U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] 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 0-22951
LANDMARK FINANCIAL CORP.
-----------------------
(Exact name of Registrant as specified in its Charter)
Delaware 16-1531343
- ----------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
211 Erie Boulevard, Canajoharie, New York 13317
- -------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 673-2012
--------------
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.
X Yes No
---- ----
As of September 30, 1998, there were 152,000 shares of the Registrant's
common stock, par value $0.10 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes X No
--- ---
<PAGE>
LANDMARK FINANCIAL CORP. AND SUBSIDIARY
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition at September 30,
1998, (unaudited) and March 31,1998.................................1
Consolidated Statements of Operations for the three months and six
months ended September 30, 1998 and 1997, (unaudited)...............2
Consolidated Statement of Changes In Stockholders' Equity for the
six months ended September 30, 1998 (unaudited).....................3
Consolidated Statements of Cash Flows for the six months ended
September 30, 1998 and 1997 (unaudited).............................4
Notes to Consolidated Financial Statements..........................5
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations...........................................7
PART II - OTHER INFORMATION...............................................14
SIGNATURES................................................................16
<PAGE>
Landmark Financial Corporation and Subsidiary
Consolidated Statements of Financial Condition
September 30,1998 and March 31, 1998
September 30, 1998 March 31, 1998
------------------ --------------
(Unaudited)
Assets
Cash 398,697 $40,236
Interest Bearing Deposits 260,032 1,490,000
Investment Securities,
(Available For Sale) 1,307,368 1,103,916
Mortgage-Backed Securities,
(Held To Maturity) 52,697 74,080
Loans Receivable, Net 16,111,013 13,640,142
Accrued Interest Receivable 101,307 86,143
Stock In Federal Home Loan Bank, At Cost 87,400 87,400
Premises And Equipment, At Cost
Less Accumulated Depreciation 506,632
197,234
Deferred Tax Asset 14,669 7,100
Foreclosed Real Estate 78,696 0
Other Assets 128,564 84,787
------- ------
Total Assets $19,047,075 $16,811,038
Liabilities And Stockholders' Equity
Accounts Payable 3,299 3,851
Deposits 16,922,191 14,628,856
Accrued Interest On Deposits 81 0
Advance Payments By Borrowers For Taxes
And Insurance 42,452 97,453
Accrued Expenses And Other Liabilities 17,275 21,523
------ ------
Total Liabilities $16,985,298 $14,751,683
Stockholders' Equity:
Preferred Stock, $0.10 Par Value Per Share:
100,000 Shares Authorized; None Issued 0 0
Common Stock, $0.10 Par Value Per Share:
152,000 Shares Authorized;
152,000 Issued and Outstanding 15,200 15,200
Additional Paid-In Capital 1,192,833 1,192,833
Retained Earnings,
Substantially Restricted 939,283 963,752
Unrealized Gain On Securities
Available For Sale, Net 27,954 5,036
Unearned ESOP Shares (113.493) (117,466)
--------- ---------
Total Stockholders' Equity $ 2,061,777 $2,059,355
Total Liabilities and
Stockholders' Equity $19,047,075 $16,811,038
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
Landmark Financial Corporation and Subsidiary
Consolidated Statements of Operations
September 30, 1998
(Unaudited)
For the Three Months Ended 9/30 For the Six Months Ended 9/30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $347,233 $308,924 $662,390 $541,530
Mortgage-backed securities 917 1,799 2,266 4,454
Investments 37,167 25,861 84,794 36,820
------ ------ ------ ------
Total interest expense 385,317 336,584 749,440 582,804
Interest expense:
Deposits 222,855 201,889 433,045 341,388
------- ------- ------- -------
Total interest expense 222,855 201,889 433,045 341,388
------- ------- ------- -------
Net interest income 162,462 134,695 316,395 241,416
Provision for losses on loans 11,721 12,000 30,168 12,000
------ ------ ------ ------
Net interest income after provision
for losses on loans 150,741 122,695 286,227 229,416
Non-interest income:
Late charges and other loan fees 4,159 14,005 11,155 22,688
Gain on sale of investment securities
and mortgage-backed securities 0 0 0 12,411
Commissions and other fees 0 0 2,546 0
Other 3,632 (5,809) 7,645 (2,437)
----- ------- ----- -------
Total non-interest income 7,791 8,196 21,346 32,662
Non-interest expense:
Compensation and employee benefits 80,951 74,728 162,558 130,649
Office buildings and equipment 8,738 11,575 15,200 16,258
Data processing 9,337 9,070 19,273 17,259
Advertising 2,040 4,823 3,677 6,443
Deposit insurance premiums 3,437 1,609 7,284 2,952
Other 65,744 40,301 130,524 96,347
Amortization of cost in excess of
fair Value of net assets acquired (752) (2,594) 2,681 949
Total non-interest expense 169,495 139,512 341,197 270,857
Income (loss) before income taxes (10,963) (8,621) (33,624) (8,779)
Income taxes (3,000) (2,300) (9,155) (2,300)
------- ------- ------- -------
Net income (loss) ($7,963) ($6,321) ($24,469) ($6,479)
Earnings per share ($0.06) N.A. ($0.17) N.A.
Average common and common
equivalent shares outstanding 140,550 0 140,448 0
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
Landmark Financial Corporation and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended September 30, 1998
(Unaudited)
<TABLE>
Additional Accumulated Unearned Total
Common paid-in Retained other comprehensive ESOP Stockholders'
Stock capital earnings income Shares Equity
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1998 $15,200 $1,192,833 $963,752 $5,036 ($117,466) $2,059.355
Comprehensive Income
Net income (loss) (24,469) (24,469)
Change in unrealized gain on
securities available for sale, net
of deferred income taxes of $6,000 22,918 22,918
ESOP shares earned 3,973 3,973
Total Comprehensive Income 2,422
- ------------------------------------------------------------------------------------------------------------------------
Balance at September 30,1998 $15,200 $1,192,833 $939,283 $27,954 ($113,493) $2,061,777
</TABLE>
See accompanying notes to audited consolidated financial statements.
<PAGE>
Landmark Financial Corporation and Subsidiary
Consolidated Statements of Cash Flows
Six Month Ended September 30,1998 and 1997
(Unaudited)
<TABLE>
September 30, September 30,
1998 1997
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
Net income (loss) ($24,469) ($6,479)
Adjustments to reconcile net income to net
cash provided by (used in) Operating activities
Depreciation 9,269 8,472
Amortization (accretion), net 2,681 948
Provision for loan losses 30,168 12,000
Deferred income taxes (7,569) (16,300)
Decrease (increase) in
Accrued interest receivable (15,164) (19,596)
ESOP Loan 3,973 0
Trading account securities 0 69,324
Intangible assets, conversion costs 0 (187,961)
Real Estate Foreclosed (78,696) 0
Other assets (43,777) (46,749)
Increase (decrease) in
Accounts payable (552) 28,200
Accrued interest payable 81 3,029
Other liabilities (4,248) 19,488
------- ------
(128,303) (135,624)
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
Net increase in loans receivable (2,501,039) (4,528,022)
Proceeds from sale of held-to-maturity securities 0 235,533
Proceeds from disposition of available-for-sale securities 500,000 0
Proceeds from sale of investments required by law 0 (13,100)
Purchase of available-for-sale securities (710,644) (401,185)
Proceeds from principal repayments of
mortgage-backed securities 48,812 23,972
Purchase o premises and equipment (318,667) (10,764)
--------- --------
(2,981,538) (4,703,566)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Net increase (decrease) in deposits 2,293,335 4,276,751
Increase in deposits, stock subscriptions (restricted) 0 768,780
Increase (decrease) in advances from borrowing
taxes and insurance (55,001) 5,786
-------- -----
2,238,334 5,051,317
Net increase (decrease) in cash (871,507) 212,127
CASH, beginning of year 1,530,236 709,458
CASH, end of year $658,729 $921,585
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Income taxes 0 900
Interest $433,045 $338,359
Increase (decrease) on unrealized gain
on securities available-for-sale 28,918 5,564
Transfer of deposits to
Deposits, stock subscriptions (restricted) 0 216,500
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
LANDMARK FINANCIAL CORP. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(Unaudited)
September 30,1998
(1) Landmark Financial Corp. and Subsidiary
---------------------------------------
Landmark Financial Corp. (the Company) was incorporated under the laws of
the state of Delaware for the purpose of becoming the savings and loan
holding company of Landmark Community Bank, a Savings Bank (the Bank) in
connection with the Bank's conversion from a federally chartered
mutual savings bank to a federally chartered stock savings bank, pursuant
to its Plan of Conversion. On August 12, 1997, the Company commenced a
Subscription and Community Offering of its shares in connection with the
conversion of the Bank (the Offering). The Offering was consummated and
the Company acquired the Bank on November 13, 1997. The Company had no
assets prior to the conversion and acquisition on November 13, 1997.
The accompanying consolidated financial statements as of and for the
three months and six months ended September 30, 1998, and the statements
of financial condition as of September 30 and March 31, 1998,
respectively include the accounts of the Company and the Bank. The
accompanying statements of operations and cash flows for the three months
and six months ended September 30, 1997, respectively, are of the Bank.
(2) Basis of Preparation
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB. To the extent
that information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in or
consistent with the audited financial statements incorporated by
reference in the Company's Annual Report on Form 10-KSB for the year
ended March 31, 1998, such information and footnotes have not been
duplicated herein. In the opinion of management, all adjustments
consisting only of normal recurring accruals which are necessary for the
fair presentation of the interim financial statements have been included.
The consolidated statements of operations for the three month period and
six month period ended September 30, 1998 are not necessarily indicative
of the results which may be expected for the entire year. The March 31,
1998 balance sheet has been derived from the audited financial statements
as of that date.
<PAGE>
LANDMARK FINANCIAL CORP. AND SUBSIDIARY
Notes To Consolidated Financial Statements
(Unaudited)
September 30, 1998
(3) Earnings Per Share
------------------
On November 13, 1997, 152,000 shares of the Company's stock were
issued, including 12,160 shares issued to the Employees Stock Ownership
Plan (ESOP). Income per share amounts for the three month and six month
periods ended September 30, 1998 are based upon 140,651 shares exclusive
of 11,349 unearned shares issued to the ESOP, as though those shares were
outstanding for the entire period.
(4) Stockholders' Equity and Stock Conversion
-----------------------------------------
The Bank converted from a federally chartered mutual savings bank to a
federally chartered stock savings bank pursuant to its Plan of Conversion
which was approved by the Bank's members on September 23, 1997. The
conversion was effective on November 23, 1997 and resulted in the
issuance of 152,000 shares of common stock (par value $0.10) at $10.00
per share for a gross sales price of $1,520,000. Cost related to
conversion (primarily underwriters' commissions, printing and
professional fees) aggregated $311,967 and were deducted to arrive at the
net proceeds of $1,086,433 net of the ESOP loan. The company established
an employee stock ownership trust which purchased 12,160 shares of common
stock of the Company at the issuance price of $10.00 per share with funds
borrowed from the Bank.
(5) Employee Stock Ownership Plan
-----------------------------
All employees meeting age and service requirements are eligible to
participate in an ESOP established on November 23, 1997. Contributions
made by the Bank to the ESOP are allocated to participants by a formula
based on compensation. Participant benefits become 100% vested after
five years. ESOP expenses for the three and six month periods ended
September 30, 1998 were $1,946 and $3,973, respectively. There was no
ESOP expense for the period ended September 30, 1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the financial condition of Landmark
Financial Corp. and its wholly owned subsidiary, Landmark Community Bank, a
Savings Bank, (collectively the Bank) at September 30, 1998 to the financial
condition at March 31, 1998, its fiscal year-end, and the results of
operations for the three month and six month periods ended September 30, 1998,
with the same periods in fiscal 1997. This discussion should be read in
conjunction with the interim financial statements and notes which are included
herein.
During August and September 1997, the Office of Thrift Supervision (OTS)
conducted its previously scheduled routine safety and soundness on-sight
examination of the Bank. During the course of its examination OTS examiners
raised a number of concerns and noted certain deficiencies in the Bank's
operations. As a result of the examination the Bank had agreed with the OTS
not to originate any new consumer or commercial loans and to limit one-to-four
family loan origination's to no more than $200,000 per month. Management has
addressed the concerns of the OTS and full operational lending authority was
restored effective February 10, 1998.
General
- -------
Landmark Financial Corp. was organized as a Delaware corporation in June 1997
to acquire all of the capital stock issued by Landmark Community Bank upon its
conversion from the mutual to stock form of ownership. Landmark Community
Bank was founded in 1925 as a New York chartered savings and loan association
located in Canajoharie, New York. In 1997, its members voted to convert to a
federal charter. The business of the holding company consists primarily of
the business of the Bank. The Bank conducts its business through its main
office located at 211 Erie Blvd., Canajoharie, Montgomery County, New York.
The Bank has been, and intends to continue to be, a community oriented
financial institution offering selected financial services to meet the needs
of the communities it serves. The Bank attracts deposits from the general
public and historically has used such deposits, together with other funds,
primarily to originate one-to-four family residential mortgage loans,
construction and land loans for single- family residential properties, and
consumer loans consisting primarily of loans secured by automobiles. While
the Bank's primary business has been that of a traditional thrift
institution, originating loans in its primary market area for retention in its
portfolio, the Bank also has been an active participant in the origination of
consumer loans primarily for the purchase of automobiles.
The most significant factors influencing the operations of the Bank and other
financial institutions include general economic conditions, competition in the
local market place and the related monetary and fiscal policies of agencies
that regulate financial institutions. More specifically, the cost of funds
primarily consisting of insured deposits is influenced by interest rates on
competing investments and general market rates of interest, while lending
activities are influenced by the demand for real estate financing and other
types of loans, which in turn is affected by the interest rates at which such
loans may be offered and other factors affecting loan demand and funds
availability.
<PAGE>
Financial Condition
- --------------------
Total assets increased $2.24 million, or 13.3%, to $19.05 million at September
30, 1998 from $16.81 million at March 31, 1998. The increase in assets is
primarily due to increases in loans receivable, premises and equipment, and
investment securities, partially offset by a decrease in interest bearing
deposits.
Loans receivable, net, increased by $2.47 million, or 18.1%, to $16.11 million
at September 30, 1998 from $13.64 million at March 31, 1998, primarily due to
increases in consumer loans of $1.58 million, an increase in commercial loans
of $375,000, and an increase in one-to-four family portfolio loans of
$518,000.
Premises and equipment increased $309,000. On August 24, 1998 Landmark
Community Bank moved to an entirely new facility owned by the bank and located
at 211 Erie Blvd., Canajoharie, NY.
Investment securities increased $202,000, or 18.3% to $1.31 million at
September 30, 1998 from $1.10 million at March 31, 1998. Interest bearing
deposits decreased $1.23 million to partially fund the growth in the above
mentioned assets.
Deposits increased $2.29 million, or 15.7%, to $16.92 million at September
30,1998 from $14.63 million at March 31, 1998. The increase in deposits is
primarily attributable to an increase in local deposits of $2.07 million held
by the bank in the form of certificates of deposit, and an increase in DDA
checking account deposits of $396,000. Savings accounts decreased $163,000.
Total equity increased $1,302 or 0.06%, to $2,061,657 at September 30, 1998
from $2,059,355 at March 31, 1998, primarily due to an increase in the
unrealized gain of $22,918 on Available-for-Sale Securities, which was offset
by a net loss for the six months ended September 30, 1998 of $25,589 and the
allocation of $3,973 for ESOP shares.
<PAGE>
Comparison of Operating Results for the Three Months and Six Months
Ended September 30, 1998 and the Three Months and Six Months Ended
September 30, 1997
-------------------------------------------------------------------
Performance Summary. The Company's net income decreased $1,642 to a loss of
$7,963 for the three months ended September 30, 1998, compared to a net loss
of $6,321 for the three months ended September 30, 1997. The increase in net
loss for the three months ended September 30, 1998 as compared to the same
period in 1997 is primarily due to an increase in non-interest expense of
$29,983 which was partially offset by an increase in net interest income of
$27,767. The net loss increased $17,990 to $24,469 for the six months ended
September 30, 1998 as compared to a loss of $6,479 for the same period in
fiscal year 1997. The decrease in earnings is primarily due to the increase
in non-interest expense of $70,340 and a decrease in gain on sale of
investment securities of $12,411, partially offset by the increase in net
interest income of $74,979.
Net Interest Income. The Company's net interest income increased $27,767, or
20.6%, to $162,462 for the three months ended September 30, 1998, from
$134,695 for the three months ended September 30, 1997. For the six months
ended September 30, 1998, net interest income increased $74,979, or 31.1%,
from $241,416 for the same period in fiscal 1997. The increases in net
interest income reflect an increase of $48,733 in interest income and a
corresponding increase of $20,966 in interest expense for the three months
ended September 30, 1998 as compared to the same period in 1997, and an
increase of $166,636 in interest income and an increase of $91,657 in interest
expense for the six months ended September 30, 1998 as compared to the same
period in 1997. The increase in interest income reflects increased balances
of loans receivable, primarily consumer auto loans and one-to-four family
mortgages. Interest expense increased primarily due to the increase in
deposits.
Provision for Loan Losses. During the three months ended September 30, 1998,
the Bank charged $11,721 against earnings as a provision for loan losses
compared to a provision of $12,000 charged against earnings for the three
months ended September 30, 1997. For the six months ended September 30, 1998
the Bank charged $30,168 against earnings as a provision for losses compared
to $12,000 charged against earnings for the six months ended September 30,
1997. The allowance for loan losses at September 30, 1998 is .89% of loans
receivable, as compared to .89% of loans receivable, at March 31, 1998. Total
non-performing loans at September 30, 1998 are $4,000, or .02% of loans
receivable, as compared to total non-performing loans at March 31, 1998 of
144,000 or 1.05% of loans receivable.
Management regularly reviews the loan portfolio, including problem loans, and
changes in the relative makeup of the loan portfolio to determine whether any
loans require classification or the establishment of additional reserves.
Management will continue to monitor its allowance for loan losses and make
future additions to the allowance as economic conditions dictate. Although
the Bank maintains its allowance for loan losses at a level which it considers
to be adequate to provide for potential losses, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods.
Non-interest Income. For the three months ended September 30, 1998,
non-interest income decreased $405 or 4.9%, to $7,791 from $8,196 for the same
period in 1997. For the six months ended September 30, 1998, non-interest
income decreased $11,316 or 34.6% from $32,662 for the same period in 1997.
The decrease is primarily due to gain realized in the six months ended
September 30, 1997 on the sale of trading investment securities in the amount
of $12,411. No investment securities were sold in the six months ended
September 30, 1998, although there are unrealized gains of $27,954 reflected
on the Statement of Financial Condition for September 30, 1998 compared to
$5,036 on March 31, 1998.
<PAGE>
Non-interest Expense. Non-interest expense increased $29,983 or 21.5%, to
$169,495 for the three months ended September 30, 1998 from $139,512 for the
same period in 1997. The increase was primarily due to increases in employee
compensation and related benefits and increases in other expenses primarily
related to the increased operating expenses of a stock savings bank.
Non-interest expense increased $70,340 or 26.0% for the six months ended
September 30, 1998 from $270,857 in the same period in 1997, primarily due to
the increases in compensation and expenses related to a stock savings bank.
Income Taxes. Income tax expense, (benefit) decreased $700 to ($3,000) for
the three months end September 30, 1998, from ($2,300) for the same period in
1997. For the six months ended September 30, 1998 the tax benefit was
($9,155) compared to ($2,300) for the six months ended September 30, 1997.
Non-performing Assets
- ---------------------
On September 30, 1998, non-performing assets were $106,000 compared to
$144,000 on March 31, 1998. The non-performing assets consisted of loans of
$4,000 and repossessed or foreclosed assets of $102,000. The balance of the
Bank's allowance for loan losses was $144,677 or 136.5% of non-performing
assets and 3,616.7% of non-performing loans as of September 30, 1998. Loans
are considered non-performing when the collection of principal and/or interest
is not probable, or in the event payments are more than ninety days
delinquent.
Capital Resources
- -----------------
The Bank is subject to three capital to asset requirements in accordance with
OTS regulations. The following table is a summary of the Bank's regulatory
capital requirements versus actual capital as of September 30, 1998 and March
31, 1998, respectively:
<TABLE>
September 30, 1998
------------------
Actual Required Excess
amount/percent amount/percent amount/percent
-------------- -------------- --------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible $2,026 10.75% $283 1.50% $1,743 9.23%
Core leverage capital $2,026 10.75% $75 44.00% $1,272 6.77%
Risk-based capital $2,171 17.45% $995 8.00% $1,176 9.45%
</TABLE>
March 31, 1998
--------------
<TABLE>
Actual Required Excess
amount/percent amount/percent amount/percent
-------------- -------------- --------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible $2,054 12.22% $252 1.50% $1,802 10.72%
Core leverage capital $2,054 12.22% $674 4.00% $1,380 8.21%
Risk-based capital $2,176 21.88% $799 8.00% $1,377 13.85%
</TABLE>
<PAGE>
Liquidity
- ---------
The Bank's principal sources of funds are deposits, principal and interest
payments on loans, deposits in other insured institutions and investment
securities. While scheduled loan repayments and maturing investments are
relatively predictable, deposit flows and early loan prepayments are more
influenced by interest rates, general economic conditions and competition.
Additional sources of funds may be obtained from the FHLB of New York by
utilizing numerous available products to meet funding needs.
The Bank is required to maintain minimum levels of liquid assets as defined by
regulations. The required percentage is currently 5.0% of net withdrawable
savings deposits and borrowings payable on demand or in one year or less. The
Bank has maintained its liquidity ratio at levels exceeding the minimum
requirement. The eligible liquidity ratios at September 30, 1998 and March
31, 1998 were 16.14% and 18.90%, respectively.
In light of the competition for deposits, the Bank may utilize the funding
source of the FHLB to meet demand in accordance with the Bank's growth plans.
The wholesale funding sources may allow the Bank to obtain a lower cost of
funding and create a more efficient liability match to the respective assets
being funded.
For the purpose of the cash flow statement, all short-term investments with a
maturity of three months or less at date of purchase are considered cash
equivalents. Cash and cash equivalents for the periods ended September 30,
1998 and March 31, 1998 were $658,729 and $1,530,236, respectively. The
decrease was primarily due to the fact that an increase in deposits of $2.2
million was offset by an increase in loans receivable of $2.5 million and
increases in Premises and Equipment net of accumulated depreciation of
$309,000, and investment securities of $202,000.
Net cash provided (used) by operating activities decreased to $(128,303) at
September 30, 1998, from $(135,624) at September 30, 1997.
Year 2000
- ---------
The Bank has conducted a review of its computer systems in order to determine
which systems could be affected by the "Year 2000" issue, and developed an
implementation plan to resolve any identified problem. The testing phase of
the implementation plan is currently under way. The "Year 2000" problem is
the result of computer programs that were written using a two digit field
rather than a four digit field to define the year. For example, programs that
have date-sensitive fields may recognize a date using "00" as the year 1900
rather than the year 2000. The results of this programming error could be
system failure or miscalculation. Management believes that with modifications
to existing software and by converting to new hardware, the "Year 2000"
problem will not pose significant operational problems for the Bank. Given
the Bank's interdependence on a third-party service provider, the internal
costs related to the Bank's Year 2000 efforts will consist primarily of
accelerating various hardware and software upgrades which generally would have
been incurred in the normal course of business, and testing various
information systems. The upgrades for hardware and software will be
substantially in place by December 31, 1998. Management believes that the
internal costs necessary to address the "Year 2000" issue have been identified
and these costs have been estimated to be approximately $20,000. Management
cannot guarantee that any third-party service provider will be Year 2000 ready
other than through assurances provided from the third party service provider
to the Company. All third party providers have been contacted and the Company
has received such assurances.
<PAGE>
Recent Developments
- -------------------
FASB Statement on Employer Disclosures about Pensions and Post-retirement
Benefits In February, 1998, the FASB issued SFAS No. 132 which standardizes
the disclosure requirements for pensions and other post- retirement benefits;
requires additional information on changes in the benefit obligations and fair
values of plan assets; and eliminates certain present disclosure requirements.
The Statement does not change the measurement or recognition requirements for
post-retirement benefits. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997 and, accordingly, will be adopted by the
Company in the year ending March 31, 1999. Management does not expect that
this standard will significantly affect the Company's financial reporting.
FASB Statement on Derivatives and Hedging Activities - In June, 1998, the FASB
issued SFAS No. 133 which establishes accounting and reporting standards for
derivative instruments and for hedging activities. The Statement requires
that an entity recognize all derivatives as either assets or liabilities in
the balance sheet at fair value. If certain conditions are met, a derivative
may be specifically designated as a fair value hedge, a cash flow hedge, or a
foreign currency hedge. Entities may reclassify securities from the held-to-
maturity category to the available-for-sale category at the time adopting SFAS
No. 133. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999 and, accordingly, would apply to the Company
beginning on April 1, 2000. The Company plans to adopt the standard at that
time and does not presently intend to reclassify securities between
categories. The Company has not engaged in derivatives and hedging activities
covered by the new standard, and does not expect to do so in the foreseeable
future. Accordingly, SFAS No. 133 is not expected to have a material impact
on the Company's financial statements.
FASB Statement on Mortgage-Backed Securities Retained after the Securitization
Of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise - In October,
1998 the FASB issued SFAS No. 134 which amends SFAS No. 65 "Accounting for
Certain Mortgage Banking Activities". Statement No. 65, as amended by
Statement No. 115 and Statement No. 125, required that after securitization of
a mortgage loan held for sale, a mortgage banking enterprise classify the
resulting security as a trading security. Statement No. 134 amends this
section to require that after the securitization of mortgage loans held for
sale, the entity classify the resulting mortgage-backed security or other
retained interest based on its ability and intent to sell or hold those
investments. SFAS 134 is effective for the first quarter beginning after
December 15, 1998 and accordingly would apply to the Company for the year
ending March 31, 1999. The Company has not engaged in retaining securities
after the securitization of its mortgage loans held for sale and does not
expect to do so in the foreseeable future. Accordingly, SFAS No. 134 is not
expected to have a material impact on the Company's financial statements.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
-----------------
From time to time, the Company is involved as a plaintiff or defendant in
various legal actions incident to its business. None of these actions
individually or in the aggregate is believed to be material to the financial
condition of the Company.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual meeting of shareholders was held July 22, 1998. There were four
matters submitted to a vote of the shareholders of record as of June 12, 1998:
1) Election of three directors; nominees were John R. Francisco,
Gordon E. Coleman, and Carl S. Salmon 111.
For Withheld
John R. Francisco 133,474 4,356
Gordon E. Coleman 133,474 4,356
Carl S. Salmon III 133,474 4,356
2) Adoption of the Landmark Financial Corp. 1998 Stock Option
Plan.
For Against Abstain
----- ------- -------
Number of Votes 93,198 9,700 2,100
3) Adoption of the Landmark Financial Corp. 1998 Recognition and
Retention Plan.
For Against Abstain
----- ------- -------
Number of Votes 80,699 22,299 2,000
4) Ratification of the appointment of Harvazinski & Montanye, LLP
as auditors of the Company for the fiscal year ending March 31,
1999.
For Against Abstain
----- ------- -------
Number of Votes 132,630 4,400 500
<PAGE>
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Financial Data Schedule Attached
<PAGE>
SIGNATURES
----------
Under 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.
LANDMARK FINANCIAL CORP.
------------------------
Date: 11/02/98
/s/Gordon E. Coleman
-------------------------------------
Gordon E. Coleman
President and Chief Executive Officer
(Duly Authorized Officer)
/s/Paul S. Hofmann
Date: 11/02/98 -------------------------------------
Paul S. Hofmann
Vice President and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
Landmark Financial Corporation and Subsidiary
Financial Data Schedule
Six Months Ended September 30, 1998
(Unaudited)
Multiplier: 1,000
Period Type 6 months
Fiscal year-end 03/31/99
Period-end 09/30/98
Cash 398.7
Interest-bearing deposits 260.0
Federal fiends sold-purchased securities for resale 0.0
Trading account assets 0.0
Investment and mortgage-backed securities held for sale 1,307.4
Investment and mortgage-backed securities held to
maturity - carrying value 52.7
Investment and mortgage-backed securities held to
maturity - market value 52.8
Loans 16,255.7
Allowance for losses (144.7)
-----
Total assets 19,047.1
Deposits 16,922.2
Short-term borrowings 0.0
Other liabilities 63.2
Long-term debt 0.0
Common stocks 15.2
Preferred stock -mandatory redemption 0.0
Preferred stock - no mandatory redemption 0.0
Other stockholders' equity 2,046.5
Total Liabilities and stockholders' equity 19,047.1
Interest and fees on loans 662.4
Interest and dividends on investments 87.0
Other interest income 0.0
Total interest income 749.4
Interest on deposits 433.0
Total interest expense 433.0
Net interest income 316.4
<PAGE>
Landmark Financial Corporation and Subsidiary
Financial Date Schedule
Six Months Ended September 30, 1998
(Unaudited)
(Page 2)
Provision for loan losses (30.2)
Investment securities gains/losses 0.0
Other expenses (342.3)
Income/loss before income tax (34.7)
Income/loss before extraordinary items (34.7)
Extraordinary items, less tax 0.0
Cumulative change in accounting principles 0.0
Net income or loss (25.6)
Earnings per share - primary (0.18)
Earnings per share - fully diluted (0.17)
Net yield - interest-earning assets - actual 3.17
Loans on non-accrual 4.0
Accruing loans past due 90 days or more 0.0
Troubled debt restructuring 0.0
Potential problem loans 70.9
Allowance for loan loss -beginning of period 122.0
Total charge-offs (7.4)
Total recoveries 0.0
Allowance for loan loss - end of period 144.7
Loan loss allowance allocated to domestic loans 0.0
Loan loss allowance allocated to foreign loans 0.0
Loan loss allowance - unallocated 144.7
