FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2000
Commission File No. 0-24793
CGB&L FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 37-1374123
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
229 East South Street, Cerro Gordo, Illinois 61818
(Address of principal executive offices and Zip Code)
(217) 763-2911
(Registrant's telephone number, including area code)
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______
As of August 14, 2000, the registrant had outstanding 92,573 shares of
its $.01 par value common stock.
Transitional Small Business Disclosure Format (Check One):
Yes/__/ No_X_/
Page 1 of 12 pages
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Table of Contents
Part I - FINANCIAL INFORMATION
Page
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Item 1. Financial Statements 3-6
Item 2. Management's Discussion and Analysis 7
Of Financial Condition and Results of Operations
Part II - OTHER INFORMATION
Item l. Legal Proceedings 10
Item 2. Change in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
</TABLE>
Statements contained in the Form 10-QSB which are not historical facts are
forward-looking statements, as that term is described in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risk and uncertainties that could cause actual results to differ materially from
those projected. Such risks and uncertainties include potential changes in
interest rates, competitive factors in the financial services industry, general
economic conditions, the effect of new legislation and other risks detailed in
documents filed by the Company with the Securities and Exchange Commission from
time to time and in the Company's last filed Form 10KSB.
2
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CGB&L Financial Group, Inc.
Condensed Consolidated Balance Sheet
As of June 30 and March 31, 2000
<TABLE>
<CAPTION>
June 30 March 31
2000 2000
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(unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 211,051 $ 512,729
Interest-bearing time deposits 590,000 590,000
Investment securities available for sale 149,688 163,317
Loans 6,832,424 6,624,200
Allowance for Loan losses (32,700) (32,700)
----------- -----------
Net Loans 6,799,724 6,591,500
Premises and equipment 16,190 16,526
Federal Home Loan Bank stock 62,800 55,100
Other assets 53,523 52,512
----------- -----------
Total Assets $ 7,882,976 $ 7,981,684
=========== ===========
Liabilities
Interest-bearing deposits $ 5,177,111 $ 5,265,067
Long-term debt 1,000,000 1,000,000
Other liabilities 96,448 109,676
----------- -----------
Total liabilities 6,273,559 6,374,743
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Equity Received from Contributions to the ESOP 22,358 20,278
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Stockholders' Equity
Preferred stock, $.01 par value
Authorized and unissued -- 100,000 shares
Common stock, $ .01 par value
Authorized -- 900,000 shares
Issued -- 99,000 shares, less ESOP shares of
5,657 and 5,939 shares 911 911
Paid in capital 619,044 618,747
Retained earnings 928,795 921,780
Accumulated other comprehensive income 96,406 105,401
----------- -----------
1,645,156 1,646,839
Less: Unearned incentive plan shares,
3,179 and 3,366 shares (33,264) (35,343)
Less: Treasury stock at cost -2,365 shares (24,833) (24,833)
----------- -----------
Total stockholders' equity 1,587,059 1,586,663
----------- -----------
Total liabilities and stockholders' equity $ 7,882,976 $ 7,981,684
=========== ===========
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See note to condensed consolidated financial statements
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CGB&L Financial Group, Inc.
Condensed Consolidated Income Statement
For the three months ended June 30, 2000 and 1999 (Unaudited)
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For the 3 months ended June 30
2000 1999
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Interest Income
Loans receivable $ 146,791 $ 120,068
Investment securities 1,736 1,447
Interest-bearing deposits 14,681 22,384
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Total interest income 163,208 143,899
Interest Expense
Deposits 70,179 67,190
FHLB borrowings 15,895 9,646
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Total interest expense 86,074 76,836
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Net Interest Income 77,134 67,063
Provision for Loan Loss 0 0
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Net Interest Income After Provision for Loan Losses 77,134 67,063
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Noninterest Income 1,293 1,025
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Noninterest Expense
Salaries and employee benefits 37,796 45,340
Net occupancy and equipment expenses 2,123 1,531
Deposit insurance expense 273 767
Insurance expense 1,263 1,263
Other expenses 14,673 22,255
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Total noninterest expense 56,128 71,156
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Income (Loss) Before Income Tax 22,299 (3,068)
Income tax expense (Benefit) 5,400 (675)
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Net Income (Loss) $ 16,899 ($ 2,393)
========= =========
Per share data:
Basic Earnings Per Share $ 0.19 ($ 0.03)
========= =========
Diluted Earnings Per Share $ 0.19 ($ 0.03)
========= =========
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See notes to condensed consolidated financial statements.
4
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CGB&L Financial Group, Inc.
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
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For the 3 months ended June 30,
2000 1999
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Net Income (Loss) $ 16,899 ($ 2,393)
Other comprehensive income,
Net of tax
Unrealized holding gain (loss) arising
during the period ($ 8,995) $ 1,676
-------- --------
Comprehensive income (loss) $ 7,904 ($ 717)
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</TABLE>
See notes to condensed consolidated financial statements.
5
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CGB&L Financial Group, Inc.
Condensed Consolidated Statement of Cash Flows
Three Months Ended June 30, 2000 (Unaudited)
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2000 1999
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Operating Activities
Net income $ 16,899 ($ 2,393)
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 336 336
Compensation expense related to employee
stock ownership plan and incentive plan 3,861 4,023
Net change in:
Other liabilities (8,594) (5,448)
Other assets (1,011) 15,528
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Net cash provided by operating activities 11,491 12,046
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Investing Activities
Net change in loans (208,224) (144,588)
Purchase of premises and equipment 0 (902)
Purchase of FHLB stock (7,700) 0
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Net cash used by investing activities (215,924) (145,490)
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Financing Activities
Net change in deposits (87,956) 179,596
Cash dividend (9,289) (9,900)
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Net cash provided by financing activities (97,245) 169,696
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Net Change in Cash and Cash Equivalents (301,678) 36,252
Cash and Cash Equivalents, Beginning of Period 512,729 775,314
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Cash and Cash Equivalents, End of Period $ 211,051 $ 811,566
========= =========
Additional Cash Flows Information
Interest paid $ 86,349 $ 78,159
Income tax paid 0 0
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See notes to condensed consolidated financial statements.
6
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Notes to Condensed Consolidated Financial Statements
1. BACKGROUND INFORMATION
CGB&L Financial Group, Inc. (the "Company") was incorporated on May 21,
1998 and on September 22, 1998 acquired all of the outstanding shares
of common stock of Cerro Gordo Building and Loan, s.b. of Cerro Gordo,
(the "Bank") upon the Bank's conversion from a state chartered mutual
savings bank to a state chartered savings bank. The Company purchased
100% of the outstanding capital stock of the Bank using 50% of the net
proceeds from the Company's initial stock offering, which was completed
on September 22, 1998. The Company sold 99,000 shares of common stock
in the initial offering at $10 per share, including 7,919 shares
purchased by the Bank's Employee Stock Ownership Plan ("ESOP"). The
Bank acquired the ESOP shares with proceeds from a Company loan
totaling $79,190. The net proceeds of the offering totaled $699,293:
$990,000 less $290,707 in underwriting costs and other conversion
expenses.
The acquisition of the Bank by the Company was accounted for as a
"pooling-of-interests" under generally accepted accounting principles.
The application of the pooling-of-interests method records the assets
and liabilities of the merged companies on a historical cost basis with
no goodwill or other intangible assets being recorded.
2. STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and item 310(b) of
Regulations S-B. In the opinion of management these statements contain
all adjustments necessary to present fairly the financial position as
of June 2000 and March 2000, the results of operations for the three
months ended June 2000 and June 1999, comprehensive income and the cash
flows for the three months ended June 2000 and June 1999. All
adjustments to the financial statements were normal and recurring in
nature. These results have been determined on the basis of generally
accepted accounting principles. The results of operations for the three
months ended June 2000 are not necessarily indicative of the results to
be expected for the entire fiscal year.
The consolidated financial statements are those of the Company and the
Bank. These consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto
included in the Company's Annual Report to shareholders dated July 10,
2000.
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
CGB&L Financial Group, Inc. (the "Company") is the holding company for
Cerro Gordo Building and Loan, s.b. (the "Bank"). Prior to the Company's
acquisition of the Bank on September 22, 1998, the Company had no material
assets or operations.
FINANCIAL CONDITION
Total assets decreased $98,708 from March 31, 2000 to June 30, 2000 or
1.24% for the first quarter. This decrease was attributable primarily to
decreases in cash and cash equivalents and investment securities offset by
increases in the loan portfolio and Federal Home Loan Bank ("FHLB") stock.
Cash and cash equivalents decreased $301,678 and investment securities
decreased $13,629. Net loans increased $208,224 and FHLB stock increased
$7,700.
The increase in net loans from March 31, 2000 to June 30, 2000 was the
result of an increase in one-to-four family residential mortgage loans.
This growth was the result of management's continued emphasis on the
Bank's loan portfolio.
The decrease in investment securities was the result of a decrease in the
market value of the Federal Home Loan Mortgage Corporation ("FHLMC")
stock. The FHLMC stock is the sole investment security held by the
Building and Loan.
The Company experienced a decrease in total deposits from March 31, 2000
to June 30, 2000 of $87,956 or 1.67%.
Total stockholders' equity increased $396 from March 31, 2000 to June 30,
2000; the increase summarized as follows:
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<S> <C>
Stockholders' equity, March 31, 2000 .................................. $ 1,586,663
Net Income ................................................... 16,899
Decrease in unrealized gain on securities available for sale . (8,995)
Cash dividends paid .......................................... (9,289)
Incentive plan shares earned ................................. 1,781
-----------
Stockholders' equity, June 30, 2000 ................................... $ 1,587,059
===========
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RESULTS OF OPERATIONS
THREE MONTHS COMPARISON
Net income was $19,292 more in the quarter ended June 30, 2000 compared to
the same quarter in 1999, primarily due to an increase in net interest
income and a decrease in employee compensation and other expenses.
Net interest income was $10,071 higher in the three months ended June 30,
2000 compared to the same period in 1999. Interest income was $19,309
higher, primarily due to a higher average balance in the mortgage loan
portfolio and FHLB stock offset by a decrease in the average balance in
interest bearing deposit accounts for the same period. Interest expense
increased by $9,238 in the quarter ended June 30, 2000 compared to the
quarter ended June 30, 1999 due to an increase in FHLB borrowings used to
fund mortgage loans.
8
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The provision for loan losses were $0 for the first three months in 2000
and $0 for the same period in 1999. Management of the Bank believes that
the allowance for loan losses is sufficient based on information currently
available. No assurances can be made that future events or conditions or
regulatory directives will not result in increased provisions for loan
losses or additions to the Bank's allowance for loan losses which may
adversely affect net income. Non-performing assets for the quarter ended
June 30, 2000 decreased to $95,155 (3 loans) from $98,843 (3 loans) at
June 20, 1999. These loans were each three payments delinquent when
classified, all have sufficient collateral and the Building and Loan
anticipates no collection problems.
Noninterest expense was $15,028 lower in the quarter ended June 30, 2000
compared to the same period in 1999. Employee compensation decreased a
total of $7,544 for the period. The Simplified Employee Pension Plan that
had been in effect was frozen July 1, 1999, for a decrease of $4,466,
salaries decreased by $1,170 due to a change in personnel, and the
Illinois unemployment contribution rate for the Building and Loan
decreased from 5.4% in 1999 to .6% in 2000 for a savings of $1,338 for the
quarter compared to the same period in 1999. Other expense decreased
$7,582 as a result of a reduction in the initial expenses related to being
a public company.
Income tax expense was $6,075 more in the three months ended June 30, 2000
compared to the three months ended the same period in 1999 due to the
$22,298 income before taxes this period compared to a net loss for the
same period in 1999. The effective tax rate was 24.2% in 2000 compared to
22.0% in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, principal and interest
payments on loans and FHLB advances. While maturities and scheduled
amortizations of loans are predictable sources of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates,
economic conditions, and competition. The Federal Deposit Insurance
Corporation ("FDIC"), the Company's and the Bank's primary regulator,
requires the Bank to maintain minimum levels of liquid assets. Currently,
the required ratio is 5%. The Bank's liquidity ratios were 13.23% and
15.16 % at June 30, 2000 and March 31, 2000, respectively, well above the
required minimum.
A review of the Condensed Consolidated Statement of Cash Flows included in
the accompanying financial statement shows that the Company's cash and
cash equivalents ("cash") decreased $301,678 from March 31, 2000 to June
30, 2000 compared to an increase of $36,252 from March 31, 1999 to June
30, 1999. During the first three months of fiscal 2000, funds were used
primarily to fund a $208,224 net increase in one- to four-family loans,
purchase of $7,700 FHLB stock, a $87,956 net decrease in customer
deposits, and a dividend payment of $9,289 offset by net cash of $9,710
provided by operating activities and $1,781 unearned incentive shares.
As of June 30, 2000, the Bank had outstanding commitments (including
undisbursed loan proceeds) of $261,808. The bank anticipates that it will
have sufficient funds available to meet its current loan origination
commitments. Certificates of deposit, which are scheduled to mature in one
year or less from June 30, 2000, total $1.5 million. Based upon the Bank's
experience, management believes that a significant portion of such
deposits will remain with the Bank.
Federally insured state-chartered banks are required to maintain minimum
levels of regulatory capital. Under current FDIC regulations, insured
state-chartered banks generally must maintain (i) a ratio of Tier 1
leverage capital to total assets of at least 3.0% (4.0% to 5.0% for all
but the most highly rated banks) and (ii) ratio of Tier 1 capital to risk
weighted assets of at least 4.0% and a ratio of total risk based capital
to risk weighted assets of at least 8.0%. At June 30, 2000, the Bank was
in compliance with applicable regulatory capital requirements as follows:
Tier 1 Capital to Risk Weighted Assets 31.83%
Tier 1 Capital to Total Assets 15.39%
Risk Based Capital to Risk Weighted Assets 32.73%
9
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RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This Statement requires companies to record derivatives on
the balance sheet at their fair value. Statement No. 137 amended the
effective date of Statement No. 133 to fiscal years beginning after June
15, 2000. The new Statement applies to all entities. This Statement may
not be applied retroactively to financial statements of prior periods. The
adoption of the Statement will have no material impact on the
Corporation's financial condition or result of operations.
Part II. OTHER INFORMATION
Item l. Legal Proceedings
Not applicable
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
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following exhibits are filed as part of this report:
11.0 Computation of earnings per share
27. Financial Data Schedule
b. Report on Form 8-K
none
---------------------------------
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 2000 By: /s/ Maralyn F. Heckman
(Authorized Signor)
President (Principal Executive Officer)
and Treasurer (Chief Financial Officer)
10
