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 September 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 October 31, 2000, the registrant had outstanding 96,313 shares of
its $.01 par value common stock.
Transitional Small Business Disclosure Format
(Check One): Yes/__/ No_X_/
Page 1 of 14 pages
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TABLE OF CONTENTS
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Part I - FINANCIAL INFORMATION
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Page
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Item 1. Financial Statements 3-7
Item 2. Management's Discussion and Analysis 8
Of Financial Condition and Results of Operations
Part II - OTHER INFORMATION
---------------------------
Item l. Legal Proceedings 11
Item 2. Change in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</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 September 30 and March 31, 2000
<TABLE>
<CAPTION>
September 30 March 31
2000 2000
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 591,809 $ 512,729
Interest-bearing time deposits 491,000 590,000
Investment securities available for sale 199,815 163,317
Loans 6,837,087 6,624,200
Allowance for loan losses (32,700) (32,700)
----------- -----------
Net Loans 6,804,387 6,591,500
Premises and equipment 15,854 16,526
Federal Home Loan Bank stock 63,900 55,100
Other assets 58,463 52,512
----------- -----------
Total Assets $ 8,225,228 $ 7,981,684
=========== ===========
LIABILITIES
Interest-bearing deposits $ 5,459,294 $ 5,265,067
Long-term debt 1,000,000 1,000,000
Other liabilities 122,089 109,676
----------- -----------
Total liabilities 6,581,383 6,374,743
----------- -----------
Equity Received from Contributions to the ESOP 24,344 20,278
----------- -----------
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
5,374 and 5,939 shares 911 911
Paid in capital 618,607 618,747
Retained earnings 929,962 921,780
Accumulated other comprehensive income 129,490 105,401
----------- -----------
1,678,970 1,646,839
Less: Unearned incentive plan shares,
2,992 and 3,366 shares (31,416) (35,343)
Less: Treasury stock at cost -2,687 and 2,365 shares (28,053) (24,833)
----------- -----------
Total stockholders' equity 1,619,501 1,586,663
----------- -----------
Total liabilities and stockholders' equity $ 8,225,228 $ 7,981,684
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
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CGB&L Financial Group, Inc.
Condensed Consolidated Income Statement
For the six months ended September 30, 2000 and 1999 (Unaudited)
For the 6 months ended
September 30
2000 1999
-------- --------
Interest Income
Loans receivable $289,667 $269,520
Investment securities 3,589 2,904
Interest -bearing deposits 29,878 41,281
-------- --------
Total interest income 323,134 313,705
Interest Expense
Deposits 144,372 135,859
FHLB borrowings 31,964 20,865
-------- --------
Total interest expense 176,336 156,724
-------- --------
Net Interest Income 146,798 156,981
Provision for Loan Loss 0 0
-------- --------
Net Interest Income After Provision for Loan Losses 146,798 156,981
-------- --------
Noninterest Income 2,778 1,903
-------- --------
Noninterest Expense
Salaries and employee benefits 76,128 81,153
Net occupancy and equipment expenses 4,463 3,979
Deposit insurance expense 544 1,491
Insurance expense 2,526 2,526
Other expenses 42,329 45,709
-------- --------
Total noninterest expense 125,990 134,858
-------- --------
Income Before Income Tax 23,586 24,026
Income tax expense 5,974 6,065
-------- --------
Net Income $ 17,612 $ 17,961
======== ========
Per share data:
Basic Earnings Per Share $ 0.20 $ 0.20
======== ========
Diluted Earnings Per Share $ 0.20 $ 0.20
======== ========
See notes to condensed consolidated financial statements.
4
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CGB&L Financial Group, Inc.
Condensed Consolidated Income Statement
For the three months ended September 30, 2000 and 1999 (Unaudited)
For the 3 months ended
September 30
2000 1999
-------- --------
Interest Income
Loans receivable $142,876 $149,452
Investment securities 1,853 1,457
Interest -bearing deposits 15,197 18,897
-------- --------
Total interest income 159,926 169,806
Interest Expense
Deposits 74,193 68,669
FHLB borrowings 16,069 11,219
-------- --------
Total interest expense 90,262 79,888
-------- --------
Net Interest Income 69,664 89,918
Provision for Loan Loss 0 0
-------- --------
Net Interest Income After Provision for Loan Losses 69,664 89,918
-------- --------
Noninterest Income 1,485 878
-------- --------
Noninterest Expense
Salaries and employee benefits 38,332 35,813
Net occupancy and equipment expenses 2,340 2,448
Deposit insurance expense 271 724
Insurance expense 1,263 1,263
Other expenses 27,656 23,454
-------- --------
Total noninterest expense 69,862 63,702
-------- --------
Income Before Income Tax 1,287 27,094
Income tax expense 574 6,740
-------- --------
Net Income $ 713 $ 20,354
======== ========
Per share data:
Basic Earnings Per Share $ 0.01 $ 0.22
======== ========
======== ========
Diluted Earnings Per Share $ 0.01 $ 0.22
======== ========
See notes to condensed consolidated financial statements.
5
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CGB&L Financial Group, Inc.
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
For the six months ended September 30,
2000 1999
----------------------------------------------
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Net Income $17,612 $17,961
Other comprehensive income,
Net of tax
Unrealized holding gain (loss) arising
during the period $24,089 ($12,960)
----------------- -----------------
Comprehensive income $41,701 $5,001
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
CGB&L Financial Group, Inc.
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
For the 3 months ended September 30,
2000 1999
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Net Income $713 $20,354
Other comprehensive income,
Net of tax
Unrealized holding gain (loss) arising
during the period $33,084 ($14,636)
----------------- -----------------
Comprehensive income $33,797 $5,718
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
6
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CGB&L Financial Group, Inc.
Condensed Consolidated Statement of Cash Flows
Six Months Ended September 30, 2000 (Unaudited)
2000 1999
--------- ---------
Operating Activities
Net income $ 17,612 $ 17,961
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 672 672
Compensation expense related to employee
stock ownership plan and incentive plan 7,712 3,002
Net change in :
Other liabilities 4 (68)
Other assets (5,951) 13,712
--------- ---------
Net cash provided by operating activities 20,049 35,279
--------- ---------
Investing Activities
Net change in interest-bearing deposits 99,000 99,000
Net change in loans (212,887) (831,776)
Purchase of premises and equipment (1,678)
Purchase of FHLB stock (8,800)
--------- ---------
Net cash used by investing activities (122,687) (734,454)
--------- ---------
Financing Activities
Net change in deposits 194,227 296,319
Payment of dividend (9,289) (9,900)
Purchase of treasury stock (3,220)
Net change in borrowed money 300,000
--------- ---------
Net cash provided by financing activities 181,718 586,419
--------- ---------
Net Change in Cash and Cash Equivalents 79,080 (112,756)
Cash and Cash Equivalents, Beginning of Period 512,729 775,314
--------- ---------
Cash and Cash Equivalents, End of Period $ 591,809 $ 662,558
========= =========
Additional Cash Flows Information
Interest paid $ 176,612 $ 157,262
Income tax paid 4,304
See notes to condensed consolidated financial statements.
7
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Notes to 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 September 2000 and March 2000, the results of operations
for the six months ended September 2000 and September 1999, the results
of operations for the three months ended September 2000 and September
1999, comprehensive income and the cash flows for the six and three
months ended September 2000 and September 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 six months and three
months ended September 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.
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 increased $243,544 from March 31, 2000 to September 30, 2000
or 3.0% for the semi-annual period. This increase was attributable
primarily to increases in the loan portfolio, cash and cash equivalents,
investment securities, Federal Home Loan Bank (FHLB) Stock and other
assets
8
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offset by a decrease in interest bearing time deposits. Net loans
increased $212,887, cash and cash equivalents increased $79,080,
investment securities increased $36,498, FHLB Stock increased $8,800,
other assets increased $5,951 and interest-bearing deposits decreased
$99,000.
The increase in net loans from March 31, 2000 to September 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 $99,000 interest bearing time deposit
matured and resulted in an increase in cash and cash equivalent. The
increase in investment securities was the result of an increase in the
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 an increase in total deposits from March 31, 2000
to September 30, 2000 of $194,227 or 3.7%. The increase is primarily a
result of estate taxes collected by the bank for the Piatt County
Collector that are deposited into a passbook savings account. Other
liabilities increased as a result of deferred income tax liability for the
FHLMC stock.
Total stockholders' equity increased $32,838 from March 31, 2000 to
September 30, 2000; the increase summarized as follows:
<TABLE>
<S> <C>
Stockholders' equity, March 31, 2000.............................. $ 1,586,663
Net Income........................................................ 17,612
Increase in unrealized gain on securities available for sale...... 24,089
Dividends Paid.................................................... (9,289)
Incentive Plan Shares Earned...................................... 3,646
Purchase of Treasury Stock........................................ (3,220)
-----------------
Stockholders' equity, September 30, 2000...................... $ 1,619,501
=================
</TABLE>
RESULTS OF OPERATIONS
SIX MONTHS COMPARISON
Net income was $349 less in the six months ended September 30, 2000
compared to the same period in 1999. Net interest income was $10,183 lower
in the six months ended September 30, 2000 compared to the same period in
1999. Interest income was $9,429 higher, primarily due to an increase in
the average balance in the mortgage loan portfolio offset by a lower
average balance of deposits with financial institutions. Interest expense
increased by $19,612 in the period ended September 30, 2000 compared to
the period ended September 30, 1999 due to an increase in the average
balance in interest-bearing deposits and FHLB borrowings.
The provision for loan losses was $0 for the first six 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.
Noninterest expense was $8,868 lower in the six months ended September 30,
2000 compared to the same period in 1999. This was attributable to a
decrease in employee compensation due to retirement of a long-time
employee, the Simplified Employee Pension Plan that had been effect was
frozen July 1, 1999, the Illinois unemployment contribution rate for the
Building and Loan decreased, and a reduction in cost of deposit insurance.
9
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Income tax expense was $91 less in the six months ended September 30, 2000
compared to the same period in 1999 due to a slight decrease in net income
for the six months ended September 30, 2000. The effective tax rate is
estimated to be 25.3% in 2000 compared to 25.2% in 1999.
THREE MONTHS COMPARISON
Net income was $19,641 less in the three months ended September 30, 2000
compared to the same period in 1999, due to a decrease of net interest
income and an increase in noninterest expenses related to being a public
company.
Net interest income was $20,254 lower in the three months ended September
30, 2000 compared to the same period in 1999. Interest income was $9,880
lower due to a lower average balance of deposits with financial
institutions and a reduction of loan fee income resulting from a policy
change in loan fee structure. In 1999 the bank discontinued the policy of
charging points to close mortgage loans. Interest expense increased
$10,374 in the period ended September 30, 2000 compared to the period
ended September 30, 1999 due to higher average balances on interest
bearing deposits and FHLB borrowings.
Noninterest expense was $6,160 higher in the three months ended
September 30, 2000 compared to the same period in 1999 primarily due to
additional expenses related to employee plans and being a public company.
Income tax expense was $6,166 less in the three months ended September
30, 2000 compared to the same period in 1999 due to a decrease in net
income for the three month period ended September 30, 2000.
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 17.22% and
15.16% at September 30, 2000 and March 31, 2000, respectively, well above
the required minimum.
A review of the Consolidated Statement of Cash Flows included in the
accompanying financial statement shows that the Company's cash and cash
equivalents ("cash") increased $79,080 from March 31, 2000 to September
30, 2000. Cash and cash equivalent decreased $112,756 from March 31, 1999
to September 30, 1999. During the first six months of fiscal 2000, net
income, maturing interest-bearing deposits, and increased deposits
primarily provided cash. During the six months of fiscal 1999, net income,
interest-bearing deposits, increased deposits and FHLB borrowings
primarily provided cash. Cash was primarily used in 2000 to fund mortgage
loans and purchase FHLB stock and in 1999 to fund mortgage loans.
As of September 30, 2000, the Bank had outstanding commitments (including
undisbursed loan proceeds) of approximately $61,000.00. 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 September 30, 2000, total
$1.79 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
10
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(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 capital risk weighted assets of at least 8.0%. At September 30,
2000, the Bank was in compliance with applicable regulatory capital
requirements as follows:
Tier 1 Capital to Risk Weighted Assets 31.61%
Tier 1 Capital to Total Assets 15.30%
Risk Based Capital to Risk Weighted Assets 32.48%
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 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
On August 9, 2000 the Company held its second Annual
Meeting of Stockholders at which the following matters were
voted on:
Proposal I - Election of Directors
Nominee For Against Withheld
------- ---- ------- --------
Buckley 66,395 N/A 1,000
Gaitros 60,570 6,825
Sochor 66,395 N/A 1,000
There were no abstentions or broker non-votes.
The terms of office of Directors Crandall, Flaugher,
Heckman and York continued after the Annual Meeting.
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
11
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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: November 10, 2000 By: /s/ Maralyn F. Heckman
(Authorized Signor)
President (Principal Executive Officer)
and Treasurer (Chief Financial Officer)
