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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE A1CT OF 1934
For the quarterly period ended March 31, 2000
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 1-13605
EFC BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-4193304
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1695 Larkin Avenue, Elgin, Illinois 60123
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(Address of principal executive offices) (Zip Code)
(847) 741-3900
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changes since last
report)
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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 4,880,169 shares
of common stock, par value $0.01 per share, were outstanding as of May 10,
2000.
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EFC Bancorp, Inc.
Form 10-Q
For the Quarter Ended March 31, 2000
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999...................................1
Consolidated Statements of Income - For the Three Months
Ended March 31, 2000 and 1999..........................................2
Consolidated Statements of Cash Flows - For the Three
Months Ended March 31, 2000 and 1999...................................3
Notes to Consolidated Financial Statements.............................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................12
PART II: OTHER INFORMATION..............................................................13
Item 1. Legal Proceedings..............................................................13
Item 2. Changes in Securities and Use of Proceeds......................................13
Item 3. Defaults Upon Senior Securities................................................13
Item 4. Submission of Matters to a Vote of Security Holders............................13
Item 5. Other Information..............................................................14
Item 6. Exhibits and Reports on Form 8-K...............................................14
SIGNATURES...................................................................................15
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PART I. FINANCIAL INFORMATION
EFC BANCORP, INC.
MARCH 31, 2000
Item 1. FINANCIAL STATEMENTS.
EFC BANCORP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
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March 31, December 31,
Assets 2000 1999
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Cash and cash equivalents:
On hand and in banks $ 2,123,031 $ 6,839,710
Interest bearing deposits with financial institutions 10,652,756 15,333,885
Loans receivable, net 412,425,668 396,006,771
Mortgage-backed securities available-for-sale, at fair value 11,237,620 11,882,080
Investment securities available-for-sale, at fair value 69,188,071 61,079,696
Foreclosed real estate 325,939 168,145
Stock in Federal Home Loan Bank of Chicago, at cost 5,860,000 5,760,000
Accrued interest receivable 2,735,715 2,807,426
Office properties and equipment, net 8,789,740 8,640,410
Other assets 2,114,204 2,453,629
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Total assets $ 525,452,744 $ 510,971,752
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Liabilities and Stockholders' Equity
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Liabilities:
Deposits $ 336,040,724 $ 323,879,293
Borrowed money 117,200,000 115,200,000
Advance payments by borrowers for taxes and insurance 1,403,129 897,038
Income taxes payable 723,883 528,421
Accrued expenses and other liabilities 5,615,638 4,044,911
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Total liabilities 460,983,374 444,549,663
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Stockholders' Equity:
Preferred stock, par value $.01 per share, authorized 2,000,000 shares;
no shares issued - -
Common stock, par value $.01 per share, authorized 25,000,000 shares;
issued 7,491,434 shares 74,914 74,914
Additional paid-in capital 71,989,135 72,039,597
Treasury stock, at cost, 2,611,265 and 2,331,184 shares at March 31, 2000
and at December 31, 1999, respectively (30,528,058) (27,671,724)
Unearned employee stock ownership plan (ESOP), 509,417 and 519,406
shares at March 31, 2000 and December 31, 1999, respectively (7,617,102) (7,766,459)
Unearned stock award plan, 207,894 and 222,224 shares at
March 31, 2000 and December 31, 1999, respectively (2,312,821) (2,472,242)
Retained Earnings, substantially restricted 34,128,759 33,469,424
Accumulated other comprehensive loss (1,265,457) (1,251,421)
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Total stockholders' equity 64,469,370 66,422,089
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Commitments and contingencies - -
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Total liabilities and stockholders' equity $ 525,452,744 $ 510,971,752
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
1
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EFC BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
For the three months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
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2000 1999
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<S> <C> <C>
Interest income:
Loans secured by real estate $ 7,055,217 5,742,043
Other loans 569,730 310,639
Mortgage-backed securities available-for-sale 220,169 276,348
Investment securities available-for-sale and interest
bearing deposits with financial institutions 1,344,081 1,137,686
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Total interest income 9,189,197 7,466,716
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Interest expense:
Deposits 3,554,163 2,715,657
Borrowed money 1,554,303 811,523
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Total interest expense 5,108,466 3,527,180
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Net interest income before provision for loan losses 4,080,731 3,939,536
Provision for loan losses 60,000 45,000
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Net interest income after provision for loan losses 4,020,731 3,894,536
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Noninterest income:
Service fees 215,859 218,879
Real estate and insurance commissions 35,126 8,478
Other 14,801 9,194
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Total noninterest income 265,786 236,551
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Noninterest expense:
Compensation and benefits 1,419,016 1,368,983
Office building, net 108,576 92,190
Depreciation and repairs 226,581 207,274
Data processing 126,295 102,845
Federal insurance premium 16,366 40,278
NOW account operating expenses 111,271 62,589
Other 810,510 653,981
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Total noninterest expense 2,818,615 2,528,140
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Income before income taxes 1,467,902 1,602,947
Income tax expense 505,025 568,661
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Net income $ 962,877 1,034,286
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Earnings per share (basic and diluted) $ 0.21 0.16
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</TABLE>
See accompanying notes to consolidated financial statements.
2
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EFC BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited) For the three months ended
March 31, 2000 and 1999
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<CAPTION>
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2000 1999
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Cash flows from operating activities:
Net income $ 962,877 1,034,286
Adjustment to reconcile net income to net cash provided by
operating activities:
Amortization of premiums and discounts, net 8,940 24,171
Provision for loan losses 60,000 45,000
Stock award plan shares allocated 159,421 166,684
ESOP shares committed to be released 149,357 149,357
Change in fair value of ESOP shares (50,462) (46,067)
Depreciation of office properties and equipment 163,907 136,158
Decrease in accrued interest receivable and other assets, net 411,136 65,271
Increase in income taxes payable, accrued expenses
and other liabilities, net 2,325,927 1,427,445
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Net cash provided by operating activities 4,191,103 3,002,305
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Cash flows from investing activities:
Net increase in loans receivable (8,903,860) (8,142,649)
Purchases of loans receivable (7,789,967) (4,626,275)
Principal payments on mortgage-backed securities available-for-sale 642,223 2,714,205
Maturities of investment securities available-for-sale 6,370 9,009,530
Purchases of investment securities available-for-sale (8,144,456) (10,495,209)
Purchases of office properties and equipment (313,237) (236,665)
Purchases of stock in the Federal Home Loan Bank of Chicago (100,000) (425,160)
Proceeds from the sale of foreclosed real estate 57,136 -
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Net cash used in investing activities (24,545,791) (12,202,223)
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Cash flows from financing activities:
Cash dividends paid (348,217) -
Purchase of treasury stock (2,856,334) -
Net increase in deposits 12,161,431 289,524
Proceeds from borrowed money 45,000,000 8,500,000
Repayments on borrowed money (43,000,000) -
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Net cash provided by financing activities 10,956,880 8,789,524
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Net decrease in cash and cash equivalents (9,397,808) (410,394)
Cash and cash equivalents at beginning of period 22,173,595 23,279,906
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Cash and cash equivalents at end of period $ 12,775,787 22,869,512
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
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Item 1. FINANCIAL STATEMENTS, CONTINUED
EFC BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of EFC Bancorp, Inc. (the Company) and its wholly-owned subsidiary,
Elgin Financial Savings Bank (the Bank) and its wholly-owned subsidiary, Fox
Valley Service Corp.
In the opinion of the management of the Company, the accompanying
consolidated financial statements include all normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations for the periods presented. All significant intercompany transactions
have been eliminated in consolidation. These interim financial statements have
been prepared according to the rules and regulations of the Securities and
Exchange Commission and therefore certain information and footnote disclosures
normally included in financial statements presented in accordance with generally
accepted accounting principles have been condensed or omitted. The results of
operations for the interim periods are not necessarily indicative of the results
to be expected for the full year. It is suggested that the accompanying
unaudited consolidated financial statements be read in conjunction with the
Company's 1999 Annual Report on Form 10-K. Currently, other than investing in
various securities, the Company does not directly transact any material business
other than through the Bank. Accordingly, the discussion herein addresses the
operations of the Company as they are conducted through the Bank.
Note 2: COMPREHENSIVE INCOME
The Company's comprehensive income for the three month periods ended
March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
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Net income $ 962,877 1,034,286
Other comprehensive loss, net of tax:
Unrealized holding losses on
securities arising during the period (14,036) (429,365)
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Comprehensive income $ 948,841 604,921
========== ==========
</TABLE>
There were no sales of investment securities as of and for the three months
ended March 31, 2000 and 1999.
4
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Note 3: REORGANIZATION TO A STOCK CORPORATION
On August 12, 1997, the Board of Directors adopted a Plan of
Conversion, as amended pursuant to which the Bank converted (the Plan) from a
state chartered savings bank to a state chartered stock savings bank (the
Conversion). The Plan was approved by the regulatory authorities and the
members at a special meeting. EFC Bancorp, Inc. was formed by the Bank in
October 1997 and acquired 100% of the Bank's outstanding common stock in
connection with the Conversion. During 1997, the Bank changed its name to
Elgin Financial Savings Bank.
On April 3, 1998, the Bank completed the Conversion and the Company
completed the issuance and sale of 6,936,513 shares of its own common stock
(the Transaction), at a price of $10.00 per share, through an initial public
offering (IPO). The Company also contributed 554,921 shares of its common
stock, from authorized, but unissued shares, to a charitable foundation (the
Foundation) immediately following the conversion. The combined effect of the
net proceeds from the Transaction and the contribution to the Foundation
amounted to $72,769,326. The Company received net proceeds from the
Transaction of $67,220,130, after the reduction from gross proceeds of
$2,145,000 for IPO related expenses, which were initially deferred. On the
date of the Transaction, $12,490,054 of deposits and $56,875,076 of
nondepository stock subscription funds were transferred to stockholders'
equity and $37,258,531 of nondepository stock subscription funds were
subsequently returned to subscribers; also subsequent to the Transaction, the
trustee for the ESOP purchased, through a $8,961,298 loan from the Company,
599,314 shares of common stock in the open market.
The Bank established a liquidation account, as of the date of
Conversion, in the amount of $31,024,068, equal to its retained earnings as
of the date of the latest consolidated balance sheet appearing in the final
prospectus. The Liquidation Account is established to provide a limited
priority claim on the assets of the Bank to qualifying pre-conversion
depositors (Eligible and Supplemental Eligible Account Holders) who continue
to maintain deposits in the Bank after Conversion. In the unlikely event of a
complete liquidation of the Bank, and only in such an event, each Eligible
Account Holder would then receive from the Liquidation Account a liquidation
distribution based on his proportionate share of the then total remaining
qualifying deposits.
The Foundation, created in connection with the Conversion, is a tax
exempt private foundation as determined by the Internal Revenue Service. The
contribution of common stock to the Foundation by the Company will be tax
deductible, subject to an annual limitation based on 10% of the Company's
annual taxable income. The Company, however, would be able to carryforward
any unused portion of the deduction for five years following the
contribution. The Company recognized a $5,549,000 expense for the full amount
of the contribution, offset in part by the $2,053,000 corresponding tax
benefit, during the second quarter of 1998.
In addition to the 25,000,000 authorized shares of common stock, the
Company is authorized to issue 2,000,000 shares of preferred stock with a par
value of $.01 per share. The Board of Directors is authorized, subject to any
limitations by law, to provide for the issuance of
5
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the shares of preferred stock in series, to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each series and
any qualifications, limitations or restrictions thereof. As of March 31,
2000, there were no shares of preferred stock issued.
6
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PART I: FINANCIAL INFORMATION
EFC BANCORP, INC
MARCH 31, 2000
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following analysis discusses changes in the financial condition
at March 31, 2000 and results of operations for the three months ended March
31, 2000, and should be read in conjunction with the Company's Unaudited
Consolidated Financial Statements and the notes thereto, appearing in Part I,
Item 1 of this document.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends
such forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995, and is including this statement for purposes of these
safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Company, are generally identified by use of the words "believe,"
"expect," "intend," "anticipate," "estimate," "project," or similar
expressions. The Company's ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have
a material adverse effect on the operations of the Company and the
subsidiaries include, but are not limited to, changes in: interest rates,
general economic conditions, legislative/regulatory changes, monetary and
fiscal policies of the U.S. Government, including policies of the U.S.
Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company
and its business, including additional factors that could materially affect
the Company's financial results, is included in the Company's filings with
the SEC, including its 1999 Annual Report on Form 10-K.
The Company does not undertake - and specifically disclaims any
obligation - to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.
7
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COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2000 AND DECEMBER 31, 1999
Total assets at March 31, 2000 were $525.5 million, which
represented an increase of $14.5 million, or 2.8%, compared to $511.0 million
at December 31, 1999. The increase in total assets was primarily as a result
of an increase in loans receivable of $16.4 million, or 4.1%, to $412.4
million at March 31, 2000 from $396.0 million at December 31, 1999. Of the
$16.4 million increase, $7.8 million was due to loans purchased. The increase
in loans receivable was primarily attributable to strong loan demand during
the quarter. The growth in total assets was funded by increases in borrowed
money and savings deposits. Borrowed money, representing FHLB advances,
increased by $2.0 million to $117.2 million at March 31, 2000 from $115.2
million at December 31, 1999. Savings deposits increased $12.2 million to
$336.0 million at March 31, 2000 from $323.9 million at December 31, 1999.
Stockholders' equity decreased by $2.0 million to $64.4 million at March 31,
2000 from $66.4 million at December 31, 1999. The decrease in stockholders'
equity was primarily the result of the Company completing its third and
fourth stock repurchases since becoming a public company in April, 1998. A
5.0% repurchase announced on October 1, 1999 was completed January 13, 2000.
The total shares repurchased were 270,370 and the average price was $10.38
per share. Subsequently, on March 22, 2000, the Company announced the
completion of an additional stock repurchase. Total shares repurchased were
256,851, or 5.0%, of the outstanding shares of common stock and the average
price was $10.20 per share. After these transactions, there were 4,880,169
shares of common stock issued and outstanding. In addition to the stock
repurchases, dividends totaling $0.12 per share were declared during the
first three months of 2000.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
1999
GENERAL. The Company's net income decreased $71,000, to $963,000 for
the three months ended March 31, 2000, from $1.0 million for the three months
ended March 31, 1999.
INTEREST INCOME. Interest income increased $1.7 million, or 23.1%,
to $9.2 million for the three months ended March 31, 2000, compared with the
same period in 1999. The increase in interest income was primarily due to an
increase in average interest-earning assets from planned growth, which
increased by $85.5 million, or 20.6%, to $500.9 million for the three months
ended March 31, 2000 from $415.4 million for the comparable period in 1999,
and an increase in the average yield on interest-earning assets by 21 basis
points to 7.34% for the three months ended March 31, 2000 from 7.13% for the
three months ended March 31, 1999.
Mortgage loan interest income increased by $1.3 million for the
three months ended March 31, 2000. The average balance of mortgage loans
increased $80.1 million, while the loan yield decreased by 14 basis points
from 7.56% to 7.42%. Interest income from investment securities, mortgage
backed securities and short term deposits increased by $150,000 for the three
months ended March 31, 2000, compared with the same period in 1999. This
increase resulted from a combination of a decrease in average balance of $5.5
million and a 97 basis point increase in yield.
8
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INTEREST EXPENSE. Interest expense increased by $1.6 million, or
44.8%, to $5.1 million for the three months ended March 31, 2000 from $3.5
million for the three months ended March 31, 1999. This increase resulted
from the combination of an increase in the average balance of
interest-bearing liabilities, and an overall increase in the average rate
paid on those interest-bearing liabilities. The average balance of
interest-bearing liabilities increased by $109.9 million, or 34.3%, to $430.3
million at March 31, 2000 from $320.4 million at March 31, 1999. This change
reflects a $61.4 million increase in the deposit accounts, with the remaining
$48.5 million increase attributable to advances from the FHLB-Chicago. The
average rate paid on combined deposits and borrowed money increased by 35
basis points to 4.75% for the three months ended March 31, 2000 from 4.40%
for the three months ended March 31, 1999.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses increased $141,000, or 3.6%, to $4.1
million for the three months ended March 31, 2000 from $3.9 million for the
comparable period in 1999. The net interest margin as a percent of
interest-earning assets decreased by 47 basis points to 3.26% for the three
months ended March 31, 2000 from 3.73% for the comparable period in 1999.
This decrease is due to a net decrease in interest-earning assets in excess
of interest-bearing liabilities of $24.5 million.
PROVISION FOR LOAN LOSSES. The provision for loan losses increased
by $15,000, to $60,000 for the three months ended March 31, 2000 from $45,000
in 1999. At March 31, 2000, December 31, 1999 and March 31, 1999,
non-performing loans totaled $1.0 million, $1.3 million and $1.0 million,
respectively. At March 31, 2000, the ratio of the allowance for loan losses
to non-performing loans was 154.2% compared to 121.7% at December 31, 1999
and 141.3% at March 31, 1999. The ratio of the allowance to total loans was
0.39%, 0.39% and 0.44%, at March 31, 2000, December 31, 1999 and March 31,
1999, respectively. Charge-offs for the three months ended March 31, 1999
amounted to $2,000. There were no charge-offs for the current three month
period. Management periodically calculates an allowance sufficiency analysis
based upon the portfolio composition, asset classifications, loan-to-value
ratios, potential impairments in the loan portfolio, and other factors.
NONINTEREST INCOME. Noninterest income totaled $266,000 and $237,000
for the three months ended March 31, 2000 and 1999, respectively. The
increase in noninterest income is primarily attributable to an increase in
insurance commission income.
NONINTEREST EXPENSE. Noninterest expense increased $290,000, to $2.8
million for the three months ended March 31, 2000 from $2.5 million for the
comparable period in 1999. Compensation and benefits increased by $50,000.
This increase was primarily due to a combination of annual salary increases
and the addition of staff necessitated by the addition of a full service
branch office in Huntley, Illinois. All other operating expenses, including
advertising, marketing, insurance, postage, communications, data processing
and other office expense increased by a combined $240,000, or 20.7%, to $1.4
million for the three months ended March 31, 2000 from $1.2 million for the
three months ended March 31, 1999. Of this increase, $23,000 is related to
data processing costs and $50,000 to media advertising and $49,000 increase
in NOW account operating expenses. Management continues to emphasize the
importance of expense management and control while continuing to provide
expanded banking
9
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services to a growing market base.
INCOME TAX EXPENSE. Income tax expense totaled $505,000 for the
three months ended March 31, 2000 compared to $569,000 for the comparable
period in 1999. The decrease in the provision for income taxes was primarily
the result of a decrease of $135,000 in income before income tax expense for
the three months ended March 31, 2000 compared to the three months ended
March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are savings deposits, proceeds
from the principal and interest payments on loans and proceeds from the
maturation of securities and borrowings from the FHLB-Chicago. While
maturities and scheduled amortization of loans and securities are predictable
sources of funds, deposit outflows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition.
The primary investing activities of the Bank are the origination of
residential one-to- four-family loans and, to a lesser extent multi-family
and commercial real estate, construction and land, commercial and consumer
loans and the purchase of mortgage-backed and mortgage-related securities. In
addition, the Bank purchases loans, consisting of multi-family and commercial
real estate. Deposit flows are affected by the level of interest rates, the
interest rates and products offered by the local competitors, the Bank and
other factors.
The Bank's most liquid assets are cash and interest-bearing demand
accounts. The levels of these assets are dependent on the Bank's operating,
financing, lending and investing activities during any given period. At March
31, 2000, cash and interest-bearing demand accounts totaled $12.8 million, or
2.4% of total assets.
See the "Consolidated Statement of Cash Flows" in the Unaudited
Consolidated Financial Statements included in this Form 10-Q for the sources
and uses of cash flows for operating, investing and financing activities for
the three months ended March 31, 2000 and 1999.
At March 31, 2000, the Bank exceeded all of its regulatory capital
requirements. The following is a summary of the Bank's regulatory capital ratios
at March 31, 2000:
<TABLE>
<S> <C>
Total Capital to Total Assets.................... 11.30%
Total Capital to Risk-Weighted Assets............ 18.34%
Tier I Leverage Ratio............................ 11.62%
Tier I to Risk-Weighted Assets................... 17.87%
</TABLE>
At March 31, 2000, the Company had a Total Capital to Total Assets ratio of
12.27%.
On March 22, 2000, the Company announced its first quarter dividend
of $0.12 per share. This represents a 20.0% increase over the previous
quarter's dividend of $0.10 per share. The effective date of the dividend was
April 3, 2000. Payment of the cash dividend was made on
10
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April 11, 2000.
YEAR 2000
The Bank did not experience any material disruptions of the systems
or software applications due to the start of the Year 2000 nor has the Bank
experienced any problems with third party vendors, suppliers or service
providers. The Bank developed contingency plans, which were validated by a
third party and will be updated periodically during 2000. These plans
continue to be maintained and can be implemented, in the unlikely event that
any mission critical systems fail. In addition, the Bank did not incur Year
2000 related expenses for the three months ended March 31, 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," in June 1998. SFAS No. 133
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. Under the standard,
entities are required to carry all derivative instruments in the statement of
financial position at fair value. The accounting for changes in the fair
value (I.E., gains or losses) of a derivative instrument depends on whether
it has been designated and qualifies as part of a hedging relationship and,
if so, on the reason for holding it. If certain conditions are met, entities
may elect to designate a derivative instrument as a hedge of exposures to
changes in fair values, cash flows, or foreign currencies. If the hedged
exposure is a fair value exposure, the gain or loss on the derivative
instrument is recognized in earnings in the period of change together with
the offsetting loss or gain on the hedged item attributable to the risk being
hedged. If the hedged exposure is a cash flow exposure, the effective portion
of the gain or loss on the derivative instrument is reported initially as a
component of other comprehensive income (outside earnings) and subsequently
reclassified into earnings when the forecasted transaction affects earnings.
Any amounts excluded from the assessment of hedge effectiveness as well as
the ineffective portion of the gain or loss is reported in earnings
immediately. SFAS No. 133 is effective for all quarters of fiscal years
beginning after June 15, 1999. Earlier application is encouraged, but is
permitted only as of the beginning of any fiscal quarter that begins after
the issuance of the statement. This statement should not be applied
retroactively to financial statements of prior periods. During June, 1999,
the FASB issued the Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133 - an amendment of FASB Statement No.
133," ("SFAS 137") that delays SFAS 133 until fiscal years beginning after
June 15, 2000. The Company anticipates that the adoption of SFAS No. 133 will
not have a material impact in the Company's results of operations.
11
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Bank's interest rate sensitivity is monitored by management
through the use of a Net Portfolio Value Model which generates estimates of
the change in the Bank's net portfolio value ("NPV") over a range of interest
rate scenarios. NPV is the present value of expected cash flows from assets,
liabilities, and off-balance sheet contracts. The NPV ratio, under any
interest rate scenario, is defined as the NPV in that scenario divided by the
market value of assets in the same scenario. The model assumes estimated
prepayment rates, reinvestment rates and deposit decay rates. The Sensitivity
Measure is the decline in the NPV ratio, in basis points, caused by a 2%
increase or decrease in rates, whichever produces a larger decline. The
higher the institution's Sensitivity Ratio, the greater its exposure to
interest rate risk is considered to be. The following NPV Table sets forth
the Bank's NPV as of March 31, 2000.
<TABLE>
<CAPTION>
(IN THOUSANDS)
Change in NPV as % of Portfolio
Interest Rates Net Portfolio Value Value of Assets
in Basis Points ------------------- ---------------
(Rate Shock) Amount $ Change % Change NPV Ratio % Change
-------------- ------ -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
+300 $26,930 $(27,565) (50.58)% 5.57% (47.40)%
+200 35,546 (18,949) (34.77) 7.21 (31.92)
+100 44,914 ( 9,581) (17.58) 8.91 (15.86)
Static 54,495 - - 10.59 -
-100 62,817 8,322 15.27 11.98 13.13
-200 69,840 15,345 28.16 13.09 23.61
-300 71,030 16,535 30.34 13.19 24.55
</TABLE>
Certain shortcomings are inherent in the methodology used in the
above interest rate risk measurements. Modeling changes in NPV require the
making of certain assumptions which may or may not reflect the manner in
which actual yields and costs respond to changes in market interest rates. In
this regard, the NPV Table presented assumes that the composition of the
Bank's interest sensitive assets and liabilities existing at the beginning of
a period remains constant over the period being measured and also assumes
that a particular change in interest rates is reflected uniformly across the
yield curve regardless of the duration to maturity or repricing of specific
assets and liabilities. Accordingly, although the NPV Table provides an
indication of the Bank's interest rate risk exposure at a particular point in
time, such measurements are not intended to and do not provide a precise
forecast of the effect of changes in market interest rates on the Bank's net
interest income and will differ from actual results.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of the stockholders was held April 25,
2000. The following proposals were voted on by the stockholders.
<TABLE>
<CAPTION>
BROKER
PROPOSAL FOR WITHHELD ABSTAIN NON-VOTES
- -------- --- -------- ------- ---------
<S> <C> <C> <C> <C>
1) Election of Directors -
nominees for three year term
Thomas I. Anderson 3,989,282 125,218 N/A N/A
John J. Brittain 3,982,141 132,359 N/A N/A
Barrett J. O'Connor 3,982,783 131,717 N/A N/A
Continuing Directors:
James J. Kovac
Leo M. Flanagan, Jr.
Vincent C. Norton
Ralph W. Helm, Jr.
Peter A. Traeger
James A. Alpeter
2) Approval of EFC Bancorp, Inc.
2000 Stock Option Plan 2,672,716 371,385 50,156 1,020,243
3) Approval of appointment of
KPMG LLP as the Company's
Independent auditors for the
Year ended December 31, 2000 4,069,176 23,292 22,032 N/A
</TABLE>
13
<PAGE>
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (Section 249.308 OF THIS CHAPTER).
(a) Exhibits
3.1 Certificate of Incorporation of EFC Bancorp, Inc. *
3.2 Bylaws of EFC Bancorp, Inc. *
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule
(b) Reports on Form 8-K On January 13, 2000, the Company issued a
press release announcing that it had completed its third stock
repurchase program. The press release was attached to a Form
8-K which was filed with the Securities and Exchange
Commission on January 18, 2000, Commission File No. 1- 13605.
Such Exhibit is incorporated herein by reference to the Form
8-K filed on January 18, 2000.
-------------
* Incorporated herein by reference from the Exhibits filed
with the Registration Statement on Form S-1 and any amendments
thereto. Registration Statement No. 333-38637 filed with the
Securities and Exchange Commission on October 24, 1997.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EFC BANCORP, INC.
Dated: May 12, 2000 By: /s/ Barrett J. O'Connor
------------ ----------------------------------------
Barrett J. O'Connor
President and Chief Executive Officer
(principal executive officer)
Dated: May 12, 2000 By: /s/ James J. Kovac
------------ ------------------------------------------
James J. Kovac
Senior Vice President and Chief
Financial Officer
(Principal financial and accounting officer)
15
<PAGE>
Exhibit 11.0 - Computation of Per Share Earnings
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per share
is calculated by dividing net income by average number of shares adjusted for
the dilutive effect of outstanding stock options. ESOP shares are only
considered outstanding for earnings per share calculations when they are
committed to be released.
Presented below are the calculations for the basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
---- ----
<S> <C> <C>
BASIC:
Net income $ 962,877 1,034,286
Weighted average shares outstanding 4,533,103 6,564,234
========== ==========
Basic earnings per share $ 0.21 0.16
========== ==========
DILUTED:
Net income $ 962,877 1,034,286
Weighted average shares outstanding 4,533,103 6,564,234
Effect of dilutive stock options outstanding -- --
---------- ----------
Diluted weighted average shares outstanding 4,533,103 6,564,234
========== ==========
Diluted earnings per share $ 0.21 0.16
========== ==========
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,123
<INT-BEARING-DEPOSITS> 10,653
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 80,426
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 414,031
<ALLOWANCE> 1,605
<TOTAL-ASSETS> 525,453
<DEPOSITS> 336,041
<SHORT-TERM> 0
<LIABILITIES-OTHER> 7,857
<LONG-TERM> 117,200
0
0
<COMMON> 75
<OTHER-SE> 64,280
<TOTAL-LIABILITIES-AND-EQUITY> 525,453
<INTEREST-LOAN> 7,625
<INTEREST-INVEST> 1,564
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 9,189
<INTEREST-DEPOSIT> 3,554
<INTEREST-EXPENSE> 5,108
<INTEREST-INCOME-NET> 4,081
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,819
<INCOME-PRETAX> 1,468
<INCOME-PRE-EXTRAORDINARY> 1,468
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 963
<EPS-BASIC> .21
<EPS-DILUTED> .21
<YIELD-ACTUAL> 7.34
<LOANS-NON> 1,041
<LOANS-PAST> 1,041
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,545
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,605
<ALLOWANCE-DOMESTIC> 1,605
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 19
</TABLE>
