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 December 31, 1997
Commission File Number: 0-27930
Community Federal Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 64-0869537
(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 December 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 DECEMBER 31, 1997 AND
SEPTEMBER 30, 1997
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR 3
THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 4
FOR THE THREE MONTHS ENDED DECEMBER 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 8
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
OTHER INFORMATION 10
SIGNATURES 11
Part I. Financial Information
Item 1. Financial Statements
COMMUNITY FEDERAL BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
December 31 September 30,
1997 1997
CASH AND CASH EQUIVALENTS $5,764,557 $5,437,003
SECURITIES AVAILABLE FOR SALE, at fair value 81,352,785 73,976,278
SECURITIES HELD TO MATURITY,
fair values of $4,674,304 and
$4,122,225 respectively 3,891,254 4,156,732
LOANS RECEIVABLE, net 133,017,589 127,334,958
PREMISES AND EQUIPMENT 2,958,581 3,318,561
OTHER ASSETS 1,670,856 1,714,291
Total assets $228,655,622 $215,937,823
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1997 1997
DEPOSITS $133,901,479 $132,718,390
OTHER LIABILITIES 34,247,457 24,656,432
Total liabilities 168,148,936 157,374,822
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 45,167,256 45,113,004
Retained earnings 14,030,024 13,714,336
Unrealized gain on securities
available for sale, net 7,041,542 5,687,696
Unearned ESOP compensation (5,778,424) (5,998,323)
Total stockholders' equity 60,506,686 58,563,001
Total liabilities and stockholders' equity $228,655,622 $215,937,823
The accompanying notes are an integral part of these statements
COMMUNITY FEDERAL BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months
Ended December 31,
1997 1996
INTEREST INCOME:
Interest and fees on loans $2,595,266 $2,363,602
Interest and dividends on securities
on Held to Maturity 59,060 72,673
Interest and dividends on securities
Available for Sale 1,146,038 1,163,413
Total interest income 3,800,364 3,599,688
INTEREST EXPENSE:
Interest on deposits 1,730,187 1,665,944
Other interest expense 321,175 11,471
Total interest expense 2,051,362 1,677,415
PROVISION FOR LOAN LOSSES 10,000 5,000
Net interest income after
provision for loan losses 1,739,002 1,917,273
NONINTEREST INCOME:
Deposit fees 19,736 21,636
Loan servicing fees 69,056 40,453
Other income 12,885 3,922
Total noninterest income 101,677 66,011
NONINTEREST EXPENSE:
Compensation and benefits 565,147 322,382
Occupancy and equipment 59,574 25,895
Other operating expense 215,206 222,433
Total noninterest expense 839,927 570,710
Income before income taxes 1,000,752 1,412,574
PROVISION FOR INCOME TAXES 340,746 528,104
NET INCOME $660,006 $884,470
Basic Earnings Per Share $0.16 $0.21
Diluted Earnings Per Share $0.15 $0.20
SHARES OUTSTANDING LESS UNALLOCATED ESOP and MRP 4,132,040 4,282,339
The accompanying notes are an integral part of these statements
<TABLE>
COMMUNITY FEDERAL BANCORP, INC.
STATEMENT OF CASH FLOWS
December 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $660,006 $884,470
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 42,858 17,109
Amortization of Premium/discounts, net (1,812) (14,824)
Amortizatin of Unearned Compensation 275,825 89,091
Provision for loan losses 10,000 5,000
Changes in assets and liabilities:
Decrease in other assets 43,436 468,291
Increase (decrease) in accrued expenses
and other liabilities 3,019,433 (1,027,243)
Total adjustments 3,389,740 (462,576)
Net cash provided by operating
activities 4,049,746 421,894
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections and maturities
on securities available for sale 7,565,299 3,274,684
Principal collections and maturities
on securities held to maturity 263,000 113,842
(Purchase of) proceeds for the sale
of property and equipment, net 317,122 (2,273)
Loan (originations) and principal
repayments, net (5,692,631) (3,712,534)
Purchase of securities available for sale (12,764,057) (18,300)
Net cash used by investing activities (10,311,267) (344,581)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in customer deposits, net 1,183,089 (588,011)
Dividends paid (344,318) (321,176)
(Decrease) increase in advances from borrowers
for taxes and insurance (280,729) (306,013)
Purchase of stock for stock plan trust (1,674) 0
Net change in FHLB advances 6,032,707 1,500,000
Net cash provided by financing activities 6,589,075 284,800
Net increase in cash and cash equivalents 327,554 362,113
CASH AND CASH EQUIVALENTS, beginning of year 5,437,003 4,205,679
CASH AND CASH EQUIVALENTS, end of period $5,764,557 $4,567,792
</TABLE>
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 December 31, 1997, and for the three month
period 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
month period ended December 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, 1998. 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 30,1997. The
accounting policies followed by the Bank are set forth in the
summary of significant accounting policies in the
Bank's September 30, 1997 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.
Within one year following the Conversion, and subject to
shareholder approval, the Company is expected to implement
the Management Recognition Plan, under which employees 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 the Stock Option Plan, under which 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. EARNINGS PER SHARE
Basic earnings per share were computed by dividing net income by
the weighted average number of shares of common stock
outstanding during the three month periods ended December 31,
1997 and 1996. Common stock outstanding consists of issued
share less treasury stock, unallocated ESOP shares, and share
owned by the MRP and Stock option plan trust. Diluted earnings
per share for the three months periods ended December 31, 1997
and 1996, were computed by dividing net income by the weighted
average number of shares of common stock and the dilutive effect
of the shares awarded under the MRP and Stock Option plans,
based on the treasury stock method using an average fair market
value of the stock during the respective periods.
In 1997, the Company adopted SFAS No.128, "Earnings Per Share,"
effective December 15, 1997. As a result, the Company's
reported earnings per share for 1996 were restated. The
following table represents the earnings per share calculations
for the three months ended December 31, 1997 and 1996,
accompanied by the effect of this accounting change on
previously reported earnings per share:
Per Share
For the Three Months Ended Income Shares Amount
December 31, 1997
Net income $660.006
Basic earning per share
Income available to common
shareholders 660,006 4,132,040 $0.16
Dilutive Securities:
Management recognition plan shares 174,545
Stock option plan shares 63,731
Diluted earnings per share:
Income available to common shareholders
Plus assumed conversions $660,006 4,370,316 $0.15
December 31, 1996
Net income $884,470
Basic earnings per share:
Income available to common
shareholders 884,470 4,282,339 $0.21
Dilutive Securities:
Management recognition plan shares 174,545
Stock option plan shares 25,991
Diluted earnings per share:
Income available to common shareholders
plus assumed conversions $884,470 4,482,875 $0.20
For the Three
Months Ended
December 31,
1996
Changes in previously reported EPS:
Earnings per share, as reported $0.21
Earnings per share, as amended:
Basic $0.21
Diluted 0.20
4. PENDING ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 129, Disclosure of Information About
Capital Structure. This Statement establishes standards for
disclosing information about an entity's capital structure.
In June 1997, the FASB issued SFAS No. 130, Reporting of
Comprehensive Income. This Statement established standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of
financial statements. This Statement also requires that all
items that are required to be recognized under accounting
standards as components of comprehensive income, be reported in
financial statements and are displayed with the same prominence
as other financial statements. This Statement is effective for
fiscal years beginning after December 15, 1997. Earlier
application is permitted. Reclassification of financial
statements for earlier periods for comparative purposes is
required.
In June 1997, FASB issued SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information. This
Statement established standards for the way that public business
enterprises report information about operating segments in
annual financial statements and requires that those enterprises
report selected information about operating segments in interim
financial reports issued to stockholders. This Statement also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. This Statement
requires the reporting of financial and descriptive information
about an enterprises's reportable operating segments. This
Statement is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of
application comparative information for earlier years is to be
restated.
Management believes there will be no material effect on the
consolidated financial statements from the adoption of these
pronouncements.
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 December 31, 1997 and
September 30, 1997
Total assets increased by $12.7 million, or 5.9%, from $215.9
million at September 30, 1997 to $228.8 million at December 31,
1997. The increase in total assets was primarily attributed to
a $5.7 million increase in loans receivable and a $11.3 million
decrease in investment securities, which was funded in part by
FHLB advances.
Total deposits increased by $1.2 million from $132.7 million at
September 30, 1997 to $133.9 million at December 31, 1997.
Equity increased $2.3 million over the prior year as a result of
the $1.4 million increase in unrealized gains on securities
available for sale, the $220,000 decrease in unearned
compensation and the net income for the quarter ended December
31, 1997 of $660,000.
Comparison of Results of Operations for the Three Months Ended
December 31, 1997 and 1996
The company reported net income for the three months ended
December 31, 1997 of $660,000 as compared to $884,000 for the
three months ended December 31, 1996. The decrease in income
for the three months ended December 31, 1996 was due mainly to a
decrease in net interest income.
Net Interest Income
Net interest income for the three months ended December 31, 1997
amounted to $1.7 million as compared to $1.9 million for the
three months ended December 31, 1996. Total interest income
increased $200,000 during the quarter ended December 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 loans receivable. Total interest
expense increased $374,000, compared to the same three month
period of the previous year, due primarily to an increase in the
average outstanding balance of FHLB advances.
Provision for Loan Losses
A $10,000 provision for loan losses was made during the first
quarter of 1997 to correspond with the volume in the mortgage
and consumer loan portfolio, compared to a $5,000 provision
for loan losses during the comparable 1996 first 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 December 31, 1997 were $987,000 compared to $654,000
at December 31, 1996. The allowance for loan losses at
December 31, 1997 was $600,000 compared to $575,000 at
December 31, 1996.
Noninterest Income
Noninterest income increased $36,000 from $66,000 for the three
months ended December 31, 1996 to $102,000 for the three months
ended December 31, 1997, due primarily to a $29,000 increase in
loan servicing fees.
Noninterest Expense
Noninterest expense increased $269,000 from $571,000 for the
three months ended December 31, 1996 to $840,000 for the three
months ended December 31, 1997. The primary reasons for the
increase were the increase in compensation expense associated
with the benefit plans and the additional staffing of the new
branch office and the consumer- lending department.
Provision for Income Tax
Income tax expense for the three months ended December 31, 1997
decreased $187,000 to $341,000 as compared to income tax expense
of $528,000 for the three months ended December 31, 1996. This
decrease is the result of a decrease in net income.
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 a 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 December 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 December 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
None
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: February 12, 1998 (s)Jim Ingram
Jim Ingram, President
and Chief Executive Officer
Date: February 12, 1998 (s)Sherry McCarty
Sherry McCarty, Controller
and Chief Financial Officer
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