<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998
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 0-21687
IFB HOLDINGS, INC.
- ------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 43-1760023
- ------------------------------ ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
522 Washington Street, Chillicothe, Missouri 64601
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (660) 646-3733
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (x) No ( )
Indicate the number of shares outstanding of each of the issuer's common stock
as of the latest practicable date.
Class Outstanding at September 30, 1998
- ----------------------------- ---------------------------------
Common stock, $01 par value 474,398
<PAGE>
IFB HOLDINGS, INC.
FORM 10-QSB
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
- -------------------------------
Item 1 Financial Statements Page
----
<S> <C> <C>
Consolidated Statements of Financial Condition as of September 30,
1998 (Unaudited) and June 30, 1998...................................................... 2
Consolidated Statements of Income for the Three Months
ended September 30, 1998 and 1997 (Unaudited)........................................... 3
Consolidated Statements of Comprehensive Income for
the Three Months ended September 30, 1998 and 1997 (Unaudited).......................... 4
Consolidated Statements of Changes in Stockholders' Equity
for the Three Months ended September 30, 1998 (unaudited)............................... 5
Consolidated Statements of Cash Flows for the Three Months
ended September 30, 1998 and 1997 (Unaudited)........................................... 6
Notes to Unaudited Consolidated Financial Statements.................................... 8
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................... 11
PART II. OTHER INFORMATION
- ---------------------------
Item 1 Legal Proceedings....................................................................... 17
Item 2 Changes in Securities................................................................... 17
Item 3 Default upon Senior Securities.......................................................... 17
Item 4 Submission of Matters to a Vote of Security Holders..................................... 17
Item 5 Other Information....................................................................... 17
Item 6 Exhibits and Reports on Form 8-K........................................................ 17
Signature Page......................................................................................... 18
</TABLE>
<PAGE>
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
At At
September 30, June 30,
1998 1998
---------- ----------
(Unaudited)
(In Thousands)
<S> <C> <C>
ASSETS
Cash on hand and noninterest-earning deposits $ 587 $ 546
Interest-earning deposits in other institutions 2,162 2,995
Investment securities:
Securities available-for-sale at fair value 7,986 4,911
Securities held-to-maturity at amortized cost 245 245
Mortgage-backed and related securities
available-for-sale, at fair value 27,146 29,495
Loans receivable, net 35,159 35,255
Accrued interest receivable 670 623
Investment required by law:
FHLB and FRB stock, at cost 1,770 1,638
Premises and equipment 403 417
Other assets 53 53
---------- ----------
Total assets $ 76,181 $ 76,178
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 34,472 $ 35,255
Federal Home Loan Bank advances 33,723 31,075
Advances from borrowers for taxes and insurance 43 28
Income taxes payable 186 214
Accrued expenses and other liabilities 187 294
---------- ----------
Total liabilities 68,611 66,866
---------- ----------
Preferred stock, $.01 par value;
authorized 100,000 shares; none outstanding - -
Common stock, $.01 par value; authorized 900,000
shares, issued 592,523 shares at September 30, 1998
and at June 30, 1998 6 6
Additional paid-in capital 5,560 5,554
Retained earnings, substantially restricted 4,074 3,992
Less:
Common stock acquired by the ESOP (356) (374)
Treasury stock, 118,125 shares at September 30, 1998 (1,817) -
and 0 at June 30, 1998, at cost
Unrealized gain (loss) on securities available-for-sale,
net of applicable deferred income taxes 103 134
---------- ----------
Total stockholders' equity 7,570 9,312
---------- ----------
Total liabilities and stockholders' equity $ 76,181 $ 76,178
========== ==========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
2
<PAGE>
IFB HOLDINGS, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
---- ----
(In thousands
except share data)
<S> <C> <C>
Interest income:
Loans receivable $ 733 $ 645
Investment securities 113 109
Mortgage-backed and related securities 451 341
Other interest-earning assets 20 12
----- -----
Total interest income 1,317 1,107
----- -----
Interest expense:
Deposits 401 398
FHLB Advances 476 268
----- -----
Total interest expense 877 666
----- -----
Net interest income 440 441
Provision for loan losses 93 -
----- -----
Net interest income after provision for loan losses 347 441
----- -----
Noninterest income:
Fees and service charges 53 55
Gain on sales of mortgage-backed securities 9 8
Other 13 9
----- -----
Total noninterest income 75 72
----- -----
Noninterest expense:
Compensation and benefits 175 170
Occupancy and equipment 35 26
SAIF deposit insurance premiums 5 5
Other 75 55
------ -------
Total noninterest expense 290 256
------ -------
Income (loss) before income taxes 132 257
Income tax expense 50 108
------- -------
Net income (loss) $ 82 $ 149
======= =======
Earnings per share:
Primary and fully diluted $ .15 $ .27
======= =======
Weighted average number of
shares outstanding:
Primary and fully diluted 555,323 547,333
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
September 30,
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Net income $ 82 $149
Other comprehensive income (loss), net of tax:
Unrealized holding income (losses) arising during period (31) 25
---- ----
Comprehensive income $ 51 $174
==== ====
</TABLE>
4
<PAGE>
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
Securities
Available-
For-Sale,
Net of
Common Applicable
Additional Stock Deferred
Common Paid-In Retained Treasury Acquired Income
Stock Capital Earnings Stock by ESOP Taxes Total
------ ------- -------- ----------- ----------- ----------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended
- -------------------
September 30, 1998
- -------------------
Balance at June 30, 1998 $6 $5,554 $3,992 $ 0 $(374) $134 $ 9,312
Additions (deductions) for
the three months ended
September 30, 1998
Net income - - 82 - - - 82
Reduction of ESOP
obligation - - - - 18 - 18
Compensation Expense
related to ESOP - 6 - - - - 6
Purchase of Treasury Stock
(118,125 shares) - - - (1,817) - - (1,817)
Unrealized gain on
securities available-for-
sale, net of deferred
Income tax of $16,000 - - - - - (31) (31)
------ ------- -------- ---------- ---------- ---------- -------
Balance, September 30, 1998 $6 $5,560 $4,074 $(1,817) $(356) $103 $ 7,570
====== ======= ======== ========== ========== ========== =======
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
5
<PAGE>
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September, 30
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ 82 $ 149
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Net loss (gain) on sale of investments (9) (8)
Depreciation 14 12
Provision for loan loss 93 -
Amortization of premiums and discounts 32 3
Compensation expense related to ESOP 24 15
Decrease (increase) in interest receivable (47) (109)
Decrease (increase) in other assets - (8)
Increase (decrease) in income tax payable (28) 58
Increase (decrease) in other liabilities (107) 6
------ -----
Net cash provided by operating activities 54 118
------ -----
Cash flow from investing activities:
Loans purchased (229) (1,387)
(Increase) decrease in loans, net 235 (353)
Proceeds from sales of available-for-sale mortgage-backed and
related securities 442 -
Proceeds from sales of available-for-sale investment securities 1,459 491
Proceeds from maturities/calls of investment securities 1,163 1,000
Purchase of available-for-sale investment securities (5,694) (1,544)
Purchase of available-for-sale mortgage-backed
and related securities (1,787) (3,437)
Principal collected on repayments and maturities of
available-for-sale mortgage-backed and related securities 3,634 728
Purchase of FHLB and FRB stock (132) (222)
Purchase of equipment - (60)
------- -------
Net cash provided (used) by investing activities (909) (4,784)
------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits (783) (779)
Net increase (decrease) in advances from
borrowers for taxes and insurance 15 11
Proceeds from FHLB advances 18,478 7,650
Principal payments on FHLB advances (15,830) (3,219)
Purchase of treasury stock (1,817) -
-------- -------
Net cash provided (used) by financing activities 63 3,663
-------- -------
Increase (decrease) in cash and cash equivalents (792) (1,003)
Cash and cash equivalents at beginning of period 3,541 3,003
-------- -------
Cash and cash equivalents at end of period $ 2,749 $ 2,000
======== =======
</TABLE>
6
<PAGE>
IFB HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
----- -----
(In Thousands)
<S> <C> <C>
Supplemental cash flow disclosures:
Cash paid for:
Interest $ 641 $ 339
===== =====
Income Taxes $ 56 $ 65
===== =====
Noncash activity:
Loans transferred to real estate owned $ - $ -
===== =====
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
7
<PAGE>
IFB HOLDINGS, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles
(GAAP) for interim financial information and with the instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) necessary
for a fair presentation have been included. The results of operations
and other data for the three month period ended September 30, 1998 are
not necessarily indicative of results that may be expected for the
entire fiscal year ending June 30, 1999.
The unaudited consolidated financial statements include the accounts
of IFB Holdings, Inc. (the "Holding Company") and its wholly-owned
subsidiary, Investors Federal Bank, National Association, (the
"Bank"), and the Bank's wholly-owned subsidiary, Investors Federal
Service Corporation for the three months ended September 30, 1998.
Material intercompany accounts and transactions have been eliminated
in consolidation.
(2) CONVERSION TO STOCK OWNERSHIP AND NATIONAL BANK
The Board of Directors of the Bank, on September 23, 1996, unanimously
adopted a Plan of Conversion pursuant to which the Bank converted from
a federally chartered mutual savings bank to a federally chartered
stock savings bank, with the concurrent formation of the Holding
Company. The Holding Company, on December 30, 1996, sold 592,523
shares of common stock at $10.00 per share during the subscription
offering. The proceeds from the conversion, after recognizing
conversion expenses and underwriting costs of approximately $403,000,
were $5,522,000 and are recorded as common stock and additional paid
in capital on the accompanying unaudited consolidated statement of
financial condition. The Holding Company utilized approximately
$2,762,000 of the net proceeds to purchase all of the capital stock of
the Bank.
On January 30, 1997, the Bank changed its charter from a federally
chartered savings bank to a national bank.
The Bank has established for eligible employees an Employee Stock
Ownership Plan ("ESOP") in connection with the conversion. The ESOP
borrowed $474,010 from the Holding Company and purchased 47,401 common
shares issued in the conversion. The Bank is making the scheduled
discretionary cash contributions to the ESOP sufficient to service the
amount borrowed. To date, the Bank has made payments of $178,648
($117,898 principal) to the Holding Company. The $356,112 ESOP
obligation ($474,010 in stock issued by the Holding Company on
December 30, 1996 less the principal payments made by the Bank) is
reflected in the accompanying consolidated financial statements as a
charge to unearned compensation and a credit to common stock and paid-
in capital. The unamortized balance of unearned compensation is shown
as a deduction of stockholders' equity. The unpaid balance of the ESOP
loan is eliminated in consolidation.
(3) EARNINGS PER SHARE
Earnings per share (EPS) computations follow SFAS No. 128 which is
effective for financial statements issued for periods ending after
December 15, 1997. Basic EPS have been determined by dividing net
income for the period (numerator) by the weighted-average number of
common shares outstanding during the period (denominator).
8
<PAGE>
Weighted-average common shares include allocated ESOP shares.
Unallocated ESOP shares are not used in basic EPS calculations.
(4) STOCK REPURCHASE PROGRAM
During the quarter ended September 30, 1998, the Company repurchased
118,125 shares of its common stock. As of October 1, 1998, IFB
Holdings, Inc. has repurchased a total of 118,504 shares of its common
stock.
(5) COMMITMENTS AND CONTINGENCIES
Commitments to originate and purchase mortgage loans of $507,404 at
September 30, 1998, represent amounts which the Bank plans to fund
within the normal commitment period of thirty to ninety days. As of
September 30, 1998, the Bank had no commitments to purchase mortgage-
backed securities, CMOs or investment securities. The Bank had no
commitments outstanding to sell mortgage loans, mortgage-backed
securities, CMOs or investment securities at September 30, 1998.
(6) RECENT ACCOUNTING DEVELOPMENTS
SFAS No. 130 "Reporting Comprehensive Income," was adopted July 1,
1998. This statement provides accounting and reporting standards to
report a measure of all changes in equity of an enterprise that
results from recognized transactions and economic events of the
period. The major component of comprehensive income for the Company
will be unrealized gains and losses on certain investments in debt and
equity securities.
SFAS No. 133, " Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives)
and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value
of a recognized asset of liability or an unrecognized firm commitment,
(b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or (c)hedge of the foreign currency exposure of a net
investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated
forecasted transaction. This statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999.
Management believes adoption of SFAS Nos. 130 and 133 does not have a
material effect on the financial position or results of operations,
nor will adoption require additional capital resources.
The foregoing does not constitute a comprehensive summary of all
material changes or developments affecting the manner in which the
Association keeps its books and records and performs its financial
accounting responsibilities. It is intended only as a summary of some
of the recent pronouncements made by the FASB which are of particular
interest to financial institutions.
(7) DIRECTOR AND EMPLOYEE PLANS
The Company's Board of Directors has approved a stock option and
incentive plan and a recognition and retention plan (RRP) which were
approved by the Company's shareholders at the Annual meeting in
November, 1997.
9
<PAGE>
Stock Option and Incentive Plan
-------------------------------
The plan will be implemented for the benefit of directors, officers
and employees of the Company and its affiliates. The maximum number of
shares to be issued from authorized but not currently outstanding
shares under the plan is 59,252 or 10% of the total shares issued in
the conversion. The exercise price of the options shall not be less
than the common stock market value at the date the options are
granted.
Recognition and Retention Plan
------------------------------
The RRP would award shares authorized but not currently outstanding to
directors and to employees in key management positions in order to
provide them with a proprietary interest in the Company in a manner
designed to encourage such employees to remain with the Company. The
maximum number of shares authorized under the plan is 23,700 or 4% of
the total shares issued in the conversion.
Under the terms of the stock option and incentive plan, the effective
date of the plan was January 1, 1998. The term of the plan would be
ten years. The future impact of the plan would be to increase (1) the
number of outstanding shares of common stock, and (2) compensation
expense, and decrease (1) net income per share, and (2) book value per
share. It is not possible to quantify the effect on the financial
position or results of operations from implementing the plan at this
time.
As of September 30, 1998, no stock options or RRP award shares had
been granted.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
IFB Holdings, Inc. was organized, as a Delaware corporation, in
October 1996 at the direction of the Bank's Board of Directors to acquire all of
the capital stock that the Bank issued upon its conversion from mutual to stock
form of ownership. The business of the Holding Company consists primarily of the
business of the Bank. There are no current arrangements, understandings or
agreements to expand its business activities or make any business acquisitions.
Investors Federal Bank, National Association was originally founded in
1934 as a federally chartered savings and loan association located in
Chillicothe, Missouri under the name Chillicothe Federal Savings and Loan
Association. In 1974, the Bank changed its name to Investors Federal Savings and
Loan Association, and in 1988 the Bank changed its name to Investors Federal
Bank and Savings Association. On December 30, 1996, the Bank completed a
conversion from mutual to stock ownership. On January 30, 1997, the Bank changed
its charter to a national bank charter and its name to Investors Federal Bank,
National Association. Its deposits are insured up to the maximum allowable
amount by the Federal Deposit Insurance Corporation (the "FDIC"). The Bank
serves Livingston, Caldwell, and Daviess Counties, Missouri. The Bank conducts
business through its main office and two branches located in Hamilton and
Gallatin, Missouri.
The Bank's business strategy is to operate as a well-capitalized,
profitable and independent community financial institution dedicated to home-
mortgage lending and to providing quality service to its customers. The Bank
intends to implement this strategy by (I) closely monitoring the needs of its
customers and providing quality service; (ii) maintaining asset quality; (iii)
utilizing investments in mortgage-backed securities and other investment
securities to invest excess funds and to increase net interest income; (iv)
maintaining capital in excess of the regulatory requirements; (v) attempting to
increase the Bank's earnings; and (vi) managing interest rate risk by attempting
to match asset and liability maturities and rates.
The earnings of the Bank depend primarily on its net interest income,
which is the difference between interest earned on its loans and investments and
the interest paid on its interest-bearing liabilities, consisting of deposits
and FHLB advances. The Bank, like other financial institutions, is subject to
interest-rate risk to the degree that its interest-earning assets mature or
reprice at different times, or on different bases, than its interest-bearing
liabilities. The Bank's operating results are also affected by the amount of its
noninterest income, including gain on the sales of investments, service charges,
and other income. Non-interest expense consists primarily of employee
compensation, occupancy expenses, FDIC insurance premiums and other general and
administrative expenses. The Bank's operating results are significantly affected
by general economic and competitive conditions, in particular, the changes in
market interest rates, government policies and actions by regulatory
authorities.
YEAR 2000 ISSUE
The Bank relies upon computer systems for the daily transaction of its
business. There is concern among industry experts that on January 1, 2000
computers will be unable to "read" the new year and there may be widespread
computer malfunctions. The Bank has formed a Year 2000 Committee to initiate and
implement the Year 2000 project, policies, document readiness of the Bank to
accommodate Year 2000 processing, track and test progress towards full
compliance and report to the Board of Directors. Systems are prioritized by the
committee as to mission critical or non-mission critical. The main mission
critical items consist of IBM hardware, Precision Computer Systems software and
Easy Systems teller machines. These companies provide testing assistance in Y2K
compliance. During the quarter ended September 30, 1998, date testing was
completed on the Precision Computer Systems software with all dates rolling
forward properly. A Y2K test package has been purchased for baseline and other
testing. An IBM patch-load tape was installed on the IBM Risc 6000 computer
during the quarter ended September 30, 1998. This procedure successfully
11
<PAGE>
updated the computer to the latest level of IBM testing. Precision Computer
Systems is working with IBM on Y2K issues and will notify the Bank if additional
patch-load tapes are necessary. Testing of Precision Computer Systems software
and IBM hardware will continue through 1998 and should be largely completed by
December 31, 1998. EZ Systems teller machines were tested in non-production mode
during the quarter ended September 30, 1998 and proved to be Year 2000
compliant.
The Bank's definition of Year 2000 compliant is that the system, when
used in accordance with all applicable instruction, is capable of correctly
processing, providing, and receiving data within and between the 20th and 21st
centuries, provided that all other systems that are used together with the
system properly exchange date data with the system.
The Bank does not expect costs to make their computer system Year 2000
compliant to materially affect operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's most liquid assets are cash and cash equivalents, which
includes short-term investments. The levels of these assets are dependent on the
Bank's lending, investing, operating, and deposit activities during any given
period. At September 30, 1998 and June 30, 1998, cash and cash equivalents
totaled $2.7 million and $3.5 million, respectively.
The Bank's primary sources of funds are deposits, FHLB advances,
repayments on loans, the maturity of investment securities and income from
operations. While maturity and scheduled amortization of loans and investment
securities are predictable sources of funds, deposit inflows and mortgage
prepayments are greatly influenced by local conditions, general interest rates
and regulatory changes.
The primary investment activity of the Bank is the origination and
purchase of mortgage loans. Another investment activity of the Bank is the
investment of funds in U.S. agency bonds, mortgage-backed securities,
collateralized mortgage obligations and FHLB overnight funds. During periods
when the Bank's loan demand is limited, the Bank may purchase short-term
investment securities to obtain a higher yield than otherwise available.
At September 30, 1998, the Bank had outstanding loan commitments of
$507,404. The Bank anticipates it will have sufficient funds available to meet
its commitments. Certificates of deposit that were scheduled to mature in one
year or less at September 30, 1998 were $13.7 million. Management believes that
a significant portion of such deposits will remain with the Bank.
Under federal law, the Bank is required to meet certain leverage and
risk-based capital requirements. The leverage ratio requires a minimum ratio of
"Tier 1 capital" to adjusted total assets. At September 30, 1998, the Bank
exceeded both of the capital requirements. The Bank's capital ratios were: 8.48%
leverage capital and 21.11% risk-based capital. The Bank had "Tier 1 capital" of
$6.4 million at September 30, 1998 and risk-based capital of $6.7 million.
FINANCIAL CONDITION
There was no significant change in total assets. Total assets were
$76.2 at September 30, 1998 and at June 30, 1998. Investment securities
increased $3.1 million, from $5.2 million at June 30, 1998, to $8.2 million at
September 30, 1998. FHLB and FRB stock increased $132,000, or 8.1%, from $1.6
million at June 30, 1998, to $1.8 million at September 30, 1998. The increases
were funded primarily from an increase in FHLB advances of $2.6 million, or
8.5%, from $31.1 million at June 30, 1998, to $33.7 million at September 30,
1998, which reflected management's asset/liability strategy of seeking to earn
the spread between the yield earned on adjustable-rate earning assets and the
rates paid on the FHLB advances. Mortgage-backed and related securities
decreased $2.3 million, or 8%, from $29.5 million at June 30, 1998, to $27.1
million at September 30, 1998. Loans receivable decreased $96,000, or 2.7%, from
$35.3 million at June 30, 1998, to $35.2 million at September 30, 1998.
Interest-earning
12
<PAGE>
stock during the quarter ended September 30, 1998. Unrealized loss on securities
available-for-sale, net of deferred income tax decreased $31,000 for the three
months ended September 30, 1998. In addition, net income for the three months
ended September 30, 1998 was $82,000.
ASSET QUALITY
The Bank regularly reviews interest earning assets to determine proper
valuation. Management's monitoring of the asset portfolio includes reviews of
historical loss experience, known and inherent risks in the portfolio, the value
of any underlying collateral, prospective economic conditions and the regulatory
environment. The Bank's non-accrual loans decreased from $495,000 at June 30,
1998 to $389,000 at September 30, 1998.
The table on the following page sets forth information regarding the
Bank's non-accrual loans and foreclosed real estate at the dates indicated. The
Bank discontinues accruing interest on delinquent loans no later than ninety
days past due. At September 30, 1998, the Bank had no restructured loans within
the meaning of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 15.
13
<PAGE>
IFB HOLDINGS, INC.
Asset Quality
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
---- ----
(In thousands)
<S> <C> <C>
Non-accrual mortgage loans
delinquent more than 90 days $281 $344
Non-accrual other loans
delinquent more than 90 days 108 151
--------- --------
Total non-performing loans $389 $495
Real estate owned and in-
substance foreclosed loans,
net of allowance 0 0
--------- --------
Total non-performing assets $389 $495
========= ========
Non-performing loans to
total loans 1.10% 1.39%
========= ========
Non-performing assets to
total assets 0.51% 0.65%
========= ========
Allowance for loan losses
to non-performing loans 107.46% 65.45%
========= ========
</TABLE>
14
<PAGE>
RESULTS OF OPERATIONS
Comparisons of quarterly results in this section are between the three
month periods ended September 30, 1998, and September 30, 1997.
GENERAL
Net income for the quarter ended September 30, 1998 was $82,000, a
decrease of $67,000 from the $149,000 net income for the quarter ended September
30, 1997. The decrease was due primarily to the increase of provision for loan
losses during the quarter ended September 30, 1998.
INTEREST INCOME
Interest income for the quarter ended September 30, 1998, was $1.3
million, an increase of $210,000, or 19%, compared to $1.1 million for the
quarter ended September 30, 1997. Interest on loans receivable increased
$88,000, or 13.6%, from $645,000 for the quarter ended September 30, 1997, to
$733,000 for the quarter ended September 30, 1998. Interest on investment
securities increased $4,000, or 3.7%, from $109,000 for the three months ended
September 30, 1997, to $113,000 for the three months ended September 30, 1998.
Interest on mortgage-backed and related securities increased $110,000, or 32.3%,
from $341,000 for the quarter ended September 30, 1997, to $451,000 for the
quarter ended September 30, 1998. The increases are primarily the result of the
increases in the average balances of investment securities, mortgage-backed and
related securities, and loans receivable outstanding during the three months
ended September 30, 1998, as compared to the three months ended September 30,
1997.
INTEREST EXPENSE
Interest expense for the quarter ended September 30, 1998 was $877,000
as compared to $666,000 for the quarter ended September 30, 1997, an increase of
$211,000, or 31.7%. Interest on advances from FHLB was $476,000 for the three
months ended September 30, 1998, as compared to $268,000 for the same period
ended September 30, 1997, an increase of $208,000 or 77.6%. The increase was due
to an increase in the amount of advances outstanding during the three month
period ended September 30, 1998, as compared to the three month period ended
September 30, 1997. Interest on deposits remained fairly stable for the three
month period ended September 30, 1998, as compared to September 30, 1997.
NET INTEREST INCOME
Net interest income before provisions for loan losses was $440,000 for
the quarter ended September 30, 1998, as compared to $441,000 for the quarter
ended September 30, 1997, a decrease of $1,000 or .2%.
PROVISION FOR LOAN LOSSES
The provision for loan losses increased $93,000 for the three months
ended September 30, 1998, as compared to the three months ended September 30,
1997. During fiscal years ending June 30, 1996 and 1997, the Bank purchased $1.4
million of FHA Title 1 Home Loans. As of September 30, 1998, the current book
value is $873,000, reflecting scheduled repayments and prepayments of principal.
Recently, the Bank was notified by the servicer of the loans that the reserve to
cover uncollectible loans may not be adequate. Therefore, management has been
evaluating the loans. After the delinquent reports were evaluated, a provision
was recorded for $90,000 as of September 30, 1998. The loans are still under
evaluation at this time and an additional provision may be possible at a later
date.
NONINTEREST INCOME
There was little change in noninterest income for the quarter ended
September 30, 1998,
15
<PAGE>
compared to the quarter ended September 30, 1997. Noninterest income was $75,000
for the quarter ended September 30, 1998 as compared to $72,000 for the quarter
ended September 30, 1997.
NONINTEREST EXPENSE
Noninterest expense was $290,000 for the quarter ended September 30,
1998, an increase of $34,000, or 13.3%, compared to $256,000 for the quarter
ended September 30, 1997. The increase was primarily due to an increase of
$20,000 or 36.4%, in the amount of other noninterest expenses as compared to the
same period ended September 30, 1997. Occupancy and equipment expense increased
$9,000 or 34.6%, from $26,000 for the quarter ended September 30, 1997, to
$35,000 for the quarter ended September 30, 1998. This was a result of expensing
1997 prepaid maintenance agreements that had not been expensed on a monthly
basis.
INCOME TAX
The provision for income taxes decreased $58,000, from $108,000 for
the quarter ended September 30, 1997, to $50,000 for the quarter ended September
30, 1998. The decrease is due to a decrease in income for the quarter.
16
<PAGE>
IFB HOLDINGS, INC.
Part II -- Other Information
ITEM 1 LEGAL PROCEEDINGS
The Holding Company and the Bank are not involved in any pending legal
proceedings other than legal proceedings incident to the business of
the Holding Company and the Bank, which involve amounts in the
aggregate which management believes are immaterial to the financial
condition and results of operations of the Holding Company and the
Bank.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULT 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) Exhibits; Statement re: Computation of Per Share Earnings-Exhibit
11 Financial Data Schedule--Exhibit 27
(B) Reports on Form 8-K:
On September 10, 1998, the company filed a Current Report on Form
8-K due to the purchase of 118,125 shares of treasury stock in
open market transactions from August 28, 1998 to September 2,
1998, which reduced the total outstanding shares to 474,398.
17
<PAGE>
IFB HOLDINGS, INC.
SIGNATURES
Pursuant to the requirement 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.
IFB Holdings, Inc.
-------------------------------------
(Registrant)
Dated November 12,1998 /s/ Earle S. Teegarden, Jr.
-------------------------------------
Earle S. Teegarden, Jr., President
Chief Executive Officer, Chief Financial
Officer and Director
Dated November 12, 1998 /s/ Mark D. Buntin
-------------------------------------
Mark D. Buntin
(Principal Financial Officer)
18
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Quarter Ended
Sep. 30, 1998
-------------
1. Net income $ 82,000
========
2. Weighted average common shares outstanding 555,323
========
3. Basic earnings per share $ 0.15
========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 587
<INT-BEARING-DEPOSITS> 2,162
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,132
<INVESTMENTS-CARRYING> 245
<INVESTMENTS-MARKET> 245
<LOANS> 35,577
<ALLOWANCE> 418
<TOTAL-ASSETS> 76,181
<DEPOSITS> 34,472
<SHORT-TERM> 21,100
<LIABILITIES-OTHER> 416
<LONG-TERM> 12,623
0
0
<COMMON> 6
<OTHER-SE> 7,570
<TOTAL-LIABILITIES-AND-EQUITY> 76,181
<INTEREST-LOAN> 733
<INTEREST-INVEST> 564
<INTEREST-OTHER> 20
<INTEREST-TOTAL> 1,317
<INTEREST-DEPOSIT> 401
<INTEREST-EXPENSE> 877
<INTEREST-INCOME-NET> 440
<LOAN-LOSSES> 93
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 290
<INCOME-PRETAX> 132
<INCOME-PRE-EXTRAORDINARY> 132
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
<YIELD-ACTUAL> .07
<LOANS-NON> 389
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 324
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 418
<ALLOWANCE-DOMESTIC> 418
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
