UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
Commission File Number: 0-27930
Community Federal Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 64-086536
(State or other jurisdiction (I.R.S. Employer
Of incorporation or organization) Identification No.)
P.O. Box F
333 Court Street
Tupelo, Mississipi 38802
(Address of principal (Zip Code)
Executive offices)
Registrant's telephone number, including
area code: (601) 842-3981
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1997
Common Stock, 4,628,750 shares
$.01 par value
COMMUNITY FEDERAL BANCORP, INC.
PART I. FINANCIAL INFORMATION
Page
ITEM 1. FINANCIAL STATEMENTS:
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL 2
CONDITION AS OF MARCH 31, 1997 AND
SEPTEMBER 30, 1996
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR 3
THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
AND THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 4
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FURNISHED HAVE NOT BEEN AUDITED BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN
THE OPINION OF MANAGEMENT,ALL ADJUSTMENTS
NECESSARY FOR A FAIR PRESENTATION OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS FOR
THE PERIODS PRESENTED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 7
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
OTHER INFORMATION 10
SIGNATURES 12
Part I. Financial Information
Item 1. Financial Statements
COMMUNITY FEDERAL BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
March 31, September 30,
1997 1996
CASH AND CASH EQUIVALENTS $4,563,848 $4,205,679
SECURITIES AVAILABLE FOR SALE, at fair value 70,645,368 75,111,784
SECURITIES HELD TO MATURITY,
fair values of $4,518,634 and
$4,625,305, respectively 4,613,066 4,755,702
LOANS RECEIVABLE, net 123,243,090 117,630,885
PREMISES AND EQUIPMENT 1,603,739 607,267
OTHER ASSETS 1,380,010 1,705,625
Total assets $206,049,122 $204,016,942
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30,
1997 1996
DEPOSITS $131,941,156 $131,740,433
OTHER LIABILITIES 5,042,153 5,137,613
Total liabilities 136,983,309 136,878,046
STOCKHOLDERS' EQUITY:
Preferred stock, no par, no shares issued,
2,000,000 authorized 0 0
Common stock, par $.01 per share, 4,628,750
issued and outstanding, 10,000,000 authorized 46,288 46,288
Additional paid-in capital 45,087,259 45,006,311
Retained earnings 23,640,006 22,511,930
Unrealized gain on securities
available for sale, net 3,647,800 3,038,477
Unearned ESOP compensation (3,355,540) (3,464,110)
Total stockholders' equity 69,065,813 67,138,896
Total liabilities and stockholders' equity $206,049,122 $204,016,942
The accompanying notes are an integral part of these statements
<TABLE>
<CAPTION>
COMMUNITY FEDERAL BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Six Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $2,417,154 $2,119,422 $4,780,756 $4,133,769
Interest and dividends 355,271 514,848 765,154 945,540
on securities
Interest on mortgage-backed
and related securities 833,976 488,021 1,660,179 1,660,180
Total interest income 3,606,401 3,122,291 7,206,088 6,739,489
INTEREST EXPENSE:
Interest on deposits 1,627,248 1,837,306 3,293,192 3,621,032
Other interest expense 21,348 3,646 32,819 18,936
Total interest expense 1,648,596 1,840,952 3,326,011 3,639,968
PROVISION FOR LOAN LOSSES 5,000 5,000 10,000 15,000
Net interest income after
provision for loan losses 1,952,805 1,276,339 3,870,077 3,084,521
NONINTEREST INCOME:
Deposit fees 18,729 10,940 40,365 21,490
Loan servicing fees 63,299 24,066 103,752 43,587
Other income 17,916 30,363 21,838 72,321
Total noninterest income 99,944 65,369 165,956 137,398
NONINTEREST EXPENSE:
Compensation and benefits 373,791 263,468 696,173 508,099
Occupancy and equipment 28,264 70,729 54,159 113,415
Other operating expense 231,070 164,112 453,503 311,020
Total noninterest expense 633,125 498,309 1,203,835 932,534
Income before income taxes 1,419,624 843,399 2,832,198 2,289,385
PROVISION FOR INCOME TAXES 531,686 316,200 1,059,790 616,200
NET INCOME $887,938 $527,199 $1,772,408 $1,673,185
EARNINGS PER SHARE $0.21 $0.11 $0.41 $0.36
SHARES OUTSTANDING LESS
UNALLOCATED ESOP 4,282,339 4,628,750 4,282,339 4,628,750
The accompanying notes are an integral part of these statements
</TABLE>
COMMUNITY FEDERAL BANCORP, INC.
STATEMENT OF CASH FLOWS
MARCH 31, 1997 AND 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,772,408 $995,784
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 34,218 40,693
Deferred loan fees 9,240 49,639
Accreation of discounts, net (18,664) (274,874)
Amortization of Unearned Compensation 189,518 0
Provision for loan losses 10,000 15,000
Gain on sale of securities, net 2,617 (53,711)
Changes in assets and liabilities:
Decrease in prepaid taxes 0 44,212
Increase (Decrease) in other assets 222,678 (238,739)
Increase in interest and dividends
receivable 102,937 55,450
Decrease (Increase) in other liabilities (1,414,092) 86,340
Total adjustments (861,548) (275,990)
Net cash provided by operating activities 910,860 719,794
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of Real Estate Owned 0 1,000
Proceeds from maturities of securities 1,505,051 5,658,184
Proceeds from sales of securities 2,990,156 1,454,596
Principal collections and maturities on
mortgage-backed and related securities 3,788,667 201,909
Purchase of property and equipment (1,030,690) (13,679)
Loan (originations) and principal
repayments, net (5,631,445) (9,450,278)
Purchase of securities (3,045,575) (4,076,791)
Net cash used by investing activities (1,423,836) (6,225,059)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in customer deposits, net 200,723 (3,880,797)
Dividends paid (644,333) 0
(Decrease) increase in advances from
borrowers for taxes and insurance (185,245) (193,932)
Net change in FHLB advances 1,500,000 (1,000,000)
Net proceeds from issuance of common stock 0 41,376,814
Net cash provided by financing activities 871,145 36,302,085
Net increase in cash and cash equivalents 358,169 30,796,820
CASH AND CASH EQUIVALENTS, beginning of year 4,205,679 2,895,100
CASH AND CASH EQUIVALENTS, end of period $4,563,848 $33,691,920
The accompanying notes are an integral part of these statements
COMMUNITY FEDERAL BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Community Federal Bancorp, Inc. (The "Company") was incorporated
in the State of Delaware on November 22, 1995, for the purpose of
becoming a holding company to own all of the outstanding capital
stock of Community Federal Savings Bank (the "Bank"), an existing
Stock Bank which was 100% owned by Community Federal Mutual
Holding Company (the "MHC"). Upon the conversion from a
federally chartered mutual holding company form of organization
to a federally chartered stock savings association (the
"Conversion"), the MHC was dissolved.
The accompanying unaudited condensed consolidated financial
statements as of March 31, 1997, and for the three and six month
periods then ended, include the accounts of the Company and the
Bank. All significant intercompany transactions and accounts
have been eliminated in consolidation.
The condensed consolidated financial statements were prepared by
the company without an audit, but in the opinion of management,
reflect all adjustments necessary for the fair presentation of
financial position and results of operations for the three and
six month periods ended March 31, 1997 and 1996. Results of
operations for the current interim period are not necessarily
indicative of results expected for the fiscal year ended
September 30, 1997. While certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange commission, management believes
that the disclosures herein are adequate to make the information
presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended
September 30, 1996. The accounting policies followed by the Bank
are set forth in the summary of significant accounting policies
in the Bank's September 30, 1996 consolidated financial
statements.
2. STOCK CONVERSION
On March 14, 1996, the Conversion to a federally chartered stock
savings bank through amendment of its charter, dissolution of the
MHC, and issuance of common stock to the company was completed.
Related thereto, the Company sold 4,628,750 shares of common
stock, par value $.01 per share, at an initial price of $10 per
share in subscription and community offerings. Costs associated
with the Conversion were approximately $1,300,000 including
underwriting fees. These conversion costs were deducted from the
gross proceeds of the sale of the common stock.
In connection with the Conversion, the Company has established an
employee stock ownership plan (the "ESOP"). The ESOP purchased
approximately 8%, or 363,200 shares, of the total shares of
common stock sold. The company lent $3,632,000 to the ESOP for
the purchase of the shares of common stock. Unearned
compensation for the ESOP was charged to stockholders' equity and
is reduced ratably in connection with principal payments under
the terms of the Plan.
The Management Recognition and Retention Plan Trust and the Stock
Option Plan (the "Plans") were approved by shareholders and will
be effective April 1, 1997. Under the Management Recognition and
Retention Plan, employees and directors could be awarded an
aggregate amount of shares of common stock equal to 4% of the
shares issued in the Conversion (185,150 shares of common stock)
and under the Stock Option Plan, employees and directors could
be granted options to purchase an aggregate amount of shares of
common stock equal to 10% of the shares issued in the Conversion
at exercise prices equal to the market price of the common stock
on the date of grant.
3. PRO FORMA EARNINGS PER SHARE
Earnings per share for the three and six months ended March 31,
1996 has been computed based on the weighted average number of
shares of common stock, less any unallocated ESOP shares, which
were outstanding during the three and six month periods ended
March 31, 1997.
4. ACCOUNTING PRONOUNCEMENT
In June 1996, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities". SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on
consistent application of financial-components approach that
focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished.
This statements is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring
after December 31, 1996, and is to be applied prospectively.
Earlier or retroactive application is not permitted. The Company
adopted the provisions of the Standard on January 1, 1997. Based
on the Company's current operating activities, the adoption of
this statement did not have an impact on the Company's financial
condition or results of operations.
In February 1997, FASB issued SFAS No. 128, " Earnings per
Share". This Statement establishes standards for computing and
presenting earnings per share (ESP) and applies to entities with
publicly held common stock or potential common stock. This
Statement simplifies the standards for computing earnings per
share previously found in APB Opinion No 15, Earnings per Share,
and makes them comparable to international EPS standards, It
replaces the presentation of primary EPS with a presentation of
basic EPS and requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex
capital structures and requires a reconciliation denominator of
the diluted EPS computation.
This Statement is effective for financial statements issued for
periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. This Statement
requires restatement of all prior-period EPS data presented. The
Company will adopt the Statement at fiscal year-end 1998. Basic
and diluted earnings per share under SFAS No 128 would be
identical to earning per share as presents in the financial
statements.
Part 1
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
On March 25, 1996, Community Federal Bancorp, Inc. (The
"Company") completed the sale of 4,628,750 shares of its common
stock in an initial public offering at a price of $10.00 and
simultaneously acquired the shares of common stock of Community
Federal Savings Bank (the "Bank") in connection with the mutual
to stock conversion (the "Conversion"). Costs associated with
the conversion were approximately $1,300,000. Prior to March 25,
1996, the Company had not issued any stock, had no assets or
liabilities, and had not engaged in any business activities other
than of an organizational nature. Accordingly, the financial
data for periods prior to March 24, 1996 included herein reflect
the operations of the Bank only.
Comparisons of Financial Conditions at March 31, 1997 and
September 30, 1996
Total assets increased by $2.0 million, or 1.0%, from $204
million at September 30, 1996 to $206 million at March 31, 1997.
The increase in total assets was primarily attributed to a $4.6
million decrease in investments, $5.6 million increase in loans
receivable and a $996,000 increase in premises and equipment.
Equity increased $1.9 million since September 30, 1996 as a
result of a $600,000 increase in unrealized gain on Assets
available for sale, declaration of dividends of $644,000, and
$1.8 million in net income for the six month ended March 31,
1997.
Comparison of Results of Operations for the Three Months Ended
March 31, 1997 and 1996
The company reported net income for the three months ended March
31, 1997 of $874,000 as compared to $527,000 for the three months
ended March 31, 1996. The increase in income for the three
months ended March 31, 1997 was due mainly to an increase in net
interest income.
Net Interest Income
Net interest income for the three months ended March 31, 1997
amounted to $2.0 million as compared to $1.3 million for the
three months ended March 31, 1996. Total interest income
increased $484,000 during the quarter ended March 31, 1997 as
compared to the same three month period of the prior year. This
increase resulted primarily from increased interest and fees on
the higher average balance in earning assets discussed above.
Total interest expense decreased 10.4% during the 2nd quarter
1997 compared to the same three month period of the previous
year. This decrease in interest expense is attributed to the
lower average balance in deposit accounts resulting from
depositors being able to withdraw from their deposit account
without penalty to fund their stock purchase at the initial
public offering.
Provision for Loan Losses
A $5,000 provision for loan losses was made during the second
quarter of 1997 to correspond with the volume in the mortgage
and consumer loan portfolio, consistent with the $5,000 provision
for loan losses during the comparable 1996 second quarter. This
adjustment reflects management's estimates which took into
account historical experience, the amount of nonperforming
assets, and general economic condition. Total nonperforming
assets at March 31, 1997 were $731,000, compared to $531,000 at
March 31, 1996. The allowance for loan losses at March 31, 1997
was $580,000 compared to $567,000 at March 31, 1996.
Noninterest Income
Noninterest income increased $35,000 from $65,000 for the three
months ended March 31, 1996 to $100,000 for the three months
ended March 31, 1997.
Noninterest Expense
Noninterest expense increased $135,000 from $498,000 for the
three months ended March 31, 1996 to $633,000 for the three
months ended March 31, 1997. Chief reasons for the increase were
the increase in compensation expense associated with the Employee
Stock Ownership plan ("ESOP").
Provision for Income Tax
Income tax expense for the three months ended March 31, 1997
increased $215,000 to $531,000 as compared to income tax expense
of $316,000 for the three months ended March 31, 1996. This
increase is the result of the increase in income before income
taxes.
Comparisons of Results of Operations for the Six Months Ended
March 30, 1997 and 1996.
The Company reported net income for the six month ended March
1997 of $1.8 million as compared to $996,000 for the six months
ended March 31, 1996. The increase was due mainly to an increase
in net interest income.
Net Interest Income
Net interest income for the six months ended March 31, 1997
amounted to $3.9 million as compared to $2.4 million for the six
months ended March 31, 1996. The increase resulted from growth
in volume of earning assets, funded by the proceeds of the
initial public offering. A $300,000 decrease in interest expense
contributed to the $1.1 million increase in net interest income.
Provisions for Loan Losses
A $10,000 provisions for loan losses was made during the six
months ended March 31, 1997, consistent with the $15,000
provision made during the six months ended March 31, 1996. This
adjustment reflects management's estimates which took into
account historical experience, the amount of nonperforming
assets, and general economic conditions.
Noninterest Expense
Noninterest expense increased by $271,000 from $933,000 for the
six months ended March 31, 1996 to $1.2 million for the six
months ended March 31, 1997. The increase was primarily due to
an increase in compensation expense associated with ESOP.
Provision for Income Tax
Income tax expense for the six months ended March 31, 1997
increased by $444,000 to $1.1 million as compared to the income
tax expense of $616,000 for the six months ended March 31, 1996.
This increase was due to the overall increase in income before
income taxes.
Capital Resources
The Bank's primary sources of funds are customer deposits,
repayments of loan principal, and interest from loans and
investments. While scheduled principal repayments on loans and
mortgage-backed securities are relatively predictable source of
funds, deposit flows and loan prepayments are greatly influenced
by general interest rates, economic conditions, and competition.
The Bank manages the pricing of its deposits to maintain a
desired deposit balance. In addition, the Bank invests in short
term interest-earning assets which provide liquidity to meet
lending requirements.
The Bank is required to maintain certain levels of regulatory
capital. At March 31, 1997, the Bank was in compliance with all
regulatory capital requirements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company and any subsidiaries may be a
party to various legal proceedings incident to its or their
business. At March 31, 1996, there were no legal proceedings to
which the Company or any subsidiary was a party, or to which any
of their property was subject, which were expected by management
to result in a material loss.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders held on March 27,
1997, in Tupelo, Mississippi, the shareholders elected
directors, approved the 1997 Stock Option Plan, approved
the 1997 Management Recognition Plan and Trust, and
ratified the appointment of Arthur Andersen, LLP as
Community Federal's independent auditors for 1997. The
following is a tabulation of all votes timely cast in
person or by proxy by shareholders of Community Federal
for the annual meeting:
To elect directors to three-year terms:
Nominee For Withheld
Robert R. Black 4,004,075 107,715
Jim Ingram 4,004,025 107,765
L. F. Sams 4,003,625 108,165
To approve the adoption of the 1997 Stock Option Plan:
For 3,093,503
Against 159,013
Abstain 36,315
To approve the adoption of the 1997 Management Recognition Plan
and Trust:
For 3,138,159
Against 173,138
Abstain 38,120
To ratify the appointment of Arthur Andersen, LLP as
Community Federal's independent auditors for 1997:
For 4,060,190
Against 32,900
Abstain 18,700
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
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.
COMMUNITY FEDERAL BANCORP, INC.
Date: May 14, 1997 (S) Jim Ingram
Jim Ingram, President
and Chief Executive Officer
Date: May 14, 1997 (S) Sherry McCarty
Sherry McCarty, Controller
and Principal Financial Officer
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