<PAGE> 1
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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number 0-19783
SUBURBFED FINANCIAL CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3796361
- ------------------------------ ---------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or Identification or
organization) Number
3301 W. Vollmer Road, Flossmoor, Illinois 60422
- ------------------------------------------ -----------
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 333-2200
------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of August 9, 1996, the Registrant had 1,252,519 shares of Common
stock issued and outstanding.
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SUBURBFED FINANCIAL CORP.
Contents
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
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Item 1. Financial Statements
<S> <C> <C>
Consolidated Statements of Financial Condition,
June 30, 1996 (unaudited) and December 31, 1995 1
Consolidated Statements of Income, Three Months
and Six Months Ended June 30, 1996 and 1995
(unaudited) 2
Consolidated Statements of Cash Flows, Six
Months Ended June 30, 1996 and 1995
(unaudited) 3
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
PART II. OTHER INFORMATION 12-13
</TABLE>
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SUBURBFED FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions $ 3,854,681 $ 1,608,019
Interest-bearing deposits 5,833,046 8,911,445
------------ ------------
Total cash and cash equivalents 9,687,727 10,519,464
Investment securities held to maturity 3,964,167 5,954,167
(Market value: 1996: $3,890,000; 1995: $5,946,875)
Investment securities available for sale, at market 3,064,541 2,345,376
Investment securities held for trade 1,228,781 1,215,654
Mortgage-backed securities held to maturity 101,195,534 108,386,409
(Market value: 1996: $100,337,259; 1995: $108,276,030)
Mortgage-backed securities available for sale, at market 63,450,829 77,478,970
Loans receivable 185,583,782 147,908,039
Real estate owned 0 13,597
Stock in Federal Home Loan Bank of Chicago 2,290,000 2,045,000
Office properties and equipment 4,636,642 4,835,447
Accrued interest receivable 2,205,022 2,114,963
Prepaid expenses and other assets 933,950 489,991
Deposit base intangible 147,493 173,284
------------ ------------
Total assets 378,388,468 363,480,361
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits 304,798,635 288,955,466
Federal Home Loan Bank advances 34,800,000 34,200,000
Other borrowed money 7,895,000 9,227,000
Advance payments by borrowers for taxes and insurance 2,815,115 2,387,758
Other liabilities 2,034,712 2,346,029
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Total liabilities 352,343,462 337,116,253
Stockholders' Equity:
Common stock 13,555 13,518
Additional paid-in capital 8,297,068 8,225,832
Treasury stock -1,482,062 -1,032,625
Retained earnings 20,017,908 19,371,312
Unrealized gain (loss) on securities available for sale -548,494 112,011
Common stock acquired by ESOP -215,092 -259,654
Common stock acquired by Bank Incentive Plan -37,877 -66,286
------------ ------------
Total stockholders' equity 26,045,006 26,364,108
------------ ------------
Total liabilities and stockholders' equity $378,388,468 $363,480,361
============ ============
</TABLE>
See notes to consolidated financial statements.
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SUBURBFED FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
QUARTER ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income:
Interest on loan $3,372,961 $2,319,813 $ 6,401,102 $4,478,543
Interest on mortgage-backed
securities 2,855,112 3,228,484 5,836,914 6,463,069
Interest on investment securities 101,194 144,345 229,663 289,137
Interest on other financial assets 29,191 25,560 75,349 53,983
Dividends on FHLB stock 50,556 32,014 88,183 61,122
---------- ----------- ----------- ----------
Total interest income 6,409,014 5,750,216 12,631,211 1,345,854
Interest expense:
Interest on deposits 3,348,510 2,631,029 6,605,653 4,978,733
Interest on borrowed money 510,211 595,253 1,021,540 1,216,541
---------- ----------- ----------- ----------
Total interest expense 3,858,721 3,226,282 7,627,193 6,195,274
---------- ----------- ----------- ----------
Net interest income before
provision for loan losses 2,550,293 2,523,934 5,004,018 5,150,580
Provision for loan losses 39,000 12,800 84,680 32,000
---------- ----------- ----------- ----------
Net interest income after
provision for loan losses 2,511,293 2,511,134 4,919,338 5,118,580
Non-interest income:
Loan fees and service charges 254,103 163,467 437,564 281,306
Commission income 102,739 110,502 227,326 198,315
Gain(loss) on sale of loans and
securities - net 7,252 39,267 98,001 51,413
Unrealized gain(loss) on investment
and mortgage-backed
securities - net 4,486 37,130 4,348 91,568
Deposit-related fees and
other income 369,479 330,167 742,250 633,798
---------- ----------- ----------- ----------
Total Other Income 738,059 680,533 1,509,489 1,256,400
Non-Interest Expense:
General and Administrative:
Staffing costs 1,377,988 1,234,404 2,712,007 2,475,359
Advertising 76,144 127,490 134,075 200,535
Occupancy and equipment expenses 476,174 494,003 947,611 970,696
Data processing 80,888 71,390 154,591 146,141
Federal deposit insurance premiums 165,037 147,953 325,819 294,950
Other 382,420 418,211 791,014 838,785
---------- ----------- ----------- ----------
Total general and administrative
expenses 2,558,651 2,493,451 5,065,117 4,926,466
Amortization of deposit base
intangible 12,895 15,744 25,790 30,491
---------- ----------- ----------- ----------
Total Non-Interest Expense 2,571,546 2,509,195 5,090,907 4,956,957
---------- ----------- ----------- ----------
Income before income taxes 677,806 682,472 1,337,920 1,418,023
Provision for income taxes 247,400 253,000 489,900 525,000
---------- ----------- ----------- ----------
Net income $ 430,406 $ 429,472 $ 848,020 $ 893,023
========== =========== =========== ==========
Earnings per share - primary $.33 $.32 $.64 $.66
- fully diluted $.33 $.32 $.64 $.66
Dividends declared per common share $.08 $.08 $.16 $.16
</TABLE>
See notes to consolidated financial statements.
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SUBURBFED FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 848,020 $ 893,023
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 334,396 350,862
Amortization of intangible 25,791 30,491
Amortization of cost of stock benefit plans 72,971 72,970
Amortization of discount on investment securities -10,000 -10,000
Provision for loan losses 84,680 32,000
Net gain on sale of loans and securities -98,001 -51,413
Net gain on sale of real estate owned -13,106 0
Unrealized (gain) loss on investment securities -4,348 -91,568
Proceeds from sales of trading account securities 227,585 407,025
Purchase of trading account securities -196,332 -254,840
Net change in:
Accrued interest receivable -90,059 -142,651
Accrued interest payable -43,666 -10,697
Deferred income -414,610 -174,415
Deferred and accrued income taxes 324,696 133,578
Other liabilities -144,730 -1,210,684
Prepaid expenses and other assets -398,552 1,201,912
------------ ------------
Net cash flows provided by operating activities 504,735 1,175,593
------------ ------------
Investing activities:
Proceeds from sale of investment securities 2,000,000 0
Purchases of investment securities -750,000 -50,000
Proceeds from sale of mortgage-backed securities 23,427,754 3,101,159
Proceeds from repayments of mortgage-backed securities 12,338,301 6,317,954
Purchases of mortgage-backed securities -13,894,597 -6,535,577
Purchase of Federal Home Loan Bank stock -245,000 -111,900
Proceeds from sale of loans 6,186,803 1,706,260
Disbursements for loans -81,382,654 -40,182,286
Loan repayments 36,175,663 22,401,492
Proceeds from sale of real estate owned 26,703 0
Property and equipment expenditures -135,591 -1,032,761
------------ ------------
Net cash flows used in investing activities -16,252,618 -14,385,659
------------ ------------
Financing Activities:
Proceeds from exercise of stock options 28,481 0
Dividends paid on common stock -201,424 -207,296
Purchase of treasury stock -449,437 -862,625
Deposit receipts 466,887,567 431,772,883
Deposit withdrawals -456,887,317 -423,814,141
Interest credited to deposit accounts 5,842,919 4,409,874
Purchase of deposits - Hinsdale 0 2,167,763
Purchase of deposit base intangible - Hinsdale 0 -89,825
Proceeds from borrowed money 87,715,000 142,162,155
Repayment of borrowed money -88,447,000 -142,630,155
Net increase in advance payments by borrowers for
taxes and insurance 427,357 199,966
------------ ------------
Net cash flows provided by financing activities 14,916,146 13,108,599
------------ ------------
Increase (decrease) in cash and cash equivalents -831,737 -101,467
Cash and cash equivalents at beginning of period 10,519,464 9,447,586
------------ ------------
Cash and cash equivalents at end of period $ 9,687,727 $ 9,346,119
============ ============
Cash paid during the period for:
Interest $ 7,670,859 $ 6,205,971
Income taxes 275,201 390,846
Non-cash investing activities:
Loans securitized into mortgage-backed securities $ 1,596,500 $ 0
============ ============
</TABLE>
See notes to consolidated financial statements.
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SUBURBFED FINANCIAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and Article 10 of
Regulation S-X, and in the opinion of management contains all adjustments (all
of which are normal and recurring in nature) necessary to present fairly the
financial position as of June 30, 1996, the results of operations for the three
and six month periods ended June 30, 1996 and 1995 and cash flows for the six
months ended June 30, 1996 and 1995. These results have been determined on the
basis of generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The attached consolidated statements are
those of SuburbFed Financial Corp. ( the "Company") and its consolidated
subsidiaries Suburban Federal Savings, a Federal Savings Bank (the "Bank"); the
Bank's wholly owned subsidiaries, Suburban Mortgage Services, Inc. and South
Suburban Securities Corporation, and the wholly owned subsidiary of South
Suburban Securities Corporation, Suburban Insurance Resources Agency, Inc. The
results of operations for the three and six month periods ended June 30, 1996
are not necessarily indicative of the results to be expected for the full year.
Note B - Stock Conversion
On September 12, 1991 the Board of Directors of Suburban Federal approved a
plan to convert from a federally chartered mutual association to a federally
chartered stock savings bank. The stock conversion plan included, as part of
the conversion, the concurrent formation of a holding company. The stock
offering of the Bank's parent, SuburbFed Financial Corp. (the "Company") was
closed on March 3, 1992 with the sale of 891,250 shares at $10.00 per share.
The Company purchased all the shares of stock of the Bank for $4,023,750 upon
completion of its stock offering.
Note C - Earnings Per Share
Earnings per share of common stock for the three and six month periods ended
June 30, 1996 and 1995 have been determined by dividing net income for the
period by the weighted average number of shares of common stock and common
stock equivalents outstanding after consideration of the 3 for 2 stock split
completed November 3, 1995. Stock options are regarded as common stock
equivalents and are therefore considered in both the primary and fully diluted
earnings per share calculations. Common stock equivalents are computed using
the treasury stock method.
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Note D - Dividend Declaration
The Company declared a dividend of $.08 per share, representing its
seventeenth consecutive quarterly dividend payable July 15, 1996 for
shareholders of record July 1, 1996. The dividend, totaling $100,562, has been
recorded as of June 30, 1996 as a reduction of retained earnings in the
accompanying consolidated statements of financial condition.
Note E - Disparity in Insurance and Special Assessment
Federal law requires that the Federal Deposit Insurance Corporation ("FDIC")
maintain the reserve level of each of the Savings Association Insurance Fund
("SAIF") and the Bank Insurance Fund ("BIF") at 1.25% of insured deposits.
Reserves are funded through payments by insured institutions of insurance
premiums. On November 14, 1995, due to the BIF reaching the required reserve
level, the FDIC reduced the insurance premium for members of BIF to a range of
between 0.00% and 0.27% of deposits, subject to the statutory requirement that
all institutions pay at least $2000 annually for FDIC insurance, while
maintaining the current range of between 0.23% and 0.31% of deposits for
members of SAIF. The FDIC is required to set insurance premiums independently
for members of BIF and SAIF.
A disparity in insurance premiums between those required for SAIF members,
such as the Bank, and BIF members could allow BIF members to attract and retain
deposits at a lower effective cost than that of SAIF members. In the event BIF
members in the Bank's market area, as a result of the reduction in insurance
premiums, increase the interest rates paid on deposits, this could put
competitive pressure on the Bank to raise the interest rates paid on deposits
thus increasing its cost of funds and possibly reducing net interest income.
An increase in interest expense would also impair the Bank's ability to
maintain low operating costs. The resultant competitive disadvantage could
result in the Bank losing deposits to BIF members who have a lower cost of
funds and are therefore able to pay higher rates of interest on deposits.
Although the Bank has other sources of funds, these other sources may have
higher costs than those of deposits, resulting in lower net yields on loans
originated using such funds. However, because of possible regulatory or policy
changes, there can be no assurance that upon SAIF reaching its required reserve
level that deposit insurance premiums for SAIF members will be reduced, or, if
reduced, to what extent such premiums will be reduced.
Several alternatives to mitigate the effect of the BIF/SAIF insurance premium
disparity are currently under consideration by the U.S. Congress. One plan
that has gained the support of several sponsors would require all SAIF member
institutions, including the Bank, to pay a one-time fee of approximately 0.80%
to 0.90% of insured deposits ($0.80 to $0.90 for every $100 of deposits) on the
amount of deposits held by the member institution to recapitalize the SAIF. If
this proposal is enacted by Congress, the effect would be to immediately reduce
the capital of SAIF-member institutions by the amount of the fee, and such
amount would be immediately charged to earnings. If an 80 basis point (0.80%)
assessment was effected,
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based on deposits as of March 31, 1995 (as proposed), the Bank's pro rata share
would amount to approximately $2,072,000, before taxes. If the Bank is required
to pay the proposed special assessment, future deposit insurance premiums may be
reduced from 0.23% to approximately 0.00% (subject to the statutory
requirement that all institutions pay at least $2000 annually for FDIC
insurance). Based upon the Bank's deposits as of June 30, 1996, the Bank's
annual deposit insurance expense would decrease by approximately $427,000 per
year after taxes. Management of the Bank is unable to predict whether this
proposal will be enacted or whether ongoing SAIF premiums will be reduced to a
level comparable to that of BIF premiums.
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SUBURBFED FINANCIAL CORP.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
During the six month period ended June 30, 1996, total assets of the Company
increased by $14.9 million. This increase is attributable primarily to $15.8
million of deposit growth which was invested with the proceeds from
mortgage-backed security repayments and sales to increase loans receivable by
$37.7 million. The strategy of increasing loan originations, which began in
1995, has been perpetuated during the first half of 1996 and will be pursued
for the remainder of the year.
The increase in loans receivable for the six month period ended June 30, 1996
is the result of loan disbursements of $81.4 million offset, primarily, by
repayments of $36.2 million, and the sale of $6.2 million of one to four
family, fixed rate loans to the Federal National Mortgage Association.
Comparable origination and repayment data for the six month period ended June
30, 1995 shows disbursements of $40.2 million and repayments of $22.4 million.
Mortgage-backed securities ("MBS") held to maturity decreased $7.2 million
during the most recent six month period due to repayments of $8.9 million
partially offset by purchases of $1.7 million. Pursuant to the Company's
asset/liability management strategy, the Company's purchases carried
adjustable interest rates or had short effective terms (2 to 5 year average
lives).
MBS available for sale decreased $14.0 million during the most recent six month
period due to the sale of $23.4 million, repayments of $3.4 million and a
negative market value adjustment of $944,000 offset by purchases of 12.2
million and securitization of $1.6 million. During the comparable 1995 period,
mortgage-backed securities available for sale decreased $1.0 million due to
sales of $3.1 million and repayments of $1.0 million offset by a positive
market adjustment of $3.1 million. Sales during the 1996 period were made to
provide funding for loan originations.
The level of savings deposits is affected primarily by interest rates, the
total amount of funds consumers elect to save, and competition for savings from
alternative investments in the marketplace. Total savings deposit accounts
increased $15.8 million from $289.0 million on December 31, 1995 to $304.8
million on June 30, 1996. The Company experienced a net deposit inflow of
$10.0 million for the six month period ended June 30, 1996 (before interest
credited), as compared to an inflow of $8.0 million (before interest credited)
for the six month period ended June 30, 1995. Interest credited was $5.8
million and $4.4 million for the six months ended June 30, 1996 and 1995,
respectively.
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During 1996, the Company increased Federal Home Loan Bank advances by $600,000
while other borrowed money decreased $1.3 million.
Stockholders' equity decreased $319,000 during the six month period ended June
30, 1996 due primarily to the increase in unrealized losses on securities
available for sale, net of the related income tax effect, of $661,000, the
repurchase of 27,000 shares of stock for $449,000 and payment of dividends on
common stock of $201,000 offset, in part, by earnings of $848,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are deposits from customers into
interest bearing accounts, scheduled monthly repayments and prepayments of
principal and interest on loans and mortgage-backed securities, and borrowings.
Other potential sources of funds available to the Company include borrowing
from the Federal Home Loan Bank of Chicago. While scheduled loan and
mortgage-backed security payments are relatively predictable sources of funds,
the actual mix and amounts of funds from these sources are directly affected by
general interest rates, economic conditions and competition. The primary
business activity of the Company, that of making conventional mortgage loans on
residential housing, is likewise affected by economic conditions.
Current Office of Thrift Supervision regulations require the Bank to maintain
cash and eligible investments in an amount equal to at least 5% of customer
accounts and short-term borrowings to assure its ability to meet demands for
withdrawals and repayment of short-term borrowings. The Bank's average daily
liquidity ratio for the six month period ending June 30, 1996 ranged from 5.8%
to 7.7%, and it was 5.9% at June 30, 1996. The Bank's average daily liquidity
ratio at December 31, 1995 was 6.8%. Liquid assets have been reduced and the
funds reinvested in short-term fixed rate mortgage-backed securities at higher
yields.
The Company uses its capital resources principally to meet its ongoing
commitments to fund maturing certificates of deposits and deposit withdrawals,
repay borrowings, fund existing and continuing loan commitments, maintain its
liquidity and meet operating expenses. As of June 30, 1996, the Company had
approximately $29.3 million in outstanding commitments to originate mortgage
and consumer loans, $14.4 million of unused lines of credit, no commitments to
purchase MBS and $376,000 of commitments to sell mortgage loans. The Company
considers it's liquidity, borrowing capacity and capital resources to be
adequate to meet its foreseeable short and long-term needs, however, sales of
MBS available for sale will also be considered. The Company expects to be able
to fund or refinance, on a timely basis, its material commitments and long-term
liabilities.
On December 7, 1989, new capital standards were imposed on the thrift industry
as a result of the Financial Institutions Reform, Recovery and Enforcement Act
(the "FIRREA"). Regulatory standards impose the following capital
requirements: a risk-based capital standard expressed as a percent of
risk-adjusted assets, a leverage ratio of
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core capital to total adjusted assets, and a tangible capital ratio expressed
as a percent of total adjusted assets. As of June 30, 1996, the Bank exceeded
all regulatory capital standards.
At June 30, 1996, the Bank's tangible capital was $23.1 million or 6.1% of
adjusted total assets, which is in excess of the current 1.5% requirement by
$17.4 million. In addition, at June 30, 1996, the Bank had core capital of
$23.2 million or 6.2% of adjusted total assets, which exceeds the current 3.0%
requirement by $11.9 million. The Bank had risk-based capital of $23.5 million
at June 30, 1996, or 13.9% of risk-adjusted assets which exceeds the current
8.0% risk-based capital requirement by $10.0 million.
ANALYSIS OF OPERATIONS
Net income for the three and six month periods ended June 30, 1996 were
$430,000 and $848,000, respectively compared to $429,000 and $893,000 for the
same periods of the prior year. The decrease for the six month period is
primarily attributable to the decrease in net interest income of $147,000 and
the increase in general and administrative expenses of $139,000 offset by an
increase of $253,000 in non-interest income.
Net interest margin decreased from 3.12% for the three month period ended June
30,1995 to 2.77% for the three month period ended June 30, 1996. Net interest
margin for the six month period ended June 30,1996 was 2.77% as compared to
2.99% for the six months ended June 30, 1995. The asset and liability growth
is being added at smaller spreads, however, with proportionally less interest
rate risk being incurred. The asset growth was primarily in adjustable rate
mortgage loans financed by 1 to 3 year certificates of deposit.
Interest income on loans and mortgage-backed securities for the three and six
month periods ended June 30, 1996 increased $680,000 and $1.3 million from the
same periods in 1995. These increases resulted primarily from the effect of the
net increases in average loans and mortgage-backed securities outstanding of
$36.1 million during the quarter and $37.1 million during the six month period.
Interest expense on deposits increased by $717,000 and $1.6 million,
respectively, for the three and six month periods ended June 30, 1996 from the
prior year levels. These increases resulted from the effects of the increases
in the average cost of deposits from 3.98% and 3.82% for the three and six
month periods ended June 30, 1995 to 4.44% for both the three and six month
periods ended June 30,1996 plus the increased cost incurred from increases of
approximately $37.0 million and $36.8 million in average deposit account
balances for the three and six month periods ended June 30, 1996 from the
prior year levels.
Interest expense on borrowed money decreased $85,000 and $195,000,
respectively, for the quarter and six month period ended June 30, 1996 from
the same periods in 1995. These decreases are primarily attributable to
decreases of $5.7 million and $5.5 million, respectively, in the average
outstanding balance of borrowed money for the three and six month periods ended
June 30, 1996 as compared to the same periods in 1995.
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Management establishes specific reserves for estimated losses on loans when it
determines that losses are anticipated on these loans. The Company calculates
any allowance for possible loan losses based upon its ongoing evaluation of
pertinent factors underlying the types and quality of its loans. These factors
include but are not limited to current and anticipated economic conditions,
historical loan loss experience, a detailed analysis of individual loans for
which full collectability may not be assured, a determination of the existence
and realizable value of the underlying collateral, the ability of the borrower
to repay, and the guarantees securing such loans. Management, as a result of
this review process, recorded provisions for loan losses in the amount of
$39,000 and $85,000 for the three and six month periods ended June 30, 1996 as
compared to $13,000 and $32,000 for the three and six month periods ended June
30, 1995. The increased level of provision relates to the growth in the loan
portfolio and not to any significant increase in the level of non-performing
assets. The Company's general loan loss reserve balance as of June 30, 1996 was
$640,000. The December 31, 1995 general loan loss reserve balance was $611,000.
Net charge-offs for the three and six month periods ended June 30, 1996 were
$25,000 and $28,000 as compared to $18,000 and $26,000 in the related 1995
periods. Total nonperforming assets as of June 30, 1996 were $961,000 or 0.25%
of total assets.
Loan fees and service charges increased $91,000 and $156,000, respectively,
during the three and six month periods ended June 30, 1996 as compared to the
same periods in 1995 due to increases in loan related fees and charges,
resulting from increases in the volume of loans made during the periods.
Commission income decreased $8,000 during the three month period ended June
30,1996 as compared to the related 1995 period and increased $29,000 for the
six month period ended June 30, 1996 as compared to the related 1995 period
reflecting variances in the level of annuity sales. Other recurring
non-interest income, consisting of deposit-related fees and other income, for
the three and six month periods ended June 30, 1996 increased $39,000 and
$108,000, respectively, from 1995 levels primarily as a result of increases in
the number of transaction accounts.
Net realized and unrealized gains on sale of loans and securities were $12,000
and $102,000, respectively, for the three and six month periods ended June 30,
1996. Sales of loans resulted in losses of $38,000 and $32,000 for the three
and six month periods ended June 30, 1996 due to rising interest rates during
the second quarter.
Total general and administrative expenses increased $65,000 and $139,000
during the three and six month periods ended June 30, 1996, as compared to the
related 1995 period, as a result of the additional costs incurred due to the
increased volumes of checking accounts and loan originations.
The provision for income taxes for the six month period ended June 30, 1996
decreased from the comparable 1995 period primarily due to decreased earnings.
The effective tax rates were 36.5% and 37.1% for
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<PAGE> 13
the three month periods ended June 30, 1996 and 1995, respectively, and 36.6%
and 37.0% for the six month periods ended June 30, 1996 and 1995,
respectively.
IMPACT OF NEW ACCOUNTING STANDARDS
Accounting for the Impairment of Long-Lived Assets. Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of, "is effective for
fiscal years beginning after December 15, 1995. The statement requires that
long-lived assets and certain identifiable intangibles to be held and used by
an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is recognized if the sum of the expected
future cash flows is less than the carrying amount of the asset. The adoption
of SFAS 121 did not have a material impact on the Company's consolidated
financial position or results of operations.
Accounting for Stock-Based Compensation. In October, 1995 the FASB issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation." This statement establishes a value-based method
of accounting for stock compensation awards based on their fair value at the
date the awards are granted. The resulting compensation award would be shown
as an expense on the income statement.
SFAS 123 also permits entities to continue to use the intrinsic value method
contained in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees, "(the "APB Opinion No. 25 Method"), allowing them to
continue to apply current accounting requirements, which generally result in no
compensation cost for most fixed stock-option plans. If the intrinsic value
method is retained, SFAS 123 required significantly expanded disclosures,
including disclosure of the pro forma amount of net income and earnings per
share as if the fair value-based method were used to account for stock based
compensation. SFAS 123 is effective for fiscal years beginning after December
15, 1995, however, employers will be required to include in that year's
financial statements, information about options granted in 1995. The Company
has determined that it will continue to apply the APB Opinion No. 25 Method in
preparing its consolidated financial statements.
The foregoing does not constitute a comprehensive summary of all material
changes or developments affecting the manner in which the Bank keeps its books
and records and performs it financial accounting responsibilities. It is
intended only as a summary of some of the recent pronouncements made by the
FASB which are of particular interest to financial institutions.
RECENT DEVELOPMENTS
On October 24, 1995, the Company announced that its Board of Directors had
authorized a second stock repurchase program which allows the Company to
repurchase up to 4.9% (62,925 shares) of the common stock outstanding over the
next twelve months in open market transactions. As of August 9, 1996 the
Company had purchased 43,907 shares.
- 11 -
<PAGE> 14
SUBURBFED FINANCIAL CORP.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Bank is a party to legal proceedings in
the ordinary course of business, wherein it enforces its security
interest. The Company and the Bank are not engaged in any legal
proceedings of a material nature at the present time.
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
(a) The Holding Company held an Annual Meeting of
Stockholders on April 18, 1996.
(b) The Annual Meeting involved the election of three
directors of the Company and the ratification of the
appointment of Cobitz, VandenBerg & Fennessy as
auditors for the Company for the fiscal year ending
December 31, 1996.
(c) A brief description of each of the matters voted on
and the voting tabulation on each item presented at
the annual meeting was as follows:
(i) The election of the following persons as
Directors of the Company for terms of three
years:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
Alan L. Wischhover 1,071,909 57,370
Douglas L. Dance 1,070,572 58,707
Michael L. Lowenthal 1,071,234 58,045
</TABLE>
(ii) The ratification of the appointment of Cobitz,
VandenBerg & Fennessy as the Company's auditors for
the fiscal year ending December 31, 1996:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
1,099,260 20,400 9,619
</TABLE>
(d) A description of the terms of any settlement
terminating any solicitation, including cost to the
registrant: None
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Computation of earnings per share (Exhibit 11 filed herewith.)
(b) No Reports on Form 8-K were filed this quarter.
- 12 -
<PAGE> 15
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, 1996 June 30, 1996
------------- -------------
<S> <C> <C>
Net Income $ 430,406 $ 848,020
========== ==========
Weighted average
shares outstanding 1,255,727 1,262,877
Common stock
equivalents due to dilutive
effect of stock options 55,397 54,284
---------- ----------
Total weighted average
common shares and
equivalents outstanding 1,311,124 1,317,161
========== ==========
Primary earnings per share $.33 $.64
==== ====
Total weighted average
common shares and
equivalents outstanding
for primary computation 1,311,124 1,317,161
Additional dilutive
shares using the end of
period market value versus
the average market value
when applying the treasury
stock method 993 2,106
---------- ----------
Total weighted average
common shares and
equivalents outstanding for
fully diluted computation 1,312,117 1,319,267
========== ==========
Fully diluted
earnings per share $.33 $.64
==== ====
</TABLE>
*Note: If average share price is greater than the ending
price, use average price for both primary and fully
diluted calculation.
- 13 -
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
SUBURBFED FINANCIAL CORP
------------------------------
Registrant
DATE: August 13, 1996 BY:(s) Daniel P. Ryan
--------------------------------
Daniel P. Ryan
President and
Chief Executive Officer
DATE: August 13, 1996 BY:(s) Steven E. Stock
--------------------------------
Steven E. Stock
Senior Vice President
Chief Financial and
Accounting Officer
- 12-
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,854,681
<INT-BEARING-DEPOSITS> 5,833,046
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 1,228,781
<INVESTMENTS-HELD-FOR-SALE> 66,515,370
<INVESTMENTS-CARRYING> 107,449,701
<INVESTMENTS-MARKET> 106,517,259
<LOANS> 186,412,782
<ALLOWANCE> 829,000
<TOTAL-ASSETS> 378,388,468
<DEPOSITS> 304,798,635
<SHORT-TERM> 33,195,000
<LIABILITIES-OTHER> 4,849,827
<LONG-TERM> 9,500,000
<COMMON> 13,555
0
0
<OTHER-SE> 26,031,451
<TOTAL-LIABILITIES-AND-EQUITY> 378,388,468
<INTEREST-LOAN> 6,401,102
<INTEREST-INVEST> 6,230,109
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 12,631,211
<INTEREST-DEPOSIT> 6,605,653
<INTEREST-EXPENSE> 7,627,193
<INTEREST-INCOME-NET> 5,004,018
<LOAN-LOSSES> 84,680
<SECURITIES-GAINS> 102,349
<EXPENSE-OTHER> 5,090,907
<INCOME-PRETAX> 1,337,920
<INCOME-PRE-EXTRAORDINARY> 848,020
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 848,020
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
<YIELD-ACTUAL> 2.77
<LOANS-NON> 961,000
<LOANS-PAST> 235,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 771,000
<CHARGE-OFFS> 28,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 829,000
<ALLOWANCE-DOMESTIC> 189,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 640,000
</TABLE>
