SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
February 13, 2002
STATEFED FINANCIAL CORPORATION
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(Exact name of Registrant as specified in its Charter)
Delaware 0-22790 42-1410788
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(State or other jurisdiction (Commission File No. (IRS Identification No.)
of incorporation)
13523 University Avenue, Clive, Iowa 50325
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 223-8484
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N/A
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(Former name or former address, if changed since last report)
1
ITEM 5. Other Events
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On February 13, 2002, the Registrant filed a current report reflecting
quarterly financial information attached hereto as Exhibit 99.
ITEMS 7. Financial Statements and Exhibits
- -------------------------------------------
(a) Exhibits:
Exhibit 99 - Quarterly financial information
2
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.
STATEFED FINANCIAL CORPORATION
Date: February 13, 2002 By: /s/ Andra K. Black
-------------------------------------
Andra K. Black
Executive Vice President and
Chief Financial Officer
3
Exhibit - 99.1
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 December 31, 2001
[ ] 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)
13523 University Avenue, Clive, Iowa 50325
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(Address of principal executive offices)
(515) 223-8484
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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 February 13, 2002, there were 1,279,526 shares of the
Registrant's common stock issued and outstanding.
4
STATEFED FINANCIAL CORPORATION
Form 10-QSB
Index
Page
PART I. - CONSOLIDATED FINANCIAL INFORMATION Number
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
5
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2001 AND JUNE 30, 2001
ASSETS (UNAUDITED)
DECEMBER 31,2001 JUNE 30, 2001
Cash and amounts due from depository institutions $ 3,735,756 $ 7,278,551
Investments in certificates of deposit 297,123 297,272
Investment securities held-for-sale 1,954,978 1,924,855
Loans receivable, net 84,520,624 87,898,936
Real estate held for investment, net - 2,106,442
Property acquired in settlement of loans 1,004,761 1,320,458
Office property and equipment, net 3,928,397 3,947,620
Federal Home Loan Bank stock, at cost 1,762,200 1,762,200
Accrued interest receivable 608,005 630,166
Other assets 422,984 382,936
------------------- ------------------
TOTAL ASSETS $ 98,234,828 $ 107,549,436
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 68,386,644 $ 62,987,496
Advances from Federal Home Loan Bank 14,000,000 29,185,149
Advances from borrowers for taxes and insurance 359,208 395,032
Accrued interest payable 6,180 170,864
Dividends payable 127,953 127,633
Income taxes:current and deferred 444,893 203,541
Other liabilities 415,895 392,053
------------------- ------------------
TOTAL LIABILITIES 83,740,773 93,461,768
------------------- ------------------
Stockholders' equity:
Common stock $ 17,810 $ 17,810
Additional paid-in capital 8,536,731 8,522,356
Unearned compensation - restricted stock awards (114,241) (143,866)
Unrealized gain on investments 37,540 25,349
Treasury stock (5,162,881) (5,195,834)
Retained earnings - substantially restricted 11,179,096 10,861,853
------------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 14,494,055 14,087,668
------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 98,234,828 $ 107,549,436
=================== ==================
6
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATION
FOR THE THREE AND SIX MONTH PERIODS ENDING DECEMBER 31, 2001 AND DECEMBER 31, 2000
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
(UNAUDITED) (UNAUDITED)
-------------------- ------------------- ------------------- -------------------
2001 2000 2001 2000
==================== =================== =================== ===================
Interest Income:
Loans $ 1,797,089 $ 2,025,510 $ 3,643,071 $ 3,946,394
Investments 54,455 56,992 103,149 118,154
Other 9,003 37,028 64,612 64,450
-------------------- ------------------- ------------------- -------------------
Total interest income 1,860,547 2,119,530 3,810,832 4,128,998
Interest Expense:
Deposits 840,006 772,173 1,693,518 1,447,359
Borrowings 232,523 504,183 588,343 960,474
-------------------- ------------------- ------------------- -------------------
Total interest expense 1,072,529 1,276,356 2,281,861 2,407,833
Net interest Income 788,018 843,174 1,528,971 1,721,165
Provision for loan losses 154,000 9,000 178,000 18,000
-------------------- ------------------- ------------------- -------------------
Net interest income after
provision for loan losses 634,018 834,174 1,350,971 1,703,165
Non-interest Income:
Real estate operations 107,075 134,386 234,884 262,131
Loss on sale of investments - (90,673) - (90,673)
Gain on sale of real estate, net 638,155 7,772 638,195 7,809
Other 33,567 31,599 62,275 60,322
-------------------- ------------------- ------------------- -------------------
Total non-interest income 778,797 83,084 935,354 239,589
Non-interest expense:
Salaries and benefits 339,755 273,617 665,541 514,480
Real estate operations 60,052 64,626 141,048 144,505
Occupancy and equipment 99,363 38,526 173,995 76,404
FDIC Premiums and OTS assessments 12,887 9,627 22,294 19,175
Data processing 31,356 30,286 64,421 58,986
Other 237,606 233,472 376,619 377,222
-------------------- ------------------- ------------------- -------------------
Total non-interest expense 781,019 650,154 1,443,918 1,190,772
-------------------- ------------------- ------------------- -------------------
Income before income taxes 631,796 267,104 842,407 751,982
Income tax expense 202,240 90,740 269,480 251,526
-------------------- ------------------- ------------------- -------------------
Net income $ 429,556 $ 176,364 $ 572,927 $ 500,456
==================== =================== =================== ===================
Basic earnings per share $ 0.34 $ 0.12 $ 0.46 $ 0.34
Diluted earnings per share $ 0.33 $ 0.12 $ 0.45 $ 0.33
7
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ending December 31, 2001 and December 31, 2000
For the Six Months Ending December 31, 2001 and December 31, 2000
Three Months Ended Six Months Ended
December 31, December 31,
(Unaudited) (Unaudited)
----------------------------------- -----------------------------------
2001 2000 2001 2000
--------------- --------------- --------------- ---------------
Net Income $ 429,556 $ 176,364 $ 572,927 $ 500,456
Other comprehensive income,
net of tax:
Unrealized holding gains on securities
arising during period 3,007 141,906 12,191 144,384
Reclassification adjustment - (60,750) - (60,750)
----------------------------------- -----------------------------------
Comprehensive Income $ 432,563 $ 257,520 $ 585,118 $ 584,090
=============== =============== =============== ===============
8
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended December 31, 2001
(UNAUDITED)
Balance - June 30, 2001 $ 14,087,668
Additional Paid in Capital 14,375
Other Comprehensive income--unrealized gain on
investment securities, net of deferred income taxes 12,191
Dividends declared (255,686)
Stock options exercised (3,200 shares) 32,954
ESOP common stock released for allocation 29,626
Net Income 572,927
--------------
Balance - December 31, 2001 $ 14,494,055
==============
9
STATEFED FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Month Periods Ending December 31, 2001 and December 31, 2000
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES December 31, December 31,
2001 2000
-------------- --------------
Net Income $ 572,927 $ 500,456
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 92,422 110,107
Gain on sale of real estate held for investment (638,155) --
Amortization of ESOP 44,000 (9,970)
Deferred loan fees (28,572) 23,043
Provision for losses on loans 125,889 (693)
Change in:
Accrued interest receivable 22,161 (126,450)
Other assets (40,048) (25,305)
Accrued interest payable (164,684) (136,089)
Current and deferred income tax liability 241,352 (130,553)
Other liabilities 23,842 (7,342)
-------------- --------------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 251,134 $ 197,204
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in certificates of deposit $ 149 $ --
Maturity of investments in certificates of deposit -- 99,238
Proceeds from sale or maturity of available-for-sale investment securities (17,932) 395,741
(Purchase) redemption of FHLB stock -- (297,600)
Net (increase) decrease in loans outstanding 3,596,695 (5,470,621)
Proceeds from sale of real estate held for investment 2,744,597 --
Investment in real estate held for development -- (28,923)
Investment in real estate acquired in settlement of loans -- (70,614)
Purchase of office property and equipment (73,198) (707,320)
-------------- --------------
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES $ 6,250,311 $ (6,080,099)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $ 5,399,147 $ 571,933
Advances from the Federal Home Loan Bank -- 6,000,000
Repayment of advances from the Federal Home Loan Bank (15,185,149) (48,656)
Net decrease in advances from borrowers (35,824) 6,380
Proceeds from stock options exercised 32,952 167,181
Dividends paid (255,366) (226,515)
Purchase of treasury stock -- (180,325)
-------------- --------------
NET CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES $(10,044,240) $ 6,289,998
-------------- --------------
CHANGE IN CASH AND CASH EQUIVALENTS $ (3,542,795) $ 407,103
-------------- --------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 7,278,551 $ 2,477,494
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,735,756 $ 2,884,597
============== ==============
10
STATEFED FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ending December 31, 2001 and December 31, 2000 And
for the Six Months Ending December 31, 2001 and December 31, 2000
1. BASIS OF PRESENTATIONS
These consolidated financial statements are unaudited (with the
exception of the Consolidated Statement of Financial Condition for June 30,
2001). 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 "Company"), its subsidiary, State Federal Savings and Loan
Association (the "Bank" or "State Federal") and the Bank'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 ended June 30, 2001.
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. For the three month period,
weighted-average common shares outstanding totaled 1,256,546 at December 31,
2001 and 1,483,478 at December 31, 2000. For the six month periods ending
December 31, 2001 and December 31, 2000, weighted-average common shares
outstanding totaled 1,253,984 and 1,477,857, respectively.
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, for the three month
periods ending December 31, 2001 and December 31, 2000, totaled 1,285,330 and
1,512,492, respectively. For the six month periods ending December 31, 2001 and
December 31, 2000, weighted-average common shares deemed outstanding for the
purpose of computing diluted earnings per share were 1,283,569 and 1,506,331,
respectively.
11
3. REGULATORY CAPITAL REQUIREMENTS
Pursuant to Federal law, the Bank must meet three separate capital
requirements. The Bank's capital ratios and balances at December 31, 2001 are as
follows:
AMOUNT %
---------- -----------
(Dollars in thousands)
Tangible Capital:
Association's $ 6,584 7.07 %
Requirement 1,397 1.50
---------- ---------
Excess $ 5,187 5.57 %
Core Capital:
Association's $ 6,584 7.07 %
Requirement 3,727 4.00
---------- ---------
Excess $ 2,857 3.07 %
Risk-Based Capital:
Association's $ 6,584 10.74 %
Requirement 4,928 8.00
---------- ---------
Excess $ 1,656 2.74 %
4. STOCK OPTION PLAN
At December 31, 2001 there were unexercised options for 56,394 shares
of common stock under the terms of the Company's 1993 Stock Option Plan. There
are 34,906, 10,744 and 10,744 options that have exercise prices of $5.00, $9.50
and $10.00 per share, respectively. There were 3,200 shares exercised during the
six months ended December 31, 2001.
5. STOCK REPURCHASE PLAN
On February 21, 2001, the Company's Board of Directors authorized
management to repurchase up to 75,580 shares of the Company's common stock over
the next six months. During the six-month period ending December 31, 2001, there
were no shares repurchased.
12
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 "Bank"). All significant inter-company
transactions and balances are eliminated in consolidation. The Company's results
of operations are primarily dependent on the Bank'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 Bank's net income is
also affected by the level of non-interest income, such as may occur from real
estate operations, gains or losses on the sale of investments, and in fiscal
2002, gains from the sale of real estate, and by 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.
FINANCIAL CONDITION
The Company's total assets at June 30, 2001 and December 31, 2001,
totaled $107.5 million and $98.2 million, respectively. The decrease of $9.3
million was due primarily to decreases in cash and amounts due from depository
institutions of $3.5 million, net loans receivable of $3.4 million and net real
estate held for investment of $2.1 million.
Cash and amounts due from depository institutions decreased from $7.2
million at June 30, 2001 to $3.7 million at December 31, 2001, or a decrease of
$3.5 million. The decrease was primarily the result
13
of the repayment of Federal Home Loan Bank advances, partially offset by an
increase in deposits and the repayment of loans receivable.
Net loans receivable decreased $3.4 million, from $87.9 million at June
30, 2001 to $84.5 million at December 31, 2001. Due to high refinancing
activity, repayment of principal totaled $17.6 million for the six month period,
while loan originations totaled $12.6 million and purchased loan participations
totaled $1.3 million.
Net real estate held for investment decreased $2.1 million from June
30, 2001 to December 31, 2001, as a result of the Company's decision to exit
property management by selling its two apartment complexes and focus on core
financial services business.
Total deposits increased by $5.4 million from $62.9 million at June 30,
2001 to $68.3 million at December 31, 2001. The increases in demand deposits and
savings and money market deposits were $3.9 million and $4.4 million,
respectively, offset in part by a decrease in certificate of deposit of $2.9
million.
Total borrowings decreased $15.2 million between the periods ended
December 31, 2001 and June 30, 2001. The decrease was the result of repayments
of Federal Home Loan Bank advances.
Total stockholders' equity increased $406,400 from $14.1 million at
June 30, 2001 to $14.5 million at December 31, 2001. The increase was primarily
the result of net earnings of $572,927, accounting for employee stock awards and
options of $77,000, and unrealized gains on investment securities of $12,200,
which was partially offset by dividends declared of $256,000.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTH PERIODS ENDED DECEMBER 31,
2001 AND DECEMBER 31, 2000
GENERAL. Net income increased $253,000 from $176,400 for the three
months ended December 31, 2000 to $429,600 for the three months ended December
31, 2001. The increase in net income was primarily due to the $638,000 net gain
on the sale of two apartment complexes owned by the Company. This increase was
partially offset by decreases in net interest income of $55,000, and increases
in non-interest expense of $131,000, provision for loan losses of $145,000 and
income tax expense of $111,500.
NET INTEREST INCOME. Net interest income decreased $55,000 from
$843,200 for the three months ended December 31, 2000 to $788,000 for the three
months ended December 31, 2001. This decrease was primarily the result of
decreases in interest income on loans of $228,400 and in other interest income
of $28,000, increases in interest paid on deposits of $68,000 and partially
offset by a decrease in interest expense on Federal Home Loan Bank borrowings of
$271,700.
INTEREST INCOME. Interest income decreased $259,000 from $2.1 million
for the three months ended December 31, 2000 to $1.9 million for the three
months ended December 31, 2001. This decrease was primarily the result of a
decrease in interest earned on the loan portfolio of $228,400, and a decrease in
other interest earned of $28,000.
The decrease in interest earned on loans receivable resulted from a
decrease in the average interest rate and, to a lesser extent, a decrease in the
average loans receivable balance. Other interest income decreased primarily from
a decrease in the balance of other interest earning assets.
14
INTEREST EXPENSE. Interest expense decreased $203,900 from $1.3 million
in the three months ended December 31, 2000 to $1.1 million in the three months
ended December 31, 2001. This decrease resulted primarily from a decrease in
interest paid on borrowings of $271,700, and was partially offset by increases
in interest paid on deposits of $67,800. The decrease in interest expense
resulted primarily from the repayment of Federal Home Loan Bank advances. The
increase on interest paid on deposits was primarily due to an increase in the
balance of deposit accounts from the prior period.
PROVISION FOR LOAN LOSSES. The provision for loan losses increased
$145,000 in the three months ended December 31, 2001 to $154,000, as compared to
$9,000 for the three months ended December 31, 2000. The increase was primarily
related to two significant participation loans totaling $593,400. The servicer
has started foreclosure proceedings on these loans. The provision during the
three months ended December 31, 2001 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 based on the condition of the loan portfolio, analysis of
specific loans, regulatory comments, and if 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 increased $695,700 from
$83,100 for the three months ended December 31, 2000 to $778,800 for the three
months ended December 31, 2001. The increase was primarily due to a net gain on
the sale of real estate held for investment of $638,200, as the Company sold its
two apartment complexes in order to focus on its core financial services
business. The increase was offset by a $27,000 decrease in real estate operation
income. Loss on the sale of equity investments was $0 and $90,673 for the three
month periods ending December 31, 2001 and 2000, respectively.
NON-INTEREST EXPENSE. Non-interest expense increased from $650,100 for
the three months ended December 31, 2000 to $781,000 for the three months ended
December 31, 2001. This increase of $130,900 for the December 2001 quarter
compared with the same quarter in December 2000 was primarily due to costs
associated with the Company's new location in Clive, which opened during March,
2001.
INCOME TAX EXPENSE. Income tax expense was $202,200 for the three
months ended December 31, 2001 compared to $90,700 for the three months ended
December 31, 2000, an increase of $111,500, primarily due to the increase in
taxable income.
COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000
GENERAL. Net income was $573,000 for the six months ended December 31,
2001 as compared to $500,500 for the six months ended December 31, 2000.
NET INTEREST INCOME. Net interest income decreased $192,200 from $1.7
million for the six months ended December 31, 2000 to $1.5 million for the six
months ended December 31, 2001. There were reductions in total interest income
and total interest expense. The $318,200 reduction in total interest income was
comprised of decreases in interest on loans of $303,200 and investment interest
income of $15,000. An increase in interest paid on deposits of $246,100 was more
than offset by a reduction in interest paid on borrowings of $372,100, resulting
in a $126,000 decrease in total interest expense.
15
INTEREST INCOME. Interest income decreased $318,300 from $4.1 million
for the six months ended December 31, 2000 to $3.8 million for the six months
ended December 31, 2001. The change was primarily due to decreases in interest
earned on the loan portfolio of $303,300 and interest earned on investments of
$15,000. The interest on loans decreased primarily as a result of a decrease in
the yield earned on the loan portfolio and, to a lesser extent, the decrease in
outstanding loans receivable. The decrease in income on investments was
primarily due to the decrease in the average yield of interest-bearing deposits
held at other depository institutions.
INTEREST EXPENSE. Interest expense decreased $126,000 from $2.4 million
in the six months ended December 31, 2000 to $2.3 million in the six months
ended December 31, 2001. This decrease was primarily due to a decrease in
interest paid on Federal Home Loan Bank advances of $372,100, offset by a
$246,100 increase in interest paid on deposits. The decrease in interest paid on
borrowings was due to a decrease in the average balance of Federal Home Loan
Bank advances and to a lesser extent the average rate paid on advances. The
increase in interest paid on deposits was primarily the result of an increase in
the balance of deposits.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the six
months ended December 31, 2001 as compared to the six months ended December 31,
2000, were $178,000 and $18,000, respectively. The increase of $160,000 was
related primarily to two significant participation loans totaling $593,400. The
servicer has started foreclosure proceedings on these loans. The provision
during the six months ended December 31, 2001 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 based on the condition of the loan portfolio, analysis
of specific loans, regulatory comments, and if 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 increased $695,800 from
$239,600 for the six months ended December 31, 2000 to $935,400 for the six
months ended December 31, 2001. The increase was primarily due to a net gain on
the sale of real estate held for investment of $630,400, which was the result of
the sale of the Company's two apartment complexes in order to focus on its core
financial services business. The increase was offset by a decrease in real
estate operations income of $27,200. Loss on the sale of investments was $0 and
$90,673 for the six month periods ending December 31, 2001 and 2000,
respectively.
NON-INTEREST EXPENSE. Non-interest expense increased from $1.2 million
for the six months ended December 31, 2000 to $1.4 million for the six months
ended December 31, 2001. This increase of $253,100 was primarily the result of
increases in costs associated with the company's new location in Clive, which
opened during March, 2001.
INCOME TAX EXPENSE. Income tax expense was $251,500 for the six months
ended December 31, 2000 and $269,500 for the six months ended December 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES. The Office of Thrift Supervision
regulations require the Bank to maintain a safe and sound level of liquid
assets. Such assets may include United States Treasury, federal agency, and
other investments having maturities of five years or less and are intended to
provide a source of relatively liquid funds upon which the Bank may rely, if
necessary, to fund deposit withdrawals
16
and other short-term funding needs. The Bank's regulatory liquidity at December
31, 2001 was 7.13%. The Company's primary sources of funds consist of deposits,
FHLB advances, repayments of loans, interest earned on investments and funds
provided by operations. Management believes that loan repayments and other
sources of funds will be adequate to meet the Company's foreseeable liquidity
needs.
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 December 31, 2001,
the Bank exceeded all fully phased-in regulatory capital requirements.
At December 31, 2001, the Bank's tangible equity capital was $6.6
million, or 7.07%, of tangible assets, which is in excess of the 1.5%
requirement by $5.2 million. In addition, at December 31, 2001, the Bank had
core capital of $6.6 million, or 7.07%, of adjusted total assets, which exceeds
the 4% requirement by $2.9 million. The Bank had total risk-based capital of
$6.6 million at December 31, 2001, or 10.74%, of risk-weighted assets which
exceeds the 8.0% risk-based capital requirements by $1.7 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
Bank. 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 December 31, 2001, management is not aware of any current
proposals or recommendations by regulatory authorities which, if they were to be
implemented, would have or would be reasonably likely to have a material adverse
effect on the Company's liquidity, capital resources or operations.
17
STATEFED FINANCIAL CORPORATION
PART II - OTHER INFORMATION
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
-------------------------------------------------
Not applicable
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 December 31, 2001:
1. On November 13, 2001, a current report on Form 8-K was
filed reflecting first quarter earnings.
2. On November 14, 2001, a current report on Form 8-K was
filed reflecting quarterly financial information
18
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: FEBRUARY 13, 2002 /s/ Craig Wood
- --------------------------------- -------------------------------------
Craig Wood
Executive Vice President
Date: FEBRUARY 13, 2002 /s/ Andra K. Black
- ---------------------------------- -------------------------------------
Andra K. Black
Executive Vice President and
Chief Financial Officer
19