<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 December 31, 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 December 31, 1998
- ----------------------------- --------------------------------
Common stock, $.01 par value 474,019
<PAGE>
IFB HOLDINGS, INC.
FORM 10-QSB
Index
PART I. FINANCIAL INFORMATION
- --------------------------------
<TABLE>
<CAPTION>
Item 1 Financial Statements Page
----
<S> <C> <C>
Consolidated Statements of Financial Condition as of
December 31, 1998 (Unaudited) and June 30, 1998.................. 2
Consolidated Statements of Income for the Three Months
and Six Months ended December 31, 1998 and 1997 (Unaudited)...... 3
Consolidated Statements of Comprehensive Income for
Three Months and Six Months ended December 31, 1998 and 1997
(Unaudited)...................................................... 4
Consolidated Statements of Changes in Stockholders' Equity
for the Six Months ended December 31, 1998 (unaudited)........... 5
Consolidated Statements of Cash Flows for the Six
Months ended December 31, 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
December 31, June 30,
1998 1998
------------ --------
(Unaudited)
(In Thousands)
ASSETS
<S> <C> <C>
Cash on hand and noninterest-earning deposits $ 586 $ 546
Interest-earning deposits in other institutions 1,483 2,995
Investment securities:
Securities available-for-sale at fair value 7,781 4,911
Securities held-to-maturity at amortized cost 245 245
Mortgage-backed and related securities
available-for-sale, at fair value 23,437 29,495
Loans receivable, net 34,029 35,255
Accrued interest receivable 609 623
Investment required by law:
FHLB and FRB stock, at cost 1,770 1,638
Premises and equipment 396 417
Other assets 42 53
------- -------
Total assets $70,378 $76,178
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $35,693 $35,255
Federal Home Loan Bank advances 26,632 31,075
Advances from borrowers for taxes and insurance 1 28
Income taxes payable 160 214
Accrued expenses and other liabilities 337 294
------- -------
Total liabilities 62,823 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 December 31, 1998
and at June 30, 1998 6 6
Additional paid-in capital 5,565 5,554
Retained earnings, substantially restricted 4,067 3,992
Less:
Common stock acquired by the ESOP (344) (374)
Treasury stock, 118,504 shares at December 31, 1998 (1,822) -
and 0 at June 30, 1998, at cost
Unrealized gain (loss) on securities available-for-
sale, net of applicable deferred income taxes 83 134
------- -------
Total stockholders' equity 7,555 9,312
------- -------
Total liabilities and stockholders' equity $70,378 $76,178
======= =======
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
2
<PAGE>
IFB HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
(In thousands (In thousands
except share data) except share data)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 711 $ 685 $ 1,444 $ 1,330
Investment securities 135 112 248 221
Mortgage-backed and related securities 408 370 859 711
Other interest-earning assets 12 14 32 26
-------- -------- -------- --------
Total interest income 1,266 1,181 2,583 2,288
-------- -------- -------- --------
Interest expense:
Deposits 394 402 795 800
FHLB Advances 417 321 893 589
-------- -------- -------- --------
Total interest expense 811 723 1,688 1,389
-------- -------- -------- --------
Net interest income 455 458 895 899
Provision for loan losses 147 64 240 64
-------- -------- -------- --------
Net interest income after provision for loan losses 308 394 655 835
-------- -------- -------- --------
Noninterest income:
Fees and service charges 51 54 104 109
Gain on sales of mortgage-backed securities 19 35 28 43
Other 18 7 31 16
-------- -------- -------- --------
Total noninterest income 88 96 163 168
-------- -------- -------- --------
Noninterest expense:
Compensation and benefits 145 167 320 337
Occupancy and equipment 30 26 65 52
SAIF deposit insurance premiums 5 5 10 10
(Loss) on sales of mortgage-backed securities (4) 0 (4) 0
Other 92 105 167 160
-------- -------- -------- --------
Total noninterest expense 276 303 566 559
-------- -------- -------- --------
Income (loss) before income taxes 120 187 252 444
Income tax expense 56 72 106 180
-------- -------- -------- --------
Net income $ 64 $ 115 $ 146 $ 264
======== ======== ======== ========
Earnings per share:
Basic $.15 $.21 $.31 $.48
======== ======== ======== ========
Weighted average number of
shares outstanding:
Basic 438,421 549,703 477,131 549,110
</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 SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
---- ---- ---- ----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income $ 64 $115 $146 $264
Other comprehensive income (loss), net of tax:
Unrealized holding income (losses) arising during period (20) 88 (51) 113
---- ---- ---- ----
Comprehensive income $ 44 $203 $ 95 $377
==== ==== ==== ====
</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)
Six Months Ended
- -----------------
December 31, 1998
-----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1998 $ 6 $5,554 $3,992 $ 0 $(374) $134 $ 9,312
Additions (deductions) for the six months ended
December 31, 1998
Net income - - 146 - - - 146
Dividends declared - - (71) - - - (71)
Reduction of ESOP obligation - - - - 30 - 30
Compensation Expense related to ESOP - 11 - - - - 11
Purchase of Treasury Stock (118,504 shares) - - - (1,822) - - (1,822)
Unrealized gain on securities available-for-
sale, net of deferred Income tax of $26,000 - - - - - (51) (51)
--- ------ ------ ------- ----- ---- -------
Balance, December 31, 1998 $ 6 $5,565 $4,067 $(1,822) $(344) $ 83 $ 7,555
=== ====== ====== ======= ===== ==== =======
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
5
<PAGE>
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
-------- -------
(In thousands)
Cash flow from operating activities:
<S> <C> <C>
Net income (loss) $ 146 $ 264
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Net loss (gain) on sale of investments (28) (43)
Depreciation 29 24
Provision for loan loss 240 64
Amortization of premiums and discounts 59 6
Compensation expense related to ESOP 41 33
Decrease (increase) in interest receivable 14 (59)
Decrease (increase) in other assets 11 43
Increase (decrease) in income tax payable (54) 117
Increase (decrease) in other liabilities 43 44
-------- -------
Net cash provided by operating activities 501 493
-------- -------
Cash flow from investing activities:
Loans purchased (229) (3,649)
(Increase) decrease in loans, net 1,215 (390)
Proceeds from sales of available-for-sale mortgage-backed and
related securities 1,361 2,275
Proceeds from sales of available-for-sale investment securities 2,014 491
Proceeds from maturities/calls of investment securities 1,660 1,999
Purchase of available-for-sale investment securities (6,535) (1,562)
Purchase of available-for-sale mortgage-backed
and related securities (2,702) (8,169)
Principal collected on repayments and maturities of
available-for-sale mortgage-backed and related securities 7,308 2,039
Purchase of FHLB and FRB stock (132) (310)
Purchase of equipment (8) (91)
-------- -------
Net cash provided (used) by investing activities 3,952 (7,367)
-------- -------
Cash flows from financing activities:
Dividends paid (71) (82)
Net increase (decrease) in deposits 438 (265)
Net increase (decrease) in advances from
borrowers for taxes and insurance (27) (16)
Proceeds from FHLB advances 28,378 14,450
Principal payments on FHLB advances (32,821) (8,245)
Purchase of treasury stock (1,822) -
-------- -------
Net cash provided (used) by financing activities (5,925) 5,842
-------- -------
Increase (decrease) in cash and cash equivalents (1,472) (1,032)
Cash and cash equivalents at beginning of period 3,541 3,003
-------- -------
Cash and cash equivalents at end of period $ 2,069 $ 1,971
======== =======
</TABLE>
6
<PAGE>
IFB HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
----- ----
(In Thousands)
Supplemental cash flow disclosures:
<S> <C> <C>
Cash paid for:
Interest $1,165 $ 734
====== =====
Income Taxes $ 122 $ 127
====== =====
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 six month period ended December 31, 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 six months ended December 31, 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 $197,742
($129,748 principal) to the Holding Company. The $344,262 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
8
<PAGE>
weighted-average number of common shares outstanding during the period
(denominator). 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. The Company repurchased an
additional 379 shares of its common stock during the quarter ended
December 31, 1998. As of December 31, 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 $1.3 million
at December 31, 1998, represent amounts which the Bank plans to fund
within the normal commitment period of thirty to ninety days. As of
December 31, 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 December 31, 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.
9
<PAGE>
(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.
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 December 31, 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.
This Quarterly Report on Form 10-Q may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
competition; changes in accounting principles, policies, or guidelines; changes
in legislation or regulation; and other economic, competitive, governmental,
regulatory, and technological factors affecting the Company's operations,
pricing, products and services.
YEAR 2000 ISSUE
Like many financial institutions, the Bank relies upon computers for
the daily conduct of its business and for data processing generally. 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
11
<PAGE>
project, policies, document readiness of the Bank to accommodate Year 2000
processing, to 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 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 continued during the
quarter ended December 1998 and is largely completed at this time. 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 December 31, 1998 and June 30, 1998, cash and cash equivalents
totaled $2.1 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 December 31, 1998, the Bank had outstanding loan commitments of
$1.3 million. 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 December 31, 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 December 31, 1998, the Bank
exceeded both of the capital requirements. The Bank's capital ratios were:
8.78% leverage capital and 22.05% risk-based capital. The Bank had "Tier 1
capital" of $6.4 million at December 31, 1998 and risk-based capital of $6.8
million.
FINANCIAL CONDITION
Total assets decreased $5.8 million, or 7.6%, to $70.4 million at
December 31, 1998, from $76.2 million at June 30, 1998. Investment securities
increased $2.8 million, from $5.2 million at June
12
<PAGE>
30, 1998, to $8.0 million at December 31, 1998. FHLB and FRB stock increased
$132,000, or 8.1%, from $1.6 million at June 30, 1998, to $1.8 million at
December 31, 1998. Mortgage-backed and related securities decreased $6.1
million, or 20.7%, from $29.5 million at June 30, 1998, to $23.4 million at
December 31, 1998. Loans receivable decreased $1.3 milion, or 3.7%, from $35.3
million at June 30, 1998, to $34.0 million at December 31, 1998. Interest-
earning deposits in other institutions decreased $1.5 million, or 50%, from $3
million at June 30, 1998 to $1.5 million at December 31, 1998.
Total liabilities decreased $4.1 million, or 6.1%, from $66.9 million
at June 30, 1998, to $62.8 million at December 31, 1998. The decrease was
primarily the result of the decrease in FHLB advances of $4.5 million or 14.5%,
from $31.1 at June 30, 1998, to $26.6 million at December 31, 1998. Proceeds
from the sales of mortgage backed and related securities were used to pay down
the advances. In addition, deposits increased $438,000 or 1.2%, from $35.3
million at June 30, 1998, to $35.7 million at December 31, 1998.
Total equity decreased $1.7 million, or 18.7%, from $9.3 million at
June 30, 1998 to $7.6 million at December 31, 1998. The decrease was due
primarily to the purchase of $1.8 million of treasury stock during the six
months ended December 31, 1998. Unrealized loss on securities available-for-
sale, net of deferred income tax decreased $51,000 for the six months ended
December 31, 1998. In addition, net income for the six months ended December
31, 1998 was $146,000.
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 $362,000 at December 31, 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 December 31, 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>
DECEMBER 31, JUNE 30,
1998 1998
---- ----
(In thousands)
<S> <C> <C>
Non-accrual mortgage loans
delinquent more than 90 days $ 267 $ 344
Non-accrual other loans
delinquent more than 90 days 95 151
------- ------
Total non-performing loans $ 362 $ 495
Real estate owned and in-
substance foreclosed loans,
net of allowance 0 0
------- ------
Total non-performing assets $ 362 $ 495
======= ======
Non-performing loans to
total loans 1.05% 1.39%
======= ======
Non-performing assets to
total assets 0.51% 0.65%
======= ======
Allowance for loan losses
to non-performing loans 137.57% 65.45%
======= ======
</TABLE>
14
<PAGE>
RESULTS OF OPERATIONS
Comparisons of quarterly results in this section are between the three
month periods ended December 31, 1998, and December 31, 1997 and between the six
month periods then ended.
GENERAL
Net income for the quarter ended December 31, 1998 was $64,000, a
decrease of $51,000 from the $115,000 net income for the quarter ended December
31, 1997. Net income for the six months ended December 31, 1998, was $146,000, a
decrease of $118,000, or 44.7% from the $264,000 net income for the comparable
period ended December 31, 1997. The decrease was due primarily to the increase
of provision for loan losses during the six month period ended December 31,
1998.
INTEREST INCOME
Interest income for the quarter ended December 31, 1998, was $1.3
million, an increase of $85,000, or 7.2%, compared to $1.2 million for the
quarter ended December 31, 1997. Interest income for the six months ended
December 31, 1998, was $2.6 million, an increase of $295,000 , or 12.9% as
compared to $2.3 million the six months ended December 31, 1997. Interest on
loans receivable increased $26,000, or 3.8%, from $685,000 for the quarter ended
December 31, 1997, to $711,000 for the quarter ended December 31, 1998. Interest
on loans receivable increased $114,000, or 8.6%, from $1.3 million for the six
months ended December 31, 1997, to $1.4 million for the six months ended
December 31, 1998. Interest on investment securities increased $23,000, or
20.5%, from $112,000 for the three months ended December 31, 1997, to $135,000
for the three months ended December 31, 1998. Interest on investment securities
increased $27,000, or 12.2%, from $221,000 for the six months ended December 31,
1997, to $248,000 for the six months ended December 31, 1998. Interest on
mortgage-backed and related securities increased $38,000, or 10.3%, from
$370,000 for the quarter ended December 31, 1997, to $408,000 for the quarter
ended December 31, 1998. Interest on mortgage-backed and related securities
increased $148,000, or 20.8%, from $711,000 for the six months ended December
31, 1997, to $859,000 for the six months ended December 31, 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 at December 31, 1998, as compared to December 31, 1997.
INTEREST EXPENSE
Interest expense for the quarter ended December 31, 1998 was $811,000
as compared to $723,000 for the quarter ended December 31, 1997, an increase of
$88,000, or 12.2%. Interest expense for the six months ended December 31, 1998,
was $1.7 million as compared to $1.4 million for the six months ended December
31, 1997, an increase of $299,000 or 21.5%. Interest on advances from FHLB was
$417,000 for the three months ended December 31, 1998, as compared to $321,000
for the same period ended December 31, 1997, an increase of $96,000 or 29.9%.
Interest on advances increased $304,000, or 51.6%, from $589,000 for the six
months ended December 31, 1997 to $893,000 for the six months ended December 31,
1998. The increase was due primarily to an increase in the average balance of
advances outstanding during the three and six month periods ended December 31,
1998, as compared to the three and six month periods ended December 31, 1997.
Interest on deposits remained fairly stable for the three month period ended
December 31, 1998, as compared to December 31, 1997.
NET INTEREST INCOME
Net interest income before provisions for loan losses was $455,000 for
the quarter ended December 31, 1998, as compared to $458,000 for the quarter
ended December 31, 1997, a decrease of $3,000, or .7%. Net interest income
before provisions for loan losses was $895,000 for the six months ended December
31, 1998, a decrease of $4,000, or .4%, as compared to $899,000 for the six
months ended December 31, 1997.
15
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses increased $83,000 for the three months
ended December 31, 1998, as compared to the three months ended December 31,
1997. The provision for loan losses increased $176,000 for the six months ended
December 31, 1998, as compared to the six months ended December 31, 1997. During
fiscal years ending June 30, 1996 and 1997, the Bank purchased $1.4 million of
FHA Title 1 Home Loans. As of December 31, 1998, the current book value is
$771,000, reflecting charge offs of three loans totaling $67,000, scheduled
repayments and prepayments of principal. Recently, the Bank was notified by the
servicer of the loans that the reserve established by the servicer 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. After further evaluation, an
additional provision was recorded for $143,000 as of December 31, 1998.
NONINTEREST INCOME
Noninterest income was $88,000 for the quarter ended December 31, 1998
as compared to $96,000 for the quarter ended December 31, 1997, a decrease of
$8,000, or 8.3%. Noninterest income was $163,000 for the six months ended
December 31, 1998 as compared to $168,000 for the six months ended December 31,
1997, a decrease of $3,000, or 1.8%. The decreases were a result of a decrease
in gain on sales of mortgage backed securities from $35,000 for the quarter
ended December 31, 1997, to $19,000 for the quarter ended December 31, 1998, a
decrease of $16,000, or 45.7%. For the six months ended December 31, 1997, gain
on sales of mortgage backed securities was $43,000 as compared to $28,000 for
the six months ended December 31, 1998, a decrease of $15,000, or 34.9%. In
addition, other noninterest income increased $11,000, or 157.1%, from $7,000 for
the quarter ended December 31, 1997, to $18,000 for the quarter ended December
31, 1998. For the six months ended December 31, 1998, noninterest income was
$31, 000 as compared to $16,000 for the six months ended December 31, 1997, an
increase of $15,000, or 93.8%. The increase in noninterest income was primarily
due to an increase in late fees on loans and loan fees earned.
NONINTEREST EXPENSE
Noninterest expense was $276,000 for the quarter ended December 31,
1998, a decrease of $27,000, or 8.9%, compared to $303,000 for the quarter ended
December 31, 1997. The decrease for the quarter ended December 31, 1998 was
primarily due to a decrease in the amount of compensation expenses as compared
to the same period ended December 31, 1997. Compensation and benefits expense
decreased $22,000, or 13.2%, from $167,000 for the quarter ended December 31,
1997, to $145,000 for the quarter ended December 31, 1998. For the six months
ended December 31, 1998, compensation and benefits expense was $320,000 as
compared to $337,000 for the same period ended December 31, 1997, a decrease of
$17,000, or 5%. For the six months ended December 31, 1998, noninterest expense
was $566,000 as compared to $559,000 for the six months ended December 31, 1997,
an increase of $7,000, or 1.3%. The increase for the six months ended December
31, 1998, was primarily due the the $7,000, or 22.9% increase in other
noninterest expense for the six months ended December 31, 1998.
INCOME TAX
The provision for income taxes decreased $16,000, or 22.2%, from
$72,000 for the quarter ended December 31, 1997, to $56,000 for the quarter
ended December 31, 1998. The provision for income taxes decreased $74,000, or
41.1%, from $180,000 for the six months ended December 31, 1997, to $106,000 for
the six months ended December 31, 1998. The decrease is due to decreases in
income for the periods.
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
(A) On November 17, 1998, the Company held its Annual Meeting of
Stockholders.
(B) Election of Directors
Broker
Nominee For Against Withheld Non-Votes
------- --- ------- -------- ---------
Larry R. Johnson 428,189 -0- -0- -0-
J. Michael Palmer 428,189 -0- -0- -0-
The terms of office of Directors Edward P. Milbank, Robert T.
Fairweather, Armand J. Peterson, and Earle S. Teegarden, Jr continued
after the Annual Meeting.
(C) Other Matters voted on at the Annual Meeting
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; No reports on Form 8-K have been filed during
the quarter for which this report is filed.
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 February 11, 1999 /s/ Earle S. Teegarden, Jr.
-------------------------------------
Earle S. Teegarden, Jr., President
Chief Executive Officer, Chief Financial
Officer and Director
Dated February 11, 1999 /s/ Mark D. Buntin
-------------------------------------
Mark D. Buntin
(Principal Financial Officer)
18
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
QUARTER ENDED
DEC. 31, 1998
-------------
<S> <C>
1. Net income $ 64,000
==========
2. Weighted average common shares outstanding 438,421
==========
3. Basic earnings per share $ .21
==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1998
<CASH> 586
<INT-BEARING-DEPOSITS> 1,483
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 31,218
<INVESTMENTS-CARRYING> 245
<INVESTMENTS-MARKET> 245
<LOANS> 34,527
<ALLOWANCE> 498
<TOTAL-ASSETS> 70,378
<DEPOSITS> 35,693
<SHORT-TERM> 14,100
<LIABILITIES-OTHER> 468
<LONG-TERM> 12,532
0
0
<COMMON> 6
<OTHER-SE> 7,549
<TOTAL-LIABILITIES-AND-EQUITY> 70,378
<INTEREST-LOAN> 1,444
<INTEREST-INVEST> 1,107
<INTEREST-OTHER> 32
<INTEREST-TOTAL> 2,583
<INTEREST-DEPOSIT> 795
<INTEREST-EXPENSE> 1,688
<INTEREST-INCOME-NET> 895
<LOAN-LOSSES> 240
<SECURITIES-GAINS> 28
<EXPENSE-OTHER> 566
<INCOME-PRETAX> 252
<INCOME-PRE-EXTRAORDINARY> 252
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
<YIELD-ACTUAL> .072
<LOANS-NON> 362
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 324
<CHARGE-OFFS> 68
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 498
<ALLOWANCE-DOMESTIC> 498
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
