SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
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[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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SEC File Number: 000-25009
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SKIBO FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
United States 25-1820465
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
242 East Main Street, Carnegie, Pennsylvania 15106
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(Address of principal executive offices) (Zip Code)
(412) 276-2424
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(Registrant's telephone number, including area code)
Check whether the registrant: (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares outstanding of common stock
as of July 28, 2000
$0.10 Par Value Common Stock 3,214,826 Shares
---------------------------- -----------------
Class Outstanding
Transitional Small Business Disclosure Format (check one)
Yes No X
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<PAGE>
SKIBO FINANCIAL CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Statements of Financial Condition (As of
June 30, 2000 (unaudited) and March 31, 2000) ............. 1
Consolidated Statements of Income (For the three
months ended June 30, 2000 and 1999 (unaudited)) .......... 2
Consolidated Statement of Stockholders' Equity (For the
three months ended June 30, 2000 (unaudited)) ............. 3
Consolidated Statements of Cash Flows (For the three
months ended June 30, 2000 and 1999 (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
-------- -----------------
Item 1. Legal Proceedings .............................................. 10
Item 2. Changes in Securities .......................................... 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
<PAGE>
SKIBO FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
-------- -------
ASSETS (Unaudited)
------
<S> <C> <C>
Cash and amounts due from depository institutions $ 423 $ 446
Interest-bearing deposits with other institutions 1,401 1,280
Investment securities:
Held-to-maturity (market value $24,974 and $24,928) 26,731 26,696
Mortgage-backed securities:
Held-to-maturity (market value $56,827 and $57,840) 58,157 59,181
Loans receivable, net 55,508 56,504
Accrued interest receivable:
Investment securities 381 427
Mortgage-backed securities 410 410
Loans receivable 483 486
FHLB stock -- 43
Federal Home Loan Bank stock, at cost 2,615 2,615
Premises and equipment, net 608 626
Prepaid expenses and other assets 4,388 3,918
--------- ---------
Total Assets $ 151,105 $ 152,632
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits $ 74,300 $ 75,583
Federal Home Loan Bank advances 48,500 49,000
Advances from borrowers for taxes and insurance 180 128
Accrued expenses and other liabilities 3,252 2,778
--------- ---------
Total Liabilities 126,232 127,489
Stockholders' Equity:
Preferred stock, 5,000,000 shares authorized; none issued -- --
Common stock, $0.10 par value; 10,000,000 shares authorized;
3,449,974 shares issued 345 345
Additional paid-in capital 9,735 9,740
Treasury stock, at cost (229,631 shares at June 30, 2000
and 163,111 shares at March 31, 2000)(1) (1,560) (1,119)
Unearned Employee Stock Ownership Plan (ESOP) shares (220) (267)
Unearned Restricted Stock Plan (RSP) shares (171) (199)
Retained earnings, substantially restricted 16,744 16,643
--------- ---------
Total Stockholders' Equity 24,873 25,143
--------- ---------
Total Liabilities and Stockholders' Equity $ 151,105 $ 152,632
========= =========
</TABLE>
(1)Included are shares held by the Bank's RSP totaling 10,483 at June 30, 2000
and 7,863 at March 31, 2000, respectively.
See accompanying notes to consolidated financial statements.
1
<PAGE>
SKIBO FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
For the Three Months Ended June 30, 2000 and 1999
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Interest income:
Loans receivable $1,025 $1,149
Mortgage-backed securities 1,007 835
Investment securities 463 404
Other 66 98
------ ------
Total interest income 2,561 2,486
Interest expense:
Savings deposits 815 816
Federal Home Loan Bank advances 672 626
Bonds payable -- 31
------ ------
Total interest expense 1,487 1,473
------ ------
Net interest income 1,074 1,013
Provision for loan losses -- 1
------ ------
Net interest income after provision for loan losses 1,074 1,012
Other income:
Fees and service charges 8 19
Other 18 9
------ ------
Total other income 26 28
Other expenses:
Compensation and employee benefits 460 490
Premises and occupancy costs 53 54
Federal insurance premiums 4 11
Other operating expenses 8 84
------ ------
Total other expenses 605 639
------ ------
Income before income taxes 495 401
Provision for income taxes 212 174
------ ------
Net income 283 227
Other comprehensive income:
Unrealized gain on securities available-for-sale, net of tax -- --
------ ------
Total comprehensive income $ 283 $ 227
====== ======
Basic earnings per share $ .09 $ .07
Diluted earnings per share $ .09 $ .07
Weighted average shares outstanding - Basic 3,230,863 3,348,686
Weighted average shares outstanding - Diluted 3,230,863 3,348,686
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
SKIBO FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Three Months Ended June 30, 2000 (unaudited)
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Additional Unearned Unearned
Common Paid-in Treasury ESOP RSP Retained
Stock Capital Stock Shares Shares Earnings Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 2000 $345 $9,740 $(1,119) $(267) $(199) $16,643 $25,143
Cash dividends declared net
($.075 per share regular,
$.075 per share special) -- -- -- -- -- (182) (182)
Excess of fair value above cost of
ESOP shares released or
committed to be released -- (5) -- -- -- -- (5)
Amortization of ESOP liability -- -- -- 47 -- -- 47
Amortization of RSP liability -- -- -- -- 28 -- 28
Treasury stock purchased,
at cost (66,520 shares) -- -- (441) -- -- -- (441)
Net income -- -- -- -- -- 283 283
-------------------------------------------------------------------------------------------
Balance at June 30, 2000 $345 $9,735 $(1,560) $(220) $(171) $16,744 $24,873
===========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
SKIBO FINANCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 2000 and 1999
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Operating activities:
Net income $ 283 $ 227
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Provision for loan losses -- 1
Depreciation 19 20
Compensation expense-ESOP and RSP 70 101
Net amortization of premiums and discounts 25 71
Decrease in accrued interest receivable 92 252
Increase in prepaid expenses (470) (31)
Increase in accrued interest payable 137 175
Decrease in accrued income taxes (53) (110)
Other, net 389 (155)
------- -------
Net cash provided by operating activities 492 551
------- -------
Investing activities:
Purchases of premises and equipment (1) (5)
Purchases of investment securities held-to maturity (300) (720)
Purchases of mortgage-backed securities held-to-maturity (1,459) (4,117)
Proceeds from maturities/calls and principal repayments of:
Investment securities held-to-maturity 264 1,503
Mortgage-backed securities held-to-maturity 2,468 5,201
Loans purchased (653) (547)
Net principal repayments on loans 1,641 4,962
------- -------
Net cash provided by investing activities 1,960 6,277
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Financing activities:
Net decrease in savings deposits (1,283) (401)
Proceeds from Federal Home Loan Bank advances 8,500 --
Repayment of Federal Home Loan Bank advances (9,000) --
Net increase in mortgage escrow 52 55
Treasury stock purchased (441) (17)
Cash dividends paid (182) (107)
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Net cash used in financing activities (2,354) (470)
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Net increase in cash and cash equivalents 98 6,358
Cash and cash equivalents, beginning of period 1,726 2,499
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Cash and cash equivalents, end of period $ 1,824 $ 8,857
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,349 $ 1,298
======= =======
Income taxes $ 346 $ 330
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
SKIBO FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The accompanying unaudited consolidated financial statements include the
accounts of Skibo Financial Corp., its wholly-owned subsidiary First Carnegie
Deposit (the "Bank"), and the Bank's wholly- owned subsidiaries, Fedcar, Inc.
and Carnegie Federal Funding Corporation ("CFFC"). Fedcar, Inc. is a service
corporation that is currently inactive. CFFC was a special purpose subsidiary
that was formed for the issuance of collateralized mortgage obligations. In
September 1999, CFFC fully repaid the remaining obligation and subsequently was
dissolved.
These statements have been prepared in accordance with instructions for Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, such information presented reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
the Company's management, necessary for a fair statement of results for the
interim period. All significant intercompany transactions and balances have been
eliminated in consolidation.
The results of operations for the three months ended June 30, 2000 are not
necessarily indicative of the results to be expected for the year ending March
31, 2001 or any other period. The unaudited consolidated financial statements
and notes thereto should be read in conjunction with the audited financial
statements and notes thereto for the year ended March 31, 2000.
NOTE 2 - Dividends on Common Stock
-------------------------
On June 8, 2000, the Board of Directors of the Company declared a $0.075 per
share regular cash dividend and a $0.075 per share special cash dividend on the
Company's outstanding shares of common stock, payable to stockholders of record
as of June 30, 2000. Skibo Bancshares, M.H.C. (the "M.H.C.") waived the receipt
of dividends on its 1,897,500 shares. The cash dividends on the outstanding
shares held by persons other than the M.H.C. were paid on July 14, 2000. Under
the interim final rule of the Office of Thrift Supervision (the "OTS") effective
July 12, 2000, any waiver of dividends by the M.H.C. will no longer result in
the OTS requiring an adjustment to the ratio pursuant to which shares of Company
common stock are exchanged for shares of a stock holding company should the
M.H.C. convert from the mutual to stock form of organization. Such an adjustment
would have had the effect of diluting the minority stockholders of the Company.
Skibo Financial Corp.'s common stock is currently listed on the Nasdaq SmallCap
Market, traded under the symbol of "SKBO" and listed in the Wall Street Journal
as "SkiboFn".
NOTE 3 - Comprehensive Income
--------------------
For the three months ended June 30, 2000 and 1999, the Company's total
comprehensive income was $283,000 and $227,000, respectively. Total
comprehensive income is comprised of net income and other comprehensive income.
For both three month periods, there was no other comprehensive income.
NOTE 4 - Recent Accounting, Regulatory and Other Matters
-----------------------------------------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133," requires
that derivative instruments be carried at fair value on the balance sheet. The
statement continues to allow derivative instruments to be used to hedge various
risks and sets forth specific criteria to be used to determine when hedge
accounting can be used. The statement also provides for offsetting changes in
fair value or cash flows of both the derivative and the hedged asset or
liability to be recognized in earnings in the same period; however, any changes
in fair value or cash flow that represent the ineffective portion of a hedge are
required to be recognized in earnings and cannot be deferred. For derivative
instruments not accounted for as hedges, changes in fair value are required to
be recognized in earnings.
The provisions of this statement as amended will be adopted by the Company for
its quarterly and annual reporting beginning January 1, 2001. The Company
anticipates, based on current activities, that the adoption of SFAS No. 133 will
not have a material effect on its financial position or results of operations.
5
<PAGE>
SKIBO FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 5 - Earnings Per Share (EPS)
------------------------
Basic EPS is computed by dividing net income applicable to common stock by the
weighted average number of common shares outstanding during the period, without
considering any dilutive items. Diluted EPS is computed by dividing net income
applicable to common stock by the weighted average number of common shares and
common stock equivalents for items that are dilutive, net of shares assumed to
be repurchased using the treasury stock method at the average share price for
the Company's common stock during the period. Common stock equivalents arise
from the assumed conversion of outstanding stock options and unvested RSP
shares.
The computation of basic and diluted earnings per share is shown in the table
below:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
June 30, June 30,
2000 1999
--------- --------
<S> <C> <C>
Basic EPS computation:
Numerator-Net Income $ 283,000 $ 227,000
Denominator-Wt Avg common shares outstanding 3,230,863 3,348,686
Basic EPS $ .09 $ .07
=== ===
Diluted EPS computation:
Numerator-Net Income $ 283,000 $ 227,000
======== ========
Denominator-Wt Avg common shares outstanding 3,230,863 3,348,686
Dilutive Stock Options -- --
Dilutive Unvested RSP -- --
--------- ---------
Weighted avg common shares and common stock
equivalents 3,230,863 3,348,686
Diluted EPS $ .09 $ .07
=== ===
</TABLE>
For the quarters ended June 30, 2000 and 1999, 15,366 and 30,946 RSP shares,
respectively, were excluded from the diluted EPS computation due to their
anti-dilutive effect. For the quarters ended June 30, 2000 and 1999, 155,246
Option shares were excluded from the diluted EPS computation due to their
anti-dilutive effect. Shares outstanding for the three months ended June 30,
2000 and 1999 do not include ESOP shares that were unallocated in accordance
with Statement of Position ("SOP") 93-6, "Employers' Accounting for Employees
Stock Ownership Plans". Unallocated ESOP shares amounted to 33,046 and 60,585 at
June 30, 2000 and 1999, respectively.
NOTE 6 - Income Taxes
------------
The Company joins with its wholly owned subsidiary, First Carnegie Deposit, in
filing a consolidated federal income tax return and accounts for income taxes
using the asset and liability method. The objective of the asset and liability
method is to establish deferred tax assets and liabilities for temporary
differences between the financial reporting and tax basis of the Company's
assets and liabilities based on enacted tax rates expected to be in effect when
such amounts are realized and settled.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's results of operations are primarily dependent upon net interest
income, which is the difference between the interest income earned on
interest-earning assets, primarily loans, mortgage-backed securities, and
investments, and the interest expense on interest-bearing liabilities, primarily
deposits and borrowings. Net interest income may be affected significantly by
general economic and competitive conditions and policies of regulatory agencies,
particularly those with respect to market interest rates. The results of
operations are also significantly influenced by the level of noninterest
expenses, such as employee salaries and benefits, noninterest income, such as
loan-related fees and fees on deposit-related services, and the Company's
provision for loan losses.
The Management Discussion and Analysis section of this Form 10-QSB contains
certain forward-looking statements (as defined in the Private Securities
Litigation Reform Act of 1995). These forward-looking statements may involve
risks and uncertainties. Although management believes that the expectations
reflected in such forward-looking statements are reasonable, actual results may
differ from the results in these forward-looking statements.
Changes in Financial Condition
The Company's total assets of $151,105,000 at June 30, 2000, are reflective of a
decrease of $1,527,000 or 1.0%, as compared to $152,632,000 at March 31, 2000.
The decrease in total assets was due to decreases in cash, mortgage-backed
securities, loans receivable, premises and equipment and accrued interest,
partially offset by increases in interest-bearing deposits with other financial
institutions, investment securities and prepaid expenses.
The decrease in the Company's liabilities was due to decreases in savings
deposits and FHLB advances, offset by an increase in advances from borrowers for
taxes and insurance and accrued expenses. Changes in the components of assets,
liabilities and equity are discussed herein.
Cash and Cash Equivalents. Cash and cash equivalents, which consist of
interest-bearing and noninterest-bearing deposits, totaled $1,824,000, an
increase of $98,000 or 5.7% from the prior quarter. This increase was primarily
due to increased interest-bearing deposits maintained at the Federal Home Loan
Bank ("FHLB").
Investment Securities. Investment securities totaled $26,731,000 at June 30,
2000, an increase of $35,000 or 0.1%, as compared to $26,696,000 at March 31,
2000. The increase was primarily due to purchases of $300,000 of U.S. Agency
securities offset by proceeds received from maturities, calls and payments
totaling $264,000.
Mortgage-backed Securities. Mortgage-backed securities totaled $58,157,000 at
June 30, 2000, a decrease of $1,024,000 or 1.7%, as compared to $59,181,000 at
March 31, 2000. The decrease was due to principal repayments and maturities
totaling $2.5 million, partially offset by purchases of $1.5 million.
Loans Receivable, net. Net loans receivable at June 30, 2000 totaled
$55,508,000, a decrease of $996,000 or 1.8%, as compared to $56,504,000 at March
31, 2000. The decrease was primarily due to principal repayments totaling $1.8
million, partially offset by the origination of $90,000 in one- to four-family
and $37,000 in consumer loans, and purchases of $326,000 of agricultural
non-mortgage and $327,000 of Small Business Administration (SBA) loans.
Deposits. Total deposits, after interest credited, decreased by $1,283,000 or
1.7% to $74,300,000 at June 30, 2000, as compared to $75,583,000 at March 31,
2000. The decrease was primarily due to decreases in certificates of deposit and
NOW accounts, partially offset by an increase in passbook and Money Market
accounts.
FHLB Advances. FHLB advances totaled $48,500,000 at June 30, 2000, a decrease of
$500,000 or 1.0%, as compared to $49,000,000 at March 31, 2000. The Company uses
FHLB advances as a supplement to deposits to fund its purchase of loans and
investments.
Stockholders' Equity. Stockholders' equity totaled $24,873,000 at June 30, 2000,
as compared to $25,143,000 at March 31, 2000. The decrease of $270,000 or 1.1%
was primarily due to the purchase of 63,900 shares of treasury stock at an
average cost of $6.67 per share, and the payment of a $0.075 regular quarterly
and $0.075 special cash dividend, partially offset by earnings for the three
months ended June 30, 2000.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended June 30, 2000 and 1999
Net Income. The Company recorded net income of $283,000 for the three months
ended June 30, 2000, as compared to net income of $227,000 for the three months
ended June 30, 1999. The $56,000 or 24.7% increase in net income for the three
months ended June 30, 2000 was primarily the result of an increase in net
interest income and a decrease in other expenses, offset by an increase in
provision for income taxes. Changes in the components of income and expense are
discussed herein.
Net Interest Income. Net interest income increased $61,000 or 6.0% for the three
months ended June 30, 2000, as compared to the three month period ended June 30,
1999. Although the average balance of interest-earning assets decreased $4.5
million or 3.0%, the average yield earned thereon increased 42 basis points. The
average balance of interest-bearing liabilities decreased by $4.3 million or
3.4%, however, the average rate paid thereon increased 21 basis points.
The interest rate spread, which is the difference between the yield on average
interest-earning assets and the cost of average interest-bearing liabilities,
increased to 2.21% for the three month period ended June 30, 2000 from 2.00% for
the three month period ended June 30, 1999. The increase in the interest rate
spread was primarily the result of increased yields on the average balances of
mortgage-backed and investment securities and other interest earning assets,
offset by increased rates paid on the average balances of savings deposits and
FHLB advances.
Interest Income. Interest income increased $75,000 or 3.0% to $2,561,000 for the
three month period ended June 30, 2000, as compared to $2,486,000 for the three
month period ended June 30, 1999.
Interest on loans receivable decreased $124,000 or 10.8% for the three months
ended June 30, 2000, as compared to the three month period ended June 30, 1999.
This decrease was primarily the result of a $6.7 million decrease in the average
balance of loans receivable and a single basis point decrease in the average
yield earned thereon.
Interest income on mortgage-backed securities increased $172,000 or 20.6% for
the three months ended June 30, 2000, as compared to the three months ended June
30, 1999. This increase was primarily the result of a $4.6 million increase in
the average balance of mortgage-backed securities and a 68 basis point increase
in the average yield earned thereon.
Interest income on investment securities increased by $59,000 or 14.6% for the
three months ended June 30, 2000, as compared to the three months ended June 30,
1999. The increase in interest income on investment securities was primarily due
to an increase of $2.1 million in the average balance of such securities and a
36 basis point increase in the average yield earned thereon..
Interest income on other interest-earning assets decreased by $32,000 or 32.7%
for the three months ended June 30, 2000, as compared to the three months ended
June 30, 1999. The decrease was primarily due a $4.6 million decrease in the
average interest-earning assets, offset by a 211 basis point increase in the
average yield earned thereon.
The average yield on the average balance of interest-earning assets was 7.08%
and 6.66% for the three month periods ended June 30, 2000 and 1999,
respectively.
Interest Expense. Interest expense totaled $1,487,000 for the three months ended
June 30, 2000, as compared to $1,473,000 for the three months ended June 30,
1999. The $14,000 or 1.0% increase was primarily due to a 21 basis point
increase in the average rate paid on the total average interest-bearing
liabilities, partially offset by decreased average balances in savings deposits,
bonds payable and other borrowings, and FHLB advances.
Interest expense on deposits (including escrows) totaled $815,000 for the three
months ended June 30, 2000, as compared to $816,000 for the three months ended
June 30, 1999. The $1,000 or 0.1% decrease was primarily due to a $2.5 million
decrease in the average balance of deposits, partially offset by a 15 basis
point increase in the average rate paid on deposits and escrows.
Interest on FHLB advances increased $46,000 or 7.3% for the three months ended
June 30, 2000, as compared to the three months ended June 30, 1999. The increase
was primarily due to a 42 basis point increase in the rate paid thereon,
partially offset by a decrease of $467,000 in the average balance of advances.
The Company uses FHLB advances as a funding source and has in the past used
borrowings to supplement deposits, which are the Company's primary source of
funds.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest on bonds payable and other borrowings, a less significant portion of
interest expense, decreased by $31,000 or 100.0%, as the average principal
amount of other borrowings decreased by $1.3 million, due to the repayment of
the bond in its entirety.
Allowance for Loan Losses. During the three month periods ended June 30, 2000
and 1999, the Company established provisions for loan losses of $0 and $1,000,
respectively. This reflected management's evaluation of the underlying credit
risk of the loan portfolio and the level of allowance for loan losses.
At June 30, 2000, the allowance for loan losses totaled $425,000 or 0.76% and
2023.8% of total loans and total non-performing loans, respectively, as compared
to $425,000 or 0.8% and 885.4%, respectively, at March 31, 2000. The Company's
non-performing loans (non-accrual loans and accruing loans 90 days or more
overdue) totaled $21,000 and $48,000 at June 30, 2000 and March 31, 2000
respectively, which represented 0.04% and 0.08% of the Company's total loans,
respectively. The Company's ratio of non-performing loans to total assets was
0.01% and 0.03% at June 30, 2000 and March 31, 2000, respectively.
Other Income. During the three months ended June 30, 2000, other income
decreased $2,000 or 7.1%, as compared to the three months ended June 30, 1999.
Other Expenses. Total other expenses decreased by $34,000 or 5.3% during the
three months ended June 30, 2000, as compared to the three months ended June 30,
1999. The decrease was primarily attributable to a decrease of $30,000 in
compensation and employee benefits expense. Compensation and employee benefits
expense decreased due to the reduction of $20,000 in RSP expense, $11,000 in
ESOP expense, and $9,000 in the Company's defined benefit plan, Supplemental
Employee Retirement Plan (SERP) and Director's Retirement Plan (DRP) costs,
offset by a $10,000 increase in compensation and other employee benefits
expense.
Income Tax Expense. The provision for income tax totaled $212,000 for the three
months ended June 30, 2000, as compared to $174,000 for the three months ended
June 30, 1999. The $38,000 or 21.8% increase was due to increased income.
Liquidity and Capital Requirements
The Company's subsidiary bank, First Carnegie Deposit, is subject to various
requirements administered by the federal banking agencies. The Bank is required
by Section 6 of the Home Owners' Loan Act ("HOLA") to hold a prescribed amount
of statutorily defined liquid assets. The Director of the OTS may, by
regulation, vary the amount of the liquidity requirement, but only within
pre-established statutory limits. The requirement must be no less than four
percent and no greater than ten percent of the Bank's net withdrawable accounts
and borrowings payable on demand or with unexpired maturities of one year or
less. The minimum required liquidity is currently 4%. The Bank's average
liquidity ratio was 139.13% and 154.76%, at June 30, 2000 and March 31, 2000,
respectively.
The Bank is subject to federal regulations that impose certain minimum capital
requirements. Quantitative measures, established by regulation to ensure capital
adequacy, require the Bank to maintain amounts and ratios of tangible and core
capital to adjusted total assets and of total risk-basked capital to
risk-weighted assets. On June 30, 2000, the Bank was in compliance with its
three regulatory capital requirements as follows:
Amount Percent
------ -------
(Dollars in thousands)
Tangible capital ........................ $24,749 16.41%
Tangible capital requirement ............ 2,262 1.50
------- -----
Excess over requirement ................. $22,487 14.91%
======= =====
Core capital ............................ $24,749 16.41%
Core capital requirement ................ 4,524 3.00
------- -----
Excess over requirement ................. $20,225 13.41%
======= =====
Risk based capital ...................... $25,174 54.94%
Risk based capital requirement .......... 3,666 8.00
------- -----
Excess over requirement ................. $21,508 46.94%
======= =====
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management believes that under current regulations, the Bank will continue to
meet its minimum capital requirements in the foreseeable future. Events beyond
the control of the Bank, such as increased interest rates or a downturn in the
economy in areas in which the Bank operates could adversely affect future
earnings and as a result, the ability of the Bank to meet its future minimum
capital requirements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
The Company's subsidiary First Carnegie Deposit and other third
parties were informed of an impending legal action regarding a
previously completed sale of foreclosed real estate. Although First
Carnegie Deposit has not been served as a defendant in any lawsuit,
the Company has notified its insurance carrier of this potential
action. At this time management believes this action, if commenced,
will not result in significant loss to the Company.
The Company and its counsel are not in a position at this time to
express an opinion as to the outcome of this action.
Item 2. Changes in Securities.
----------------------
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) Not applicable
b) On April 18, 2000, the Company filed a current report on Form
8-K announcing the adoption of a stock repurchase plan whereby
the Company was authorized to purchase up to 10% of the shares
of common stock held by persons other than Skibo Bancshares,
M.H.C., the Company's majority stockholder and mutual holding
company.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
SKIBO FINANCIAL CORP.
Date: August 9, 2000 By: /s/ Walter G. Kelly
--------------------------------------
Walter G. Kelly
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/ Walter G. Kelly /s/ Carol A. Gilbert
------------------------------------- ---------------------------------------------------
Walter G. Kelly Carol A. Gilbert
President and Chief Executive Officer Chief Financial and Operating Officer and Treasurer
(Principal Executive Officer) (Principal Financial and Accounting Officer)
Date: August 9, 2000 Date: August 9, 2000
</TABLE>
