<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1996
-----------------
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 Number 0-20907
KENWOOD BANCORP, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1457996
- ---------------------- --------------
(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification Number)
7711 Montgomery Road
Cincinnati, Ohio 45236
- ---------------------------- ----------
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (513) 791-2834
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 past 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 7, 1996, the latest practicable date, 295,170 shares of the
registrant's common stock, $.01 par value, were issued and outstanding.
<PAGE> 2
KENWOOD BANCORP, INC.
Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
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 12
SIGNATURES 13
</TABLE>
<PAGE> 3
KENWOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
Assets (Unaudited) ----
------ ---------
<S> <C> <C>
Cash and due from banks $ 566 689
Interest-bearing deposits in other financial institutions 989 2,119
------- -------
Cash and cash equivalents 1,555 2,808
Certificates of deposit in other financial institutions 380 1,330
Investment securities - at amortized cost, approximate
market value of $1,953 and $1,971 as of June 30, 1996
(unaudited) and September 30, 1995 1,993 1,991
Investment securities - available for sale (amortized
cost of $500 and $999 at June 30, 1996 (unaudited) and
September 30, 1995) 485 1,006
Mortgage-backed securities at cost, approximate market
value of $277 and $7,364 at June 30, 1996 (unaudited)
and September 30, 1995 271 7,311
Mortgage-backed securities - available for sale (amortized
cost of $6,522 at June 30, 1996, (unaudited) 6,546 -
Loans receivable - net 36,221 32,559
Loans held for sale - at lower of cost or market 798 213
Property and equipment, net 364 380
Federal Home Loan Bank stock - at cost 422 401
Accrued interest receivable on loans 184 144
Accrued interest receivable on mortgage-backed securities 38 38
Accrued interest receivable on investments and interest-
bearing deposits 57 29
Prepaid expenses and other assets 85 70
Prepaid Federal income taxes - 29
------- -------
Total assets $ 49,399 48,309
======= =======
Liabilities and Stockholders Equity
-----------------------------------
Deposits $ 42,355 44,428
Advances from Federal Home Loan Bank 2,167 194
Accounts payable on mortgage loans serviced for others 22 107
Advances by borrowers for taxes and insurance 133 181
Other liabilities 125 85
Accrued federal income taxes 10 -
Deferred Federal income taxes 99 98
------- -------
Total liabilities 44,911 45,093
------- -------
Commitments - -
------- -------
Preferred stock - authorized 1,000,000 shares of
$.01 par value, none issued - -
Common stock - authorized 4,000,000 shares of .01
par value at June 30, 1996 and $.10 par value at
September 30, 1995, 295,170 and 151,656 shares
issued and outstanding at June 30, 1996 (unaudited)
and September 30, 1995 3 15
Additional paid-in capital 1,742 452
Retained earnings - substantially restricted 2,881 2,763
Shares acquired by Management Recognition Plan (19) (19)
Shares acquired by Employee Stock Ownership Plan (126) -
Unrealized gain on available for sale securities,
net of income taxes 7 5
------- -------
Total stockholders' equity 4,488 3,216
------- -------
Total liabilities and stockholders' equity $ 49,399 48,309
======= =======
</TABLE>
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<PAGE> 4
KENWOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Three months
ended ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income
Loans $ 1,959 1,782 679 614
Mortgage-backed securities 349 337 116 115
Investment securities 144 96 45 44
Interest-bearing deposits and other 90 143 20 58
----- ----- ----- -----
Total interest income 2,542 2,358 860 831
----- ----- ----- -----
Interest expense
Deposits 1,865 1,626 608 626
Borrowings 31 40 21 3
----- ----- ----- -----
Total interest expense 1,896 1,666 629 629
----- ----- ----- -----
Net interest income 646 692 231 202
Provision (credit) for losses on loans 10 11 4 (1)
----- ----- ----- -----
Net interest income after provision
(credit) for losses on loans 636 681 227 203
----- ----- ----- -----
Other income
Gain on sale of mortgage loans 159 19 52 16
Gain on sale of investments 13 - - -
Other operating 12 11 4 3
----- ----- ----- -----
Total other income 184 30 56 19
----- ----- ----- -----
General, administrative and other expense
Employee compensation and benefits 313 273 97 92
Occupancy and equipment 91 77 32 23
Federal deposit insurance premiums 75 65 25 23
Franchise taxes 31 31 10 10
Other 185 139 66 53
----- ----- ----- -----
Total general, administrative and
other expense 695 585 230 201
----- ----- ----- -----
Earnings before income taxes 125 126 53 21
Federal income taxes
Current 31 37 13 5
Deferred - - - -
----- ----- ----- -----
Total Federal income taxes 31 37 13 5
----- ----- ----- -----
NET EARNINGS $ 94 89 40 16
===== ===== ===== =====
Earnings per share $ .61 .59 .26 .11
===== ===== ===== =====
</TABLE>
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<PAGE> 5
KENWOOD BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
For the Nine Months Ended June 30
(In thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 94 89
Adjustments to reconcile net earnings to net cash
used by operating activities:
Depreciation and amortization 25 19
Loans disbursed for sale in the secondary market (10,177) (1,345)
Proceeds from sale of loans in the secondary market 9,751 1,064
Gain on sale of mortgage loans (159) (19)
Gain on sale of investment securities (13) -
Federal Home Loan Bank stock dividends (21) (16)
Amortization of deferred loan origination (fees) cost (7) (2)
Provision for losses on loans 10 11
Increase (decrease) in cash due to changes in:
Accrued interest receivable (68) (54)
Prepaid expenses and other assets (4) (2)
Accounts payable on mortgage loans serviced for others (85) 1
Other liabilities 40 (6)
Federal income taxes:
Current 28 25
Deferred - -
----- -----
Net cash used by operating activities (586) (235)
----- -----
Cash flows from investing activities:
Principal repayments on loans and mortgage-backed securities 7,370 3,919
Loan disbursements (10,055) (7,877)
Purchase of mortgage-backed securities (513) -
Proceeds from sale of investment securities 513 -
Purchase of investment securities (500) -
Purchase of Federal Home Loan Bank stock - (51)
Maturity of investment securities 500 -
Purchase of office premises and equipment (7) (7)
Decrease (increase) in certificates of deposit in other
financial institutions 950 (275)
------ -----
Net cash used in investing activities (1,742) (4,291)
------ -----
Cash flows from financing activities:
Net increase (decrease) in deposit accounts (2,073) 4,498
Proceeds from Federal Home Loan Bank advances 3,000 -
Repayments of Federal Home Loan Bank advances (1,027) (13)
Advances by borrowers for taxes and insurance (48) (23)
Net proceeds from the issuance of common stock 1,264 -
Funding of Management Recognition Plan - 1
Dividends paid on common stock (41) (53)
------ -----
Net cash provided by financing activities 1,075 4,410
------ -----
Net decrease in cash and cash equivalents (1,253) (116)
Cash and cash equivalents at beginning of period 2,808 1,778
------ -----
Cash and cash equivalents at end of period $ 1,555 1,662
===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes (refunds) $ (8) (7)
===== ======
Interest on deposits and borrowings $ 1,895 1,661
===== ======
Transfer of investment securities to
available for sale classification $ 7,253 -
===== ======
</TABLE>
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<PAGE> 6
KENWOOD BANCORP, INC.
Notes to Financial Statements
1. Organizational Summary:
Kenwood Bancorp, Inc. (the "Company" or "Bancorp") is a holding company
formed in March 1996 in conjunction with the second step conversion of
Kenwood Savings and Loan Association from a mutual holding company format
to a stock holding company format. The second step conversion was
completed on June 28, 1996 with all the stock of the Association
cancelled and converted into stock of the Bancorp. The Bancorp's
financial statements include the accounts of it's wholly owned subsidiary
Kenwood Savings Bank (formerly Kenwood Savings and Loan Association).
2. Basis of Presentation:
The accompanying unaudited 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
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. However, all adjustments
(consisting only of normal recurring accruals) which, in the opinion of
management, are necessary for a fair presentation of the financial
statements have been included. The results of operations for the three
and nine month periods ended June 30, 1996 are not necessarily indicative
of the results which may be expected for the entire fiscal year.
3. Earnings Per Share:
Earings per share for the three and nine month periods ended June 30,
1996 is computed based on 156,019 and 153,110 weighted average shares
outstanding, respectively. Earnings per share for the three and nine
month periods ended June 30, 1995 is computed based on 151,656 weighted
average shares outstanding for Kenwood Savings and Loan Association.
Weighted average shares for the three months and nine months ended June
30, 1996 include the effect of the completion of the offering of 295,170
shares on June 30, 1996 of Kenwood Bancorp, Inc. These shares were sold
or converted pursuant to a plan of conversion and agreement and plan of
reorganization whereby, in addition to newly issued shares, each share of
common stock of Kenwood Savings and Loan Association held by Kenwood
Federal Mutual Holding Company were cancelled and each share of the
Association common stock held by the Association's public stockholders
were converted into shares of Kenwood Bancorp, Inc.
4. Effects of Recent Accounting Pronouncements:
In June 1993, the Financial Accounting Standards Board (FASB) issued SFAS
No. 114, "Accounting for Creditors for Impairment of a Loan" which amends
SFAS No. 5 and SFAS No. 15. SFAS No. 114 requires the measurement of
potential losses on impaired loans. SFAS No. 114 provides guidance on
methods of calculating losses associated with impaired loans. SFAS No.
114 is effective for fiscal years beginning after December 15, 1994.
Initial application shall be as of the beginning of fiscal 1996 for the
Savings Bank. As the Savings Bank, historically, has not had significant
amounts of impaired loans, management does not believe SFAS No. 114 will
have a significant effect at this time.
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights". This statement requires that a mortgage banking
enterprise recognize as separate assets rights to service mortgage loans
for others, however those servicing rights are acquired. A mortgage
banking enterprise that acquires mortgage servicing rights through either
the purchase or origination of mortgage loans and sells or securitizes
those loans with servicing rights retained would allocate the total cost
of the mortgage loans to the mortgage servicing rights and the loans
based on their relative fair value. Statement No. 122 is effective for
fiscal years beginning after December 15, 1995. Management has not
evaluated the effect of this pronouncement on its financial position and
results of operations.
- 6 -
<PAGE> 7
In October 1995, the FASB issued 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
of 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 income 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. Companies are required, however, to disclose
information for awards granted in their first fiscal year ending after
December 15, 1994. Management has not completed an analysis of the
potential effects of SFAS No. 123 on its financial condition or results
of operations.
In June 1996 the FASB issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Entinguishments of Liabilities" which
established accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. The
standards are based on a consistent application of a financial components
approach that focuses on control. Under that approach, after a transfer
of financial seets, 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. SFAS No. 125 provides consistent
standards for distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings. SFAS No. 125 supersedes SFAS
No. 122. SFAS No. 125 is effective for transactions occurring after
December 31, 1996. Management does not expect an impact from adoption of
SFAS No. 125.
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<PAGE> 8
KENWOOD BANCORP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from September 30, 1995 to June 30,
1996
At June 30, 1996, the Company had total assets of $49.4 million, an increase of
approximately $1.1 million or 2.3%, from September 30, 1995. The growth in
assets was primarily funded by the stock conversion proceeds of $1.1 million
and an increase in Federal Home Loan Bank advances of $2.0 million offset by a
reduction in deposits of approximately $2.1 million.
Liquid assets (i.e. cash and interest bearing deposits) decreased by $1.3
million or 44.6% during the nine months ended June 30, 1996, reflecting the use
of the liquid assets to fund current loan demand.
Loans receivable (including loans held for sale) increased by $4.2 million or
13.0% to a total of $37.0 million at June 30, 1996 as compared to $32.8 million
at September 30, 1995. The Savings Bank had total loan originations for resale
and for portfolio of $20.2 million for the nine months ended June 30, 1996,
offset by loans sold and principal repayments on loans of $15.9 million. The
Savings Bank sold in the secondary market loans totalling $9.6 million for the
nine months ended June 30, 1996 as the consumer demand for fixed-rate lending
has increased over the prior nine months ended June 30, 1995. The Savings Bank
sells the majority of fixed-rate loan originations and all FHA/VA loan
originations.
At June 30, 1996 the Company's allowance for loan losses totalled $91,000,
which represented a $10,000 increase over the level maintained at September 30,
1995. The provision for loan losses in the 1996 period was solely attributable
to the aforementioned growth in the loan portfolio and the inherent risk
associated with mortgage lending. At June 30, 1996 the Company's allowance for
loan losses consisted solely of a general loan loss allowance (which is
included as a component of regulatory risk-based capital). As of such date,
the Company's allowance for loan losses amounted to .25% of total loans. The
Company had no non-performing loans at June 30, 1996.
The Company's investment portfolio which consist of certificates of deposits,
investment securities (both held to maturity and available for sale), and
mortgage-backed securities (both held to maturity and available for sale)
decreased by $2.0 million over the level maintained at September 30, 1995. The
reduction in investments was used to fund the growth in the loan portfolio.
Gain on sale of investments totalling $13,000 was recognized during the period.
Also, the Company has seen a reduction in its mortgage-backed securities due to
repayments of the underlying mortgages. Certificates of deposit have decreased
by $950,000 as the Savings Bank has allowed deposits to mature without renewal.
Deposits totalled $42.4 million at June 30, 1996, a decrease of $2.1 million or
4.7% from the $44.4 million of deposits at September 30, 1995. The decrease in
deposits is due to the reduction in certificates of deposit as consumers
continued to look for other types of savings vehicles. The Savings Bank
normally does not offer special rates or terms to attract deposits unless the
terms and rates are favorable for the long-term. Demand deposit accounts
increased by $765,000 as the Savings Bank has competitively priced its demand
deposit accounts along with the addition of new products including ATM access
and "debit" cards.
During the 1996 period the Savings Bank borrowed a net $2 million in cash
management FHLB advances to fund current year loan originations.
Bancorp completed its second step conversion during June 1996 and additional
capital was raised totalling $1.1 million after conversion costs of
approximately $300,000.
The Savings Bank is required to meet each of three minimum capital standards
promulgated by the Office of Thrift Supervision. The capital standards
generally require the maintenance of regulatory capital sufficient to meet a
tangible capital requirement, core capital requirement, and a risk-based
capital requirement. At June 30, 1996, the Savings Bank's tangible and core
capital totalled $4.2 million or 8.5% of adjusted total assets, which exceeded
the respective minimum requirements at that date of 1.5% or $744,000 and 3.0%
or $1.5 million by $3.5 million and $2.7 million respectively. The Savings
Bank's risk-based capital totalled $4.3 million at June 30, 1996 or 20.7% of
risk weighted assets, which exceeded the 8% requirement by $2.6 million.
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<PAGE> 9
KENWOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Nine Month Periods Ended June 30, 1996
and 1995
General
Net earnings for the nine months ended June 30, 1996 totaled $94,000, an
increase of $5,000 or 5.6%, from the $89,000 in net earnings recorded for the
nine months ended June 30, 1995. The increase in earnings resulted primarily
from a $140,000 increase in gain on sale of mortgage loans, a gain on sale of
investment securities of $13,000, and a $6,000 decrease in the provision for
income taxes, which were partially offset by a $46,000 decrease in net interest
income and an increase of $110,000 in general, administrative and other
expense,
Net Interest Income
Interest income on loans for the nine months ended June 30, 1996, increased by
$177,000, or 9.9%, due to a $4.2 million, increase in the balance of the
outstanding loan portfolio. Interest income on mortgage-backed securities
increased by $12,000, or 3.6%, due primarily to an increase in the average
balance outstanding. Interest income on investment securities and other
interest-earning assets decreased by $5,000 or 2.1%.
Interest expense on deposits increased by $239,000, or 14.7%, during the nine
months ended June 30, 1996. This increase was the result of an increase of
$1.3 million, or 3.0%, in the average balance of deposits outstanding
year-to-year and an increase in the weighted average rate paid thereon from
5.15% to 5.73%. Interest expense on borrowings decreased by $9,000 for the
nine months ended June 30, 1996, as compared to the same period in 1995. This
decrease resulted primarily from the decrease in average balance of advances
outstanding year-to-year.
As a result of the foregoing changes in interest income and interest expense,
net interest income decreased by $46,000, or 6.6%, during the nine months ended
June 30, 1996 as compared to the nine months ended June 30, 1995.
Provision for Losses on Loans
The Association's provision for loan losses totaled approximately $10,000 for
the nine months ended June 30, 1996. The current period provision was the
result of loan portfolio growth in 1996 and the inherent risk in lending.
Other Income
Other income increased by $154,000 during the nine months ended June 30, 1996,
as compared to the same period in 1995. This increase was due primarily to an
increase of $140,000 in gains on sale of mortgage loans. The Savings Bank's
secondary market activities have increased during the current fiscal year,
primarily as a result of the current stable interest rate environment and the
consumer demand for fixed-rate loans.
General, Administrative and Other Expense
General, administrative and other expense increased by $110,000, or 18.8%,
during the nine months ended June 30, 1996, as compared to the nine months
ended June 30, 1995, due primarily to a $40,000, or 14.7% increase in employee
compensation and benefits and a $46,000 increase in other operating expenses.
Such increases resulted from additional costs relating to the Savings Bank's
new mortgage loan origination office.
Federal Income Taxes
The provision for Federal income taxes decreased by $6,000, or 16.2%, during
the nine months ended June 30, 1996 as compared to the same period in 1995.
The Company's effective tax rates amounted to 24.8% and 29.3% during the nine
months ended June 30, 1996 and 1995, respectively.
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<PAGE> 10
KENWOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Month Periods Ended June 30, 1996
and 1995
General
Net earnings for the three months ended June 30, 1996 totaled $40,000, an
increase of $24,000 or 150% from the $16,000 in net earnings recorded for the
three months ended June 30, 1995. The increase in net earnings resulted
primarily from a $29,000 increase in net interest income and a $37,000 increase
in other income which were partially offset by a $29,000 increase in general,
administrative and other expense.
Net Interest Income
Interest income on loans for the three months ended June 30, 1996 increased by
$65,000, or 10.6%, due to an increase in the average balance of the loan
portfolio outstanding. Interest income on mortgage-backed securities increased
$1,000, due primarily to an increase in the weighted average interest rate
earned on such securities. Interest income on investment securities and other
interest-earning assets decreased by $37,000, or 36.3%. This decrease was
primarily the result of management's efforts to redeploy excess liquidity into
higher yielding mortgage loans.
Interest expense on deposits increased by $18,000, or 2.9%, during the three
months ended June 30, 1996. This increase was the result of an increase in the
average balance of deposits outstanding and an increase in the weighted average
rate paid thereon. Interest expense on borrowings increased $18,000 for the
three months ended June 30, 1996, as compared to the 1995 quarter, due
primarily to an increase in such borrowings outstanding which were utilized to
fund loan demand.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $29,000, or 14.4%, during the three months
ended June 30, 1996 as compared to the three months ended June 30, 1995.
Provision for Loan Losses
The Savings Bank's provision for loan losses totaled approximately $4,000 for
the three months ended June 30, 1996. The current period provision was
primarily the result of loan portfolio expansion during the 1996 quarter and
the inherent risk in lending.
Other Income
Other income increased by $37,000 during the three months ended June 30, 1996,
as compared to the same period in 1995. This increase was due to a $36,000
increase in gains on sale of mortgage loans. The Association's secondary
market activities have increased during the current period versus the prior
period, primarily as a result of the current interest rate environment and the
demand for fixed-rate loan products.
General, Administrative and Other Expense
General, administrative and other expense increased by $29,000, or 14.4%,
during the three months June 30, 1996, as compared to the three months ended
June 30, 1995, due primarily to a $13,000 increase in other expenses and a
$9,000 increase in occupancy and equipment expenses. The increase in the
general and administrative expenses relate directly to the increase in the
secondary market activity and expenses related to the Savings Bank's new
mortgage origination office.
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<PAGE> 11
KENWOOD BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Month Periods Ended June 30, 1996
and 1995 (Continued)
Federal Income Taxes
The provision for Federal income taxes increased by $8,000, during the three
months ended June 30, 1996 as compared to the same period in 1995, due
primarily to an increase in earnings before income taxes of $32,000. The
Company's effective tax rates amounted to 26.0% and 23.8% during the three
months ended June 30, 1996 and 1995, respectively.
Recent Developments
The deposits of savings associations such as the Savings Bank are presently
insured by the SAIF, which together with the BIF, are the two insurance funds
administered by the FDIC. On November 14, 1995, the FDIC revised the premium
schedule for BIF-insured banks to provide a range of .00% to .27% (subject to a
$2,000 minimum) of deposits (as compared to the current range of .23% to .31%
of deposits for SAIF-insured institutions) due to the BIF achieving its
statutory reserve ratio. As a result, BIF members generally pay substantially
lower premiums than the SAIF members. It is anticipated that the SAIF will
not be adequately recapitalized until 2002, absent a substantial increase in
premium rates or the imposition of special assessments or other significant
developments, such as a merger of the SAIF and the BIF. As a result of this
disparity, SAIF members could be placed at a significant, competitive
disadvantage to BIF members due to higher costs for deposit insurance. A
recapitalization plan under consideration by the U. S. Congress reportedly
provides for a one-time assessment of .80% to .85% to be imposed on all
deposits assessed at the SAIF rates in order to recapitalize the SAIF and
eliminate the disparity, and an eventual merger of the SAIF and the BIF.
The Savings Bank currently is unable to predict the likelihood of legislation
effecting these changes, although a consensus among regulators, legislators and
bankers appears to be developing in this regard. If such an assessment was
effected based on deposits as of March 31, 1995, as proposed, the Savings
Bank's pro rata share would amount to approximately $247,000 to $262,000 after
taxes, respectively.
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<PAGE> 12
KENWOOD BANCORP, INC.
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
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
- 12 -
<PAGE> 13
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 8, 1996 By /s/ THOMAS W. BURNS
--------------------------- -----------------------------
Thomas W. Burns
Executive Vice President,
Chief Executive Officer and
Chief Financial Officer
- 13 -
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 566
<INT-BEARING-DEPOSITS> 989
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7031
<INVESTMENTS-CARRYING> 3066
<INVESTMENTS-MARKET> 3032
<LOANS> 37019
<ALLOWANCE> 91
<TOTAL-ASSETS> 49399
<DEPOSITS> 42355
<SHORT-TERM> 2167
<LIABILITIES-OTHER> 389
<LONG-TERM> 0
0
0
<COMMON> 3
<OTHER-SE> 4485
<TOTAL-LIABILITIES-AND-EQUITY> 49399
<INTEREST-LOAN> 1959
<INTEREST-INVEST> 234
<INTEREST-OTHER> 349
<INTEREST-TOTAL> 2542
<INTEREST-DEPOSIT> 1865
<INTEREST-EXPENSE> 1896
<INTEREST-INCOME-NET> 646
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</TABLE>
