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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996 Commission File Number 2-98651
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Kingfisher Bancorp, Inc.
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(Exact name of registrant as specified in its Charter)
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<CAPTION>
<S> <C>
OKLAHOMA 73-1247579
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 419
124 South Main Street
Kingfisher, Oklahoma 73750
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 375-3121
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
Common Stock, $1 par value 49,172
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1
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KINGFISHER BANCORP, INC. AND SUBSIDIARY
INDEX
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<CAPTION>
Page No.
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Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets - March 31, 1996
and December 31, 1995 3
Consolidated Statements of Income -
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Changes in
Stockholders' Equity - Three Months Ended
March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. OTHER INFORMATION:
Signatures 13
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2
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KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
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<S> <C> <C>
ASSETS:
Cash and due from banks $ 2,308,366 $ 2,410,772
Federal funds sold 4,350,000 4,750,000
Investment securities:
U.S. government securities and
government agencies 24,234,241 23,919,564
States and political subdivisions 2,972,741 3,013,960
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Total investment securities 27,206,982 26,933,524
Loans, net of unearned income 51,911,301 53,116,218
Less allowance for possible loan loss (1,163,000) (1,163,000)
----------- -----------
Net loans 50,748,301 51,953,218
Owned real estate 67,509 13,100
Bank premises and equipment, net 227,930 251,357
Deferred income taxes 393,954 382,879
Accrued interest and other assets 1,731,844 1,505,444
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TOTAL $87,034,886 $88,200,294
=========== ===========
LIABILITIES AND EQUITY:
Deposits:
Demand $ 6,009,813 $ 6,291,322
NOW accounts 8,757,922 8,218,752
Savings and time deposits 61,539,518 62,425,980
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76,307,253 76,936,054
Other short-term borrowings 216,933 151,111
Long-term debt 2,158,108 39,280
Dividends payable 49,172
Accrued interest and other liabilities 699,132 722,662
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Total liabilities 79,430,598 77,849,107
Stockholders' Equity:
Common stock, par value $1 per share,
240,000 shares authorized;
120,000 shares issued 120,000 120,000
Additional paid-in capital 2,360,000 2,360,000
Retained earnings 11,706,502 11,598,039
Unrealized (loss) gain on securities
available for sale (9,512) 31,170
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14,176,990 14,109,209
Less treasury shares(70,828 and 55,282) (6,572,702) (3,758,022)
----------- -----------
Total stockholders' equity 7,604,288 10,351,187
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TOTAL $87,034,886 $88,200,294
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3
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KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
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<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,151,144 $1,174,411
Investment securities:
United States government 371,685 413,557
State and political subdivisions 46,524 58,727
Federal funds sold 70,779 10,920
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Total interest income 1,640,132 1,657,615
INTEREST EXPENSE:
Savings and other time deposits 855,009 788,659
Other short-term borrowings 2,052 4,569
Long-term debt 29,958 988
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Total interest expense 887,019 794,216
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NET INTEREST INCOME 753,113 863,399
PROVISION FOR POSSIBLE LOAN LOSS 60,000 60,000
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NET INTEREST INCOME, after provision
for loan loss 693,113 803,399
OTHER INCOME:
Service charges on deposit accounts 68,280 72,038
Other 18,710 20,895
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Total other income 86,990 92,933
OTHER EXPENSES:
Salaries and employee benefits 259,595 255,091
Occupancy 12,909 10,799
Depreciation and amortization 23,428 27,091
Other 257,638 248,006
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Total other expenses 553,570 540,987
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INCOME BEFORE INCOME TAXES 226,533 355,345
INCOME TAX PROVISION (68,898) (77,361)
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NET INCOME $ 157,635 $ 277,984
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NET INCOME PER SHARE $3.02 $4.12
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4
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KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
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<CAPTION>
Three Months Ended
March 31,
1996 1995
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<S> <C> <C>
COMMON STOCK $ 120,000 $ 120,000
ADDITIONAL PAID-IN CAPITAL 2,360,000 2,360,000
RETAINED EARNINGS:
Balance at beginning of year 11,598,039 11,121,400
Cash dividends declared (49,172) (271,472)
Net income 157,635 277,984
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11,706,502 11,127,912
UNREALIZED LOSS ON SECURITIES AVAILABLE FOR SALE:
Balance at beginning of year 31,170 (98,709)
Change in loss on securities available for sale (40,682) 48,431
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(9,512) (50,278)
TREASURY SHARES:
Balance, at beginning of year, at
cost net of sales (3,758,022) (3,393,372)
Acquisition of 15,546 and 450 shares (2,814,680) (51,750)
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(6,572,702) (3,445,122)
$ 7,604,288 $10,112,512
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5
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KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 157,635 $ 277,984
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 60,000 60,000
Amortization of investment security premiums 9,497 16,077
Accretion of investment security discounts (24,239) (24,822)
Depreciation 23,428 27,091
Provision for deferred taxes 13,860 14,198
Other transactions, net - (515)
Changes in operating assets and liabilities:
Increase in accrued interest receivable
and other assets (226,400) (98,989)
(Decrease) Increase in accrued interest
payable and other liabilities (23,530) 32,279
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Net cash (used in) provided by
operating activities (9,749) 303,303
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in loans 1,144,917 2,265,049
Proceeds from maturities of investment securities 2,224,105 586,763
Purchase of investment securities (2,548,439) -
Purchase of premises and equipment - (5,551)
Sale of owned real estate - 65,393
Purchase of owned real estate (54,409) -
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Net cash provided by investing activities 766,174 2,911,654
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposit and
NOW accounts 257,662 570,974
Net decrease in savings and time deposits (886,463) (479,894)
Increase (decrease) in other borrowed funds 65,822 (937,361)
Increase in long-term debt 2,125,000
Repayment of long-term debt (6,172) (5,604)
Payments to acquire treasury stock (2,814,680) (51,750)
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Net cash provided by financing activities (1,258,831) (903,635)
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(Continued)
6
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KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
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<CAPTION>
Three Months Ended
March 31,
1996 1995
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<S> <C> <C>
(DECREASE) INCREASE CASH AND CASH EQUIVALENTS $ (502,406) $2,311,322
CASH AND CASH EQUIVALENTS:
Beginning of the period 7,160,772 1,312,256
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End of the period $6,658,366 $3,623,578
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 914,675 $ 768,287
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND
INVESTING ACTIVITIES:
Unrealized loss on securities available for sale $ 40,682 $ 48,431
========== ==========
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7
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KINGFISHER BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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THREE MONTHS ENDED MARCH 31, 1996
---------------------------------
1. The consolidated financial statements include the accounts of Kingfisher
Bancorp, Inc. (the "Company") and Kingfisher Bank and Trust Co. (the "Bank")
after elimination of all material intercompany accounts and transactions.
2. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's December 31, 1995 Annual Report on form 10-K.
3. Net income per share is computed on the basis of weighted average number of
common shares outstanding during the periods. Weighted average common shares
for the three month period ended March 31, 1996 and March 31, 1995 were
52,247 and 67,513, respectively.
4. The financial statements include all adjustments necessary to fairly present
the results of operations for the periods presented. All such adjustments
are of a normal recurring nature.
5. As of January 1, 1996 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 122 ("SFAS 122") "Accounting for Mortgage
Servicing Rights" which amends accounting for the rights to service mortgage
loans originated and requires evaluating for impairment amounts capitalized
as mortgage servicing rights, and SFAS No. 123 " Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures", which establishes
a fair value method and disclosure standards for stock-based employee
compensation arrangements, such as stock purchase plans and stock options.
The Company does not participate in stock-based employee compensation
arrangements and does not anticipate participation in such arrangements in
the future. These new standards had no material impact on the Company's
financial statements at initial adoption nor expected ongoing operations.
6. In general, the Company has defined its population of impaired loans as
consisting of all internally classified by management's loan review process.
This review process includes consideration of factors such as cash flow,
collateral position, past performance and overall financial condition of the
borrower.
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<CAPTION>
March 31, 1996 December 31, 1995
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<S> <C> <C>
Gross impaired loans which have allowances $3,403,000 $4,110,000
Less: Related allowances for loan losses (579,000) (733,000)
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Net impaired loans with related allowances 2,824,000 3,377,000
Impaired loans with no related allowances 3,744,000 2,967,000
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$6,568,000 $6,344,000
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The average impaired loans outstanding for the period ended March 31, 1996
was
8
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approximately $6,600,000 and interest income recognized on impaired loans the
period ended March 31, 1996 was approximately $107,000.
The average impaired loans outstanding for the period ended March 31, 1995
was approximately $6,000,000 and interest income recognized on impaired loans
the period ended March 31, 1996 was approximately $102,000.
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<CAPTION>
Quarter Ended March 31,
--------------------------
1996 1995
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<S> <C> <C>
Allowance for loan loss activity:
Beginning of quarter $1,163,000 $1,182,000
Provision for losses 60,000 60,000
Recoveries 22,000 1,700
Realized losses (82,000) (2,700)
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End of quarter $1,163,000 $1,241,000
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Uncollected interest on loans which are more than 90 days past due are
currently being charged off. Subsequently, such interest is recognized as
income as it is collected.
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Net income for the three months ended March 31, 1996 was $157,635 as compared
to $277,984 for the same period in 1995. This $120,000 net decrease was the
result of a $93,000 increase in interest expense and a $17,000 decrease in
interest income.
NET INTEREST INCOME
Net interest income is affected by the volume of earning assets, the interest
rate earned on those assets, the volume of interest bearing liabilities and the
rates paid on those liabilities.
Net interest income decreased 12.77% to $753,113 for the three months ended
March 31, 1995, as compared to $863,399 for the same period last year. This
$110,000 decrease can be attributed to interest expense rising at a faster rate
than interest income and a $30,000 increase in interest expense on long-term
debt.
The net interest spread is the difference between the rate earned on earning
assets and the rate paid on interest bearing liabilities. The net interest
spread at March 31, 1996 was 3.61% as compared to 3.96% at March 31, 1995.
OTHER EXPENSE
Other expense increased 2.32% to $553,570 for the three months ended March 31,
1996, as compared to $540,987 for the same period last year.
OTHER INCOME
Other income decreased 6.39% to $86,990 for the three months ended March 31,
1996, as compared to $92,933 for the same period last year.
LOAN QUALITY
The allowance for possible loan losses as a percent of loans was 2.24% at
March 31, 1996, as compared to 2.19% at December 31, 1995. This increase is due
to management's continued systematic evaluation of the local economic conditions
and a decrease in loans due to seasonal loan demand in the agricultural sector.
A significant portion of the Bank's loan portfolio is in the agricultural
related industry. The Agricultural industry is currently experiencing a downward
cyclical trend in the livestock markets and wheat growing conditions have not
been ideal. These factors combined could have an adverse effect on the overall
agricultural economy. Agriculture loans which are impaired are valued at the
current market value of underlying collateral and therefore, subject to changes
in market conditions and related values of the underlying collateral.
While there can be no assurance that the allowance for loan losses will be
adequate to cover all losses from all loans, management believes that the
allowance for loan losses is adequate.
10
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Management believes the demand for loans will begin to decrease during the
next quarter and into the third quarter of 1996 due to seasonal demand for
livestock loans.
BALANCE SHEET COMPOSITION
The loan to deposit ratio was 68.03% at March 31, 1996 as compared to 69.04%
at December 31, 1995.
The capital to asset ratio at March 31, 1996 was 8.74% as compared to 11.74%
at December 31, 1994.
CAPITAL ADEQUACY
The Federal Reserve Board requires minimum capital for bank holding companies
as follows: 8% total risk-based capital to risk-weighted assets; 4% Tier I risk-
based capital to risk-weighted assets; and a 3% leverage ratio. At March 31,
1996, the Company's capital exceeds these requirements. The Company's capital
ratios at March 31, 1996 are as follows: 15.65% total risk-based capital to net
risk-weighted assets; 14.40% Tier I risk-based capital to net risk-weighted
assets; and a 8.69% leverage ratio. Similar capital requirements also exist for
the Bank.
Approval of the regulatory authorities is required if the Bank declares
dividends in any calendar year which exceed the net profits for that year, as
defined, combined with the retained net profits of the two preceding years, less
any required transfers to surplus. At March 31, 1996, the Bank had
approximately $133,000 available for the payment of dividends without regulatory
approval.
LIQUIDITY
Liquidity can be defined as a financial institutions ability to meet possible
deposit withdrawals, provide for the credit needs of its customers and take
advantage of investment opportunities as they arise. Management considers the
banks liquidity position of 20% adequate to meet these needs.
OTHER MATTERS
As of January 1, 1996 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 122 ("SFAS 122") "Accounting for Mortgage
Servicing Rights" which amends accounting for the rights to service mortgage
loans originated and requires evaluating for impairment amounts capitalized as
mortgage servicing rights, and SFAS No. 123 " Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures", which establishes a
fair value method and disclosure standards for stock-based employee compensation
arrangements, such as stock purchase plans and stock options. The Company does
not participate in stock-based employee compensation arrangements and does not
anticipate participation in such arrangements in the future. These new
standards had no material impact on the Company's financial statements at
initial adoption nor expected ongoing operations.
On January 18, 1996, the Board of Directors of the Company accepted offers to
purchase 15,546 shares of common stock from stockholders at a per share amount
of $180. This treasury stock transaction resulted in a reduction of total
stockholders' equity of approximately $2,800,000. The purchase was partially
funded by a third party bank loan funded under a $2,500,000 line of credit with
variable interest at lender's prime (currently 8.25%), and secured by Bank
stock. Quarterly principal payments of approximately $88,000 commence on
11
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March 31, 1997, until maturity on December 31, 1998 when the unpaid balance
shall be due in full.
As of March 31, 1996, the Company has borrowed $2,125,000 on this line of
credit. The Company has currently been paying the interest on this line of
credit on a monthly basis. This has increased interest expense by approximately
$29,000. Book value of the Company's stock at March 31, 1996 was $154.65 as
compared to $159.94 at December 31, 1995. The repurchase of common shares in
January of 1996 would result in a proforma book value at year end 1995 of
approximately $153.60 per share.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KINGFISHER BANCORP, INC.
Date: April 30, 1996 /s/ Waynard Hasenfratz
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President
Date: April 30, 1996 /s/ George Brownlee
---------------------------- -----------------------------
Secretary
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,308
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,522
<INVESTMENTS-CARRYING> 22,685
<INVESTMENTS-MARKET> 22,788
<LOANS> 51,911
<ALLOWANCE> 1,163
<TOTAL-ASSETS> 87,035
<DEPOSITS> 76,307
<SHORT-TERM> 217
<LIABILITIES-OTHER> 748
<LONG-TERM> 2,158
0
0
<COMMON> 120
<OTHER-SE> 7,494
<TOTAL-LIABILITIES-AND-EQUITY> 87,035
<INTEREST-LOAN> 1,151
<INTEREST-INVEST> 489
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,640
<INTEREST-DEPOSIT> 855
<INTEREST-EXPENSE> 887
<INTEREST-INCOME-NET> 753
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 554
<INCOME-PRETAX> 227
<INCOME-PRE-EXTRAORDINARY> 158
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158
<EPS-PRIMARY> 3.02
<EPS-DILUTED> 3.02
<YIELD-ACTUAL> 0.19
<LOANS-NON> 1,572
<LOANS-PAST> 890
<LOANS-TROUBLED> 184
<LOANS-PROBLEM> 6,510
<ALLOWANCE-OPEN> 1,163
<CHARGE-OFFS> 82
<RECOVERIES> 22
<ALLOWANCE-CLOSE> 1,163
<ALLOWANCE-DOMESTIC> 579
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 584
</TABLE>
