<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2000
--------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
----------- ------------
Commission file number: 0-21297
-----------------------------
Foundation Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Ohio 31-1465239
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
25 Garfield Place, Cincinnati, Ohio 45202
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(513) 721-0120
- --------------------------------------------------------------------------------
(Issuer's telephone number)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common shares, no par value, outstanding at March 31, 2000: 462,785
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
<PAGE> 2
FOUNDATION BANCORP, INC.
FORM 1O-QSB
QUARTER ENDED MARCH 31, 2000
Part l - Financial Information
Item 1 - Financial Statements
Interim financial information required by Regulation 210.10 - 01 of Regulation S
- - X is included in this Form 10-QSB as referenced below:
Consolidated Statements of Financial Condition..............3
Consolidated Statements of Earnings.........................4
Consolidated Statements of Cash Flows.......................5
Notes to Consolidated Financial Statements..................6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations......................7
<PAGE> 3
FOUNDATION BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ -----------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks $ 203,852 $ 79,041
Interest-bearing deposits in other financial institutions 839,561 2,335,212
------------ ------------
Cash and cash equivalents 1,043,413 2,414,253
Certificates of deposit 398,000 1,206,398
Investment securities-at amortized cost (approximate market value of $5,123,559
and $3,701,563 at March 31, 2000 and June 30, 1999, respectively) 5,250,392 3,753,920
Mortgage-backed securities-at cost (approximate market value of $4,247,328
and $4,920,386 at March 31, 2000 and June 30, 1999, respectively) 4,461,480 5,017,882
Loans receivable-net 21,055,062 20,468,039
Office premises and equipment-at depreciated cost 285,124 299,787
Real estate acquired through foreclosure-net - -
Federal Home Loan Bank stock-at cost 362,200 343,800
Accrued interest receivable on loans 99,680 96,078
Accrued interest receivable on mortgage-backed securities 29,637 33,591
Accrued interest receivable on investments and interest-bearing deposits 94,715 21,866
Prepaid expenses and other assets 50,405 105,966
------------ ------------
TOTAL ASSETS $ 33,130,108 $ 33,761,580
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 25,268,062 $ 25,754,436
Advances from the Federal Home Loan Bank 539,795 601,530
Advances by borrowers for taxes, insurance and other 144,515 59,551
Other liabilities 68,765 199,619
Deferred federal income taxes 74,300 74,300
------------ ------------
TOTAL LIABILITIES 26,095,437 26,689,436
Shareholders' equity
Common shares-2,000,000 shares, no par value, authorized; 462,875 shares
issued and outstanding - -
Additional paid-in capital 4,412,429 4,394,429
Unallocated shares held by Employee Stock Ownership Plan (150,873) (203,773)
Retained earnings-substantially restricted 2,873,762 3,004,988
Shares acquired for restricted stock plan (100,647) (123,500)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 7,034,671 7,072,144
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 33,130,108 $ 33,761,580
============ ============
</TABLE>
<PAGE> 4
FOUNDATION BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
----------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest Income
Loans $ 407,810 $ 392,450 $ 1,222,301 $ 1,253,676
Mortgage-backed securities 69,586 78,221 208,807 224,076
Investment securities 96,900 14,482 289,722 104,996
Interest bearing deposits and other 22,749 92,992 62,325 243,560
----------- ----------- ----------- -----------
Total interest income 597,045 578,145 1,783,155 1,826,308
Interest expense
Deposits 328,497 330,523 975,837 $ 1,085,386
Borrowings 7,691 8,792 26,601 27,170
----------- ----------- ----------- -----------
Net interest expense 336,188 339,315 1,002,438 1,112,556
Net interest income before provision for losses on loans 260,857 238,830 780,717 713,752
Provision for losses on loans - (3,000) - (9,000)
----------- ----------- ----------- -----------
Net interest income after provision for losses 260,857 235,830 780,717 704,752
Other operating income 12,058 27,389 41,718 111,972
General, administrative and other expense
Employee compensation and benefits 117,501 113,353 355,268 338,371
Occupancy and equipment 21,211 21,004 62,912 59,612
Federal deposit insurance premiums 1,335 4,109 8,933 12,576
Franchise taxes 18,847 18,015 58,840 58,291
Data processing 8,473 8,345 26,248 26,689
Other 81,185 33,813 147,721 101,347
----------- ----------- ----------- -----------
Total general, administrative and other expenses 248,552 198,639 659,922 596,886
----------- ----------- ----------- -----------
Income before income taxes 24,363 64,580 162,513 219,838
Provision for federal income taxes (10,323) (23,397) (61,373) (78,600)
----------- ----------- ----------- -----------
Net earnings $ 14,040 $ 41,183 $ 101,140 $ 141,238
=========== =========== =========== ===========
Primary and diluted earnings per share $ 0.03 $ 0.09 $ 0.23 $ 0.32
=========== =========== =========== ===========
</TABLE>
<PAGE> 5
FOUNDATION BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
March 31
------------------------------
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 101,140 $ 141,238
Adjustments to reconcile net income to net cash provided by operating
activities
Gain on sale of loans (2,578) (62,284)
Loss(Gain)on sale of REO acquired in foreclosure 3,954 (7,476)
Depreciation and amortization 14,663 11,397
Amortization of premiums and discounts on investments and
mortgage-backed securities 12,442 12,141
FHLB stock dividends (18,400) (17,200)
Provision for loan losses - 9,000
Amortization of deferred loan fees 55 (4,117)
Recognition and Retention Plan(RRP) allocation 23,200 -
ESOP expense 70,900 70,900
Deferred loan origination costs (5,780) (7,122)
Effects of changes in operating assets and liabilities
Accrued interest receivable (72,497) 14,395
Prepaid expenses and other assets 55,561 21,136
Accrued expenses (130,855) (101,205)
----------- -----------
Net cash provided by operating activities 51,805 80,803
----------- -----------
Cash flows from investing activities
Repayments of mortgage-backed securities 547,488 646,741
Purchases of mortgage-backed securities - (1,947,182)
Purchases of investment securities - held to maturity (1,500,000) (2,109,592)
Maturities of investment securities - held to maturity - 3,650,000
Maturity of certificates of deposits 813,144 -
Purchases of certificate of deposits (4,746) (1,102,418)
Loan disbursements (3,784,443) (9,656,505)
Loan principal repayments 2,991,770 6,118,223
Proceeds from sale of loans 213,953 6,121,339
Purchase of REO acquired in foreclosure (50,000) (4,235)
Proceeds from sale of REO acquired in foreclosure 46,046 65,942
Purchases of property and equipment - (28,989)
----------- -----------
Net cash provided by (used in) investing activities (726,788) 1,753,324
----------- -----------
Cash flows from financing activities
Net decrease in deposits (486,374) (1,866,036)
FHLB advances 750,000 -
Repayment of FHLB advances (811,735) (58,479)
Net increase in advances by borrowers for taxes, insurance and other 84,964 74,136
Purchase of shares for restricted stock plan (1,275) (104,000)
Dividends paid (231,437) (185,150)
----------- -----------
Net cash used in financing activities (695,857) (2,139,529)
----------- -----------
Net decrease in cash and cash equivalents (1,370,840) (305,402)
Cash and cash equivalents at beginning of period 2,414,253 6,196,370
----------- -----------
Cash and cash equivalents at end of period $ 1,043,413 $ 5,890,968
=========== ===========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest expense $ 1,002,167 $ 1,114,603
Income taxes 45,442 159,354
</TABLE>
<PAGE> 6
FOUNDATION BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine months ended
March 31, 2000 and 1999
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. However, in the
opinion of management, all adjustments (consisting only of normal recurring
accruals) which are necessary for a fair presentation of the consolidated
financial statements have been included. The results of operations for the nine
months ended March 31, 2000 and 1999, 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 Foundation Bancorp, Inc. (the "Company") and its wholly-owned subsidiary,
Foundation Savings Bank ("Foundation"). All significant intercompany items have
been eliminated.
3. EARNINGS PER SHARE
-------------------
Basic earnings per share for the nine month periods ended March 31,
2000 and 1999, were computed based on weighted average shares outstanding of
440,991 and 436,611, respectively, which gives effect to a reduction for the
14,140 and 19,651 unallocated shares held by the Foundation Bancorp, Inc.
Employee Stock Ownership Plan (the "ESOP") at such dates, respectively, in
accordance with Statement of Position 93-6 ("SOP 93-6") issued by the American
Institute of Certified Public Accountants.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM JUNE 30, 1999 TO MARCH 31, 2000
- ------------------------------------------------------------------------------
At March 31, 2000, the Company's assets totaled $33.1 million, a
decrease of $0.7 million, or 1.9%, from the $33.8 million total at June 30,
1999. Cash and equivalents decreased $1.4 million, or 56.8%, certificates of
deposit decreased $0.8 million, or 67.0%, and mortgage-backed securities
decreased $0.6 million, or 11.1%, from their respective totals at June 30, 1999.
These changes funded a decrease in deposits of $0.5 million, or 1.9%, an
increase in loans receivable of $0.6 million and an increase in investment
securities of $1.5 million as the Company sought higher yields in alternative
investments.
Advances from the Federal Home Loan Bank decreased $61,735, or 10.3%,
from scheduled repayments. Advances from borrowers for taxes, insurance and
other increased $84,964, or 142.7%, resulting from timing differences in the
payment of real estate taxes. Other liabilities decreased $130,854, or 65.6%,
due to timing differences in the payment of accounts payable. Shareholders'
equity decreased $37,473, or 0.5%, the result of the $.50 per share annual
dividend, which totaled $231,438, paid to shareholders in September 1999.
The Office of Thrift Supervision has two minimum regulatory capital
standards for savings associations. At March 31, 2000, Foundation's capital
substantially exceeded each of the requirements. The following is a summary of
Foundation's approximate regulatory capital position, in dollars and as a
percentage of regulatory assets, at March 31, 2000:
<TABLE>
<CAPTION>
ACTUAL REQUIRED EXCESS
------ -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Core capital $5,758 17.4% $1,326 4.0% $4,432 13.4%
Risk-based capital $5,901 40.3% $1,171 8.0% $4,730 32.3%
</TABLE>
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND
- ----------------------------------------------------------------------------
1999
- ----
General
- -------
The Company recorded net earnings of $101,140 for the nine months ended
March 31, 2000, a decrease of $40,098, or 28.4%, from the net earnings of
$141,238 recorded for the nine months ended March 31, 1999. The decrease was the
result of an increase in net interest income after provision for loan losses of
$75,965, or 10.8%, and lower federal income taxes of $17,227, or 21.9%, offset
by an increase in general, administrative and other expense of $63,036, or
10.6%, and a decrease in other income of $70,254, or 62.7%.
Net Interest Income
- -------------------
Net interest income after the provision for losses on loans for the nine
months ended March 31, 2000, increased $75,965, or 10.8%, compared to the same
period of 1999. A decrease in total interest income of $43,153, or 2.4%, was
more than offset by a decrease in total interest expense of
<PAGE> 8
$110,118, or 9.9%. The decrease in total interest income resulted from a
decrease in interest earned on loans of $31,375, or 2.5%, resulting from a lower
yield on the weighted average portfolio. Interest on mortgage-backed securities
decreased $15,269, or 6.8%, resulting from a lower portfolio balance. Interest
on interest-bearing deposits decreased $181,235, or 74.4%, resulting from lower
portfolio balances. These decreases were partially offset by an increase in
interest income on investment securities of $184,726, or 175.9%, resulting from
a larger portfolio balance. The decrease in total interest expense was primarily
attributable to the decrease in interest expense on deposits of $109,549, or
10.1%, due to a smaller portfolio, which more than offset the effect of a higher
weighted average rate.
Other Operating Income
- ----------------------
Other operating income totaled $41,718 for the nine months ended March 31,
2000, a decrease of $70,254, or 62.7%, compared to the same period in 1999, due
to a substantial decrease in gains on sales of loans as lending volume declined
resulting from the reduced refinancing activity as interest rates increased and
higher yielding loans are being kept for the Company's portfolio.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense for the nine months ended March
31, 2000 increased $63,036, or 10.6%, compared to the same period of 1999. This
was primarily due to the increase in other expense of $46,374, or 45.8%, the
result of approximately $55,000 in professional fees incurred in connection with
the evaluation and negotiation of corporate opportunities which the Company
subsequently concluded did not warrant further consideration. Occupancy and
equipment expense increased $3,300, or 5.5%, resulting from increased
depreciation on the new Y2K compliant computer system, and employee compensation
and benefits increased $16,897, or 5.0%, resulting from the amortization of the
Foundation Savings Bank Recognition and Retention Plan and Trust Agreement (the
"RRP") shares and the Financial Accounting Standards Board ("FASB") accrual
based on fewer loan originations. Federal income taxes decreased $17,227, or
21.9%, due to lower net income before taxes.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
- -----------------------------------------------------------------------------
1999
- ----
General
- -------
The Company recorded net earnings of $14,040 for the three months ended
March 31, 2000, a decrease of $27,143, or 65.9%, from the net earnings of
$41,183 recorded for the three months ended March 31, 1999. The decrease was
primarily the result of an increase in net interest income after provision for
loan losses of $25,027, or 10.6%, and lower federal income taxes of $13.074, or
55.9%, which were substantially offset by a decrease in other income of $15,331,
or 56.0%, and an increase in general, administrative and other expense of
$49,913, or 25.1%.
Net Interest Income
- -------------------
Net interest income after provision for losses on loans for the three
months ended March 31, 2000, increased $25,027, or 10.6%, compared to the same
period of 1999. This was the result of an
<PAGE> 9
increase in total interest income of $18,900, or 3.3%, offset by a decrease in
total interest expense of $3,127, or 0.9%. Interest income on loans increased
$15,360, or 3.9%, the result of an increase in the loan portfolio. Interest on
investment securities increased $82,418, or 569.1%, as excess liquidity was
invested in higher yielding federal agency notes. These increases were partially
offset by decreases in interest on mortgage-backed securities of $8,635, or
11.0%, and interest on interest-bearing deposits of $70,243, or 75.5%, both the
result of lower outstanding portfolio balances. Interest expense on deposits
decreased $2,026, or 0.6%, due to a higher weighted average rate on a smaller
portfolio.
Other Operating Income
- ----------------------
Other operating income for the three months ended March 31, 2000 decreased
$15,331, or 56.0%, compared to the same period of 1999, due to a substantial
decrease in gains on sales of loans as lending volume declined resulting from
increased interest rates and the higher yielding loans were kept for the
Company's portfolio.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense for the three months ended March
31, 2000 increased $49,913, or 25.1%, compared to the same period of 1999. This
was primarily the result of an increase in other expense of $47,372, or 140.1%,
the result of approximately $55,000 in professional fees incurred in connection
with the corporate opportunities discussed previously. Employee compensation and
benefits increased $4,148, or 3.7%, the result of the FASB adjustment on lower
loan production and the amortization of the RRP expenses. Federal deposit
insurance premiums decreased $2,774, or 67.5%, as the level of premiums charged
decreased. Federal income taxes decreased $13,074, or 55.9% due to lower net
income before taxes.
<PAGE> 10
FOUNDATION BANCORP, INC.
10-QSB
PART II
-------
OTHER INFORMATION
-----------------
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
--------------------------------
(a) Exhibit 27. Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
quarter ended March 31, 2000.
<PAGE> 11
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.
/s/ Laird L. Lazelle
-----------------------------------
Date: May 5, 2000 Laird L. Lazelle
President
/s/ Dianne K. Rabe
-----------------------------------
Date: May 5, 2000 Dianne K. Rabe
Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 203,852
<INT-BEARING-DEPOSITS> 1,237,561
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 9,711,872
<INVESTMENTS-MARKET> 9,370,887
<LOANS> 21,055,062
<ALLOWANCE> 142,907
<TOTAL-ASSETS> 33,130,108
<DEPOSITS> 25,268,062
<SHORT-TERM> 0
<LIABILITIES-OTHER> 287,580
<LONG-TERM> 539,795
0
0
<COMMON> 4,412,429
<OTHER-SE> 2,622,242
<TOTAL-LIABILITIES-AND-EQUITY> 33,130,108
<INTEREST-LOAN> 407,810
<INTEREST-INVEST> 166,486
<INTEREST-OTHER> 22,749
<INTEREST-TOTAL> 597,045
<INTEREST-DEPOSIT> 328,497
<INTEREST-EXPENSE> 336,188
<INTEREST-INCOME-NET> 260,857
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 248,552
<INCOME-PRETAX> 24,363
<INCOME-PRE-EXTRAORDINARY> 14,040
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,040
<EPS-BASIC> .03
<EPS-DILUTED> .03
<YIELD-ACTUAL> 7.35
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 137,899
<CHARGE-OFFS> 0
<RECOVERIES> 5,008
<ALLOWANCE-CLOSE> 142,907
<ALLOWANCE-DOMESTIC> 142,907
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 142,907
</TABLE>
