UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
Commission file number: 0-31847
Lawrence Financial Holdings, Inc.
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(Exact name of small business issuer as specified in its charter)
Maryland 31-1724442
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
311 South Fifth Street, Ironton, Ohio 45638
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(Address of principal executive offices)
(740) 532-0263
------------------------------------------------
(Issuer's telephone number, including area code)
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class: Outstanding at July 31, 2003
Common Stock, $.01 par value 650,110 Common Shares
Transitional Small Business Disclosure Format (Check One): Yes |_| No |X|
Lawrence Financial Holdings, Inc.
FORM 10-QSB
Quarter Ended June 30, 2003
Page
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Part I - Financial Information
ITEM 1 - Financial Statements
Consolidated Balance Sheets ........................................ 2
Consolidated Statements of Income................................... 3
Consolidated Statements of Comprehensive Income..................... 4
Consolidated Statements of Changes in
Shareholders' Equity............................................... 5
Consolidated Statements of Cash Flows............................... 6
Notes to the Consolidated Financial Statements...................... 7
ITEM 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations....................... 11
ITEM 3 - Controls and Procedures............................................. 20
Part II - Other Information
Other Information............................................................ 21
Signatures................................................................... 22
Exhibits .................................................................... 23
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1
CONSOLIDATED BALANCE SHEETS
June 30, 2003 and December 31, 2002
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(Unaudited)
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June 30, December 31,
2003 2002
------------- -------------
ASSETS
Cash and due from banks $ 10,762,740 $ 16,140,900
Merrill Lynch money market fund 487,120 179,600
------------- -------------
Total cash and cash equivalents 11,249,860 16,320,500
Securities available for sale, at fair value 25,002,609 14,192,370
Loans receivable, net 91,299,315 96,457,033
Federal Home Loan Bank stock 626,500 614,400
Premises and equipment, net 3,419,030 3,340,888
Accrued interest receivable 626,278 685,755
Cash surrender value of life insurance 2,208,880 2,131,685
Other assets 880,338 645,916
------------- -------------
Total Assets $ 135,312,810 $ 134,388,547
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits $ 3,016,513 $ 1,995,918
Interest-bearing deposits 117,627,520 116,930,237
------------- -------------
Total deposits 120,644,033 118,926,155
Other liabilities 780,356 673,601
------------- -------------
Total liabilities 121,424,389 119,599,756
------------- -------------
Shareholders' Equity
Common stock; par value $0.01 per share; shares
authorized: 4,000,000; shares issued: 799,110 7,991 7,991
Additional paid-in capital 7,499,672 7,467,042
Retained earnings 9,645,516 9,485,971
Treasury stock, at cost; shares: 149,000 in
2003 and 94,000 in 2002 (2,728,688) (1,683,600)
Unearned ESOP shares (403,540) (434,580)
Unearned restricted stock awards (201,794) (201,794)
Accumulated other comprehensive income,
net of tax of $35,681 at 2003 and $76,119 in 2002 69,264 147,761
------------- -------------
Total shareholders' equity 13,888,421 14,788,791
------------- -------------
Total liabilities and shareholders' equity $ 135,312,810 $ 134,388,547
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
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2
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended and Six Months June 30, 2003 and 2002
(Unaudited)
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Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Interest income
Loans, including fees $1,677,334 $2,048,371 $3,418,418 $4,126,248
Taxable securities 173,513 161,004 365,533 326,440
Tax exempt securities 23,219 -- 45,555 --
Overnight deposit 16,498 29,612 38,982 61,150
---------- ---------- ---------- ----------
1,890,564 2,238,987 3,868,488 4,513,838
---------- ---------- ---------- ----------
Interest expense
Deposits 627,848 925,081 1,308,559 1,944,221
Federal Home Loan Bank borrowings -- 29,469 -- 58,614
---------- ---------- ---------- ----------
627,848 954,550 1,308,559 2,002,835
---------- ---------- ---------- ----------
Net interest income 1,262,716 1,284,437 2,559,929 2,511,003
Provision for loan losses 195,000 180,000 495,000 330,000
---------- ---------- ---------- ----------
Net interest income
after provision for loan losses 1,067,716 1,104,437 2,064,929 2,181,003
Noninterest income
Net securities gains 31,488 13,103 184,610 8,214
Service charges 120,089 109,504 226,587 217,092
Other 50,979 50,668 91,296 113,590
---------- ---------- ---------- ----------
202,556 173,275 502,493 338,896
---------- ---------- ---------- ----------
Noninterest expense
Salaries and benefits 495,250 431,019 983,800 866,822
Deposit insurance premiums 15,082 28,891 30,354 57,640
Occupancy and equipment 89,729 82,953 181,893 167,245
Data processing 160,775 131,720 357,158 265,883
Franchise tax 34,594 32,250 67,594 65,250
Advertising expense 19,110 23,868 49,752 55,192
Professional fees 77,308 69,062 166,139 139,704
Other 211,190 201,320 392,890 343,980
---------- ---------- ---------- ----------
1,103,038 1,001,083 2,229,580 1,961,716
---------- ---------- ---------- ----------
Income before income tax 167,234 276,629 337,842 558,183
Provision for income tax 42,725 76,894 86,504 166,093
---------- ---------- ---------- ----------
Net income $ 124,509 $ 199,735 $ 251,338 $ 392,090
========== ========== ========== ==========
Basic earnings per common share $ 0.21 $ 0.31 $ 0.41 $ 0.57
========== ========== ========== ==========
Diluted earnings per common share $ 0.20 $ 0.29 $ 0.40 $ 0.55
========== ========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
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3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended and Six Months June 30, 2003 and 2002
(Unaudited)
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Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net income $ 124,509 $ 199,735 $ 251,338 $ 392,090
Other comprehensive income:
Unrealized gains arising during period 151,439 299,476 65,675 128,473
Reclassification adjustment for gains
included in net income (31,488) (13,103) (184,610) (8,214)
--------- --------- --------- ---------
119,951 286,373 (118,935) 120,259
Income tax effect (40,783) (97,367) 40,438 (40,888)
--------- --------- --------- ---------
Other comprehensive income (loss),
net of tax 79,168 189,006 (78,497) 79,371
--------- --------- --------- ---------
Comprehensive income $ 203,677 $ 388,741 $ 172,841 $ 471,461
========= ========= ========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
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4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Year Ended December 31, 2002 and the Six Months Ended June 30, 2003
(Unaudited)
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Unearned Accumulated
Additional Unearned Restricted Other
Common Paid-In Retained Treasury ESOP Stock Comprehensive
Stock Capital Earnings Stock Shares Awards Income
------ ---------- ----------- --------- --------- --------- ---------
Balance - January 1, 2002 $7,991 $7,426,239 $ 9,076,779 $ -- $(496,660) $(269,059) $ 33,008
Net income -- -- 606,449 -- -- -- --
Net unrealized appreciation on
securities available for sale,
net of tax of $59,115 -- -- -- -- -- -- 114,753
Treasury Stock acquired - 94,000 shares -- -- -- (1,683,600) -- -- --
Cash dividend - $0.28 per share -- -- (197,257) -- -- -- --
Stock-based compensation -- 40,803 -- -- 62,080 67,265 --
------ ---------- ----------- ----------- --------- --------- ---------
Balance, December 31, 2002 7,991 7,467,042 9,485,971 (1,683,600) (434,580) (201,794) 147,761
Net income -- -- 251,338 -- -- -- --
Net unrealized depreciation on
securities available for sale,
net of tax of $(40,438) -- -- -- -- -- -- (78,497)
Treasury Stock acquired - 55,000 shares -- -- -- (1,045,088) -- -- --
Cash dividend - $0.14 per share -- -- (91,793) -- -- -- --
Stock-based compensation -- 32,630 -- -- 31,040 -- --
------ ---------- ----------- ----------- --------- --------- ---------
Balance, June 30, 2003 $7,991 $7,499,672 $ 9,645,516 $(2,728,688) $(403,540) $(201,794) $ 69,264
====== ========== =========== =========== ========= ========= =========
Total
------------
Balance - January 1, 2002 $ 15,778,298
Net income 606,449
Net unrealized appreciation on
securities available for sale,
net of tax of $59,115 114,753
Treasury Stock acquired - 94,000 shares (1,683,600)
Cash dividend - $0.28 per share (197,257)
Stock-based compensation 170,148
------------
Balance, December 31, 2002 14,788,791
Net income 251,338
Net unrealized depreciation on
securities available for sale,
net of tax of $(40,438) (78,497)
Treasury Stock acquired - 55,000 shares (1,045,088)
Cash dividend - $0.14 per share (91,793)
Stock-based compensation 63,670
------------
Balance, June 30, 2003 $ 13,888,421
============
The accompanying notes are an integral part of these
consolidated financial statements.
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5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2003 and 2002
(Unaudited)
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Six Months Ended
June 30,
-------------------------------
2003 2002
------------ ------------
Cash flows from operating activities
Net income $ 251,338 $ 392,090
Adjustments to reconcile net income to net cash from
operating activities
Depreciation 108,282 89,503
Provision for loan losses 495,000 330,000
Stock dividend on Federal Home Loan Bank stock (12,100) (13,500)
Net premium amortization (discount accretion) 82,530 (10,291)
Net securities gains (184,610) (8,214)
ESOP expense 63,670 51,782
Restricted stock award expense 52,369 37,654
Change in other assets and liabilities (113,829) 69,809
------------ ------------
Net cash from operating activities 742,650 938,833
------------ ------------
Cash flows from investing activities
Purchase of:
Securities available for sale (27,873,325) (7,458,857)
Premises and equipment (186,423) (118,715)
Proceeds from:
Sale of securities available for sale 15,401,821 5,560,000
Calls, maturities and principal repayments of securities
available for sale 1,641,357 1,550,000
Sale of fixed assets 2,800 --
Net change in loans 4,619,483 479,724
------------ ------------
Net cash from investing activities (6,394,287) 12,152
------------ ------------
Cash flows from financing activities
Net change in:
Deposits 1,717,878 233,015
Cash dividend paid (91,793) (101,149)
Purchase of treasury stock (1,045,088) (1,683,600)
------------ ------------
Net cash from financing activities 580,997 (1,551,734)
------------ ------------
Net change in cash and cash equivalents (5,070,640) (600,749)
Cash and cash equivalents at beginning of the year 16,320,500 12,197,766
------------ ------------
Cash and cash equivalents at end of the period $ 11,249,860 $ 11,597,017
============ ============
Supplemental disclosures:
Cash paid during the period for:
Interest $ 1,312,062 $ 2,008,161
Income taxes 347,413 486,500
Non-cash transactions
Transfer of loans to real estate owned 43,235 --
The accompanying notes are an integral part of these
consolidated financial statements.
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6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
Lawrence Financial Holdings, Inc. and its wholly-owned subsidiary, Lawrence
Federal Savings Bank (the "Bank") and the Bank's wholly-owned subsidiary,
Lawrence Financial Services Corporation (together, the "Company"). Intercompany
transactions and balances are eliminated in consolidation.
Nature of Operations: The Company provides financial services through its
offices in Lawrence and Scioto Counties, Ohio. Its primary deposit products are
checking, savings, and term certificate accounts, and its primary lending
products are real estate mortgage and installment loans. Substantially all loans
are secured by specific items of collateral including consumer assets and real
estate. Lawrence Financial Services Corporation only holds liquid assets in the
form of cash. The operations from Lawrence Financial Services Corporation are
not considered to be significant. Management considers the Company to operate in
one segment, banking.
Earnings Per Common Share: Basic earnings per common share is net income divided
by the weighted average number of common shares outstanding during the period.
Diluted earnings per common share includes the dilutive effect of additional
potential common shares issuable. ESOP shares are considered to be outstanding
for this calculation unless they are unearned. The weighted average number of
common shares outstanding for basic and diluted earnings per share computations
were as follows:
Six Month Period Three Month Period
Ended June 30, Ended June 30
-------------------- --------------------
2003 2002 2003 2002
------- ------- ------- -------
Weighted average shares outstanding 617,446 683,557 601,941 653,005
Effect of stock options 13,202 6,903 9,744 7,876
Effect of non-vested stock awards 2,136 17,457 1,668 16,874
------- ------- ------- -------
Net Effect of stock options and non-vested
stock awards 15,338 24,360 11,413 24,750
Weighted average shares outstanding - Diluted 632,784 707,917 613,354 677,755
======= ======= ======= =======
Stock-Based Compensation: Employee compensation under the stock option plan is
reported if options are granted below market price at grant date. Pro forma
disclosures of compensation cost of stock-based awards have been determined
using the fair value method that considers the time value of the option
considering the volatility of the Company's stock, expected dividend yield, and
the risk-free interest rate over the expected life of the option using a
Black-Scholes valuation model.
The options granted on December 31, 2001 have an exercise price of $14.45 and
expire in December 2011. One-fifth of the options vested on the date of grant;
the remaining options vest over four years. The fair value of options granted in
2001 was estimated using the following assumptions: Risk-free interest rate of
4.49%, expected life of 5 years, expected volatility of stock price of 27% and
expected dividend yield of 1.94%. Based on these assumptions, the estimated fair
value of options granted in 2001 was $3.77 per option.
The following pro forma information presents net income and earnings per common
share had the fair value of the options been used to measure compensation cost
for the stock option plan.
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7
Six Months Ended Three Months Ended
June 30, June 30,
------------------------ ------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Reported net income $251,338 $392,090 $124,509 $199,735
Pro forma impact (19,450) (19,450) (9,725) (9,725)
-------- -------- -------- --------
Pro forma net income $231,888 $372,640 $114,784 $190,010
======== ======== ======== ========
Reported basic earnings per common share $ 0.41 $ 0.57 $ 0.21 $ 0.31
Pro forma impact (0.03) (0.02) (0.02) (0.02)
-------- -------- -------- --------
Pro forma basic earnings per common share $ 0.38 $ 0.55 $ 0.19 $ 0.29
======== ======== ======== ========
Reported diluted earnings per common share $ 0.39 $ 0.55 $ 0.20 $ 0.29
Pro forma impact (0.03) (0.02) (0.01) (0.01)
-------- -------- -------- --------
Pro forma diluted earnings per common share $ 0.36 $ 0.53 $ 0.19 $ 0.28
======== ======== ======== ========
Management's Opinion: In the opinion of management, the accounting and reporting
policies followed by Lawrence Financial Holdings, Inc. conform to accounting
principles generally accepted in the United States of America (US GAAP). The
preparation of finacial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclousrure of contingent assets and liabiltities at
the date of the financial statements. Actual results could differ from those
estimates. The allowance for loan losses is particularly subject to change.
These interim financial statements are prepared without audit and reflect all
adjustments of a normal recurring nature which, in the opinion of management,
are necessary to present fairly the consolidated financial position of Lawrence
Financial Holdings, Inc. at June 30, 2003, and its results of operations and
cash flows for the periods presented. Certain amounts in prior financial
statements have been reclassified to conform to the current presentation. The
accompanying consolidated financial statements do not contain all financial
disclosures required by US GAAP. Lawrence Financial Holdings, Inc.'s Annual
Report for the year ended December 31, 2002, contains consolidated financial
statements and related notes which should be read in conjunction with the
accompanying consolidated financial statements.
NOTE 2 - REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements
administered by federal regulatory agencies. Failure to meet minimum capital
requirements can initiate certain mandatory actions that, if undertaken, could
have a direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and regulatory framework for prompt-corrective action, the
Bank must meet specific capital guidelines involving quantitative measures of
the Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by regulators about
the Bank's components, risk weightings and other factors. At June 30, 2003 and
December 31, 2002, management believes the Bank complied with all regulatory
capital requirements. At June 30, 2003, Lawrence Federal exceeded all of its
regulatory capital requirements. Lawrence Federal is considered "well
capitalized" under regulatory guidelines. Management is unaware of any events or
circumstances that would change the Bank's classification since this time.
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8
The Bank's actual capital levels and minimum required levels were as
follows:
Minimum
Required to be
Minimum Required Well Capitalized Under
for Capital Prompt Corrective
Actual Adequacy Purposes Action Regulations
------------------- ------------------- ---------------------
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------ -----
June 30,2003:
Total capital (to risk-
weighted assets) $13,509 15.36% $ 7,036 8.0% $ 8,795 10.0%
Tier 1 (core) capital (to
risk-weighted assets) $12,684 14.42% $ 3,518 4.0% $ 5,278 6.0%
Tier 1 (core) capital (to
adjusted total assets) $12,684 9.35% $ 5,426 4.0% $ 6,783 5.0%
December 31,2002:
Total capital (to risk-
weighted assets) $13,806 15.19% $ 7,271 8.0% $ 9,089 10.0%
Tier 1 (core) capital (to
risk-weighted assets) $12,976 14.28% $ 3,635 4.0% $ 5,452 6.0%
Tier 1 (core) capital (to
adjusted total assets) $12,976 9.67% $ 5,368 4.0% $ 6,709 5.0%
Regulations of the Office of Thrift Supervision (OTS) limit the amount of
capital distributions that may be made by the Bank without prior approval of the
OTS. The regulatory restriction provides that the Bank may make a capital
distribution without notifying the OTS or applying to the OTS for approval
provided that (1) the total amount of all capital at the institution (including
the proposed capital distribution) for the applicable calendar year does not
exceed the institution's net income for that year to date plus the institution's
retained net income for the preceding two years; (2) the institution will be
well capitalized following the proposed capital distributions; and, (3) certain
other conditions are met.
In addition to the restriction described above, the Bank may not make any
capital distributions if the effect thereof would reduce the Bank's capital
level below the aggregate balance required for the liquidation account
established in connection with the Bank's mutual-to-stock conversion.
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9
NOTE 3 - ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING LOANS
Activity in the allowance for loan losses is as follows:
Six Months Ended June 30,
---------------------------
2003 2002
------- -------
(Dollars in Thousands)
Beginning Balance $ 1,111 $ 1,232
Provision for Loan Losses 495 330
Charge Offs (505) (519)
Recoveries 23 15
------- -------
Ending Balance $ 1,124 $ 1,058
======= =======
The following table shows the components of non-performing assets at:
June 30, December 31,
2003 2002
-------- ------------
(Dollars in Thousands)
Non-Accrual Loans $ 751 $ 531
Loans 90 days or more past due
and still accruing interest 539 1,411
------ ------
Total Non-Performing Loans 1,290 1,942
Other Real Estate Owned 75 151
------ ------
Total Non-Performing Assets $1,365 $2,093
====== ======
Non-performing loans to total loans 1.40% 1.99%
Non-Performing assets to total loans plus 1.48% 2.14%
other real estate owned
Allowance for credit losses to total 87.10% 57.20%
non-performing loans
Loans 90 days or more past due and .58% 1.45%
not on non-accrual to total loans
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10
ITEM 2
Management's Discussion and Analysis of Financial Condition
And Results of Operations
Selected Financial Data
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2003 2002 2003 2002
-------- -------- -------- --------
Significant Ratios:
Net income to
Average total assets 0.37% 0.60% 0.37% 0.59%
Average stockholders' equity 3.58 5.49 3.55 5.22
Net Interest Margin 4.05 4.16 4.08 4.05
Average net loans to average deposits 78.70 90.05 79.40 90.33
Average stockholders' equity to
average total assets 10.33 10.99 10.51 11.37
Capital ratios
Tier I capital 9.35 9.94 9.35 9.94
Risk-based capital 15.36 15.03 15.36 15.03
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Per Share Data:
Earnings per weighted average share
Basic $ 0.21 0.31 $ 0.41 0.57
Diluted 0.20 0.29 0.40 0.55
Weighted average shares outstanding
Basic 601,941 653,005 617,446 683,557
Diluted 613,354 677,755 632,784 707,917
Total shares outstanding at end of period 650,110 705,110 650,110 705,110
Cash dividends per share $ 0.07 0.07 $ 0.14 0.14
Book value per share at end of period $ 21.36 20.59 $ 21.36 20.59
Market price at end of period
Source: NASDAQ.com $ 27.50 16.15 $ 22.50 16.15
Introduction
This report contains certain "forward-looking statements" within the
meaning of the federal securities laws. These statements are not historical
facts, rather they are statements based on Lawrence Financial Holdings, Inc.'s
("Lawrence Financial") current expectations regarding its business strategies,
intended results and future performance. Forward-looking statements are preceded
by terms such as "expects," "believes," "anticipates," "intends" and similar
expressions.
Management's ability to predict results or the effect of future plans or
strategies is inherently uncertain. Factors which could affect actual results
include interest rate trends, the general economic climate in the market area in
which Lawrence Financial operates, as well as nationwide, Lawrence Financial's
ability to control costs and expenses, competitive products and pricing, loan
delinquency rates and changes in federal and state legislation and regulation.
These factors should be considered in evaluating the forward-looking statements
and undue reliance should not be placed on such statements. Lawrence Financial
assumes no obligation to update any forward-looking statements.
Operating Strategy
Lawrence Financial, through its wholly owned subsidiary Lawrence Federal
Savings Bank (the "Bank" or "Lawrence Federal"), operates as a
community-oriented financial institution focused on meeting the financial
service needs of consumers in its market area. To accomplish this objective,
Lawrence Federal offers a variety of mortgage and consumer loans and retail
deposit products. Lawrence Federal extends its lending activities outside of its
market area through programs for originating automobile loans through a network
of dealers. The consumer loans originated through these indirect lending
programs typically have shorter terms and higher yields than mortgage loans. In
addition, the
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11
origination of shorter term consumer loans will help Lawrence Federal in
managing its interest rate risk. However, these indirect lending programs
represent a higher risk of credit loss than real estate loans, since the
collateral securing these loans may decline in value quickly.
Lawrence Federal's results of operations depend primarily on net interest
income, which is the difference between the interest income earned on Lawrence
Federal's interest-earning assets, such as loans and securities, and the
interest expense on its interest-bearing liabilities, such as deposits and
borrowings. Lawrence Federal also generates noninterest income primarily from
loan fees and service charges. Lawrence Federal's noninterest expenses primarily
consist of employee compensation and benefits, occupancy expense, data
processing costs, and other operating expenses. Lawrence Federal's results of
operations are also affected by general economic and competitive conditions,
notably changes in market interest rates, government policies and regulations.
The Bank continued to experience credit quality issues in portions of the
loan portfolio, and expensed $300,000 of provision in the first quarter of 2003,
and $195,000 was expensed in the second quarter of 2003, compared to $150,000 in
the first quarter of 2002, and $180,000 in the second quarter of 2002.
During the six month period ended June 30, 2003, the Company had net
charge-offs of approximately $482,000, of which $272,000 occurred in the second
quarter. At June 30, 2003, the Company had a ratio of ALLL to gross loans of
1.22% compared to 1.24% at the end of the prior quarter, and 1.01% for the six
months ended June 30, 2002 and 1.19% for the quarter ended March 31, 2002.
General
Lawrence Federal's results of operations depend primarily on net interest
income, which is the difference between the interest income earned on Lawrence
Federal's interest-earning assets, such as loans and securities, and the
interest expense on its interest-bearing liabilities, such as deposits and
borrowings. Lawrence Federal also generates noninterest income primarily from
loan fees and deposit service charges. Lawrence Federal's noninterest expenses
primarily consist of employee compensation and benefits, occupancy expense, data
processing costs, and other operating expenses. Lawrence Federal's results of
operations are also affected by general economic and competitive conditions,
notably changes in market interest rates, government policies and regulations.
Comparison of Financial Condition at June 30, 2003 and December 31, 2002
During the first six months of 2003, total assets increased $924,000, or
0.7%, to $135.3 million at June 30, 2003 when compared to December 31, 2002. At
June 30, 2003, net loans receivable had decreased $5.2 million, or 5.3%, when
compared to December 31, 2002. Direct and indirect consumer loans decreased $3.4
million, or 8%, real estate loans decreased by $4.4 million, or 9%, indirect
mobile home loans decreased $1.5 million, or 9%, and commercial loans increased
by $2.2 million, or 42%. The allowance for loan losses at June 30, 2003 was $1.1
million. The growth in the commercial loan portfolio was due primarily to the
origination of commercial loan participations with other, local commercial
banks. In general, the decline in the direct consumer loan portfolios reflects a
combination of reduced loan demand and very aggressive competition from other
in-market and out-of-market lenders. The Bank has maintained competitve and
consistent pricing and underwriting criteria during this period of heightened
competition. The decline in indirect loan balances is the result of an ongoing
strategic objective to gradually reduce the outstanding amounts in both the
indirect mobile home and indirect consumer loan portfolios. Lawrence Federal's
long term investments, held in the form of securities, increased by $10.8
million, or 76%, when comparing June 30, 2003 balances to December 31, 2002. The
reason for the growth in long term investments was due to the fact the bank had
excess liquidity in the form of cash in the form of overnight deposits, which
were earning only minimal interest. During the first six months of 2002,
Lawrence Financial's available cash and cash equivalents decreased to $11.3
million, a decrease of $5.1 million, or 31%. This decrease was primarily due to
the purchase of long term investments.
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12
Compared to December 31, 2002, total deposits increased $1.7 million, or
1%, to $120.6 million at June 30, 2003.
Equity decreased $0.9 million, or 6%, to $13.9 million at June 30, 2003
when compared to December 31, 2002. During the period ended June 30, 2003,
treasury stock purchased totaled $1,045,088, retained earnings increased
$251,000 as a result of net income for the period, the net unrealized
appreciation on securities available-for-sale decreased from an unrealized gain
of $148,000 to an unrealized gain of $69,000 and $92,000 of cash dividends were
paid to shareholders.
Comparison of Operating Results for the Three Month and Six Month Periods Ending
June 30, 2003 and 2002
General. For the three months ended June 30, Lawrence Financial's net
income decreased 38% to $125,000 for 2003 from $200,000 for 2002. For the six
month period ended June 30, Lawrence Financial's net income decreased 36% to
$251,000 for 2003 from $392,000 for 2002. Return on average assets was 0.37% and
0.37% for the second quarter and first six months of 2003, respectively,
compared to 0.60% and 0.59% for the same two periods in 2002. Return on average
equity was 3.58% and 3.55% for the second quarter and first six months of 2003,
respectively, compared to 5.49% and 5.22% for the same two periods in 2002. Net
interest income decreased $22,000, or 2%, during the second quarter and
increased $49,000, or 2%, for the six month period ending June 30. Noninterest
income increased $29,000, or 17%, during the second quarter and $164,000, or
48%, for the six month period ending June 30. Offseting the increase in net
interest was a $15,000 or 8% increase in the provision for loan losses for the
quarter ended June 30, and a $165,000 or 50% increase in the provision for loan
losses for the six months ended June 30. Offsetting the increase in net interest
and noninterest income was a $102,000, or 10%, increase in noninterest expense
for the quarter ended June 30 and a $268,000, or 14%, increase in noninterest
expense for the six months ended June 30. There are several causes for the
increase in non-interest expense. The Company has expensed $610,000 year to date
for salaries and wages compared to $524,000 during the same period in 2002. The
Company has also experienced: increased costs of employee benefits; increased
data processing fees; increased costs related to the collection of delinquent
mobile home loans; and other non-interest expenses which are related to the
growth of the Company's customer base.
Interest Income. Interest income decreased $348,000, or 16%, for the
quarter compared to the same quarter in 2002 and decreased $645,000, or 14%, for
the first six months of 2003 compared to the first six months of 2002. Interest
income on loans decreased $371,000, or 18%, and decreased $708,000, or 17%, for
the quarter and six months ended June 30 respectively. These decreases were
primarily a result of a decline in the balance of the loan portfolio and as a
result of a decrease in the yield on the portfolio. Interest income on long-term
investments increased $36,000, or 22%, for the quarter and increased $85,000, or
26%, for the six months ended June 30 primarily as a result of a larger average
balance being carried by the Company during 2003. The average yield on
interest-earning assets declined to 6.06% for the quarter and 6.16% for the six
months ended June 30, 2003, from 7.26% and 7.32% for the same two periods in
2002, as lower yielding long term investments became a higher percentage of
interest earning assets.
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13
Interest Expense. Interest expense decreased $327,000, or 34%, for the
quarter compared to the same quarter in 2002 and decreased $694,000, or 35%, for
the first six months of 2003 compared to the first six months in 2002. The
decrease in interest expense for the quarter and six months ending June 30,
2003, was a direct result of a decline in the rates paid on deposits. In the
second quarter and first six months of 2003, there was no interest paid on
Federal Home Loan Bank advances, compared to $29,000 and $59,000 for the same
periods in 2002. The average cost of interest-bearing liabilities was 2.11% for
the quarter and 2.20% in the first six months of 2003 compared to 3.28% and
3.46% for the same periods in 2002, primarily as a result of lower market rates
on certificates of deposits and a change in the mix of deposits with a higher
percentage of deposit dollars being made up from lower cost funding sources.
Provision for Loan Losses. Activity in the allowance for loan losses (the
"Allowance") consists of increases due to monthly provisions for loan losses and
decreases for monthly charge offs, net of recoveries. Management analyzes the
adequacy of the allowance balance quarterly by determining its estimate of
probable losses in the loan portfolio and comparing that estimate to the
allowance's balance. Management calculates its estimate of probable losses
primarily by applying expected loss percentages to classified loans and
homogeneous loan categories. The impact of these events are described in more
detail below as part of the discussion comparing the second quarter of 2003, to
the fourth quarter 2002 and to the second quarter 2002 provisions for loan
losses.
The provision for loan losses was $195,000 for the second quarter of 2003
which represents an increase of $15,000, or 8%, over the $180,000 of provision
recorded for the same period in 2002. The provision for loan losses was $495,000
for the six months ended June 30, 2003 compared to $330,000 for the same period
in 2002. Through the six month periods ended June 30, provision increased
$165,000, or 50% when comparing 2003 to 2002. The increase in provision was
driven, in part, by a shift in the loan portfolio's mix toward more consumer
loan balances which, historically, contain more risk of loss to the Bank than
loans secured by mortgages.
Non-performing assets totaled $1.37 million at June 30, 2003, or 1.01% of
assets. Of the $1.37 million in non-performing assets, $539,000 were loans which
are 90 days or more past due and still accruing interest and $751,000 were loans
in a non-accrual status. Non-performing indirect mobile home loans made up
$360,000 of the loans that were 90 days or more past due and still accruing
interest and $311,000 of the loans that are carried in a non-accrual status. At
December 31, 2002, non-performing assets totaled $2.09 million or 1.56% of
assets. Of the $2.09 million $1.41 million were loans which are 90 days or more
past due and still accruing interest and $531,000 were loans in a non-accrual
status. At December 31, 2002, non-performing indirect mobile home loans made up
$975,000 of the loans that were 90 days or more past due and still accruing
interest and $180,000 of the loans that are carried in a non-accrual status. To
facilitate long-term improvement to the quality of the Bank's loan portfolios,
the Bank's loan review and collection processes have been enhanced in 2002 by
the addition of experienced employees. In addition to these improvements the
Bank hired an experienced Certified Public Accountant to implement a full time
internal audit function within the Company during the second quarter of 2002.
Management believes that these changes have served to improve the quality of the
information used to analyze the credit risk contained on the balance sheet and
the adequacy of the Bank's allowance for loan losses.
Allowance for loan losses totaled $1.1 million at June 30, 2003, as well
as at June 30, 2002. At June 30, 2003, Lawrence Federal's allowance for loan
losses represented 1.22% of total gross loans and 87.00% of nonperforming loans.
Although management believes that it uses the best information available to
establish the allowance for loan losses, future adjustments to the allowance for
loan losses may be necessary and results of operations could be adversely
affected. Furthermore, while Lawrence Federal believes it has established its
existing allowance for loan losses in conformity with generally accepted
accounting principles, there can be no assurance that regulators, in reviewing
Lawrence Federal's loan portfolio, will not request Lawrence Federal to increase
its future provisions for loan losses. In addition, because future events
affecting borrowers and collateral cannot be predicted with certainty, there can
be no assurance that the existing allowance for loan losses is adequate or that
increases will not be necessary should the quality of any loans deteriorate as a
result of the factors discussed above. Any material increase in the allowance
for loan losses may adversely affect Lawrence Federal's financial condition and
results of operations.
Management continues to monitor closely the risk characteristics of the
loan portfolio, local economic conditions and, as stated earlier, will consider
these factors when evaluating the appropriate amount of provision and allowance
for loan losses. Management believes the company to be adequately reserved at
June 30, 2003.
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14
Noninterest Income. The following table shows the components of noninterest
income and the dollar and percentage change from the three months ended June 30,
2003 to the same period in 2002 and the six months ending June 30, 2003 to the
same period in 2002.
Quarters Ended
------------------- Dollar Percentage
06/30/03 06/30/02 Change Change
-------- -------- ------ ------
(Dollars in Thousands)
Net securities gains (losses) $ 31 $ 13 $ 18 N/M
Service charges 120 $109 11 10%
Other 51 51 -- --
---- ---- ----
Total $202 $173 $ 29 17%
==== ==== ====
Net securities gains recognized for the quarter ended June 30, 2003 were
not duplicated in the same period of 2002. Service charges increased during the
period as a result of growth in the number of deposit accounts.
Six Months Ended
------------------- Dollar Percentage
06/30/03 06/30/02 Change Change
-------- -------- ------ ------
(Dollars in Thousands)
Net securities gains (losses) $ 185 $ 8 $ 177 N/M
Service charges 226 $ 217 9 4%
Other 91 114 (23) (20)%
----- ----- -----
Total $ 502 $ 339 $ 163 48%
===== ===== =====
Net securities gains recognized in the first six months of 2003 were not
duplicated in the same period of 2002. Securities were sold in the first quarter
of 2003 to reduce the Bank's exposure to unrealized losses in an upward rate
environment. During the first quarter of 2003, management determined that there
were investments being held that should be sold due to market conditions. The
gains recognized are not expected to be repeated during the remainder of 2003.
The decrease in "Other" was primarily due to the loss of $18,000 recorded from
the sale of real estate owned, in addition to fluctuations in various items
including a decrease in income earned on the cash surrender value of bank owned
life insurance. Service charges increased during the period as a result of
growth in the number of deposit accounts.
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15
Non-Interest Expense. The following tables show the components of noninterest
expense and the dollar and percentage change from the three months ended June
30, 2003 to the same period in 2002 and the six months ending June 30, 2003 to
the same period in 2002.
Quarters Ended
-------------------- Dollar Percentage
06/30/03 06/30/02 Change Change
-------- -------- ------ ------
(Dollars in Thousands)
Salaries and benefits $ 495 $ 431 $ 64 15%
Deposit insurance premiums 15 29 (14) (48)%
Occupancy and equipment 90 83 7 8%
Data processing 161 132 29 22%
Franchise tax 35 32 3 9%
Advertising expense 19 24 (5) (21)%
Professional fees 77 69 8 12%
Other 211 201 10 5%
------ ------ ------
Total $1,103 $1,001 $ 102 10%
====== ====== ======
Non-interest expense increased $102,000, or 10%, for quarter ended June
30, 2003, as compared to the same period in 2002. The increase in salaries and
benefits for the quarter ended June 30, 2003 compared to the same period in 2002
reflects the addition of employees as discussed below. The Company has also
experienced increases in: data processing as described in greater detail below;
printing and supplies; and other non-interest expenses which are related to the
growth of the Company's customer base and the daily operation of the Company.
Six Months Ended
-------------------- Dollar Percentage
06/30/03 06/30/02 Change Change
-------- -------- ------ ------
(Dollars in Thousands)
Salaries and benefits $ 984 $ 867 $ 117 13%
Deposit insurance premiums 30 58 (28) (48)%
Occupancy and equipment 182 167 15 9%
Data processing 357 266 91 34%
Franchise tax 68 65 3 5%
Advertising expense 50 55 (5) (9)%
Professional Fees 166 140 26 19%
Other 393 344 49 14%
------ ------ ------
Total $2,230 $1,962 $ 268 14%
====== ====== ======
Non-interest expense increased $268,000, or 14%, for the six months ended
June 30, 2003, as compared to the same period in 2002. The increase in salaries
and benefits for the six months ended June 30, 2003 compared to the same period
in 2002 reflects the addition of employees in the loan collection, loan review,
internal audit and operations departments within the Company's banking
subsidiary. The increase in data processing is the result of an increase of
$10,000 in regular data processing fees and a $75,000 expense related to the
conversion process (discussed in the following paragraph). The Company has also
experienced increases in: data processing; printing and supplies; and other
non-interest expenses which are related to the growth of the Company's customer
base and the daily operation of the Company.
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16
In July of 2003, the Company replaced its existing data processing system.
This conversion to a new processing system will better position the Bank to
offer additional products, manage existing products, enhance customer service
value, and as an ultimate result, enhance shareholder value. While the final
costs for the deconversion process are unknown until the conversion process is
completed, the final savings for the post conversion process from the current
processor will more than offset these costs within the first full year of
processing under the new data processing service provider. Management is
actively monitoring the post conversion activities and working with outside
parties to provide for a successful conversion.
Income Tax Expense. The provision for income tax was $42,700 for the three
months ended June 30, 2003, compared to $76,900 in the same period for 2002 and
$86,500 for the six months ended June 30, 2003, compared to $166,100 in the same
period for 2001. The provision decreased as a result of lower taxable income.
The effective tax rate for the quarter ended June 30, 2003 was 25.5% compared
with 27.8% for the same period in 2002 and for the six months ended June 30,
2003 was 25.6% compared with 29.8% for the same period in 2002.
Average Balances, Interest and Average Yields/Cost
The following table presents certain information regarding average
balances of assets and liabilities, as well as the total dollar amounts of
interest income from average interest-earning assets and interest expense on
average interest-bearing liabilities and the resulting average yields and costs.
The yields and costs for the periods indicated are derived by dividing income or
expense by the average balances of assets or liabilities, respectively, for the
periods presented. Average balances were derived from daily balances.
Six months ended June 30,
-------------------------------------------------------------------------
2003 2002
---------------------------------- ---------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
(Dollars in Thousands)
Interest-earning assets:
Loans (1) $ 95,030 $ 3,418 7.22% $103,565 $ 4,126 8.00%
Securities (2) 22,514 411 3.95% 11,953 327 5.52%
Short term investments 9,154 39 0.09% 8,337 61 1.48%
-------- -------- ---- -------- --------
Total interest-earning assets 126,698 3,868 6.16% 123,855 4,514 7.35%
Non-interest-earning assets 9,163 9,316
-------- --------
Total assets $135,861 $133,171
======== ========
Interest-bearing liabilities:
Deposits:
Passbook accounts $ 33,305 155 0.94% $ 26,340 294 2.25%
Money market accounts 980 6 1.14% 981 14 2.87%
NOW accounts 16,074 52 0.65% 15,236 103 1.33%
Certificates of deposit 69,321 1,095 3.19% 72,100 1,533 4.28%
-------- -------- ---- -------- --------
Total deposits 119,680 1,308 2.20% 114,657 1,944 3.42%
FHLB advances -- -- -- 2,000 59 5.91%
-------- -------- ---- -------- --------
Total interest-bearing liabilities 119,680 1,308 2.20% 116,657 2,003 3.46%
Non-interest-bearing liabilities 1,092 1,375
-------- --------
Total liabilities 120,772 118,032
Total retained earnings 15,089 15,139
-------- --------
Total liabilities and
retained earnings $135,861 $133,171
======== ========
Net interest-earning assets $ 7,018 $ 7,198
======== ========
Net interest income/interest
rate spread (3) $ 2,560 3.91% $ 2,511 3.86%
======== ==== ======== ====
Net interest margin (4) 4.08% 4.05%
Ratio of interest-earning assets to
interest-bearing liabilities 105.86% 106.17%
- ----------
(1) Balances are net of deferred loan origination costs, allowance for loan
losses, undisbursed proceeds of construction loans in process, and include
non-accrual loans.
(2) Includes investment securities available-for-sale, stock in the Federal
Home Loan Bank of Cincinnati and mutual funds.
(3) Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(4) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
- --------------------------------------------------------------------------------
17
Management of Interest Rate Risk and Market Risk Analysis
Qualitative Aspects of Market Risk. Lawrence Federal's most significant
form of market risk is interest rate risk. The principal objectives of Lawrence
Federal's interest rate risk management are to evaluate the interest rate risk
inherent in certain balance sheet accounts, determine the level of risk
appropriate given Lawrence Federal's business strategy, operating environment,
capital, liquidity requirements and performance objectives, and manage the risk
consistent with the Board of Director's approved guidelines. Lawrence Federal
has an Asset/Liability Committee (ALCO), responsible for reviewing its
asset/liability policies and interest rate risk position, which meets monthly
and reports trends and interest rate risk position to the Board of Directors
quarterly. The ALCO is actively involved in reviewing the mix, volume and
pricing strategies associated with managing the Bank's balance sheet and
interest rate risk. During the first six months of 2003 management has utilized
several internal reports to better analyze the current financial position of the
Bank, and the Company, and to identify historic trends in both entities.
However, management is aware that the movement of interest rates is an
uncertainty which could have a negative impact on the earnings of Lawrence
Federal.
At this time, Lawrence Federal is liability sensitive which makes the Bank
subject to increased interest expense during periods of rising interest rates.
Lawrence Federal has placed an emphasis on adjustable-rate loans and the
origination of fixed-rate mortgage loans through a third party which, over the
long-term, will serve to make the balance sheet less liability sensitive.
Lawrence Federal currently does not participate in hedging programs, interest
rate swaps or other activities involving the use of derivative financial
instruments.
Quantitative Aspects of Market Risk. When evaluating interest rate risk
Lawrence Federal utilizes an interest sensitivity analysis prepared by the
Office of Thrift Supervision (the "OTS"), which is supplemented by an internally
generated, monthly "Rate-Volume-Variance Report". The following table, which is
based on information provided to Lawrence Federal by the Office of Thrift
Supervision, presents the change in Lawrence Federal's net portfolio value at
March 31, 2003, that would occur upon an immediate change in interest rates
based on OTS assumptions, but without giving effect to any steps that management
might take to counteract that change.
NPV as % of Portfolio
Change in Net Portfolio Value Value of Assets
Interest Rates ----------------------------------- ---------------------
In Basis Points (Dollars in thousands) NPV
(Rate Shock) $ Amount $ Change % Change Ratio Change(1)
------------ -------- -------- -------- ----- ---------
300 13,625 (2,352) (15)% 10.02% (132)
200 14,691 (1,286) (8)% 10.65% (69)
100 15,496 (481) (3)% 11.10% (24)
Static 15,977 -- -- 11.34% --
(100) 16,101 124 1% 11.35% 1
- ----------
(1) Expressed in basis points.
The preceding table shows that in the event of a sudden and sustained
increase in market interest rates of 200 basis points or more, the net portfolio
value of Lawrence Federal would decrease moderately.
The OTS uses certain assumptions in assessing the interest rate risk of
savings associations. These assumptions relate to interest rates, loan
prepayment rates, deposit decay rates, and the market values of certain assets
under differing interest rate scenarios, among others.
- --------------------------------------------------------------------------------
18
As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable rate mortgage loans, have
features which restrict changes in interest rates on a short-term basis and over
the life of the asset. Further, if interest rates change, expected rates of
prepayments on loans and early withdrawals from certificates of deposit could
deviate significantly from those assumed in calculating the table.
Liquidity and Capital Resources
Liquidity is the ability to meet current and future financial obligations
of a short-term nature. Lawrence Federal further defines liquidity as the
ability to respond to the needs of depositors and borrowers as well as
maintaining the flexibility to take advantage of investment opportunities.
Lawrence Federal's primary sources of funds consist of deposit inflows, loan
repayments, maturities and sales of investment securities and borrowings from
the Federal Home Loan Bank. While maturities and scheduled amortization of loans
and securities are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
Lawrence Federal's most liquid assets are cash and short-term investments
(securities maturing in one year or less). The levels of these assets are
dependent on Lawrence Federal's operating, financing, lending and investing
activities during any given period. At June 30, 2003, cash and short-term
investments totaled $11.3 million. Securities classified as available-for-sale
totaled $25.0 million at June 30, 2003.
Funding is obtained primarily from activity involving deposit accounts and
Federal Home Loan Bank advances. In the first six months of 2003 Lawrence
Federal experienced a net increase in total deposits of $1.7 million since
December 31, 2002 compared to an increase of $0.2 million for the same period in
2002. In addition, at June 30, 2003, Lawrence Federal had the ability to borrow
a total of approximately $15 million from the Federal Home Loan Bank of
Cincinnati through the use of an existing cash management advance agreement. On
that date, Lawrence Federal had no long term advances outstanding. On the same
date in 2002, Federal Home Loan Bank advances were at $2 million. Deposit flows
are affected by the overall level of interest rates, the interest rates and
products offered by Lawrence Federal and its local competitors and other
factors. Lawrence Federal generally manages the pricing of its deposits to be
competitive and to increase core deposit relationships. Occasionally, Lawrence
Federal offers promotional rates on certain deposit products in order to attract
deposits.
Lawrence Federal is subject to various regulatory capital requirements
administered by the OTS including a risk-based capital measure. The risk-based
capital guidelines include both a definition of capital and a framework for
calculating risk-weighted assets by assigning balance sheet assets and
off-balance sheet items to broad risk categories. At June 30, 2003, Lawrence
Federal exceeded all of its regulatory capital requirements. Lawrence Federal is
considered "well capitalized" under regulatory guidelines. See the table on page
nine (9) of this filing for more detail regarding the Bank's capital position.
Effect of Inflation and Changing Prices
The consolidated financial statements and related financial data presented
in this Form 10-QSB have been prepared following accounting principles generally
accepted in the United States of America, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time due
to inflation. The primary impact of inflation is reflected in the increased cost
of Lawrence Federal's operations. Unlike most industrial companies, virtually
all the assets and liabilities of a financial institution are monetary in
nature. As a result, interest rates generally have a more significant impact on
a financial institution's performance than do general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.
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19
ITEM 3
Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The Company maintains
controls and procedures designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of
this report, the chief executive and chief financial officers of the
Company concluded that the Company's disclosure controls and procedures
were effective.
(b) Changes in internal controls. The Company made no significant changes in
its internal controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation of those controls
by the Chief Executive and Chief Financial officers.
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20
Lawrence Financial Holdings, Inc.
Form 10-QSB
Quarter ended June 30, 2003
PART II - Other Information
Item 1- Legal Proceedings:
There are no matters required to be reported under this item.
Item 2- Changes in Securities:
There are no matters required to be reported under this item.
Item 3- Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4- Submission of Matters to a Vote of Security Holders:
The Annual Meeting of Stockholders of the Company was held on May
12, 2003. The results of the vote on matters presented at the
meeting is as follows:
The following individuals were elected as directors, each for a
three year term:
Votes For Votes Withheld
--------- --------------
Herbert J. Karlet 512,806 65,350
Robert N. Taylor 512,806 65,350
The appointment of Crowe, Chizek and Company LLP as auditors for the
Corporation for the fiscal year ending December 31, 2003 was
ratified by the stockholders by the following vote:
For 577,323; Against 300; Abstain 533
Broker non-votes totaled 900
Item 5- Other Information:
There are no matters required to be reported under this item.
Item 6- Exhibits and Reports on Form 8-K:
(a) Exhibits -
31.1 - Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
31.2 - Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
32.1 - Section 1350 Certification of Chief Executive Officer
32.2 - Section 1350 Certification of Chief Financial Officer
(b) Reports on Form 8-K.
A report on form 8-K was filed on April 14, 2003. Under Item
5, Other Events, Lawrence Financial Holdings, Inc. reported
that it issued a press release to announce financial results
for the quarter ended March 31, 2003.
A report on form 8-K was filed on April 21, 2003. Under Item
5, Other Events, Lawrence Financial Holdings, Inc.(the
Company) reported that it issued a press release to announce
the Company had completed the repurchase of 55,000 shares of
the Company's outstanding common stock through a repurchase
program.
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21
Signatures
In accordance with 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.
Lawrence Financial Holdings, Inc.
Date: August 13, 2003 /s/ Jack L. Blair
----------------------------------------
Jack L. Blair
President and Chief Executive Officer
Date: August 13, 2003 /s/ RobRoy Walters
----------------------------------------
RobRoy Walters
Executive Vice President
and Chief Financial Officer
- --------------------------------------------------------------------------------
22