EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
For the transition period from to
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Commission File No. 0-28934
Empire Federal Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 81-0512374
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
123 South Main Street, Livingston, Montana 59047
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(Address of principal executive offices)
(406) 222-1981
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act 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
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State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
Class: Common Stock, par value $.01 per share
Outstanding at April 30, 1999: 2,001,270
Transitional Small Business Disclosure Format (check one): YES NO X
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
EMPIRE FEDERAL BANCORP, INC.
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION Page
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Item 1. Condensed Financial Statements
Consolidated Balance Sheets at
March 31, 1999 (unaudited)
and December 31, 1998............................. 1
Consolidated Statements of Income
for the Three Months Ended
March 31, 1999 and 1998(unaudited)................ 2
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1999 and 1998(unaudited).......................... 3
Notes to Unaudited Interim Consolidated
Financial Statements.............................. 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 7
PART II OTHER INFORMATION
-----------------
Item 1. Legal Proceedings.................................... 12
Item 2. Changes in Securities................................ 12
Item 3. Defaults upon Senior Securities...................... 12
Item 4. Submission of Matters to a Vote of
Security Holders..................................... 12
Item 5. Other Information.................................... 12
Item 6. Exhibits and Reports on Form 8-K..................... 12
SIGNATURES.......................................................... 13
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Part I, Item 1 - Financial Statements
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
March 31, December 31,
Assets 1999 1998
------ ------------ ------------
(unaudited)
Cash and due from banks $ 1,194,679 2,092,487
Interest-bearing deposits 1,254,616 3,061,310
------------ ---------
Cash and cash equivalents 2,449,295 5,153,797
Investment and mortgage-backed
securities available-for-sale 39,969,779 39,865,809
Investment and mortgage-backed securities
held-to-maturity (estimated market value of
$8,930,727 at March 31, 1999 and $10,582,975
at December 31, 1998) 8,820,975 10,497,993
Loans receivable, net 50,693,010 49,499,156
Stock in Federal Home Loan Bank
of Seattle, at cost 1,386,600 1,360,600
Accrued interest receivable 375,257 353,145
Premises and equipment, net 2,131,915 2,140,807
Prepaid expenses and other assets 242,030 329,864
------------ -----------
Total assets $106,068,861 109,201,171
============ ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Passbook Accounts $ 14,410,059 13,928,934
NOW Accounts 14,538,438 14,757,910
Certificates of Deposit 37,459,082 37,725,753
------------ -----------
Total Deposits 66,407,579 66,412,597
Advances from Federal Home Loan Bank 4,000,000 4,000,000
Note payable 633,811 647,443
Advances from borrowers for
taxes and insurance 379,920 232,492
Accrued expenses and other liabilities 1,537,691 1,607,515
------------ -----------
Total liabilities 72,959,001 72,900,047
Stockholders' equity:
Preferred stock, par value $.01
per share, 250,000 shares authorized,
none issued and outstanding - -
Common stock, par value $.01 per share,
4,000,000 shares authorized, 2,592,100 issued 25,921 25,921
Additional paid-in capital 25,290,215 25,277,770
Unearned ESOP and MRDP compensation (2,423,402) (2,501,054)
MRDP shares acquired (432,215) (432,215)
Retained earnings, substantially restricted 17,452,093 17,327,635
Accumulated other comprehensive income, net 1,636,710 1,913,886
Treasury shares acquired, at cost (8,439,462) (5,310,819)
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Total stockholders' equity 33,109,860 36,301,124
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Total liabilities and
stockholders' equity $106,068,861 109,201,171
============ ===========
See accompanying notes to unaudited interim consolidated financial statements.
1
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three Months Ended
March 31,
------------------------------
1999 1998
---- ----
Interest income:
Loans receivable $ 994,301 $ 967,067
Mortgage-backed securities 721,943 773,724
Investment securities 37,583 112,726
Other 66,270 82,131
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Total interest income 1,820,097 1,935,648
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Interest expense:
Deposits 682,955 738,166
Note payable and other 65,192 15,665
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Total interest expense 748,147 753,831
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Net interest income 1,071,950 1,181,817
Provision for loan losses - -
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Net interest income after
provision for loan losses 1,071,950 1,181,817
Non-interest income:
Insurance commission income 160,140 162,284
Customer service charges 73,491 46,287
Other 9,059 9,664
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Total non-interest income 242,690 218,235
Non-interest expense:
Compensation and benefits 439,745 427,785
Occupancy and equipment 88,459 73,777
Deposit insurance premiums 25,256 27,804
Other 220,572 205,421
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Total non-interest expense 774,032 734,787
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Income before income taxes 540,608 665,265
Income taxes 213,265 261,960
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Net income $ 327,343 $ 403,305
========== =========
Basic earnings per share $ 0.17 $ 0.17
========== =========
Diluted earnings per share $ 0.17 $ 0.17
========== =========
See accompanying notes to unaudited interim consolidated financial statements.
2
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended March 31, 1999 and 1998
Three Months Ended
March 31,
----------------------
1999 1998
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Cash flows from operating activities:
Net income $ 327,343 403,305
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses - -
Depreciation 51,541 39,857
ESOP shares committed to be released 47,005 59,858
MRDP shares vested 43,092 43,094
Stock Dividends reinvested in Federal
Home Loan Bank (26,000) (24,000)
Decrease (increase) in accrued
interest receivable (22,112) 48,250
Decrease in prepaid expenses and other assets 87,833 71,647
Increase in accrued expenses and other
liabilities 107,286 139,080
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Net cash provided by operating activities 615,988 781,091
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Cash flows from investing activities:
Net change in loans receivable (1,193,854) (722,985)
Proceeds from matured or called
investment securities held-to-maturity - 1,000,200
Principal payments on mortgage-backed
securities held-to maturity 1,251,550 3,133,615
Purchases of investment securities
available-for-sale - (500,000)
Proceeds from called investment securities
available-for-sale - 1,500,000
Principal payments on mortgage-backed
securities available-for-sale 3,351,899 2,546,313
Purchases of mortgage-backed securities
available-for-sale (3,484,686) (7,864,385)
Purchases of premises and equipment (42,649) (10,702)
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Net cash used in investing activities (117,740) (917,944)
Cash flows from financing activities:
Net change in deposits (5,018) 349,019
Repayment of note payable (13,632) (12,335)
Net change in advances from borrowers
for taxes and insurance 147,428 166,985
Dividends paid (202,885) (179,892)
Funding of MRDP trust - (414,750)
Purchase of treasury stock (3,128,643) -
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Net cash used in financing activities (3,202,750) (90,973)
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Net decrease in cash and cash equivalents (2,704,502) (227,826)
Cash and cash equivalents, beginning of period 5,153,797 2,904,031
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Cash and cash equivalents, end of period $ 2,449,295 2,676,205
=========== =========
See accompanying notes to unaudited interim consolidated financial statements.
3
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
Notes to unaudited Interim Consolidated Financial Statements
Note 1 Basis of Presentation
---------------------
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for audited financial statements. They should be read in
conjunction with the audited consolidated financial statements filed as part
of the Annual Report on Form 10-KSB for the year ended December 31, 1998.
The accompanying consolidated financial statements include the
accounts of Empire Federal Bancorp, Inc. (the Holding Company) and its
wholly-owned subsidiary, Empire Federal Savings Bank (Empire) and Dime Service
Corporation (Dime), a wholly-owned subsidiary of Empire. The Holding Company,
Empire and Dime are herein referred to collectively as "the Company." All
significant intercompany balances and transactions have been eliminated in
consolidation.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentations have been
included. The results of operations for the three months ended March 31, 1999,
and 1998 are not necessarily indicative of the results which may be expected
for an entire year or any other period.
Note 2 Comprehensive Income
--------------------
The Company's only component of comprehensive income is the net
unrealized gains or losses on securities available-for-sale. The following
summarizes accumulated other comprehensive income for the periods ended March
31, 1999 and 1998 and for the year ended December 31, 1998:
Accumulated Other
Comprehensive Income, Net
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Three Months Ended Year Ended
Mar. 31, 1999 Mar. 31, 1998 Dec. 31, 1998
------------- ------------- -------------
Beginning of period $1,913,886 $1,286,180 $1,286,180
Increase (decrease) in
unrealized gains on
securities-available-for-
sale, net (277,176) 143,256 627,706
---------- ---------- ----------
Ending balance $1,636,710 $1,429,436 $1,913,886
========== ========== ==========
The increase (decrease) in unrealized gains on securities-
available-for-sale are shown net of tax. Federal and state income taxes
(benefit) related to the unrealized gains are ($177,000) and $92,000 for the
three month periods ended March 31, 1999 and 1998, and $401,000 for the year
ended December 31, 1998.
4
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Note 3 Earnings Per Share
------------------
Basic earnings per share (EPS) excludes dilution and is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. Additionally, ESOP shares
which are unallocated and not yet committed to be released (unallocated) and
unvested MRDP shares issued are excluded from the weighted-average common
shares outstanding calculation. At March 31, 1999, there were 27,650 allocated
shares and 3,456 committed to be released ESOP shares. There were 38,017
vested MRDP shares. The weighted-average common shares outstanding for the
three months ended March 31, 1999, was 1,812,365, which is net of
weighted-average unallocated ESOP and unvested MRDP shares.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or resulted
in the issuance of common stock that would share in the earnings of the
entity. At March 31, 1999, outstanding stock options and unvested MRDP shares
were anti-dilutive to EPS. Dilutive potential common shares are added to the
weighted-average shares used to compute basic EPS. The following information
provides a reconciliation of the numerators and denominators of the basic and
fully diluted EPS computation:
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For the three months ended March 31
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1999 1998
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Net Income Shares Per-Share Net Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- -------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net income available to
common stockholders $327,343 1,878,637 $0.17 $403,305 2,348,207 $0.17
======== ===== ======== =====
Effect of Dilutive
Securities
Stock Options - granted - 8,676
Unvested MRDP shares - 3,328
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DILUTED EPS
Income available to
common stockholders
plus assumed conversion $327,343 1,878,637 $0.17 $403,305 2,360,211 $0.17
======== ========= ===== ======== ========= =====
5
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
Note 4 Cash Dividend Declared
----------------------
On April 30, 1999, the Board of Directors declared a quarterly cash
dividend of $.10 per common share to stockholders of record on May 14, 1999,
payable on May 28, 1999.
Note 5 Capital Compliance
------------------
The following table presents Empire's compliance with its regulatory
capital requirements of March 31, 1999 (dollars in thousands):
Percentage
Amount of Assets
------ ---------
GAAP capital(1) $ 30,024 28.31%
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Tangible capital $ 27,939 27.16%
Tangible capital requirement 1,543 1.50%
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Excess $ 26,396 25.66%
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Core capital $ 27,939 27.16%
Core capital requirement 3,086 3.00%
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Excess $ 24,853 24.16%
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Total risk-based capital(2) $ 29,347 66.23%
Total risk-based capital requirement(2) 3,545 8.00%
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Excess $ 25,802 58.23%
======== =====
(1) Empire's GAAP capital includes unrealized gains on certain
available-for-sale securities of $1,637,000 and $448,000 of
investments in Dime, which are excluded for purposes of
calculating both tangible and core capital
(2) Based on risk-weighted assets of $44,310,000.
Note 6 Subsequent Event
----------------
The Board of Directors, at its regular meeting on April 29, 1999,
awarded 18,144 options to an officer and a director. The Stock Option Plan,
which was approved by shareholders in 1997, requires that awarded options vest
over a five-year period from the date of grant. The exercise price for these
options is $11.69.
In addition, these same two individuals were awarded 7,776 shares
under the Management Recognition and Development Plan (MRDP). The shares will
vest over a five-year period from the date of grant. Compensation expense
related to MRDP award amounts to $91,000and will be amortized over five years.
6
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PART I, ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- -----------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
GENERAL
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company.
OPERATING STRATEGY
The business of the Bank consists principally of attracting deposits from the
general public and using such deposits to originate mortgage loans secured
primarily by one- to four-family residences. The Bank also invests in
interest-bearing deposits, investment grade federal agency securities and
mortgage-backed securities. The Bank plans to continue to fund its assets
primarily with deposits, although FHLB advances have been used as a
supplemental source of funds.
The Bank's profitability depends primarily on its net interest income, which
is the difference between the income it receives on its loan and investment
portfolio and its cost of funds, which consists of interest paid on deposits.
Net interest income is also affected by the relative amounts of interest-
earning assets and interest-bearing liabilities. When interest-earning assets
equal or exceed interest-bearing liabilities, any positive interest rate
spread will generate net interest income. The Bank's profitability is also
affected by the level of other income and expenses. Other income consists of
service charges on checking and NOW accounts and other fees, and insurance
commissions. Other expenses include compensation and employee benefits,
occupancy expenses, deposit insurance premiums, equipment and data servicing
expenses, professional fees and other operating costs. The Bank's results of
operations are also significantly affected by general economic and competitive
conditions, particularly changes in market interest rates, government
legislation and policies concerning monetary and fiscal affairs, housing and
financial institutions and the attendant actions of the regulatory
authorities.
The Bank's strategy is to operate as a conservative, well-capitalized,
profitable institution dedicated to offering a full line of community banking
services and to providing quality service to all customers. The Bank believes
that it has successfully implemented its strategy by (i) maintaining strong
capital levels, (ii) maintaining effective control over operating expenses to
attempt to achieve profitability under differing interest rate scenarios,
(iii) emphasizing local loan originations, and (iv) emphasizing high-quality
customer service with a competitive fee structure.
YEAR 2000 ISSUES
As the Year 2000 approaches, significant concerns have been expressed
regarding the ability of existing computer software programs and operating
systems to function properly with respect to data containing dates in the Year
2000 and thereafter. Many existing application software products were designed
to accommodate only a two digit year. The Bank's operating, processing and
accounting operations are computer reliant and could be affected by the Year
2000 issues. Both the Bank and the
7
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
Company are reliant on third-party vendors for most of their data processing
needs as well as certain other significant functions and services.
For nearly two years the Bank has been investigating and addressing potential
Year 2000 problems. In the course of this process Empire has examined its
computer systems, phone systems, mailing and fax capabilities, office
environmental systems, and servicer relationships related to daily business
processing, ATM processing, ACH processing, check processing, wire transfers
processing, travelers check processing, and all other relevant out-sourced
services. The general plan for addressing Year 2000 problems has been
established by Company management, and is currently on schedule with respect
to implementation of that plan. As of March 31, 1999 all areas of potential
impact directly addressable by the Bank appear to be Year 2000 compliant.
Areas to be addressed by third-party vendors have been represented as either
fully compliant or on schedule for full compliance. The Company's plan for
full Year 2000 compliance, including a comprehensive second round of testing
of third-party provided data systems was completed during April 1999. Both
rounds of testing, focusing on critical operational systems, were successful.
The primary negative impact of the potential Year 2000 problem existed in the
Bank's Olivetti-America 8-window teller hardware/software system previously
used in all three offices. This system had known Year 2000 problems as well as
other inadequacies relevant to current needs on the working teller line.
During December 1998 the Bank replaced the existing teller system with a
PC-based teller system working internally at each office with a Local Area
Network (LAN) and tied together to the central office and our primary servicer
by a Wide Area Network (WAN). This conversion solved the potential Year 2000
problem in the teller system, and also positioned the Bank to take maximum
advantage of current technology in banking as it enters the 21st Century. The
cost of conversion and re-training and implementation of the new PC-based
system was approximately $225,000. Most of the estimated cost was for the new
teller system and will be depreciated over five years.
Because the Bank's operations are dependent on its computer systems and those
of third parties, the failure of these systems to be Year 2000 compliant could
cause substantial disruption of the Bank's business and could have a material
adverse financial impact. Factors that might have material adverse effects
include, but are not limited to: (1) loss of customers to other financial
institutions, resulting in a loss of revenue, if the Bank's third party
vendors are unable to properly process customer transactions; (2) the failure
of governmental agencies such as the Federal Home Loan Bank of Seattle to
provide funds to the Bank which could impair the Bank's ability to fund loans
and deposit withdrawals; (3) concern on the part of depositors that Year 2000
issues could impair access to their deposit account balances could result in
the Bank experiencing deposit outflows prior to December 31, 1999; and (4)
increased personnel costs could be incurred if additional staff is required to
manually perform functions that inoperative systems would have otherwise
performed. At the present time, it is not possible to determine whether any
such events are likely to occur, or to quantify any potential negative impact
they may have on the bank's future results of operations and financial
condition. Because substantially all of the Bank's loan portfolio consists of
loans to individuals rather than to commercial enterprises, management
believes that Year 2000 issues will not impair the ability of the Bank's
borrowers to repay their debt.
8
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
While the Company currently has no reason to believe that the cost of
addressing such issues will materially affect Bank's products, services or
ability to compete effectively, no assurance can be made that the Company or
the third-party vendors on which is relies will become Year 2000 compliant in
a successful and timely fashion. Nevertheless, the Company does not believe
that the cost of addressing the Year 2000 issues will be a material event or
uncertainty that would cause reported financial information not to be
necessarily indicative of future operating results or financial conditions,
nor does it believe that the costs or the consequences of incomplete or
untimely resolutions of its Year 2000 issues represent a known material event
or uncertainty that is reasonably likely to affect its future financial
results, or cause its reported financial information not to be indicative of
future financial condition.
FINANCIAL CONDITION
Consolidated assets decreased by approximately $3.1 million, or 2.9%, from
$109.2 million at December 31, 1998 to $106.1 million at March 31, 1999.
The consolidated balance sheet was not materially affected by market
conditions between December 31, 1998 and March 31, 1999. Net maturities and
payments of $1.7 million reduced investment and mortgage-backed securities
held-to-maturity from $10.5 million at December 31, 1998, to $8.8 million at
March 31, 1999. Net loans increased $1.2 million or 2.4%.
Deposits remained unchanged at $66.4 million at December 31, 1998 and March
31, 1999.
Stockholders' equity decreased from $36.3 million at December 31, 1998, to
$33.1 million at March 31, 1999. The change is the result of net income of
$327,000, the release of ESOP shares in the amount of $47,000 and an decrease
of $277,000 related to the decrease in market value of securities available-
for-sale. In addition, 2,592 shares of MRDP vested and unearned MRDP
compensation was reduced by $43,000. Stockholders' equity was also decreased
by the payments of $203,000 in dividends. During the three months ended March
31, 1999, the Company repurchased 221,132 shares of its common stock in the
open market for an average price of $14.15 per share for a total of $3.1
million. There were 590,830 shares held in treasury at March 31, 1999, and
369,698 shares at December 31, 1998.
ASSET QUALITY
At March 31, 1999, the Bank did not have any nonaccrual loans or troubled debt
restructuring. At March 31, 1999, Empire had fourteen loans delinquent over 30
days amounting to $1.2 million of which two loans amounting to $12,000 were
delinquent over 90 days. The Bank had no real estate acquired through
foreclosure.
RESULTS OF OPERATIONS
The operating results of the Bank depend primarily on its net interest income.
The Bank's net interest income is determined by its interest rate spread,
which is the difference between the yields earned on its interest-earning
assets and the rates paid on its interest-bearing liabilities and the degree
of mismatch in the maturity and repricing characteristics of its
interest-earning assets and interest-bearing liabilities. The Bank's net
earnings are also affected by the establishment of provisions for loan losses
and the level of its other non-interest income, including insurance commission
income and deposit service charges, as well as its other expenses and income
tax provisions.
9
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND 1998
Net Income. Net income decreased by $76,000 to $327,000 for the three months
ended March 31, 1999, as compared to $403,000 for the same period in 1998. The
decline in net income is primarily due to a decrease in net interest income of
$110,000 which was caused by a reduction in interest rate spread from 4.50%
for the three months ended March 31, 1998 to 4.11% for the comparable period
in 1999. Average earning assets and liabilities remained approximately the
same for the two comparable periods. The reduction in interest rate spread
reflects a general decrease in interest rates on loans and investments for the
comparable periods.
Interest Income. Total interest income decreased by $116,000, or 5.97%, for
the three months ended March 31, 1999 as compared to the same period in 1998.
The decline was primarily attributable to a decrease in the average yield on
interest earning assets from 7.38% for the three months ended March 31, 1998
to 6.98% for the same period in 1999 while overall average earning assets
reflected a modest decline from $104.9 million for the three months ended
March 31, 1998 to $104.4 million for the comparable period in 1999. The
reduction in average yield reflects a general decrease in interest rates on
loans and investments for the comparable period.
Interest Expense. Total interest expense was $748,000 for the three months
ended March 31, 1999, as compared to $754,000 for the same period in 1998. The
$6,000 decrease was the result of a $55,000 decrease in interest on deposits
offset by a $49,000 increase in other interest expense.
Average deposits for the three month period ended March 31, 1999 amounted to
$66.3 million as compared to $66.8 million for the same period in 1998. The
decline in deposit interest is the result of this reduction in average
outstanding deposits for the three-month period ended March 31, 1999, and a
reduction in the average cost of deposits from 4.42% to 4.18% for the three
months ended March 31, 1998 as compared to the same period for 1999.
Other interest expense of $16,000 for the three months ended March 31, 1998
related primarily to the debt associated with the purchase of the main office
building. Interest expense of $65,000 for the comparable period in 1999
includes, in addition to the interest on the building debt, interest on $4.0
million of advances from the Federal Home Loan Bank.
Provision for Loan Losses. There was no provision for loan losses during the
three month periods ended March 31, 1999 and 1998, and at the end of both
periods the level of reserves was deemed to be adequate by management. Loan
loss reserves as a percentage of loans was .43% at March 31, 1999 and 1998.
Non-Interest Income. Non-interest income increased $24,000 for the three
months ended March 31, 1999, as compared to the same period in 1998 primarily
as the result of a $26,000 increase in customer service charges and other
non-interest income offset by a decrease in commissions and profit sharing
contingencies from insurance companies of $2,000.
Insurance commissions received from Dime are the largest component of
non-interest income. Insurance commissions of $160,000 and $162,000 were
received for the three months ended March 31, 1999, and 1998, respectively.
10
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
Non-Interest Expense. Total non-interest expense increased $39,000 or 5.3% for
the three months ended March 31, 1998, compared to the three months ended
March 31, 1998. Included in this increase is a $15,000 or 19.9% increase in
occupancy and equipment expense caused by additional depreciation related to
new teller equipment purchased in late 1998. There were no other significant
changes in the remaining components of non-interest expense.
Income Taxes. Income taxes decreased $49,000 from the three month period ended
March 31, 1998, as compared to the same period in 1999 as the result of the
decrease in income before income taxes. The effective combined federal and
state tax rate was 39.45% and 39.38% for the three months ended March 31, 1999
and 1998, respectively.
11
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EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the
registrant or its subsidiaries are a party.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation of Empire Federal Bancorp, Inc. (1)
3.2 Bylaws of Empire Federal Bancorp, Inc. (1)
10.1 Employment Agreement with Beverly D. Harris (2)
10.2 Employment Agreement with William H. Ruegamer (4)
10.3 Employee Stock Ownership Plan (1)
10.4 Management Recognition and Development Plan (3)
10.5 Stock Option Plan (3)
21 Subsidiaries of the Registrant (4)
27 Financial Data Schedule
- --------------------------------
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-1, as amended (File No. 333-12653).
(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
(3) Incorporated by reference to the Company's Annual Meeting Proxy Statement
dated March 16, 1998.
(4) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1998.
(b) Report on Form 8-K
No forms 8-K were filed during the quarter ended March 31,
1999.
12
<PAGE>
<PAGE>
EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
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.
Empire Federal Bancorp, Inc.
By s/s William H. Ruegamer May 14,1999
------------------------------------ ------------
William H. Ruegamer Date
President & Chief Executive Officer
(Principal Executive Officer)
By s/s Beverly D. Harris May 14, 1999
------------------------------------ ------------
Beverly D. Harris Date
Vice Chairman
13
<PAGE>
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