UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2000
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|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from________________ to ________________
Commission file number 0-30680
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First Federal of Olathe Bancorp, Inc.
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(Exact name of small business issuer as specified in its charter)
Kansas 48-1226075
--------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 East Park Street, Olathe, KS 66061
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(Address of principal executive offices)
(913) 782-0026
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since
last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes |_| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding if each of the issuer's classes of common
equity, as of the latest practicable date:
556,328 common stock, par value $.01 per share
----------------------------------------------
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
FORM 10-QSB
NINE MONTHS ENDED SEPTEMBER 30, 2000
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:
Page
----
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition at
September 30, 2000 (Unaudited) and December 31, 1999................... 3
Consolidated Statements of Income (Unaudited) for the Three Months
and Nine Months Ended September 30, 2000 and 1999...................... 4
Consolidated Statement of Stockholders' Equity (Unaudited)
for the Nine Months Ended September 30, 2000........................... 5
Consolidated Statements of Cash Flows (Unaudited) for
the Nine Months Ended September 30, 2000 and 1999...................... 6
Notes to Consolidated Financial Statements (Unaudited)................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 10
Part II - Other Information
Item 1. Legal Proceedings................................................. 15
Item 2. Changes in Securities............................................. 15
Item 3. Defaults Upon Senior Securities................................... 15
Item 4. Submission of Matters to a Vote of Security Holders............... 15
Item 5. Other Information................................................. 15
Item 6. Exhibits and Reports on Form 8-K.................................. 15
Signatures .................................................................. 16
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and non-interest earning deposits $ 579,414 $ 90,749
Overnight deposits at Federal Home Loan Bank
and First National Bank of Olathe 2,514,611
------------ -----------
Total cash and cash equivalents 579,414 2,605,360
Held-to-maturity securities, at cost 12,586,885 11,000,000
Available-for-sale securities 683,904 618,966
Federal Home Loan Bank stock, at cost 319,700 308,300
Loans receivable, net of deferred loan fees and loss allowance 34,860,811 31,472,474
Accrued interest and dividend receivable 480,482 420,090
Equipment, net of accumulated depreciation 15,270 19,643
Refundable income taxes 1,100 21,000
Other assets 6,147 146,258
------------ -----------
Total Assets $ 49,533,713 $46,612,091
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 29,489,023 $36,203,251
Advance payments from borrowers for taxes and insurance 405,749 13,994
Interest payable on deposits 332,998 51,089
Advances from the Federal Home Loan Bank 4,500,000 1,000,000
Accrued expenses 115,430 106,175
Deferred income taxes 117,586 68,957
Income taxes payable 11,400
------------ -----------
Total Liabilities 34,972,186 37,443,466
------------ -----------
Stockholders' equity
Common stock, $.01 par value, 4,000,000 shares
authorized, 556,328 shares issued and outstanding 5,563
Additional paid-in capital 5,036,269
Retained earnings 9,553,793 8,796,861
Unearned ESOP shares (445,060)
Accumulated other comprehensive income 410,962 371,764
------------ -----------
Total Stockholders' Equity 14,561,527 9,168,625
------------ -----------
Total Liabilities and Stockholders' Equity $ 49,533,713 $46,612,091
============ ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements
- 3 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- -------------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Interest and Dividend Income:
Loans receivable $753,307 $675,414 $2,151,537 $1,967,812
Investment securities 228,611 235,900 616,652 687,139
Cash and cash equivalents 2,946 117,555
Capital stock 6,911 18,394
-------- -------- ---------- ----------
Total Interest and Dividend Income 991,775 911,314 2,904,138 2,654,951
-------- -------- ---------- ----------
Interest Expense:
Deposits 425,339 482,231 1,367,131 1,418,024
Federal Home Loan Bank advances 50,140 14,468 80,255 42,932
-------- -------- ---------- ----------
Total Interest Expense 475,479 496,699 1,447,386 1,460,956
-------- -------- ---------- ----------
Net Interest and Dividend Income Before
Provision for Loan Losses 516,296 414,615 1,456,752 1,193,995
Provision for Loan Losses 150,000 150,000
-------- -------- ---------- ----------
Net Interest and Dividend Income After
Provision for Loan Losses 516,296 264,615 1,456,752 1,043,995
-------- -------- ---------- ----------
Non-Interest Income:
Service charges and other fees 5,419 13,409 9,961 15,808
-------- -------- ---------- ----------
Non-Interest Expense:
Salaries and related payroll expenses 42,097 28,823 96,332 83,461
Directors' fees 12,720 6,000 31,860 18,440
Occupancy of premises 11,275 1,542 31,437 19,502
Professional fees 40,566 2,000 101,555 13,521
Other general and administrative 13,975 28,476 46,697 59,537
-------- -------- ---------- ----------
Total Non-Interest Expense 120,633 66,841 307,881 194,461
-------- -------- ---------- ----------
Income Before Income Taxes 401,082 211,183 1,158,832 865,342
Income Tax Provision 127,900 62,482 401,900 299,828
-------- -------- ---------- ----------
Net Income $273,182 $148,701 $ 756,932 $ 565,514
======== ======== ========== ==========
Earnings Per Share - Basic and Diluted $ .53 N/A $ 1.48 N/A
-------- -------- ---------- ----------
</TABLE>
See accompanying notes to the unaudited consolidated financial statements
- 4 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Compre- Additional Unearned Other
hensive Common Paid-In ESOP Retained Comprehensive Total
Income Stock Capital Shares Earnings Income Equity
-------- ------- ---------- --------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $8,796,861 $371,764 $ 9,168,625
Net income for the nine months
ended September 30, 2000 $756,932 756,932 756,932
Other Comprehensive gain:
Change in unrealized gain on
available-for-sale securities,
net of deferred taxes 39,198 39,198 39,198
Proceeds from issuance of
common stock $ 5,563 $5,036,269 5,041,832
Common stock purchased
by ESOP $(445,060) (445,060)
-------- ------- ---------- --------- ---------- -------- -----------
Balance, September 30, 2000 $796,130 $ 5,563 $5,036,269 $(445,060) $9,553,793 $410,962 $14,561,527
======== ======= ========== ========= ========== ======== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements
- 5 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 756,932 $ 565,514
Items not requiring (providing) cash:
Depreciation and amortization 4,373 3,710
Provision for loan losses 150,000
Amortization of discounts on securities (8,372)
Deferred income taxes 22,889 (41,955)
Changes in:
Accrued interest receivable (60,392) (99,953)
Other assets 140,111 (9,234)
Accrued interest payable 281,909 343,469
Accounts payable and accrued expenses 9,255 41,860
Income taxes payable 31,300 24,730
----------- -----------
Net cash provided by operating activities 1,178,005 978,141
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (originations) collections of loans (3,388,337) (2,237,036)
Purchase of property and equipment (4,115)
Purchase of FHLB stock (11,400) (13,900)
Proceeds from maturities of held-to-maturity securities 1,000,000 1,000,000
Purchases of held-to-maturity securities (2,578,513) (3,000,000)
----------- -----------
Net cash used in investing activities (4,978,250) (4,255,051)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (6,714,228) 520,150
Proceeds from FHLB advances 3,500,000
Proceeds from issuance of common stock 5,041,832
Common stock purchased by ESOP (445,060)
Net increases in advances from borrowers
for taxes and insurance 391,755
----------- -----------
Net cash provided by financing activities 1,774,299 520,150
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (2,025,946) (2,756,760)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,605,360 5,212,508
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 579,414 $ 2,455,748
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements
- 6 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
In December 1999, First Federal of Olathe Bancorp, Inc. (the "Company")
was incorporated to facilitate the conversion of First Federal Savings and Loan
Association of Olathe (the "Association") 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 Association as of specified dates,
to an employee stock ownership plan, and to members of the general public. The
Conversion was consummated on April 11, 2000, at which time the Company became
the holding company for the Association and issued shares of its stock to the
general public.
The Company filed a Form SB-2 with the Securities and Exchange Commission
("SEC") on December 16, 1999, which, as amended, was declared effective by the
SEC on February 11, 2000. The Association filed a Form AC with the Office of
Thrift Supervision ("OTS") on or about December 21, 1999. The Form AC and
related offering and proxy materials, as amended, were conditionally approved by
the OTS by a letter dated February 11, 2000. The Company also filed an
Application H-(e) 1-S with the OTS on or about December 23, 1999, which was
conditionally approved by the OTS by letter dated February 7, 2000. The members
of the Association approved the Plan at a special meeting held on March 23,
2000, and the subscription and community offerings closed on March 30, 2000.
Following the incorporation of the Company, the Company issued one share
of common stock to the Association on March 23, 2000. The share was cancelled
upon consummation of the Conversion, and the Conversion has been accounted for
in a manner similar to the pooling of interests method of accounting.
The accompanying unaudited consolidated 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. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's 10-KSB annual report for 1999 filed with the
SEC. However, all adjustments (consisting only of normal recurring accruals)
which, in the opinion of management, are necessary for a fair presentation of
the financial statements, have been included. The consolidated statement of
financial condition of the Company as of December 31, 1999 has been derived from
the audited consolidated statement of financial condition of the Company as of
that date. The results of operations and other data for the three and nine
months ended September 30, 2000 are not necessarily indications of results that
may be expected for the entire fiscal year ending December 31, 2000.
NOTE 2: FORMATION OF HOLDING COMPANY AND CONVERSION TO STOCK FORM
On April 11, 2000, the Company became the holding company for First
Federal Savings and Loan Association of Olathe (the "Association") upon the
Association's conversion from a federally chartered mutual savings association
to a federally chartered capital stock savings association. The conversion was
accomplished through the sale and issuance by the Company of 556,328 shares of
common stock at $10 per share (par value of $0.01 per share). Proceeds from the
sale of common stock, net of expenses incurred of $521,448, were $5,041,832,
inclusive of $445,060 related to shares held by the Association's Employee Stock
Ownership Plan ("ESOP").
- 7 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3: EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the conversion to stock form, the Association
established an ESOP for the exclusive benefit of eligible employees (all
salaried employees who have completed at least 1,000 hours of service in a
12-month period and have attained the age of 21). The ESOP borrowed funds from
the Company in an amount sufficient to purchase 44,506 shares (8% of the Common
Stock issued in the stock offering). The loan is secured by the shares purchased
and will be repaid by the ESOP with funds from contributions made by the
Association, dividends received by the ESOP, and any other earnings on ESOP
assets. Contributions will be applied to repay interest on the loan first, then
the remainder will be applied to principal. The loan is expected to be repaid
over a period of up to 30 years. Shares purchased with the loan proceeds are
held in a suspense account for allocation among participants as the loan is
repaid. Contributions to the ESOP and shares released from the suspense account
are allocated among participants in proportion to their compensation relative to
total compensation of all active participants. Participants will vest in their
accrued benefits under the employee stock ownership plan at the rate of 20% per
year. Vesting is accelerated upon retirement, death or disability of the
participant or a change in control of the Association. Forfeitures will be
reallocated to remaining plan participants. Benefits may be payable upon
retirement, death, disability, separation from service, or termination of the
ESOP. Since the Association's annual contributions are discretionary, benefits
payable under the ESOP cannot be estimated.
The Association will account for its ESOP in accordance with Statement of
Position ("SOP") 93-6, Employers Accounting for Employee Stock Ownership Plans.
Accordingly, the debt of the ESOP is eliminated in consolidation and the shares
pledged as collateral are reported as unearned ESOP shares in the consolidated
statements of financial condition. Contributions to the ESOP shall be sufficient
to pay principal and interest currently due under the loan agreement. As shares
are committed to be released from collateral, the Company reports compensation
expense equal to the average market price of the shares for the respective
period, and the shares become outstanding for earnings per share computations.
Dividends on allocated ESOP shares are recorded as a reduction of debt and
accrued interest.
A summary of ESOP shares at September 30, 2000 is as follows:
Shares committed for release --
Unreleased shares 44,506
--------
Total 44,506
--------
Fair value of unreleased shares $445,060
========
- 8 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4: COMMITMENTS AND CONTINGENCIES
At September 30, 2000, the Association had outstanding commitments to
originate loans amounting to approximately $737,000.
NOTE 5: EARNINGS PER SHARE
For 2000, earnings per share is based upon the total number of shares
outstanding, less unallocated ESOP shares, after the conversion described in
Note 2 above and is presented as if those shares had been outstanding for the
entire year. The 2000 computation does not reflect the pro forma effect of any
investment income that would have been earned if the net proceeds from
conversion had been received at the beginning of the year.
The computation of per share earnings for the three months and nine months
ended September 30, 2000 is as follows:
Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000
------------------ ------------------
Net income $273,182 $756,932
Average common shares outstanding 511,822 511,822
-------- --------
Basic and diluted earnings per share $ 0.53 $ 1.48
-------- --------
- 9 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion compares the consolidated financial condition of
First Federal of Olathe Bancorp, Inc. and Subsidiary (the "Company") at
September 30, 2000 to December 31, 1999 and the results of operations for the
three and nine months ended September 30, 2000 with the corresponding periods in
1999. Currently, the business and management of First Federal of Olathe Bancorp,
Inc. is primarily the business and management of First Federal Savings and Loan
Association of Olathe (the "Association"). 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," "intent" 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.
First Federal of Olathe Bancorp, Inc. is a Kansas corporation organized in
December 1999, by the Association for the purpose of becoming a holding company
of the Association. On April 11, 2000, the Company acquired all of the capital
stock of the Association in exchange for 50% of the net conversion proceeds and
issued shares of its common stock to persons who submitted orders in the
subscription and community offerings. Immediately following the Conversion, the
only significant assets of the Company were the capital stock of the
Association, 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 will primarily consist of the business and management
of the Association. Initially, the Company will neither own nor lease any
property, but the Company will instead use the premises, equipment and furniture
of the Association. At the present time, the Company does not intend to employ
any persons other than officers of the Association, and the Company will utilize
the support staff of the Association from time to time. Additional employees
will be hired as appropriate to the extent the Company expands or changes its
business in the future.
- 10 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management believes that the holding company structure will provide the
Company with additional flexibility to diversify, should it decide to do so, its
business activities through existing or newly formed subsidiaries, or through
acquisitions of or mergers with other financial institutions and financial
services related companies. Although there are no current arrangements,
understandings or agreements, written or oral, regarding any such opportunities
or transactions, the Company will be in a position, subject to regulatory
limitations and the Company's financial position, to take advantage of any such
opportunities that may arise. The initial activities of the Company are
anticipated to be funded by the proceeds retained by the Company and earnings
thereon or, alternatively, through dividends from the Association.
To date, the Company has not engaged in any business activities other than
those related to the Conversion.
Financial Condition
Total assets increased by $2.9 million, or 6.3%, to $49.5 million at
September 30, 2000 from $46.6 million at December 31, 1999. This increase was
primarily the result of an increase of $3.4 million in mortgage loans, an
increase of $1.5 million in securities held to maturity and a decrease of $2.0
million in cash and cash equivalents. These increases reflected the proceeds
raised in the stock conversion and the Association's decision to pursue
opportunities for growth during recent time periods.
Mortgage loans increased $3.4 million, or 10.8%, to $34.9 million at
September 30, 2000 from $31.5 million at December 31, 1999. The increase
reflects the Association's controlled growth strategy, including capitalizing on
the strong housing market in the Association's market area during the nine
months ended September 30, 2000.
Securities held to maturity increased $1.5 million, or 13.6%, to $12.6
million at September 30, 2000 from $11.0 million at December 31, 1999,
reflecting purchases of federal agency debt securities after the conversion.
Deposits decreased $6.7 million, or 18.5%, to $29.4 million at September
30, 2000 from $36.2 million at December 31, 1999. The decrease in deposits is a
combination of account holders of First Federal Savings using deposits to buy
the Company's stock issued on April 11, 2000 and outflow of brokered deposits.
During 2000, many 18-month and 30-month brokered CDs matured and the Association
determined it was not as advantageous to raise rates to keep the brokered
deposits as it was to utilize FHLB advances to fund loans. Thus, brokered
deposits were allowed to "run-off" during the period.
Additionally, advances from the Federal Home Loan Bank increased $3.5
million, or 350%, to $4.5 million at September 30, 2000 from $1.0 million at
December 31, 1999. This increase was used to fund additional mortgage loans
originated during the same period deposits were decreasing.
Total stockholders' equity increased $5.4 million, or 58.7%, to $14.6
million at September 30, 2000 from $9.2 million at December 31, 1999, due
primarily to the net proceeds from the stock offering on April 11, 2000
partially offset by the purchase of common stock by the ESOP shares and the
Company's net income during the nine months ended September 30, 2000.
- 11 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Months Ended September 30, 2000
and 1999
Net income. Net income for the three months ended September 30, 2000
increased by $124,000, or 83.2%, to $273,000 from $149,000 for the three months
ended September 30, 1999. The increase is primarily due to the reduction in the
provision for loan losses of $150,000 and increased net interest income. The
Company's return on average assets for the three-month period ended September
30, 2000 was 2.27% compared to 1.31% for the same period in 1999.
Net interest income. For the three months ended September 30, 2000, net
interest income increased by $101,000, or 24.3%, to $516,000 from $415,000 for
the three months ended September 30, 1999. The increase reflects an increase of
$81,000 in interest income to $992,000 for the 2000 period from $911,000 for the
1999 period, which reflected the corresponding increase in average loan and
investment balances during the same periods.
Interest expense on deposits decreased $57,000 to $425,000 for the 2000
period from $482,000 for the 1999 period, which reflected the decrease in the
average outstanding deposit balances for the two periods. The interest expense
on Federal Home Loan Bank Advances increased $36,000 to $50,000 for the 2000
period from $14,000 for the 1999 period, which reflected the increase in the
average outstanding loan balances from the Federal Home Loan Bank.
Provision for loan losses. There was no provision for loan losses for the
three months ended September 30, 2000. However, there was a $150,000 provision
for the three months ended September 30, 1999. The provision for loan losses
during the three months ended September 30, 1999 reflected management's overall
assessment of First Federal Savings' loan portfolio in relation to industry
standards for outstanding loan balances and potential inherent losses in that
portfolio. Management deemed no additional provision was necessary for the three
months ended September 30, 2000.
Non-interest expense. Non-interest expense increased $54,000 to $121,000
for the three months ended September 30, 2000 from $67,000 for the three months
ended September 30, 1999 reflecting increases in salaries and related payroll
costs, professional expenses, occupancy expenses and directors' fees associated
with the Company operating as a public company, and growth in the size of the
Company.
Income taxes. Income taxes increased by $66,000 to $128,000 for the three
months ended September 30, 2000 from $62,000 for the three months ended
September 30, 1999. The effective tax rates were 31.9% and 29.6% for the three
months ended September 30, 2000 and 1999, respectively.
- 12 -
<PAGE>
FIRST FEDERAL OF OLATHE BANCORP, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Nine Months Ended September 30, 2000 and
1999
Net income. Net income for the nine months ended September 30, 2000
increased by $191,000, or 33.7%, to $757,000 from $566,000 for the nine months
ended September 30, 1999. The increase was primarily due to an increase in
interest income of $249,000 and decrease in the provision for loan losses of
$150,000 for the nine months ended September 30, 2000. These increases were
offset by an increase of $114,000 in non-interest expenses and an increase in
income taxes of $102,000 for the same period. The Company's return on average
assets for the nine-month period ended September 30, 2000 was 2.10% compared to
1.66% for the same period in 1999.
Net interest income. For the nine months ended September 30, 2000 net
interest income increased by $263,000, or 21.9%, to $1.457 million from $1.194
million for the nine months ended September 30, 1999. The increase included an
increase in interest income of $249,000 to $2.904 million for the nine months
ended September 30, 2000 from $2.655 million for the nine months ended September
30, 1999, and a decrease in interest expense of $14,000 for the nine months
ended September 30, 2000 as compared to the nine months ended September 30,
1999.
The increase in interest income reflected an increase in the balance of
loans receivable due to favorable economic conditions and increased demand for
single-family housing in Johnson County, Kansas, and an increase in the average
balance of interest-bearing securities. The decrease in interest expense of
$14,000 is the result of decreases in the average outstanding deposit balances
offset by increases in advances from the Federal Home Loan Bank.
Provision for loan losses. There was no provision for loan losses for the
nine months ended September 30, 2000. However, there was a $150,000 provision
for the nine months ended September 30, 1999. The provision for loan losses
during the nine months ended September 30, 1999 reflected management's overall
assessment of First Federal Savings' loan portfolio in relation to industry
standards for outstanding loan balances and potential inherent losses in that
portfolio. Management deemed no additional provision was necessary for the nine
months ended September 30, 2000.
Non-interest expense. Non-interest expense increased $114,000 to $308,000
for the nine months ended September 30, 2000 from $194,000 for the nine months
ended September 30, 1999. The increase was primarily due to increased
professional services and directors' fees as they relate to the Company
operating as a public company.
Income taxes. Income taxes increased by $102,000 to $402,000 for the nine
months ended September 30, 2000 from $300,000 for the nine months ended
September 30, 1999. The effective tax rates were 34.7% and 34.6% for the nine
months ended September 30, 2000 and 1999, respectively.
- 13 -
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FIRST FEDERAL OF OLATHE BANCORP, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Association's primary sources of funds are deposits, FHLB advances,
repayments on loans, the maturity of investment securities and interest income.
Although maturity and scheduled amortization of loans are relatively predictable
sources of funds, deposit flows and prepayments on loans are influenced
significantly by general interest rates, economic conditions and competition.
The Association is required to maintain minimum levels of liquid assets
under the OTS regulations. Savings institutions are required to maintain an
average daily balance of liquid assets (including cash, certain time deposits,
and specified U.S. Government, state, or federal agency obligations) of not less
than 4.0% of its average daily balance of net withdrawal accounts, plus
short-term borrowings. It is the Association's policy to maintain its liquidity
portfolio in excess of regulatory requirements.
The Association's most liquid assets are cash and cash equivalents, which
include overnight deposits at First National Bank of Olathe and the FHLB of
Topeka. The levels of these assets are dependent on the Association's operating,
financing, lending, and investment activities during any given period. At
September 30, 2000 and at December 31, 1999, cash and cash equivalents were
$579,000 and $2.6 million, respectively. The decrease in cash and cash
equivalents at September 30, 2000, compared to December 31, 1999, resulted
primarily from transfers to securities held to maturity and deposit outflows.
Liquidity management for the Association is both an ongoing and long-term
function of the Association's asset/liability management strategy. Excess funds
generally are invested in overnight deposits at the FHLB of Topeka and the First
National Bank of Olathe. Should the Association require funds beyond its ability
to generate them internally, additional sources of funds are available through
FHLB advances. The Association would pledge its mortgage loans, FHLB stock or
certain other assets as collateral for such advances. At September 30, 2000, the
Association had a balance of $4.5 million in FHLB advances. The Association had
unused FHLB funds of $20,110,800 at September 30, 2000.
The Association is required to maintain regulatory capital sufficient to
meet tangible, core and risk-based capital ratios of at least 1.5%, 4.0% and
8.0%, respectively. At September 30, 2000, the Association exceeded each of its
capital requirements, with tangible, core and risk-based capital ratios of
24.56%, 24.56% and 54.77% respectively.
Impact of Inflation and Changing Prices
The financial statements and related financial data presented herein have
been prepared in accordance with generally accepted accounting principles, which
generally require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in relative purchasing
power over time due to inflation. Unlike most industrial companies, virtually
all of the Association's assets and liabilities are monetary in nature. As a
result, interest rates generally have a more significant impact on the
Association's performance than does the effect of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to a
larger extent than by interest rates.
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FIRST FEDERAL OF OLATHE BANCORP, INC.
FORM 10-QSB
NINE MONTHS ENDED SEPTEMBER 30, 2000
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Neither the Company nor the Association is a party to any material legal
proceedings at this time. From time to time the Association may be involved in
various claims and legal actions arising in the ordinary course of business.
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
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27.0 Financial Data Schedule
b. Reports on Form 8-K
Form 8-K/A was filed during the quarter (report dated August 28, 2000)
reporting a change of accountants from Taylor, Perky & Parker, LLC to
Baird, Kurtz & Dobson.
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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.
FIRST FEDERAL OF OLATHE BANCORP, INC.
Date: November 10, 2000 By /s/ Mitch Ashlock
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Mitch Ashlock, President and
Chief Executive Officer
(Duly authorized officer and principal
executive and financial officer)
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