FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20552
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
-----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 0-26248
LONDON FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-1800830
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2 East High Street
London, Ohio 43140
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (614) 852-0787
Check whether the issuer (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
As of August 11, 1997, the latest practicable date, 510,160 of the registrant's
common shares, without par value, were issued and outstanding.
Page 1 of 14 pages
<PAGE>
London Financial Corporation
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II - OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
<TABLE>
<CAPTION>
London Financial Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
June 30, September 30,
ASSETS 1997 1996
<S> <C> <C>
Cash and due from banks .......................................... $ 982 $ 319
Interest-bearing deposits in other financial institutions ........ 2,446 2,324
-------- --------
Cash and cash equivalents ............................... 3,428 2,643
Investment securities designated as available for sale - at market 281 220
Investment securities - at amortized cost, approximate market
value of $502 and $1,991 at June 30, 1997
and September 30, 1996, respectively ........................... 500 2,000
Mortgage-backed securities - at cost, approximate market
value of $3,685 and $3,944 at June 30, 1997 and
September 30, 1996, respectively ............................... 3,680 4,032
Loans receivable - net ........................................... 29,470 27,031
Office premises and equipment - at depreciated cost .............. 362 354
Stock in Federal Home Loan Bank - at cost ........................ 275 261
Accrued interest receivable ...................................... 179 178
Prepaid expenses and other assets ................................ 65 21
Deferred federal income taxes .................................... -- 77
-------- --------
Total assets ............................................ $ 38,240 $ 36,817
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits ......................................................... $ 29,587 $ 28,195
Advances from the Federal Home Loan Bank ......................... 800 300
Other liabilities ................................................ 149 279
Accrued federal income taxes ..................................... 149 136
Deferred federal income taxes .................................... 36 --
-------- --------
Total liabilities ....................................... 30,721 28,910
Shareholders' Equity
Common shares - authorized 5,000,000 shares without par value;
529,000 shares issued ........................................ -- --
Additional paid-in capital ..................................... 4,910 4,910
Shares acquired by Employee Stock Ownership Plan ............... (423) (423)
Shares acquired by Management Recognition Plan ................. (315) --
Retained earnings - substantially restricted ................... 3,585 3,416
Unrealized gains on securities designated as available for
sale, net of related tax effects ............................. 44 4
Less 13,840 treasury shares - at cost .......................... (282) --
-------- --------
Total shareholders' equity .............................. 7,519 7,907
-------- --------
Total liabilities and shareholders' equity .............. $ 38,240 $ 36,817
======== ========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
London Financial Corporation
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Nine months ended Three months ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Loans ................................................ $1,773 $1,783 $ 608 $ 588
Mortgage-backed securities ........................... 175 85 59 31
Investment securities ................................ 50 23 7 10
Interest-bearing deposits and other .................. 115 172 46 89
------ ------ ------ ------
Total interest income ......................... 2,113 2,063 720 718
Interest expense
Deposits ............................................. 1,047 1,123 356 351
Borrowings ........................................... 31 21 14 7
------ ------ ------ ------
Total interest expense ........................ 1,078 1,144 370 358
------ ------ ------ ------
Net interest income ........................... 1,035 919 350 360
Other operating income ................................. 45 45 14 7
General, administrative and other expense
Employee compensation and benefits ................... 332 309 127 101
Occupancy and equipment .............................. 50 53 17 18
Federal deposit insurance premiums ................... 28 63 5 20
Franchise taxes ...................................... 60 34 28 11
Data processing ...................................... 42 44 14 15
Other ................................................ 183 117 56 50
------ ------ ------ ------
Total general, administrative and other expense 695 620 247 215
------ ------ ------ ------
Earnings before income taxes .................. 385 344 117 152
Federal income taxes
Current .............................................. 36 110 12 41
Deferred ............................................. 92 -- 24 --
------ ------ ------ ------
Total federal income taxes .................... 128 110 36 41
------ ------ ------ ------
NET EARNINGS .................................. $ 257 $ 234 $ 81 $ 111
====== ====== ====== ======
EARNINGS PER SHARE ............................ $ .54 N/A $ .17 $ .23
====== ====== ====== ======
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
London Financial Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30,
(In thousands)
1997 1996
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net earnings for the period .................................................. $ 257 $ 234
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of deferred loan origination fees ............................. (64) (76)
Depreciation and amortization .............................................. 21 19
Federal Home Loan Bank stock dividends ..................................... (14) (13)
Increase (decrease) in cash due to changes in:
Accrued interest receivable .............................................. (1) (36)
Prepaid expenses and other assets ........................................ (44) (10)
Other liabilities ........................................................ (130) 28
Federal income taxes
Current ................................................................ 13 107
Deferred ............................................................... 92 --
------- -------
Net cash provided by operating activities ............................. 130 253
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities .............................. 1,500 --
Principal repayments on mortgage-backed securities ........................... 347 162
Purchase of mortgage-backed securities ....................................... -- (2,296)
Purchase of investment securities ............................................ -- (1,500)
Principal repayments on loans ................................................ 4,107 5,602
Loan disbursements ........................................................... (6,482) (4,684)
Purchase of office equipment ................................................. (24) (7)
------- -------
Net cash used in investing activities ................................. (552) (2,723)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposit accounts .................................. 1,392 (1,814)
Proceeds from Federal Home Loan Bank advances ................................ 500 --
Proceeds from issuance of common shares ...................................... -- 4,487
Purchase of shares for Management Recognition Plan ........................... (315) --
Purchase of treasury shares .................................................. (282) --
Dividends paid on common shares .............................................. (88) --
------- -------
Net cash provided by financing activities ............................. 1,207 2,673
------- -------
Net increase in cash and cash equivalents ...................................... 785 203
Cash and cash equivalents at beginning of period ............................... 2,643 2,844
------- -------
Cash and cash equivalents at end of period ..................................... $ 3,428 $ 3,047
======= =======
Supplemental disclosure of cash flow information: Cash paid during the year for:
Federal income taxes ....................................................... $ 23 $ 20
======= =======
Interest on deposits and borrowings ........................................ $ 1,076 $ 1,144
======= =======
Supplemental disclosure of noncash investing activities:
Unrealized gains on securities designated as available for sale, net ......... $ 40 $ --
======= =======
</TABLE>
5
<PAGE>
London Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended
June 30, 1997 and 1996
In October 1995, the Board of Directors of The Citizens Loan and Savings Company
("Citizens") adopted a Plan of Conversion (the "Plan") providing for the
conversion of Citizens to the stock form of organization (the "Conversion"). In
connection with the Conversion, Citizens formed a holding company, London
Financial Corporation, ("LFC"). On March 29, 1996, Citizens completed the
Conversion, in connection with which Citizens issued all of its outstanding
shares to LFC and LFC issued 529,000 common shares in a subscription offering
and a community offering at a price of $10.00 per share which, after
consideration of offering expenses totaling $380,000, and shares purchased by
employee benefit plans totaling $423,000, resulted in net cash proceeds of $4.5
million. The financial statements for the periods prior to March 1996 are those
of Citizens prior to the Conversion.
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of consolidated
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. Accordingly, these financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto of LFC included in the Annual Report on Form 10-KSB
for the year ended September 30, 1996. However, in the opinion of management,
all adjustments (consisting of only normal recurring accruals) which are
necessary for a fair presentation of the consolidated financial statements have
been included. The results of operations for the three and nine month periods
ended June 30, 1997 and 1996, are not necessarily indicative of the results
which may be expected for an entire fiscal year.
2. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of LFC
and Citizens. All significant intercompany items have been eliminated.
3. Earnings Per Share
Earnings per share for the three and nine month periods ended June 30, 1997, is
computed based upon 472,455 and 479,201 weighted-average shares outstanding,
respectively, which in each instance gives effect to a reduction for the 42,320
unallocated shares held by the London Financial Corporation Employee Stock
Ownership Plan (the "ESOP") in accordance with Statement of Position 93-6.
Earnings per share for the three month period ended June 30, 1996, is computed
based upon 486,680 weighted-average shares outstanding, which gives effect to a
reduction for the 42,320 unallocated shares held by the London Financial
Corporation Employee Stock Ownership Plan (the "ESOP") in accordance with
Statement of Position 93-6.
The provisions of Accounting Principles Board Opinion No. 15, "Earnings Per
Share," are not applicable for the nine month period ended June 30, 1996, as LFC
completed the Conversion in March 1996.
6
<PAGE>
London Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and nine month periods ended June 30, 1997 and 1996
4. Effects of Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," establishing financial accounting and reporting
standards for stock-based employee compensation plans. SFAS No. 123 encourages
all entities to adopt a new method of accounting to measure compensation cost of
all employee stock compensation plans based on the estimated fair value of the
award at the date it is granted. Companies are, however, allowed to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting, which generally does not result in compensation expense
recognition for most plans. Companies that elect to remain with the existing
accounting are required to disclose in a footnote to the financial statements
pro forma net earnings and, if presented, earnings per share, as if SFAS No. 123
had been adopted. The accounting requirements of SFAS No. 123 are effective for
transactions entered into during fiscal years that begin after December 15,
1995; however, companies are required to disclose information for awards granted
in their first fiscal year beginning after December 15, 1994. Management has
determined that LFC will continue to account for stock-based compensation
pursuant to Accounting Principles Board Opinion No. 25 and, therefore, the
provisions of SFAS No. 123 will have no effect on its consolidated financial
condition or results of operations.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers of
Financial Assets, Servicing Rights, and Extinguishment of Liabilities," that
provides accounting guidance on transfers of financial assets, servicing of
financial assets, and extinguishment of liabilities. SFAS No. 125 introduces an
approach to accounting for transfers of financial assets that provides a means
of dealing with more complex transactions in which the seller disposes of only a
partial interest in the assets, retains rights or obligations, makes use of
special purpose entities in the transaction, or otherwise has continuing
involvement with the transferred assets. The new accounting method, the
financial components approach, provides that the carrying amount of the
financial assets transferred be allocated to components of the transaction based
on their relative fair values. SFAS No. 125 provides criteria for determining
whether control of assets has been relinquished and whether a sale has occurred.
If the transfer does not qualify as a sale, it is accounted for as a secured
borrowing. Transactions subject to the provisions of SFAS No. 125 include, among
others, transfers involving repurchase agreements, securitizations of financial
assets, loan participations, factoring arrangements, and transfers of
receivables with recourse.
An entity that undertakes an obligation to service financial assets recognizes
either a servicing asset or liability for the servicing contract (unless related
to a securitization of assets, and all the securitized assets are retained and
classified as held-to-maturity). A servicing asset or liability that is
purchased or assumed is initially recognized at its fair value. Servicing assets
and liabilities are amortized in proportion to and over the period of estimated
net servicing income or net servicing loss and are subject to subsequent
assessments for impairment based on fair value.
7
<PAGE>
London Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and nine month periods ended June 30, 1997 and 1996
4. Effects of Recent Accounting Pronouncements
SFAS No. 125 provides that a liability is removed from the balance sheet only if
the debtor either pays the creditor and is relieved of its obligation for the
liability or is legally released from being the primary obligor.
SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1997, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Management does not believe that adoption of SFAS No. 125 will have a material
adverse effect on LFC's consolidated financial position or results of
operations.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
requires companies to present basic earnings per share and, if applicable,
diluted earnings per share, instead of primary and fully diluted earnings per
share, respectively. Basic earnings per share is computed without including
potential common shares, i.e., no dilutive effect. Diluted earnings per share is
computed taking into consideration common shares outstanding and dilutive
potential common shares, including options, warrants, convertible securities and
contingent stock agreements. SFAS No. 128 is effective for periods ending after
December 15, 1997. Early application is not permitted. Based upon the provisions
of SFAS No. 128, LFC's basic and diluted earnings per share for the nine months
ended June 30, 1997, would have each been $.54. Basic and diluted earnings per
share for the three months ended June 30, 1997, would have each been $.17.
5. Reclassifications
Certain prior year amounts have been reclassified to conform to the 1997
consolidated financial statement presentation.
8
<PAGE>
London Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
In addition to historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, LFC's operations and LFC's actual results could differ
significantly from those discussed in the forward-looking statements. Some of
the factors that could cause or contribute to such differences are discussed
herein but also include changes in the economy and interest rates in the nation
and LFC's market area generally.
Some of the forward-looking statements included herein are the statements
regarding management's determination of the amount of allowance for losses on
loans and the effect of certain accounting pronouncements.
Discussion of Financial Condition Changes from September 30, 1996 to June 30,
1997
At June 30, 1997, LFC had total assets of $38.2 million, an increase of $1.4
million, or 3.9%, over the September 30, 1996 total. The increase in assets was
funded primarily from an increase in deposits of approximately $1.4 million and
a $500,000 increase in Federal Home Loan Bank advances, which were partially
offset by a $388,000 decrease in shareholders' equity.
Investment securities and mortgage-backed securities decreased by $1.8 million,
to a total of $4.5 million at June 30, 1997, reflecting the maturity of
investment securities totaling approximately $1.5 million and principal
repayments on mortgage-backed securities of $347,000.
Loans receivable increased $2.4 million, or 9.0%, as loan disbursements of $6.5
million exceeded principal repayments of $4.1 million. Loans disbursed during
the 1997 period exceeded those of the comparable 1996 period by $1.8 million, or
38.4%.
At June 30, 1997, Citizens' allowance for losses on loans totaled $187,000,
which equaled the level maintained at September 30, 1996. Nonperforming loans
totaled $306,000, or 1.0% of the total loan portfolio at June 30, 1997, as
compared to nonperforming loans of $261,000, or .9% of the total loan portfolio
at September 30, 1996. At June 30, 1997, Citizens' allowance for loan losses was
solely general in nature which is includible as a component of regulatory
risk-based capital. Although management of LFC believes that its allowance for
losses on loans was adequate at June 30, 1997, based on the available facts and
circumstances, there can be no assurances that the allowance will be adequate to
absorb actual loan losses during the current period or that additions to such
allowance will not be necessary in future periods, which could negatively affect
LFC's results of operations.
Deposits totaled $29.6 million at June 30, 1997, an increase of $1.4 million, or
4.9%, over the $28.2 million of deposits outstanding at September 30, 1996. Such
increase resulted primarily from management's efforts to increase deposits
through marketing strategies.
9
<PAGE>
London Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from September 30, 1996 to June 30,
1997 (continued)
Citizens is required to maintain minimum levels of regulatory capital under
three separate standards promulgated by the Office of Thrift Supervision.
Citizens is required to maintain regulatory capital sufficient to meet tangible,
core and risk-based capital ratios of 1.50% and 3.00% of adjusted total assets,
and 8.00% of risk-weighted assets, respectively.
As of June 30, 1997, Citizens' regulatory capital exceeded all minimum capital
requirements as shown in the following table:
<TABLE>
<CAPTION>
Tangible Core Risk-based
capital Percent capital Percent capital Percent
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Capital under generally accepted
accounting principles ............. $5,721 $5,721 $5,721
General valuation allowances ........ - - 187
----- ----- ------
Regulatory capital computed ......... 5,721 15.6 5,721 15.6 5,908 30.1
Capital requirement ................. 552 1.5 1,103 3.0 1,571 8.0
------ ----- ----- ----- ----- -----
Regulatory capital - excess ......... $5,169 14.1 $4,618 12.6 $4,337 22.1
===== ==== ===== ==== ===== ====
</TABLE>
Comparison of Operating Results For the Nine Month Periods Ended June 30, 1997
and 1996
General
Net earnings for the nine month period ended June 30, 1997, totaled $257,000, an
increase of $23,000, or 9.8%, over the comparable 1996 period. The increase in
earnings resulted primarily from a $116,000 increase in net interest income,
which was partially offset by a $75,000 increase in general, administrative and
other expense and an $18,000 increase in the federal income tax provision.
Net Interest Income
Interest income on loans for the nine months ended June 30, 1997, decreased by
$10,000, or .6%, as compared to the nine months ended June 30, 1996. The
decrease was primarily due to a decline in yield, which was partially offset by
an increase of approximately $1.0 million in the weighted average portfolio
balance outstanding year to year. Interest income on mortgage-backed securities
increased by $90,000, or 105.9%, due primarily to a $1.2 million increase in the
weighted average portfolio balance outstanding year to year. Interest income on
investment securities and other interest-earning assets decreased by $30,000, or
15.4%, due primarily to a decline in the average balance, as these assets were
redeployed to fund growth in the loan portfolio.
10
<PAGE>
London Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net Interest Income (continued)
Interest expense on deposits decreased by $76,000, or 6.8%, during the nine
months ended June 30, 1997. This decrease was the result of a decline in the
cost of deposits, coupled with a decrease in the weighted average balance of
deposits outstanding.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $116,000, or 12.6%, during the nine months
ended June 30, 1997, as compared to the nine months ended June 30, 1996.
Provision for Losses on Loans
A provision for losses on loans is charged to earnings to bring the total
allowance for losses on loans to a level considered appropriate by management
based on historical experience, the volume and type of lending conducted by
Citizens, the status of past due principal and interest payments, general
economic conditions, particularly as such conditions relate to Citizens' market
area, and other factors related to the collectibility of Citizen's loan
portfolio. As a result of such analysis, management concluded that the allowance
for losses on loans was adequate and, as a result, a provision for losses on
loans was not necessary during the nine month periods ended June 30, 1997 and
1996. There can be no assurance that Citizens' allowance for losses on loans
will be adequate to cover losses on nonperforming assets in the future.
Other Income
Other income totaled $45,000 during each of the nine month periods ended June
30, 1997 and 1996. Other income is comprised primarily of service charges and
other fees on loans and deposit accounts.
General, Administrative and Other Expense
General, administrative and other expense increased approximately $75,000, or
12.1%, during the nine months ended June 30, 1997, as compared to the same
period in 1996. This increase was primarily the result of a $23,000, or 7.4%,
increase in employee compensation and benefits, a $26,000, or 76.5%, increase in
franchise taxes and a $66,000, or 56.4%, increase in other operating expense,
which were partially offset by a $35,000, or 55.6%, decline in federal deposit
insurance premiums. The increase in compensation expense resulted primarily from
increased costs of employee stock benefit plans and normal merit salary
increases. The increase in franchise taxes resulted primarily from the increased
shareholders' equity following the Conversion. The increase in other operating
expense was due primarily to increased professional fees and other costs
relating to reporting requirements of public stock companies. The decline in
federal deposit insurance premiums resulted from a decline in premium rates
following the special Savings Association Insurance Fund recapitalization
assessment levied in September 1996.
Federal Income Taxes
The provision for federal income taxes increased $18,000, or 16.4%, during the
nine months ended June 30, 1997, due primarily to an increase in earnings before
income taxes of $41,000 , or 11.9%. LFC's effective tax rates amounted to 33.2%
and 32.0% during the nine months ended June 30, 1997 and 1996, respectively.
11
<PAGE>
London Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods Ended June 30, 1997
and 1996
General
Net earnings for the three month period ended June 30, 1997, totaled $81,000, a
decrease of $30,000, or 27.0%, from the comparable 1996 quarter. The decrease in
net earnings resulted primarily from a $10,000 decrease in net interest income
and a $32,000 increase in general, administrative and other expense which were
partially offset by a $7,000 increase in other income and a $5,000 decrease in
the federal income tax provision.
Net Interest Income
Interest income on loans for the three months ended June 30, 1997, increased by
$20,000, or 3.4%. Interest income on mortgage-backed securities increased by
$28,000, or 90.3%, due to an increase in yield, coupled with an increase in the
weighted average portfolio balance outstanding year to year. Interest income on
investment securities and other interest-earning assets decreased by $46,000, or
46.5%. This decrease was primarily the result of a decrease in the weighted
average portfolio balance outstanding year to year.
Interest expense on deposits increased by $5,000, or 14.2%, for the three months
ended June 30, 1997, compared to the 1996 period. This increase was the result
of an increase in the average balance outstanding year to year.
As a result of the foregoing changes in interest income and interest expense,
net interest income decreased by $10,000, or 2.8%, for the three months ended
June 30, 1997, as compared to the three months ended June 30, 1996.
General, Administrative and Other Expense
General, administrative and other expense increased approximately $32,000, or
14.9%, for the three months ended June 30, 1997, compared to the same period in
1996. This increase was primarily the result of a $26,000, or 25.7%, increase in
employee compensation and benefits and a $17,000, or 154.5%, increase in
franchise taxes, which were partially offset by a $15,000, or 75.0%, decrease in
federal deposit insurance premiums. The increase in compensation expense
resulted primarily from increased costs related to employee stock benefit plans.
The increase in franchise taxes reflects the increase in shareholders' equity
year to year, while the decline in federal deposit insurance premiums resulted
primarily from the decline in premium rates year to year.
Federal Income Taxes
The provision for federal income taxes decreased by $5,000, or 12.2%, for the
three months ended June 30, 1997, due primarily to a decrease in earnings before
income taxes of $35,000, or 23.0%. LFC's effective tax rates amounted to 30.8%
and 27.0% for the three months ended June 30, 1997 and 1996, respectively.
12
<PAGE>
London Financial Corporation
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: None.
Exhibits: Financial Data Schedule.
13
<PAGE>
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.
Date: August 12, 1997 By: /s/John J. Bodle
John J. Bodle
President
Date: August 12, 1997 By: /s/Joyce E. Bauerle
Joyce E. Bauerle
Treasurer
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 982
<INT-BEARING-DEPOSITS> 2,446
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 281
<INVESTMENTS-CARRYING> 4,180
<INVESTMENTS-MARKET> 4,187
<LOANS> 29,470
<ALLOWANCE> 187
<TOTAL-ASSETS> 38,240
<DEPOSITS> 29,587
<SHORT-TERM> 0
<LIABILITIES-OTHER> 334
<LONG-TERM> 800
0
0
<COMMON> 0
<OTHER-SE> 7,519
<TOTAL-LIABILITIES-AND-EQUITY> 38,240
<INTEREST-LOAN> 1,773
<INTEREST-INVEST> 225
<INTEREST-OTHER> 115
<INTEREST-TOTAL> 2,113
<INTEREST-DEPOSIT> 1,047
<INTEREST-EXPENSE> 1,078
<INTEREST-INCOME-NET> 1,035
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 695
<INCOME-PRETAX> 385
<INCOME-PRE-EXTRAORDINARY> 257
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 257
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
<YIELD-ACTUAL> 3.83
<LOANS-NON> 299
<LOANS-PAST> 7
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 187
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 187
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 187
</TABLE>
