30, 1999. 4
Consolidated Statements of Comprehensive Income for
the Three Months Ending September 30, 2000
and September 30, 1999 5
Consolidated Statement of Stockholders'
Equity for the Three Months Ending September 30, 2000 6
Consolidated Statements of Cash Flows
for the Three Months Ending September 30, 2000 and
September 30, 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. Other Information 14
Signatures 16
2
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2000 and June 30, 2000
ASSETS (Unaudited)
September 30, 2000 June 30, 2000
Cash and amounts due from depository institutions $ 1,324,061 $ 2,477,494
Investments in certificates of deposit 495,568 495,692
Investment securities available for sale 1,983,718 2,231,274
Loans receivable, net 89,562,334 86,572,585
Real estate held for investment, net 2,160,043 2,175,785
Property acquired in settlement of loans 1,334,435 1,337,847
Office property and equipment, net 3,368,979 2,965,659
Federal Home Loan Bank stock, at cost 1,563,400 1,464,600
Accrued interest receivable 611,530 573,293
Other assets 404,173 390,550
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TOTAL ASSETS $ 102,808,241 $ 100,684,779
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 53,789,298 $ 53,648,118
Advances from Federal Home Loan Bank 31,259,756 29,283,906
Advances from borrowers for taxes and insurance -- 353,743
Accrued interest payable 151,462 140,243
Dividends payable 113,295 113,220
Income taxes:current and deferred 426,367 296,992
Other liabilities 170,511 198,689
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TOTAL LIABILITIES $ 85,910,689 $ 84,034,911
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Stockholders' equity:
Common stock $ 17,810 $ 17,810
Additional paid-in capital 8,556,369 8,546,501
Unearned compensation - restricted stock awards (189,926) (205,761)
Accumulated other comprehensive income-
unrealized gains (losses) on investments, net of deferred taxes (122,101) (124,579)
Treasury stock (2,354,214) (2,362,921)
Retained earnings - substantially restricted 10,989,614 10,778,818
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TOTAL STOCKHOLDERS' EQUITY $ 16,897,552 $ 16,649,868
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 102,808,241 $ 100,684,779
============= =============
3
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ending September 30, 2000 and 1999
(Unaudited)
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2000 1999
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Interest Income:
Loans $1,920,884 $1,507,082
Investments 61,162 69,812
Other 27,421 86,586
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Total interest income 2,009,467 1,663,480
Interest Expense:
Deposits 675,186 689,939
Borrowings 456,291 274,861
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Total interest expense 1,131,477 964,800
Net interest income 877,990 698,680
Provision for loan losses 9,000 9,000
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Net interest income after
provision for loan losses 868,990 689,680
Non-interest income:
Real estate operations 127,745 136,084
Other 28,760 26,794
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Total non-interest income 156,505 162,878
Non-interest expense:
Salaries and benefits 240,863 241,084
Real estate operations 79,879 79,239
Occupancy and equipment 37,878 38,327
FDIC premiums and OTS assessments 9,548 15,196
Data processing 28,700 20,048
Other 143,750 92,224
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Total non-interest expense 540,618 486,118
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Income before income taxes 484,877 366,440
Income tax expense 160,786 121,240
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Net income $ 324,091 $ 245,200
========== ==========
Basic earnings per share $ 0.22 $ 0.17
Diluted earnings per share $ 0.22 $ 0.16
4
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ending September 30, 2000 and 1999
(Unaudited)
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2000 1999
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Net Income $ 324,091 $ 245,200
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on
securities arising during period $ 2,478 (93,656)
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Comprehensive income $ 326,569 $ 151,544
========= =========
5
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ending September 30, 2000
(Unaudited)
Balance - June 30, 2000 $ 16,649,868
Additional paid in capital 9,868
Other comprehensive income--change in unrealized loss on
investment securities, net of deferred income taxes 2,478
Dividends declared (113,295)
Stock options exercised (1,000 shares) 8,707
ESOP common stock released for allocation 15,835
Net income 324,091
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Balance - September 30, 2000 $ 16,897,552
============
6
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ending September 30, 2000 and September 30, 1999
(Unaudited)
Cash Flows From Operating Activities September 30, 2000 September 30, 1999
------------------ ------------------
Net Income $ 324,091 $ 245,200
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 42,410 41,809
Amortization of ESOP 25,703 26,706
Deferred loan fees 10,393 2,046
Provision for losses on loans 9,000 9,000
Change in:
Accrued interest receivable (38,237) (14,590)
Other Assets (13,623) 22,813
Accrued interest payable 11,219 50,987
Current income tax liability 129,375 96,240
Other Liabilities (28,178) (37,863)
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NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 472,153 $ 442,348
CASH FLOWS FROM INVESTING ACTIVITIES
Maturity of investments in certificates of deposit $ 124 $ 198,430
Purchase of available-for-sale investment securities -- (1,068,779)
Proceeds from sale or maturity of available-for-sale investment securities 250,034 --
(Purchase) redemption of FHLB Stock (98,800) --
Net (increase) decrease in loans outstanding (3,009,143) (2,910,188)
Investment in real estate held for investment (1,923) (180,960)
Investment in real estate held for development -- 79,994
Investment in real estate acquired in settlement of loans 3,412 10,500
Purchase of office property and equipment (428,064) (5,792)
--------------- ---------------
NET CASH FLOWS USED BY INVESTING ACTIVITIES $ (3,284,360) $ (3,876,795)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $ 141,180 $ (334,931)
Advances from the Federal Home Loan Bank 2,000,000 0
Repayment of advances from the Federal Home Loan Bank (24,150) (22,776)
Net decrease in advances from borrowers (353,743) (290,280)
Dividends paid (113,220) (113,925)
Purchase of treasury stock 8,707 (121,904)
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NET CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES $ 1,658,774 $ (883,816)
--------------- ---------------
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CHANGE IN CASH AND CASH EQUIVALENTS $ (1,153,433) $ (4,318,264)
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CASH AND CASH EQUIVALENTS, beginning of period $ 2,477,494 $ 8,481,216
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CASH AND CASH EQUIVALENTS, end of period $ 1,324,061 $ 4,162,952
=============== ===============
7
STATEFED FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ending
September 30, 2000 and September 30, 1999
(Unaudited)
1. BASIS OF PRESENTATIONS
These consolidated financial statements are unaudited (with the exception
of the Consolidated Statement of Financial Condition for June 30, 2000). These
consolidated financial statements were prepared in accordance with instructions
for Form 10-QSB and therefore, do not include all disclosures necessary for a
complete presentation of the statements of financial condition, statements of
income and statements of cash flows in accordance with generally accepted
accounting principles. However, in the opinion of management, all adjustments
necessary for a fair presentation of the consolidated financial statements have
been included. Results for any interim period are not necessarily indicative of
results expected for the year. The interim consolidated financial statements
include the accounts of StateFed Financial Corporation (the "Corporation"), its
subsidiary, State Federal Savings and Loan Association (the "Association" or
"State Federal") and the Association's subsidiary, State Service Corporation.
These statements should be read in conjunction with the consolidated
financial statements and related notes, which are incorporated by reference in
the company's Annual Report on Form 10-KSB for the year, which ended June 30,
2000.
2. EARNINGS PER SHARE OF COMMON STOCK
Basic earnings per share is computed based upon the weighted-average
shares outstanding during the period, less shares in the ESOP that are
unallocated and not committed to be released. Weighted-average common shares
outstanding totaled 1,472,235 at September 30, 2000 and 1,459,591 at September
30, 1999.
Diluted earnings per share is computed by considering common shares
outstanding and dilutive potential common shares to be issued under the
Company's stock option plan. Weighted-average common shares deemed outstanding
for the purpose of computing diluted earnings per share totaled 1,500,170 at
September 30, 2000 and 1,497,935 at September 30, 1999.
8
3. REGULATORY CAPITAL REQUIREMENTS
Pursuant to Federal law, savings institutions must meet four separate
capital requirements. The Association's capital ratios and balances at September
30, 2000 are as follows:
Amount %
------------------------
(Dollars in thousands)
Tangible Capital:
Association's $8,534 8.93%
Requirement 1,433 1.50
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Excess $7,101 7.43%
Core Capital:
Association's $8,534 8.93%
Requirement 2,866 3.00
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Excess $5,668 5.93%
Risk-Based Capital:
Association's $8,802 13.65%
Requirement 5,159 8.00
------ -----
Excess $3,643 5.65%
Tier 1 Risk-Based Capital:
Association's $8,534 13.23%
Requirement 2,580 4.00
------ -----
Excess $5,954 9.23%
4. STOCK OPTION PLAN
At June 30, 2000 there were unexercised options for 61,306 shares of
common stock under the terms of the StateFed Financial Corporation 1993 Stock
Option Plan. The options have an exercise price of $5 per share. There were
1,000 options exercised during the three months ended September 30, 2000.
5. STOCK REPURCHASE PLAN
On August 23, 2000, the Company's Board of Directors authorized management
to repurchase up to 75,530 shares of the Company's common stock over the next
six months. During the three-month period ending September 30, 2000, there were
no shares repurchased.
9
PART I ITEM 2
STATEFED FINANCIAL CORPORATION
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The accompanying Consolidated Financial Statements include StateFed
Financial Corporation (the "Company") and its wholly owned subsidiary, State
Federal Savings and Loan Association (the "Association"). All significant
inter-company transactions and balances are eliminated in consolidation. The
Company's results of operations are primarily dependent on the Association's net
interest margin, which is the difference between interest income earned on
interest-earning assets and interest expense paid on interest-bearing
liabilities. The Association's net income is also affected by the level of its
non-interest expenses, such as employee compensation and benefits, occupancy
expenses, and other expenses.
When used in this Form 10-QSB and in future filings with the SEC, in the
Company's press releases or other public or shareholder communications, as well
as in oral statements made by the executive officers of the Company or its
primary subsidiary, the words or phrases "will likely result," "are expected
to," "will continue," "is anticipated," "estimated," "project" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
are subject to certain risks and uncertainties, including, among other things,
changes in economic conditions in the Company's market area, changes in policies
by regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition, that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. 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. The
Company wishes to advise readers that the factors listed above could affect its
financial performance and could cause its actual results for future periods to
differ materially from any opinions or statements expressed with respect to
future periods in any current statements.
The Company does not undertake--and specifically declines any
obligation--to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
10
Financial Condition
The Company's total assets increased $2.1 million, from $100.7 million at
June 30, 2000 to $102.8 million at September 30, 2000. This increase was due
primarily to an increase in net loans receivable of $3.0 million, and an
increase in office property and equipment of $403,300, and an increase in
Federal Home Bank Stock of $98,800, which were partially offset by a decrease in
cash and amounts due from depository institutions of $1.2 million, a decrease of
investment securities of $246,600, and a decrease in real estate held for
investments of $15,700.
Cash and amounts due from depository institutions decreased $1.2 million,
from $2.5 million at June 30, 2000 to $1.3 million at September 30, 2000. The
decrease in cash and amounts due from depository institutions was primarily due
to an increase in net loan receivable of $3.0 million.
Net loans receivable increased $3.0 million, from $86.6 million at June
30, 2000 to $89.6 million at September 30, 2000. Repayment of principal totaled
$3.5 for the three-month period, while loan origination's totaled $6.5 million
for the same period.
Total deposits increased by $141,000 from $53.6 million at June 30, 2000
to $53.8 million at September 30, 2000. Passbook accounts decreased $247,000 and
certificates accounts decreased $39,000, while money market fund accounts
increased $234,000 and demand deposit accounts increased $193,000.
Total stockholders' equity increased $247,700 from $16.65 million at June
30, 2000 to $16.90 million September 30, 2000. The increase was primarily the
result of net earnings of $324,100, accounting for employee stock awards and
options of $34,400,and a decrease in unrealized loss on investment securities of
$2,500, which was partially offset by dividends declared of $113,300.
Comparison of Operating Results for the Three Month Periods Ending September 30,
2000 and September 30, 1999
General. Net income increased $78,900 to $324,100 for the three months
ended September 30, 2000 from $245,200 for the three months ended September 30,
1999. The increase in net income was primarily due to an increase in net
interest income of $179,300, partially offset by a decrease in non-interest
income of $6,400, an increase of non-interest expense of $54,500, and an
increase in income tax expense of $39,500.
Net Interest Income. Net interest income increased $179,300 from $698,700
for the three months ended September 30, 1999 to $878,000 for the three months
ended September 30, 2000. This increase was primarily the result of an increase
in interest income of $346,000, which was offset by an increase in interest
expense of $166,700.
Interest Income. Interest income increased $346,000, from $1.66 million
for the three months ended September 30, 1999 to $2.0 million for the three
months ended September 30, 2000, as a result of an increase in interest earned
on balances in the loan portfolio of $413,800, which was partially offset by
decreases in interest on investments of $8,600 and other interest income of
$59,200. The increase of
11
$413,800 in interest earned on loans receivable was due to an increase of loans
receivable and a slight increase in average loan interest rates. Interest on
investments and other interest income decreased primarily because of a decrease
in the balance of investments and other interest earning assets.
Interest Expense. Interest expense increased $166,700 from $964,800 in the
three months ended September 30, 1999 to $1.13 million in the three months ended
September 30, 2000. This increase resulted primarily from an increase of
interest paid on borrowings of $181,400 and was partially offset by a decrease
in interest paid on deposits of $14,700. The increase of interest paid on
borrowings was primarily due to an increase in borrowings from the Federal Home
Loan Bank of Des Moines from the prior period. The decrease of interest paid on
deposits was primarily due to a decrease in deposits from the prior period.
Provision for Loan Losses. The provision for loan losses remained
unchanged in the three months ended September 30, 2000 as compared to the three
months ended September 30, 1999. The provision during the three months ended
September 30, 2000 was based on management's analysis of the allowance for loan
losses. The Company will continue to monitor its allowance for loan losses and
make future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Company maintains its allowance for
loan losses at a level, which it considers to be adequate to provide for
potential losses, there can be no assurance that future losses will not exceed
estimated amounts or that additional provisions for loan losses will not be
required for future periods.
Non-interest Income. Non-interest income decreased $6,400 from $162,900 in
the three months ended September 30, 1999 to $156,500 in the three months ended
September 30, 2000. The decrease was the result of a $8,300 decrease in income
from real estate operations, offset by an increase in other income of $1,900.
Non-interest Expense. Non-interest expense increased from $486,100 in the
three months ended September 30, 1999 to $540,600 in the three months ended
September 30, 2000. This increase of $54,500 was primarily the result of an
increase of $51,500 in other non-interest expense (which includes expenditures
of $45,000 in legal fees due to a proxy contest) and an increase in data
processing of $8,700, partially offset by a decrease in FDIC premiums and OTS
assessments of $5,700.
Income Tax Expense. Income tax expense was $160,800 for the three months
ended September 30, 2000 compared to $121,200 for the three months ended
September 30, 1999, an increase of $39,600, primarily due to the increase in
taxable income.
Liquidity and Capital Resources. The Company's primary sources of funds
are deposits, principal and interest payments on loans, FHLB Des Moines
advances, and funds provided by operations. While scheduled loan repayments and
maturity of short-term investments are a relatively predictable source of funds;
deposit flows are greatly influenced by general interest rates, economic
conditions, and competition. Current Office of Thrift Supervision regulations
require the company to maintain cash and eligible investments in an amount equal
to at least 4% of customer accounts and short-term borrowings to assure its
ability to meet demands for withdrawals and repayment of short-term borrowings.
As of September 30, 2000, the Association's liquidity ratio was 4.35%, which
exceeded the minimum regulatory requirement on such date.
12
The Company uses its capital resources principally to meet its ongoing
commitments, to fund maturing certificates of deposits and loan commitments,
maintain its liquidity, and meet its foreseeable short- and long term needs. The
Company expects to be able to fund or refinance, on a timely basis, its material
commitments and long-term liabilities.
Regulatory standards impose the following capital requirements: a
risk-based capital standard expressed as a percent of risk adjusted assets, a
leverage ratio of core capital to total adjusted assets, and a tangible capital
ratio expressed as a percent of total adjusted assets. As of September 30, 2000,
the Association exceeded all fully phased-in regulatory capital requirements.
At September 30, 2000, the Association's tangible equity capital was $8.5
million, or 8.93%, of tangible assets, which is in excess of the 1.5%
requirement by $7.1 million. In addition, at September 30, 2000, the Association
had core capital of $8.5 million, or 8.93%, of adjusted total assets, which
exceeds the 3% requirement by $5.7 million. The Association had total risk-based
capital of $8.80 million at September 30, 2000, or 13.65%, of risk-weighted
assets which exceeds the 8.0% risk-based capital requirements by $3.6 million.
The Association had tier I risk-based capital of $8.5 million, or 13.23%, of
risk-weighted assets which exceeds the 4.0% capital requirement by $6.0 million.
As required by Federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks. the OTS has proposed that only those savings associations rated
a composite one (the highest rating) under the MACRO rating system for savings
associations will be permitted to operate at or near the regulatory minimum
leverage ratio of 3%. all other savings associations will be required to
maintain a minimum leverage ratio of 3% plus at least an additional 100 to 200
basis points. The OTS will assess each individual savings association through
the supervisory process on a case-by-case basis to determine the applicable
requirement. No assurance can be given as to the final form of any such
regulation, the date of its effectiveness or the requirement applicable to the
Association. As a result of the prompt corrective action provisions of federal
law discussed below, however, a savings association must maintain a core capital
ratio of at least 4% to be considered adequately capitalized unless its
supervisory condition is such to allow it to maintain a 3% ratio.
Regulatory Developments
As of September 30, 2000, management is not aware of any current recommendations
by regulatory authorities which, if they were to be implemented, would have or
are reasonable likely to have a material adverse effect on the Company's
liquidity, capital resources of operations.
13
STATEFED FINANCIAL CORPORATION
Part II - Other Information
As of September 30, 2000, management is not aware of any current
recommendations by regulatory authorities which, if they were to be implemented,
would have or are reasonably likely to have a material adverse effect on the
Company's liquidity, capital resources or operations.
Item 1 - Legal Proceedings
Not applicable.
Item 2 - Changes in Securities
Not applicable.
Item 3 - Defaults upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to Vote of Security Holders
(a) The annual meeting of stockholders was held on October 25, 2000.
(b) The matters approved by stockholders at the annual meeting and the
number of votes cast for, against, or withheld (as well as the
number of abstentions and broker non-votes) as to each matter are
set forth below.
Election of the following Directors to a three year term:
For Withheld Broker Non-Votes
--- -------- ----------------
Andra K. Black 659,319 6,516 0
Eugene M McCormick 661,319 4,516 0
Sidney M. Ramey 660,719 5,116 0
Kyle J. Krause 617,690 0 0
Dennis N. Folden 617,690 0 0
Ratification of McGowen, Hurst, Clark & Smith, PC as auditors for the Company
for the fiscal year ending June 30, 2001:
For 664,009
Against 1,326
Abstain 500
Broker Non-Votes 0
Accordingly, Directors Black, McCormick, and Ramey were reelected to the Board
and the selection of McGowen, Hurst, Clark & Smith, PC was ratified by the
shareholders.
14
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Not applicable.
(b) The following is a description of the Form 8-K's filed during the
three months ended September 30, 2000:
1. On August 28, 2000, a current report on Form 8-K was filed
reflecting quarterly financial information.
2. Preliminary Proxy Statement filed on September 20, 2000.
15
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STATEFED FINANCIAL CORPORATION
Registrant
Date: /s/
--------------------------- -----------------------------------------
John F. Golden
Chairman of the Board
Date: /s/
--------------------------- -----------------------------------------
Andra K. Black
Co-President and Chief Financial Officer
16