U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997 Commission File No. 0-22656
CAPITAL SAVINGS BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1656529
(State of Incorporation) (I.R.S. Employer
Identification No.)
425 Madison
Jefferson City, Missouri 65101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (573) 635-4151
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 [ ]
The number of shares outstanding of the issuer's common stock, par value $.01
per share, was 1,891,800 at November 10, 1997.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
<PAGE>
CAPITAL SAVINGS BANCORP, INC.
FORM 10-QSB
Index
Part I. Financial Information
Item 1 Financial Statements
Consolidated Statements of Financial Condition as of September
30, 1997 (unaudited) and June 30, 1997
Consolidated Statements of Operations for the Three Months
ended September 30, 1997 and 1996(unaudited)
Consolidated Statements of Cash Flows for the Three Months
ended September 30, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signatures
Exhibit 11
* Exhibit 27
* Submitted only with filing in electronic format.
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
September 30, June 30,
1997 1997
------------- -------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and due from depository institutions (including ...... $ 7,115,474 $ 7,953,414
interest-earning deposits totaling $3,703,000 at
September 30, 1997 and $4,468,000 at June 30, 1997)
Securities available-for-sale ............................. 29,650,983 28,154,190
Securities held-to-maturity (approximate fair values of
$5,018,000 at September 30, 1997 and
$9,004,000 at June 30, 1997) ............................ 4,994,886 8,984,323
Stock in Federal Home Loan Bank ........................... 3,025,000 3,025,000
Loans receivable, net ..................................... 193,206,404 190,202,685
Accrued interest receivable ............................... 1,512,198 1,465,221
Real estate owned held-for-sale, net ...................... 28,566 68,898
Premises and equipment, net ............................... 2,252,236 2,231,146
Other assets .............................................. 473,022 433,019
------------- -------------
Total assets ......................................... $ 242,258,769 $ 242,517,896
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits .................................................. $ 170,994,597 $ 171,038,959
Borrowed funds ............................................ 45,000,000 46,500,000
Advances from borrowers for taxes and insurance ........... 1,645,446 1,335,474
Accrued expenses and other liabilities .................... 1,317,008 1,352,868
Income tax payable ........................................ 1,158,896 950,407
------------- -------------
Total liabilities .................................... 220,115,947 221,177,708
Serial preferred stock, $.01 par value;
authorized 800,000 shares; none issued .................. -- --
Common stock, $.01 par value:
Authorized, 5,200,000 shares; Issued, 2,149,597 ......... 21,496 21,496
Additional paid-in capital ................................ 11,980,738 11,910,849
Retained earnings, restricted ............................. 14,616,845 14,122,506
------------- -------------
26,619,079 26,054,851
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition (continued)
September 30, June 30,
1997 1997
------------- -------------
(unaudited)
<S> <C> <C>
Treasury Stock, at cost - 258,389 shares at
September 30, 1997 and 257,789 shares at June 30, 1997 (4,279,473) (4,271,136)
Deferred compensation-Recognition and
Retention Plan (RRP) ................................. (134,859) (171,176)
Deferred compensation - Employee Stock
Ownership Plan (ESOP) ................................. (431,834) (461,805)
Unrealized gain (loss) on securities available-for-sale,
net of deferred taxes ................................. 369,909 189,454
------------- -------------
Total stockholders' equity .......................... 22,142,822 21,340,188
------------- -------------
Total liabilities and stockholders' equity .......... $ 242,258,769 $ 242,517,896
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements (unaudited)
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
----------- -----------
<S> <C> <C>
INTEREST INCOME:
Loans receivable .......................... $ 3,599,440 $ 3,169,650
Consumer and other loans .................. 374,519 299,669
Investment securities held-to-maturity
and securities available-for-sale ....... 270,829 322,883
Mortgage-backed securities ................ 380,359 477,824
Other interest-earning assets ............. 41,497 18,922
----------- -----------
Total Interest Income ................... 4,666,644 4,288,948
----------- -----------
INTEREST EXPENSE:
Deposits .................................. 2,035,669 1,831,013
Borrowed funds ............................ 628,564 676,942
----------- -----------
Total Interest expense .................. 2,664,233 2,507,955
----------- -----------
Net Interest Income ..................... 2,002,411 1,780,993
Provision for loan losses ................... 30,000 30,000
----------- -----------
Net interest income after
provision for loan losses ............... 1,972,411 1,750,993
----------- -----------
NONINTEREST INCOME:
Bank service charges and fees ............. 240,249 124,215
Loan servicing fees ....................... 45,441 50,038
Other ..................................... 155,316 61,406
Income (loss) from real estate
owned held-for-sale ..................... 438 1,163
----------- -----------
Total noninterest income ................ 441,444 236,822
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited) (continued)
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
----------- -----------
<S> <C> <C>
NONINTEREST EXPENSE:
Compensation and benefits ................. 712,830 565,263
Occupancy and equipment ................... 173,241 151,551
Federal insurance premiums ................ 26,880 1,045,895
Other expense ............................. 503,546 423,155
----------- -----------
Total noninterest expense ............... 1,416,497 2,185,864
----------- -----------
Income before provision for
income taxes .......................... 997,358 (198,049)
Provision for income taxes .................. 394,948 (73,271)
----------- -----------
Net Income ................. $ 602,410 ($ 124,778)
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements (unaudited)
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Dollars in Thousands)
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net Income .............................................. $ 602 ($ 125)
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred loan origination fees ........ (20) (13)
Amortization of premiums and accretion
of discounts on mortgage-backed, investment
securities and securities held for sale ............. 18 16
Depreciation .......................................... 96 84
Provision for loan losses ............................. 30 30
Loss(gain) on sale of real estate
owned held for sale ................................. 0 0
Loss(gain) on sale of securities ...................... (52) 0
Compensation Expense-RRP .............................. 28 8
Compensation Expense-ESOP ............................. 100 20
Origination of loans receivable
originated for sale to FHLMC ........................ (1,319) 0
Proceeds from loans receivable
originated for sale to FHLMC ........................ 1,319 0
Adjustments for (increases) decreases in operating assets
and increases (decreases) in operating liabilities:
Accrued interest and other assets ..................... (87) (22)
Accrued expenses and other liabilities ................ (36) 973
Income taxes payable .................................. (104) 6
-------- --------
Net cash provided by operating activities ........... $ 575 $ 977
-------- --------
INVESTING ACTIVITIES
(Loan origination) and principal
payment on loans receivable, net ...................... ($ 2,841) ($ 9,488)
Principal payments on mortgage-backed securities ........ 1,442 1,504
Purchases of:
Securities available-for-sale ...................... (2,905) (1,326)
Securities held-to-maturity ........................ 0 (2,800)
Proceeds from maturities of:
Securities available-for-sale ...................... 0 500
Securities held-to-maturity ........................ 4,000 0
Sales of securities available-for-sale .................. 222 0
Purchase of Federal Home Loan Bank stock ................ 0 (550)
Proceeds from sale of real estate owned held-for-sale ... 38 0
Purchase of premises and equipment ...................... (21) (86)
-------- --------
Net cash provided (used) by investing activities ........ ($ 65) ($12,246)
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Unaudited) (Dollars in Thousands)
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
-------- --------
<S> <C> <C>
FINANCING ACTIVITIES
Net increase (decrease) in deposits ..................... ($ 44) $ 2,091
Net increase (decrease) in borrowed funds ............... (1,500) 11,000
Net increase (decrease) in advances from borrowers
for taxes and insurance ............................... 310 179
Acquisition of treasury stock ........................... 0 (941)
Dividends................................................ (114) (86)
Net cash provided (used) by financing activities ... ($ 1,348) $ 12,243
-------- --------
Net increase (decrease) in cash and cash equivalents (838) 974
Cash and cash equivalents at beginning of the period .... 7,953 2,973
-------- --------
Cash and cash equivalents at end of the period .......... $ 7,115 $ 3,947
======== ========
SUPPLEMENTAL DISCLOSURES Cash paid during the year for:
Interest ............................................ $ 2,623 $ 1,829
Income taxes ........................................ $ 300 $ 149
Non-cash transactions:
Transfers from loans receivable to
real estate owned held-for-sale ................... $ 0 $ 40
Transfers from real estate owned held-
for-sale to loans receivable ...................... $ 0 $ 0
</TABLE>
<PAGE>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles
("GAAP") for interim financial information and with the instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) necessary
for a fair presentation have been included. The results of operations
and other data for the three months ended September 30, 1997 are not
necessarily indicative of results that may be expected for the entire
fiscal year ending June 30, 1998.
The unaudited consolidated financial statements include the amounts of
Capital Savings Bancorp, Inc. (the "Company") and its wholly-owned
subsidiary, Capital Savings Bank, FSB (the "Bank") and the Bank's
wholly-owned subsidiary, Capital Savings Financial Services, Inc.
("CSFS") for the three months ended September 30, 1997. Material
intercompany accounts and transactions have been eliminated in
consolidation.
(2) Benefit Plans
The Bank established for eligible employees an Employee Stock Ownership
Plan ("ESOP") in connection with its conversion from mutual to stock
form (the "Conversion"). The ESOP borrowed $938,400 from the Company
and purchased 93,840 common shares issued in the Conversion,
subsequently adjusted to reflect the 2-for-1 stock split in the form of
100% stock dividend completed on November 22, 1996. The Bank is
expected to make scheduled discretionary cash contributions to the ESOP
sufficient to service the amount borrowed. At September 30, 1997, the
remaining balance of the ESOP loan was $469,200 ($938,400 in proceeds
from stock issued by the Company less the principal payments made by
the Bank) and is reflected in the accompanying consolidated financial
statements as a charge to unearned compensation and a credit to common
stock and paid-in capital. The unamortized balance of unearned
compensation is shown as a deduction to stockholders' equity. The
unpaid balance of the ESOP loan is eliminated in consolidation.
The Company has established a Recognition and Retention Plan ("RRP")
which may award up to 46,920 shares of Company common stock to
officers, directors and other employees of the Company and the Bank. On
December 28, 1993, 38,589 shares of common stock were awarded pursuant
to the RRP. All shares were awarded to directors and officers of the
Company and the Bank, and vest at a rate of 20% per calendar year. The
number of shares were adjusted for the November 22, 1996 stock
dividend. On December 19, 1996, an additional 15,800 shares of common
stock were awarded to directors, officers and certain employees of the
Company and the Bank, and also vest at a rate of 20% per calendar year
beginning January 1, 1998. The aggregate purchase price of these shares
will be amortized as compensation expense over the participants'
vesting period.
<PAGE>
The Company has also adopted a stock option plan for the benefit of
directors, officers, and other key employees of the Company and the
Bank. The number of shares of common stock reserved for issuance under
the stock option plan is 117,300. On December 28, 1993, options to
purchase 87,388 shares of common stock were granted to directors and
certain officers of the Company and the Bank at an exercise price of
$10.00 per share. As of September 30, 1997, all options awarded
December 28, 1993 have vested. The number of shares and the exercise
price were adjusted for the November 22, 1996 stock dividend. On
December 19, 1996, options to purchase 47,300 shares of common stock
were granted to directors, certain officers, and certain employees of
the Company and the Bank at an exercise price of $13.44 per share. The
maximum option term cannot exceed ten years.
(3) Earnings Per Share
Earnings per share of common stock have been determined by dividing net
income for the three month period ended September 30, 1997 by the
weighted average number of shares of common stock and common stock
equivalents outstanding for the period. Effective July 1, 1994 the
Company adopted Statement of Position ("SOP") 93-6, which requires
recognition of expense based upon ESOP shares committed to be released
and the exclusion of unallocated ESOP shares from earnings per share
computations. Under SOP 93-6, the number of shares considered
outstanding for earnings per share purposes in periods prior to July 1,
1994, that are no longer considered outstanding at September 30, 1997,
totalled 84,638 shares. The granted stock options are regarded as
common stock equivalents and are therefore considered in both primary
and fully diluted earnings per share calculations. All shares reflect
the 2-for-1 stock split, effective in the form of a 100% stock dividend
completed November 22, 1996.
(4) Stock Repurchase Program
As of September 30, 1997 the Company had repurchased a total of 273,589
shares of its common stock. The repurchased shares have become treasury
shares available for general corporate purposes, including the funding
of stock options and RRPs.
(5) Commitments and Contingencies
Commitments to originate mortgage loans of $1.5 million (of which
$669,000 were adjustable-rate commitments) at September 30, 1997
represent amounts which the Company plans to fund within the normal
commitment period of sixty to ninety days. As of September 30, 1997,
the Company did not have any commitments to purchase mortgage-backed
securities.
The Company also offers home equity lines of credit to its customers.
At September 30, 1997 the outstanding lines of credit available
totalled $4.7 million.
(6) Subsequent Events
The Company declared a cash dividend of 6.0 cents per share for the
quarter ended September 30, 1997. The cash dividend is payable to
stockholders of record as of November 3, 1997, and will be paid on
November 13, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Bank is the Company's only operating subsidiary. Unless the context
otherwise requires, all references to the Company includes the Bank and its
subsidiary.
Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in
this 10-QSB may be deemed to be forward-looking statements that involve risks
and uncertainties, including changes in economic conditions in the Company's
market area, changes in policies by regulatory agencies, fluctuations in
interest rates, demand for loans in the Company's market area and competition.
Actual strategies and results in future periods may differ materially from those
currently expected. These forward-looking statements represent the Company's
judgement as of the date of this report. The Company disclaims however, any
intent or obligation to update these forward-looking statements.
Liquidity and Capital Resources
Liquidity is a measurement of the Company's ability to raise cash when needed
without an adverse impact on current or future earnings. The Company's most
liquid assets are cash, cash due from banks, interest-earning deposits and U.S.
Treasury Securities with maturities of two years and less. The levels of these
assets are dependent on the Company's investing, operating, and deposit
activities during any given period. At September 30, 1997, cash, cash due from
banks and interest-earning deposits, totalled $7.1 million.
The Bank is required to maintain minimum levels of liquid assets as defined by
OTS regulations. Liquid assets consist of cash, cash due from banks,
interest-earning deposits and short- and intermediate-term U.S. Government
securities. This requirement, which periodically varies depending upon economic
conditions and deposit flows, is based upon a percentage of deposits and short
term borrowing. The current required liquidity ratio is 5%. The Bank has
historically maintained a level of liquid assets in excess of this regulatory
requirement. The Bank's liquidity ratio was 6.36% at September 30, 1997.
Liquidity management for the Bank is both a daily and long term function of the
Bank's management strategy. In the event that the Bank requires funds beyond its
ability to generate them internally, additional sources of funds are available
through the use of FHLB advances and reverse repurchase agreements.
The Company's primary source of funds are deposits, proceeds from maturing
investment securities, and principal and interest payments on loans. While
maturing investment securities and the repayment of loans are relatively
predictable sources of funds, deposit flows and early loan prepayments are more
influenced by interest rates, general economic conditions and competition. From
time to time, funds are borrowed from the Federal Home Loan Bank of Des Moines
("FHLB") as an additional source of funds.
The primary investment activity of the Company is the origination of mortgage
loans. During the three months ended September 30, 1997 and 1996, the Company
<PAGE>
originated mortgage loans in the aggregate amount of $11.1 million and $13.3
million, respectively. A more limited investment activity of the Company is the
investment of funds in U.S. Treasury securities, certificates of deposit with
other financial institutions, mortgage-backed securities and FHLB overnight
funds. During periods when the Company's loan demand is limited, the Company may
purchase loans for investment and purchase short-term investment securities to
obtain a higher yield than available in interest-earning deposits.
At September 30, 1997 the Company had outstanding loan commitments to originate
$6.2 million of loans, including $4.7 million of undisbursed home equity lines
of credit. The Company believes that it will have sufficient funds available to
meet all of these commitments. At September 30, 1997, certificates of deposits
scheduled to mature in one year or less, totalled $90.1 million. Management
believes based on its experience to date, that a significant portion of these
funds will remain with the Company.
At September 30, 1997 the Bank exceeded each of the three regulatory capital
ratio requirements. The Bank's tangible, core and risk-based capital ratios were
8.21%, 8.21%, and 17.03%, respectively. These regulatory capital ratio
requirements at September 30, 1997 were 1.5%, 3.0%, and 8.0%, respectively.
Changes in Financial Condition
Total assets remained stable, decreasing only $259,000, or 0.1%, to $242.2
million at September 30, 1997 from $242.5 million at June 30, 1997. Securities
held-to-maturity, consisting primarily of callable agency securities, decreased
$4.0 million or 44.4% to $5.0 million from $9.0 million at June 30, 1997 due to
securities being called prior to maturity. Loans receivable increased $3.0
million, or 1.6%, to $193.2 million at September 30, 1997 from $190.2 million at
June 30, 1997.
Total liabilities decreased $1.1 million, or 0.5%, to $220.1 million at
September 30, 1997 from $221.2 million at June 30, 1997. Deposits remained
stable, decreasing only $44,000, or less than 0.1%, to $171.0 million at
September 30, 1997. Borrowed funds decreased $1.5 million, or 3.2%, during the
same period to $45.0 million from $46.5 million.
Stockholder's equity increased $808,000, or 3.8%, to $22.1 million at September
30, 1997 from $21.3 million at June 30, 1997. The increase was primarily a
result of net income of $602,000 for the three months ended September 30, 1997
and an increase in unrealized gains in securities available-for-sale of $180,000
for the same period.
Interest Rate Sensitivity
The Bank has employed various strategies intended to minimize the adverse effect
of interest rate risk on future operations of the Bank and the Company by
attempting to match the interest rate sensitivity of its assets and liabilities
and by expanding its activities, such as checking account services, financial
services and other noninterest income areas, which are not directly dependent on
interest rate spreads. The Bank's strategies are intended to stabilize net
interest income for the long-term by protecting its interest rate spread against
changes in interest rates.
<PAGE>
The Board of Directors of the Bank has appointed an Asset/Liability Committee.
It is the responsibility of this committee to manage the interest rate
sensitivity of the Bank's balance sheet in order to minimize large fluctuations
in the net income of the Bank. The Bank utilizes adjustable rate mortgages
("ARM's"), adjustable rate mortgage-backed securities and consumer loans to
provide repricing opportunities more closely matched within the time frames in
which its deposits are repriced. The committee is charged with the
responsibility to manage interest rate risk while remaining sensitive to the
Board's policy that credit risk not be substituted for interest rate risk. As a
result of these efforts, approximately 58% of the Bank's mortgage loan and
mortgage-backed security portfolio as of September 30, 1997, consisted of ARMs
and adjustable rate mortgage backed securities, and approximately 8.1% of the
Bank's total loan portfolio consisted of consumer loans.
Results of Operations
General
The Company's results of operations depend primarily on the level of its net
interest income and noninterest income and the level of its operating expenses.
Net interest income depends upon the volume of interest-earning assets and
interest-bearing liabilities, and the interest rates earned or paid on them,
respectively.
The Company's net income increased $727,000 to $602,000 for the three months
ended September 30, 1997 compared to net income of ($125,000) for the same
period in 1996. The increase in net income for the three month period was due to
increases in net interest income and noninterest income and due to the payment
of the one-time SAIF special assessment of $592,000, after tax, made on
September 30, 1996.
Interest Income
Interest income increased $378,000, or 8.8%, to $4.7 million for the three
months ended September 30, 1997 from $4.3 million for the same period in 1996.
The increase in interest income was due primarily to an increase in volume of
loans. Interest income on loans receivable increased $505,000, or 14.6%, for the
three months ended September 30, 1997. Interest from securities held-to-maturity
and securities available-for-sale decreased $150,000, or 18.7%, for the three
months ended September 30, 1997. The decrease was primarily due to a $9.7
million decrease in the Company's balance of securities to $34.6 million at
September 30, 1997 from $44.3 million at September 30, 1996.
Interest Expense
Interest expense increased $156,000, or 6.2%, to $2.7 million for the three
months ended September 30, 1997 from $2.5 million for the same period in 1996.
The increase was due primarily to an increase in the level of deposits from the
previous period. Deposits increased $16.6 million, or 10.8%, to $171.0 million
at September 30, 1997 from $154.4 million at September 30, 1996.
Net Interest Income
Net interest income increased $221,000, or 12.4%, to $2.0 million for the three
months ended September 30, 1997 compared to the same period in 1996, due
primarily to an increase in loans and an increase in the Bank's net interest
margin. Net interest margin (interest income less interest expense, expressed as
a percentage of average interest-earning assets) increased to 3.41% for the
three months ended September 30, 1997 from 3.27% for the same period in 1996.
<PAGE>
Provision for Loan Losses
The provision for loan losses is a result of management's periodic analysis of
the adequacy of the allowance for loan losses. The provision for loan losses was
$30,000 for the three months ended September 30, 1997 and 1996. At September 30,
1997 the Company's allowance for loan losses totaled $750,000, or .39% of the
total loan portfolio and 82.2% of total non-performing assets.
Management establishes an allowance for loan losses based on an analysis of risk
factors in the loan portfolio. This analysis includes the evaluation of
concentrations of credit, past loss experience, current economic conditions,
amount and composition of the loan portfolio, estimated fair value of underlying
collateral, loan commitments outstanding, delinquencies, and other factors.
Because of the Company's extremely low loan loss experience during its history,
management also considers the loan loss experience of similar portfolios in
comparable lending markets. Accordingly, the calculation of the adequacy of the
allowance for loan losses is not based solely on the level of non-performing
assets.
Management will continue to monitor the allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions and loan portfolio quality dictate. Although the Company
maintains its allowance for loan losses at a level which it considers to be
adequate to provide for losses, there can be no assurance that future losses
will not exceed estimated amounts or that additional provisions for loan losses
will not be required in future periods. In addition, the determination as to the
amount of its allowance for loan losses is subject to review by the Bank's
regulators, as part of their examination process, which may result in the
establishment of an additional allowance based upon their judgment of the
information available to them at the time of their examination.
Noninterest Income
Noninterest income, consisting primarily of bank service charges and fees and
loan servicing income increased by $205,000, or 86.4%, to $441,000 during the
three months ended September 30, 1997. The increase was primarily attributed to
checking account fee income, which increased $116,000 to $240,000 for the
quarter ended September 30, 1997 from the same period in 1996. Management
intends to continue marketing of this program. In addition, other noninterest
income increased $94,000 from the same period in 1996, primarily due to a gain
on sale of equity securities of $52,000.
Noninterest Expense
Noninterest expense consists primarily of compensation and benefits, occupancy
and equipment, federal insurance premiums, and service bureau charges.
Noninterest expense totalled $1.4 million for the three months ended September
30, 1997 compared to $2.2 million for the same period in 1996, a decrease of
$769,000 or 35.2%. The decrease was primarily attributed to the September 30,
1996 non-recurring SAIF assessment of $959,000, offset by increases in
compensation and benefits. Compensation and benefits increased $148,000, or
26.1%, for the three months ended September 30, 1997. This was primarily a
result of the addition of 7 full time equivalent employees, which were added due
to extended hours of operation and increased activity from the Company's new
checking account program.
<PAGE>
Income Tax
The provision for income taxes increased $1.2 million for the three months ended
September 30, 1997 over the same period in 1996 due to higher pre-tax income
relating primarily to the one-time SAIF assessment in three months ended
September 30, 1996.
<PAGE>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
Part II -- Other Information
Item 1 Legal Proceedings
Not applicable.
Item 2 Changes in Securities
Not applicable.
Item 3 Default 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
Exhibit 11 - Statement re: computation of per share earnings
Exhibit 27 - Financial Data Schedule*
(b) There were no reports filed on Form 8-K.
*Submitted only with filing in electronic format.
<PAGE>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARIES
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITAL SAVINGS BANCORP, INC.
(Registrant)
Date: November 14, 1997 /s/ Larry Schepers
----------------- -------------------
Larry Schepers
President and Chief Executive Officer
(Duly Authorized Officer)
Date: November 14, 1997 /s/ Arthur Wankum
----------------- ------------------
Arthur Wankum
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
EXHIBIT 11
Statement re: Computation of Per Share Earnings
Three Months
Ended
September 30, 1997
1. Net income $ 602,410
===========
2. Weighted average common shares
outstanding* 1,708,255
3. Common stock equivalents due to dilutive effect of:
Recognition and Retention Plan 92,378
Stock Options 116,974
-----------
4. Total weighted average common shares and
equivalents outstanding for primary
earnings per share computation 1,917,607
===========
5. Primary earnings per share* $ 0.31
===========
6. Weighted average common shares and
equivalents outstanding 1,917,607
7. Additional dilutive shares using the
higher of the end of the period market
value versus average market value for
the period utilizing the treasury stock
method regarding stock options 3,145
-----------
8. Total weighted average common shares and
equivalents outstanding for fully diluted
earnings per share computation
9. Fully diluted earnings per share 1,920,752
===========
$ 0.31
===========
* The weighted average common shares outstanding has been computed in
accordance with SOP 93-6, which requires the exclusion of ESOP shares,
totaling 54,529 at September 30, 1996 that have not been committed to
be released, from earnings per share computations.
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