UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10 - QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30,1999
|_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________to________________
Commission File Number 000-24907
FPB Financial Corp.
(Exact name of small business issuer as specified in its charter)
LOUISIANA (72-1438784)
(State or other jurisdiction of (I. R. S.-Employer
incorporation or organization) Identification No.)
300 WEST MORRIS AVENUE, HAMMOND, LOUISIANA 70401
(Address of principal executive offices)
Issuer's telephone number, including area code: 504 345-1880
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes |X| No |_|
Shares of common stock, par value $.01 per share, outstanding as of July
31, 1999: 331,355
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
1
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FPB FINANCIAL CORP.
FORM 10-QSB
QUARTER ENDED JUNE 30, 1999
PART I - FINANCIAL INFORMATION
Interim Financial Information required by Rule 10 - 01 of Regulation S - X and
Item 303 of Regulation S - B is included in this Form 10 - QSB as referenced
below:
Item 1 - Financial Statements
Consolidated Statements of Financial Condition June 30, 1999
(Unaudited) and December 31, 1998............................................ 3
Consolidated Statements of Income and Comprehensive Income
(Unaudited) For the Three and Six Months Ended June 30, 1999
and June 30, 1998 ........................................................... 5
Consolidated Statements of Changes in Equity (Unaudited) For
the Six Months Ended June 30, 1999 and 1998.................................. 7
Consolidated Statements of Cash Flows (Unaudited) For the
Six Months Ended June 30, 1999 and 1998...................................... 8
Notes to Consolidated Financial Statements................................... 10
Item 2 - Management's Discussion and Analysis or Plan of Operation........... 12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings................................................... 19
Item 2 - Changes in Securities and Use of Proceeds........................... 19
Item 3 - Defaults Upon Senior Securities..................................... 19
Item 4 - Submission of Matters to a Vote of Security Holders................. 19
Item 5 - Other Information................................................... 19
Item 6 - Exhibits and reports on Form 8 - K.................................. 19
Signatures................................................................... 20
2
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FPB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
June 30,1999 December 31,1998
------------ ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and non-interest earnings deposits ................... $ 287,384 $ 446,684
Interest- earning deposits in other depository institutions 5,523,523 1,904,021
------------ ------------
TOTAL CASH AND CASH EQUIVALENTS ......................... 5,810,907 2,350,705
Investment securities (Available for Sale) .................. 989,991 992,994
Mortgage - backed securities (Held to Maturity) ............. 2,460,519 2,924,100
Federal Home Loan Bank stock ................................ 357,100 316,300
Loans receivable ............................................ 39,361,122 35,032,552
Less:
Loans in process .......................................... (212,953) (737,569)
Allowance for loan losses ................................. (170,000) (170,000)
Net deferred loan costs ................................... 58,301 26,689
------------ ------------
Loans receivable, net ................................... 39,036,470 34,151,672
Accrued interest receivable ................................. 88,215 64,139
Premises and equipment, net ................................. 194,192 204,005
Prepaid expenses and other assets ........................... 25,784 54,446
------------ ------------
TOTAL ASSETS ............................................ $ 48,963,178 $ 41,058,361
============ ============
LIABILITIES AND EQUITY
Deposits:
Non-interest-bearing demand ............................... $ 1,578,706 $ 709,739
Interest-bearing .......................................... 35,486,546 33,354,904
------------ ------------
Total Deposits .......................................... 37,065,252 34,064,643
Interest payable on deposits ................................ 63,528 74,860
Advances from Federal Home Loan Bank ........................ 5,200,000 3,200,000
Accrued expense and other liabilities ....................... 178,849 94,106
Federal income tax payable .................................. 7,471 48,771
Deferred income taxes ....................................... 8,209 5,827
------------ ------------
TOTAL LIABILITIES ....................................... $ 42,523,309 $ 37,488,207
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FPB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
June 30,1999 December 31, 1998
------------ -----------------
(Unaudited)
<S> <C> <C>
EQUITY
Preferred stock $.01 par value, 2,000,000 shares authorized, none issued -- --
Common stock - $.01 par value, 5,000,000 shares authorized, ............ -- --
331,355 shares issued and outstanding................................. 3,313 --
Additional paid-in capital ............................................. 2,970,758 --
Unearned ESOP shares ................................................... (265,080) --
Retained earnings - substantially restricted ........................... 3,737,484 3,574,778
Accumulated other comprehensive income (loss) ........................ (6,606) (4,624)
------------ ------------
TOTAL EQUITY ....................................................... 6,439,869 3,570,154
------------ ------------
TOTAL LIABILITIES AND EQUITY ....................................... $ 48,963,178 $ 41,058,361
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FPB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
Three Months Ended June 30, 1999 and 1998
Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
-----Three Months Ended----- -----Six Months Ended-----
June 30,1999 June 30, 1998 June 30, 1999 June 30, 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Mortgage loans and fees .................... $ 689,777 $ 523,693 $1,334,681 $1,004,079
Loans on deposits .......................... 8,804 8,168 17,132 15,615
Consumer loans ............................. 17,362 7,902 33,068 11,651
FHLB stock and other investment securities . 17,583 18,552 34,905 37,262
Mortgage - backed securities ............... 39,896 62,076 84,398 131,168
Demand deposits ............................ 36,454 43,612 67,665 93,696
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME .................. 809,876 664,003 1,571,849 1,293,471
INTEREST EXPENSE
Deposits ................................... 419,151 383,599 827,501 746,155
Federal Home Loan Bank advances ............ 60,937 25,749 110,867 35,629
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE ................. 480,088 409,348 938,368 781,784
---------- ---------- ---------- ----------
NET INTEREST INCOME .................... 329,788 254,655 633,481 511,687
Provision for Loan Losses .................. -- -- -- 5,764
---------- ---------- ---------- ----------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES ............................ 329,788 254,655 633,481 505,923
---------- ---------- ---------- ----------
NON-INTEREST INCOME
Gain on foreclosed real estate sold ........ -- -- 478 --
Insurance commissions ...................... 2,623 3,124 3,283 3,811
Service charges on deposits ................ 1,969 329 3,520 551
Other ...................................... 9,714 2,436 13,964 4,437
---------- ---------- ---------- ----------
TOTAL NON-INTEREST
INCOME.................................. 14,306 5,889 21,245 8,799
---------- ---------- ---------- ----------
</TABLE>
5
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FPB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
Three Months Ended June 30, 1999 and 1998
Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30,1999 June 30, 1998 June 30, 1999 June 30, 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
NON-INTEREST EXPENSE
Compensation and employee benefits 120,819 79,172 233,706 160,243
Occupancy and equipment ........... 14,834 11,608 27,104 17,712
Data processing ................... 21,492 12,564 35,965 25,355
Advertising ....................... 10,878 7,616 19,989 10,174
Federal insurance expense ......... 4,952 4,516 9,821 8,965
Other ............................. 33,268 27,114 73,735 51,990
--------- --------- --------- ---------
TOTAL NON-INTEREST
EXPENSE ....................... 206,243 142,590 400,320 274,439
--------- --------- --------- ---------
INCOME BEFORE
INCOME TAXES .................. 137,851 117,954 254,406 240,283
Income tax expense ................ 52,100 41,200 91,700 84,200
--------- --------- --------- ---------
NET INCOME .................... 85,751 76,754 162,706 156,083
Other comprehensive income (loss)
Unrealized gain (loss) on
investment securities, net of
deferred tax expense (benefit) (1,982) (3,303) (1,982) (3,303)
--------- --------- --------- ---------
COMPREHENSIVE INCOME .............. $ 83,769 $ 73,451 $ 160,724 $ 152,780
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
FPB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Retained Accumulated
Earnings Other
Additional Unearned Substan- Compre-
Common Paid-In ESOP tially hensive Total
Stock Capital Shares Restricted Income Equity
------ ---------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 ............. $ -- $ -- $ -- $3,338,631 $ -- $3,338,631
Comprehensive Income:
Net income ........................... -- -- -- 156,083 -- 156,083
Other comprehensive income, net of tax -- -- -- -- (3,303) (3,303)
-------------------------------------------------------------------------------
Balance, June 30, 1998 ............... $ -- $ -- $ -- $3,494,714 $(3,303) $3,491,411
===============================================================================
Balance January 1, 1999 .............. $ -- $ -- $ -- $3,574,178 $(4,624) $3,570,154
Comprehensive Income:
Net Income ........................... -- -- -- 162,706 -- 162,706
Other comprehensive income, net of tax -- -- -- -- (1,982) (1,982)
Proceeds from issuance of common stock 3,310 2,970,761 -- -- -- 2,974,071
Acquisition of unearned ESOP shares .. -- -- (265,080) -- -- (265,080)
-------------------------------------------------------------------------------
Balance, June 30,1999 ................ $3,310 2,970,761 (265,080) 3,737,484 (6,606) 6,439,869
====== ========== ========= ========== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
FPB FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 June 30, 1998
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ...................................................................... $ 162,706 $ 156,083
----------- -----------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation .................................................................. 14,774 6447
Provision for loan losses ..................................................... -- 5,764
Stock dividends on Federal Home Loan Bank Stock ............................... (8,900) (8,900)
Net loan costs deferred ....................................................... (31,611) (18,243)
Amortization of net premiums on mortgage backed securities .................... 3,484 4,856
Changes in Operating Assets and Liabilities:
Accrued interest receivable ................................................... (24,076) (2,203)
Prepaid expenses and other assets ............................................. 2,753 (6,602)
Interest payable on deposits .................................................. (11,332) 11,204
Accrued expenses and other liabilities ........................................ 84,743 17,428
Federal income tax payable .................................................... (41,300) (54,983)
Deferred income taxes ......................................................... 3,403 --
----------- -----------
Total Adjustments ........................................................... (8,062) (45,232)
----------- -----------
Net Cash Provided by Operating Activities ....................................... 154,644 110,851
=========== ===========
CASH FLOW FROM INVESTING ACTIVITIES
Net increase in loans receivable .............................................. (4,853,187) (5,132,413)
Principal payments from mortgage-backed securities ............................ 460,097 649,630
Purchase of Federal Home Loan Bank stock ...................................... (31,900) --
Improvements to premises ...................................................... (3,750) (7,076)
Purchase of equipment and/or software ......................................... (1,211) (37,103)
----------- -----------
Net cash used in investing activities ........................................... (4,429,951) (4,526,962)
----------- -----------
</TABLE>
8
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FPB FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 June 30, 1998
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Net increase in deposits ...................... 3,000,609 2,282,608
Advances from Federal Home Loan Bank .......... 2,000,000 1,500,000
Net proceeds from sale of common stock ........ 2,999,980 --
Acquisition of unearned ESOP shares ........... (265,080) --
----------- -----------
Net cash provided by financing activities ....... 7,735,509 3,782,608
----------- -----------
NET INCREASE (DECREASE) IN CASH ................. 3,460,202 (633,503)
Cash and cash equivalents - beginning of period 2,350,705 4,235,963
----------- -----------
Cash and cash equivalents - end of period ....... $ 5,810,907 $ 3,602,460
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
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FPB FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
Note 1 - Basis of Presentation -
This accompanying consolidated financial statements at June 30, 1999 and
for the three and six months ended June 30,1999 and 1998 include the accounts of
FPB Financial Corp. (the "Company") and its wholly owned subsidiary, Florida
Parishes Bank (the "Bank"). Currently, the business and management of FPB
Financial Corp. is primarily the business and management of the Bank. All
significant inter-company transactions and balances have been eliminated in the
consolidation.
On February 23, 1999, the Bank incorporated FPB Financial Corp. to
facilitate the conversion of the Bank from mutual to stock form (the
"Conversion"). In connection with the Conversion, the Company offered its common
stock to the depositors and borrowers of the Bank as of specified dates, to an
employee stock ownership plan and to members of the general public. Upon
consummation of the Conversion on June 30, 1999, all of the Bank's outstanding
common stock was issued to the Company, the Company became the holding company
for the Bank and the Company issued 331,355 shares of common stock.
The Company filed a Form SB-2 with the Securities and Exchange Commission
("SEC") on March 11, 1999, which as amended was declared effective by the SEC on
May 13, 1999. The Bank filed a Form AC with the Office of Thrift Supervision
("OTS") on March 11, 1999. The Form AC and related offering and proxy materials,
as amended, were conditionally approved by the OTS by letter dated May 14, 1999.
The Company also filed an Application H- (e) 1-S with the Midwest Regional
Office of the OTS on or about March 17, 1999, which was conditionally approved
by the OTS by letter dated May 14, 1999.
The members of the Bank approved the Plan at a special meeting held on
June 22, 1999, and the subscription and community offering closed on June 18,
1999.
The Conversion was accounted for under the pooling of interest method of
accounting. In the Conversion, the Company issued 331,355 shares of common
stock, 26,508 shares of which were acquired by its Employee Stock Ownership
Plan, and the Bank issued 1,000 shares of $.01 par value common stock to the
Company.
The accompanying consolidated unaudited financial statements were prepared
in accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all adjustments (consisting only of
normal recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the consolidated financial statements have been
included. The results of operations for the three and six months ended June 30,
1999 are not necessarily indicative of the results to be expected for the year
ending December 31, 1999.
Note 2 - Employee Stock Ownership Plan-
The Company sponsors a leveraged employee stock ownership plan (ESOP) that
covers all employees who have at least one year of service with the Company. The
ESOP shares initially were pledged as collateral for its debt. The debt is being
repaid based on a thirteen-year amortization and the shares are being released
for allocation to active employees annually over the thirteen-year period. The
shares pledged as collateral are deducted from stockholder's equity as unearned
ESOP shares in the accompanying balance sheets.
As shares are released from collateral, the Company reports compensation
expense equal to the current market price of the shares. Dividends on allocated
ESOP shares are recorded as a reduction of
10
<PAGE>
retained earnings; dividends on unallocated ESOP shares are recorded as a
reduction of unearned ESOP shares.
Note 3 -Earnings Per Share -
Earnings per share for periods prior to June 30, 1999 are not considered
meaningful as the Conversion was not completed until June 30, 1999 and the 100
shares of the Company previously held by the Bank were canceled upon
consummation of the Conversion as of June 30, 1999.
FPB Financial Corp. is a Louisiana corporation organized in February 1999
by the Bank for the purpose of becoming a unitary holding company of the Bank.
The Company purchased all of the capital stock of the Bank issued in the
Conversion in exchange for 50% of the net Conversion proceeds and retained the
remaining 50% of the net Conversion proceeds as its initial capitalization.
Immediately following the Conversion, the only significant assets of the Company
are the capital stock of the Bank, the Company's loan to the ESOP, and the
remainder of the net Conversion proceeds retained by the Company. Initially, the
business and management of the Company primarily consist of the business and
management of the Bank. Initially, the Company neither owns nor leases any
property, but instead uses the premises, equipment and furniture of the Bank. At
the present time, the Company does not intend to employ any persons other than
officers of the Bank and the Company will utilize the support staff of the Bank
from time to time. Additional employees will be hired as appropriate to the
extent the Company expands or changes its business in the future.
11
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FPB FINANCIAL CORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion compares the consolidated financial condition of
FPB Financial Corp. and Subsidiary at June 30, 1999 to December 31, 1998 and the
results of operations for the three and six months ended June 30, 1999 with the
same periods in 1998. Currently, the business and management of FPB Financial
Corp. is primarily the business and management of the Bank. This discussion
should be read in conjunction with the interim consolidated financial statements
and footnotes included herein.
This quarterly report on Form 10 - QSB includes statements that may
constitute forward-looking statements, usually containing the words "believe",
"estimate", "expect", "intend" or similar expressions. These statements are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that could cause future
results to vary from current expectations include, but are not limited to, the
following: changes in economic conditions (both generally and more specifically
in the markets in which the Company operates); changes in interest rates,
accounting principles, policies or guidelines and in government legislation and
regulation (which change from time to time and over which the Company has no
control); and other risks detailed in this quarterly report on Form 10 - QSB and
the Company's other Securities and Exchange Commission filings. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date hereof.
FPB Financial Corp. is the holding company for the Bank. Substantially all
of the Company's assets are currently held in, and its operations are conducted
through, its sole subsidiary the Bank. The Company's business consists primarily
of attracting deposits from the general public and using such deposits to make
loans for the purchase and construction of residential properties. The Company
also originates commercial real estate loans and various types of consumer
loans.
Changes in Financial Condition
The Company's total assets increased $7.9 million or 19.2% from $41.0
million at December 31, 1998 to $48.9 million June 30, 1999. This increase was
primarily due to increases of $4.9 million in net loan receivable and $3.5
million in cash and cash equivalents. The increase in cash and cash equivalents
was due to consummation of the Conversion.
The Company's total classified assets for regulatory purposes at June 30,
1999 (excluding loss assets specifically reserved for) amounted to $334,180, all
of which was classified as substandard. The largest classified asset at June 30,
1999 consisted of a $76,951 residential loan. The remaining $257,229 of standard
asset at June 30, 1999 consisted of 16 residential mortgage loans.
Interest-bearing deposits in other institutions increased by $3.6 million
or 52.6% from $1.9 million at December 31, 1998 to $5.5 million at June 30,
1999. This increase was primarily due to the sale of FPB Financial Corp. stock.
The demand for mortgage and consumer loans in the Bank's market area
increased during the past six months. The net loan portfolio increased $4.9
million or 14.3% from $34.2 million at December 31, 1998 to $39.0 million at
June 30, 1999.
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<PAGE>
Deposits increased by $3.0 million or 8.81% from $34.1 million at December
31, 1998 to $37.1 million at June 30, 1999. Both interest and
non-interest-bearing deposit accounts increased in the period.
Total stockholders equity increased by $2.9 million during the past six
months. Net income of $162,706 and the $2.7 million net proceeds from the sale
of common stock increased equity during the period. Stockholders equity at June
30, 1999 totaled $6.4 million compared to equity of $3.6 million at December 31,
1998.
Liquidity and Capital Resources
The Bank is required under applicable federal regulations to maintain
specified levels of "liquid" investments in qualifying types of U.S. Government,
federal agency and other investments having maturities of up to five years.
Current OTS regulations require that a savings institution maintain liquid
assets of not less than 4% of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less. At June 30, 1999,
the Bank's liquidity was 32.2% or $7.0 million in excess of the minimum OTS
requirement.
The Bank is required to maintain regulatory capital sufficient to meet
core and risk-based capital ratios of 4.0% and 8.0% respectively. At June 30,
1999, the Bank's core capital amounted to $5.2 million or 10.65% of adjusted
total assets of $49.0 million and the Bank's risk-based capital amounted to $5.2
million or 23.92% of adjusted risk-weighted assets of $22.5 million.
As of June 30, 1999, the Bank's unaudited regulatory capital requirements
are as indicated in the following table:
(In Thousands)
CORE RISK-BASED
CAPITAL CAPITAL
------- ----------
GAAP Capital ............................ $ 5,225 $ 5,225
Additional Capital Items:
General Valuation Allowances .......... -- 170
Equity Investments .................... -- (15)
------- -------
Regulatory Capital Computed ............. 5,225 5,380
Minimum Capital Requirement ............. 1,962 1,800
------- -------
Regulatory Capital Excess ............... $ 3,263 $ 3,580
======= =======
Regulatory Capital as a Percentage ...... 10.65% 23.92%
Minimum Capital Required as a Percentage 4.00% 8.00%
------- -------
Regulatory Capital as a Percentage
in Excess of Requirements ............... 6.65% 15.92%
======= =======
13
<PAGE>
Based on the above capital ratios, the Bank meets the criteria for a "well
capitalized" institution at June 30, 1999. The Bank's management believes that
under the current regulations, the Bank will continue to meet its minimum
capital requirements in the foreseeable future. However, events beyond the
control of the Bank, such as increased interest rates or a downturn in the
economy of the Bank's area, could adversely affect future earnings and,
consequently, the ability of the Bank to continue to exceed its future minimum
capital requirements.
Results Of Operations
The profitability of the Company depends primarily on its net interest
income, which is the difference between interest income on interest-earning
assets, principally loans, mortgage-backed securities, and investment
securities, and interest expense on interest-bearing deposits. Net interest
income is dependent upon the level of interest rates and the extent to which
such rates are changing. The Company's profitability also is dependent, to a
lesser extent, on the level of its non-interest income, provision for loan
losses, non-interest expenses and income taxes. In each of the three and six
month period ended June 30, 1999, net interest income before provision for loan
losses exceeded total non-interest expense. Total non-interest expense consists
of general, administrative and other expenses, such as compensation and
benefits, furniture and equipment expense, federal insurance premiums, and
miscellaneous other expenses.
14
<PAGE>
Net income increased by $9,000 or 11.7% in the quarter ended June 30, 1999
and increased by $7,000 or 4.2% in the six months ended June 30, 1999 compared
to the respective 1998 periods. The increase in the June 30, 1999 quarter was
due to an increase of $146,000 in interest income and an increase in
non-interest income of $8,000. These increases were offset by an increase in
interest expense of $71,000, an increase in non-interest expense of $64,000, and
an increase in income tax expense of $11,000. The increased net income for the
first six months of 1999 was due to a $122,000 increase in net interest income,
a decline in the provision for loan losses of $6,000, and an increase in
non-interest income of $12,000. These factors were offset by an increase in
non-interest expense of $126,000 and an increase in the provision for income
taxes of $8,000.
The $75,000 increase in net interest income in the second quarter was due
to increased earning assets and a decline in the cost of funds to 4.52 % as of
June 30, 1999 compared to 5.06 % as of June 30, 1998.
Total interest income increased by $146,000 or 21.9% in the quarter ended
June 30, 1999 and increased by $278,000 or 21.5% for the six months ended June
30, 1999 over the comparable 1998 periods. This is due primarily to an increase
in net loans receivable of $4.8 million in the period from December 31, 1998 to
June 30, 1999 and partially offset by a decline in the average interest rate
earned on loans receivable.
Total interest expense increased by $70,740 or 17.2% for the quarter and
increased $156,584 or 20.0% for the six months ended June 30, 1999 over the
comparable 1998 periods. This is due to an increase in interest-bearing deposits
of $2.1 million and an increase of $2.0 million in advances from the Federal
Home Loan Bank in the period from December 31, 1998 to June 30, 1999.
The provisions for losses decreased by $5,764 for the six month period
ended June 30, 1999 over the comparable 1998 period. At June 30, 1999, the
Company's non-accruing loans amounted to $69,966. The allowance for loan losses
amounted to $170,000 at June 30, 1999, representing .43% of the total loans held
in portfolio and 242.9% of total non-accruing loans at such date.
Non-interest income increased by $8,000 or 142.9% in the three months
ended June 30, 1999 and increased by $12,000 or 141.4% in the six months ended
June 30, 1999 over the comparable 1998 periods. The increase for both periods
were attributed to increased fees for insufficient funds and deposit account
service charges, and to a lesser extent income from debit card fees.
Non-interest expenses increased in the quarter ended June 30, 1999 by
$64,000 or 44.6% and increased by $126,000 or 45.9% in the six months ended June
30, 1999 over the comparable 1998 periods. The increase in the quarter was due
to an increase of $42,000 in compensation and benefits, $9,000 data processing,
$3,000 occupancy and equipment, $3,000 advertising and $6,000 of other expenses.
The increase in the six month period was due to increases of $73,000 in
compensation and benefits, $11,000 data processing, $9,000 occupancy and
equipment, $10,000 advertising and $22,000 on other expenses. Compensation
expense increased in both periods due to an increase in staff size and to a
lesser extent through increased compensation to existing staff members. Data
processing expenses increased in both periods due to increases in loan and
deposit accounts and the introduction of the Bank's debit card program.
Advertising expense increased due to additional advertising of the Bank's name
change in February 1999 and stock conversion which was completed June 30, 1999.
Income tax expense increased in the quarter and for the six months ending
June 30, 1999 over the comparable 1998 periods due to increased income before
income taxes and due to an increased effective tax rate to account for the State
of Louisiana income taxes that prior to the Company's stock conversion in 1999
the Bank was not required to file State of Louisiana tax returns.
15
<PAGE>
The Year 2000
General. The Year 2000 issue confronting us, as well as our suppliers,
customers, customer's suppliers and competitors, centers on the inability of
many computer systems to recognize the Year 2000. Many existing computer
programs and systems originally were programmed with six digit dates that
provided only two digits to identify the calendar year in the date field. With
the impending new millennium, these programs and computers will recognize "00"
as the year 1900 rather than the year 2000 unless they are corrected or
replaced.
Like most financial service providers, we may be significantly affected by
the Year 2000 issue due to our dependence on technology and date-sensitive data.
Computer software, hardware and other equipment, both within and outside the
Bank's direct control and third parties with whom the Bank electronically or
operationally interfaces are likely to be affected. If computer systems are not
modified in order to be able to identify the Year 2000, many computer
applications could fail or create erroneous results. In this event, calculations
which rely on date field information, such as interest, payment or due dates and
other operating functions, could generate results which are significantly
misstated.
In accordance with federal regulatory pronouncements, the Bank's Year 2000
plan addressed issues involving awareness, assessment, renovation, validation,
implementation and contingency planning. These phases are discussed below.
Awareness and Assessment. The Bank has a Year 2000 team, consisting of the
President, an Assistant Vice President and the Compliance Officer, which is
responsible for addressing Year 2000 issues. The Year 2000 team periodically
reports to the Board of Directors its actions and findings.
Management has conducted an assessment of all software, hardware,
environmental systems and other computer-controlled systems. In addition,
management has identified and developed an inventory of all technological
components and vendors. Three service providers were identified as "mission
critical", where the failure to become Year 2000 compliant in a timely manner
could cause major operational risks or disruptions.
Renovation Phase Has Been Completed. The Bank has upgraded its in-house
hardware and software that was mission critical or had applications with date
sensitive areas. The Bank's data processing and items processing are handled by
two independent third party data centers, and both centers have indicated that
they completed their renovation process. In addition, the software used with the
FHLB of Dallas was replaced.
The Bank's Validation or Testing Phase Has Ben Completed. During 1998, the
Bank tested its loan origination, loan servicing, savings deposits, savings
withdrawal and general ledger activities for Year 2000 compliance. All teller
terminals and general ledger posting terminals were tested, and different tests
were conducted with the Bank's service providers and software vendors. The
Bank's service providers and software vendors were examined by the Federal
Financial Institutions Examination Council, which consist of federal banking
agencies, for Year 2000 compliance. However, neither the council nor its member
agencies certify the Year 2000 readiness of any service provider or vendor. The
Bank explored during 1998 the steps involved in switching its data processing to
different service providers in the event its current providers were unable to
become Year 2000 compliant in a timely manner. Based on the results of the
testing, the Bank does not believe that a switch to new service providers will
be necessary.
Implementation Phase Has Been Completed. Additional testing was conducted
in the first quarter of 1999, and the implementation phase has now been
completed. All in-house hardware and software that is critical and date
sensitive is Year 2000 compliant. In-house software that is not compliant will
be used only for word processing and not for date sensitive applications.
16
<PAGE>
Contingency Planning. The Bank has adopted contingency plans in the event
that one or more of its internal or external computer systems fails to operate
on or after January 1, 2000. In a worst case scenario, the Bank would need to
post accounts and general ledger entries manually, which was last done in the
1970's. Management has discussed a manual posting system with its independent
auditors. A manual system for recording daily transactions and posting the
bank's general ledger entries was developed and tested as of June 30, 1999. The
third phase of Year 2000 compliance reviews has been completed by the federal
regulatory agencies and the Bank's contingency and business resumption plans
have been found to be in compliance with regulatory guidelines.
The Bank has obtained a $500,000 Year 2000 line of credit from the FHLB of
Dallas that can be used for liquidity purposes if other sources of funds are not
available when needed. This line of credit was obtained in anticipation of
higher than normal savings withdrawals in late 1999. The Bank can also obtain
short-term FHLB advances if necessary.
Risks. If one or more internal or external computer systems fail to
operate properly on or after January 1, 2000, the Bank may be unable to process
transactions, prepare statements or engage in similar normal business
activities. If all transactions were required to be handled manually due to
computer or other failures, we would need to hire additional personnel which
could significantly increase our expenses.
In the event any of our local utility companies were unable to provide
electricity or other needed services, our operations would be disrupted. We are
unable to provide any assurances as to the Year 2000 readiness of the utility
companies. In addition, while we believe the testing described below was done in
accordance with applicable regulatory guidelines, we are unable to provide any
assurances that the testing took into account all problems that may develop on
or after January 1, 2000.
We believe we have taken appropriate steps with respect to matters that
are within our control in order to become ready for the Year 2000 in a timely
manner. Based on the steps taken to date, including testing and other
documentation, management believes that its three mission critical service
providers are Year 2000 compliant and that issues related to the Year 2000 will
not have a material adverse effect on FPB Financial `s liquidity, capital
resources or consolidated results of operations. However, we are unable to
provide any assurance that we have foreseen all problems that may develop on or
after January 1, 2000 or that we have taken all actions that may be considered
necessary in hindsight. In addition, the readiness of all third parties,
including customers and suppliers, is inherently uncertain and cannot be
guaranteed by us. While our outside service providers have shared with us their
testing results, the findings of examination of them by regulatory authorities
and their responses to such examinations, none of the service providers have
provided us with enforceable assurances. One of the mission critical service
providers has indicated in writing that they are not making any express or
implied representation or warranty as to their Year 2000 readiness.
Costs. The Bank currently estimates the total cost of becoming Year 2000
compliant to be less than $15,000 of which approximately $6,000 has been
incurred as of June 30, 1999.
Status of Borrowers and Other Customers. The Bank's customer base consists
primarily of individuals who use the Bank's services for personal, household or
consumer uses. Management believes these customers are not likely to
individually pose material Year 2000 risks directly. It is not possible at this
time to gauge the indirect risks which could be faced if the employers of these
customers encounter unresolved Year 2000 issues. Most of the Bank's loans are
residential or consumer in nature. The Bank had 11 commercial real estate loans
at December 31, 1998 with an average balance of $59,000 at that date. Management
determined that the risk of these borrowers adversely impacting the Bank was not
material. As a result, the Bank has not contacted its customers or borrowers to
determine status of their readiness for the Year 2000.
For new commercial real estate loans, the Bank is requiring the borrower
to represent that it expects to become Year 2000 compliant in a timely manner
and that it will promptly notify the Bank if the borrower or any of its material
vendors or suppliers will not achieve compliance timely, in each case excluding
any
17
<PAGE>
noncompliance that would not have a material adverse effect on the
borrower's financial condition. The Bank believes these representations will
assist management in monitoring the status of new commercial borrowers.
18
<PAGE>
FPB Financial Corp.
Form 10-QSB
Quarter Ended June 30, 1999
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities and Use of Proceeds:
There are no matters required to be reported under sections (a) through
(c) of this item. On June 30, 1999, the Company sold 331,355 shares of its
common stock at $10.00 per share in connection with the conversion of the Bank
from a mutual to a stock form, resulting in gross proceeds of $3,313,550. Net
proceeds amounted to $2,974,071, of which 50% was used by the Company to
purchase all of the Bank's common stock issued in the conversion. Of the
proceeds retained by the Company, $265,080 was used to make a loan to the
Company's Employee Stock Ownership Plan ("ESOP") in order to fund the purchase
of 26,508 shares by the ESOP in the conversion. The remaining net proceeds
retained by the Company are being used as the Company's working capital and will
be invested in investment securities.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
On April 13, 1999, in conjunction with the Company's first annual meeting
of stockholders, the Bank as the sole stockholder of the Company at the time
executed a Consent of Sole Stockholder approving the following: (1) the division
the directors of the Corporation into three classes, as follows: the first
class, consisting of Messrs. Anderson, Durham, and Inge, has a term of office
expiring at the Corporation's first annual meeting of stockholders; the second,
class consisting of Messrs. Allen and McGee, has a term of office expiring at
the Corporation's second annual meeting of stockholders; and the third class,
consisting of Messrs. Bowden and Hutchinson, has a term of office expiring at
the Corporation's third annual meeting of stockholders; (2) the election of
Messrs. Anderson, Durham, and Inge for a three-year term expiring in 2002, or
until their successors are elected and appointed; (3) the ratification of the
appointment of Murphy, Whalen, and Broussard L.L.C. as the Corporation's
independent public accountants for the fiscal year ending December 31, 1999.
Item 5 - Other Information:
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
(a) The following exhibit is filed herewith:
EXHIBIT NO. DESCRIPTION
----------- -----------
27.1 Financial Data Schedule Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarter ended June 30,1999.
19
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized
FBP FINANCIAL CORP.
Registrant
Date: August 12, 1999 By: /s/ Fritz W. Anderson II
----------------------------------------
Fritz W. Anderson II
President and Chief Executive Officer
Date: August 12, 1999 By: /s/ G. Wayne Allen
----------------------------------------
G. Wayne Allen
Secretary
20
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FPB
FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENT OF FINANCIAL CONDITION.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 287,384
<INT-BEARING-DEPOSITS> 5,523,523
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 989,991
<INVESTMENTS-CARRYING> 3,450,510
<INVESTMENTS-MARKET> 3,828,259
<LOANS> 39,191,122
<ALLOWANCE> 170,000
<TOTAL-ASSETS> 48,963,178
<DEPOSITS> 37,065,252
<SHORT-TERM> 0
<LIABILITIES-OTHER> 258,057
<LONG-TERM> 5,200,000
0
0
<COMMON> 3,313
<OTHER-SE> 6,436,556
<TOTAL-LIABILITIES-AND-EQUITY> 48,963,178
<INTEREST-LOAN> 1,384,881
<INTEREST-INVEST> 186,968
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,571,849
<INTEREST-DEPOSIT> 827,501
<INTEREST-EXPENSE> 938,368
<INTEREST-INCOME-NET> 633,481
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (1,982)
<EXPENSE-OTHER> 400,320
<INCOME-PRETAX> 254,406
<INCOME-PRE-EXTRAORDINARY> 254,406
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,706
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> .026
<LOANS-NON> 69,966
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 170,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 170,000
<ALLOWANCE-DOMESTIC> 170,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
