===========================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the Quarterly Period Ended March 31, 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 May 1, 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 Page
Consolidated Statements of Financial Condition as of
March 31, 1997 (unaudited) and June 30, 1996 . . . . . . 2
Consolidated Statements of Operations for the Three Months
ended March 31, 1997 and 1996 and for the Nine Months
ended March 31, 1997 and 1996 (unaudited) . . . . . . . . 3
Consolidated Statements of Cash Flows for the Nine Months
ended March 31, 1997 and 1996 (unaudited) . . . . . . . . 4
Notes to Consolidated Financial Statements (unaudited). . 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 8
Part II. Other Information
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . 12
Item 2 Changes in Securities . . . . . . . . . . . . . . . . . . 12
Item 3 Defaults upon Senior Securities . . . . . . . . . . . . . 12
Item 4 Submission of Matters to a Vote of Security Holders . . . 12
Item 5 Other Information . . . . . . . . . . . . . . . . . . . . 12
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 12
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
* Exhibit 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
* Submitted only with filing in electronic format.
<PAGE>
<TABLE>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<CAPTION>
March 31, June 30,
1997 1996
(unaudited)
ASSETS ------------- ------------
<S> <C> <C>
Cash and due from depository institutions (including $ 7,064,668 $ 2,973,489
interest-earning deposits totaling $3,902,066 at
March 31, 1997 and $220,079 at June 30, 1996)
Securities available-for-sale 26,274,812 30,306,297
Securities held-to-maturity (approximate fair values of
$9,880,700 at March 31, 1997 and
$11,876,019 at June 30, 1996) 9,980,566 11,979,383
Stock in Federal Home Loan Bank 3,025,000 2,100,000
Loans receivable, net 187,453,122 166,623,231
Accrued interest receivable 1,539,433 1,401,109
Real estate owned 65,368 31,554
Premises and equipment 2,054,214 1,990,741
Other assets 457,874 547,931
------------- -------------
Total Assets $237,915,057 $217,953,735
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits $169,240,601 $152,344,791
Borrowed funds 45,000,000 42,000,000
Advances from borrowers for taxes and insurance 986,681 1,420,059
Accrued expenses and other liabilities 1,290,432 1,359,913
Income tax payable 790,370 348,046
------------- -------------
Total liabilities 217,308,084 197,472,809
Serial preferred stock, $.01 par value;
authorized 800,000 shares; none issued - -
Common stock, $.01 par value; authorized
5,200,000 shares, issued March 31, 1997,
2,149,589; June 30, 1996, 1,211,589 12,116 12,116
Additional paid-in capital 11,851,505 11,728,171
Retained earnings, restricted 13,654,176 12,983,429
25,517,797 24,723,716
------------- -------------
Treasury stock, at cost - 257,789 shares at
March 31, 1997 and 224,410 shares at June 30, 1996 (4,271,135) (3,550,170)
Unearned compensation-Recognition and
Retention Plan (RRP) (199,429) (31,110)
Unearned compensation - Employee Stock
Ownership Plan (ESOP) (492,106) (583,259)
Unrealized gains(losses) on securities available-for-sale,
net of effect of deferred taxes 51,846 (78,251)
------------- -------------
Total stockholders' equity 20,606,973 20,480,926
Total liabilities and stockholders' equity $237,915,057 $217,953,735
============= =============
<FN>
See accompanying Notes to Consolidated Financial Statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations (Unaudited)
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
------------- ------------ ------------ ------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Loans receivable $3,416,230 $2,925,111 $9,932,674 $8,678,608
Consumer and other loans 316,161 256,259 930,826 738,840
Investment securities held-to-maturity
and securities available-for-sale 223,037 96,009 852,195 354,546
Mortgage-backed securities 439,133 398,670 1,373,331 1,115,960
Other interest-earning assets 38,651 48,301 78,425 107,163
------------ ------------ ------------ ------------
Total Interest Income 4,433,212 3,724,350 13,167,451 10,995,117
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Deposits 1,915,399 1,800,262 5,579,289 5,302,666
Borrowed funds 662,529 305,478 2,106,444 870,916
------------ ------------ ------------ ------------
Total Interest expense 2,577,928 2,105,740 7,685,733 6,173,582
Net Interest Income 1,855,284 1,618,610 5,481,718 4,821,535
------------ ------------ ------------ ------------
Provision for loan losses 30,000 30,000 90,000 90,000
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 1,825,284 1,588,610 5,391,718 4,731,535
------------ ------------ ------------ ------------
NONINTEREST INCOME:
Loan servicing fees 48,189 47,435 147,673 139,953
Other 295,420 152,579 708,805 422,012
Income (loss) from real estate
owned held-for-sale 11,665 588 9,570 10,654
------------ ------------ ------------ ------------
Total noninterest income 355,274 200,602 866,048 572,619
------------ ------------ ------------ ------------
NONINTEREST EXPENSE:
Compensation and benefits 648,467 538,940 1,790,052 1,560,681
Occupancy and equipment 171,166 144,122 451,512 382,308
Federal insurance premiums 5,820 85,386 1,140,124 254,700
Other expense 439,120 275,620 1,283,964 867,429
------------ ------------ ------------ ------------
Total noninterest expense 1,264,573 1,044,068 4,665,652 3,065,118
------------ ------------ ------------ ------------
Income before provision for
income taxes 915,985 745,144 1,592,114 2,239,036
Provision for income taxes 363,237 289,788 627,593 868,527
------------ ------------ ------------ ------------
Net Income $ 552,748 $ 455,356 $ 964,521 $1,370,509
============ ============ ============ ============
Earnings per share $0.29 $0.23 $0.51 $0.69
============ ============ ============ ============
<FN>
See accompanying Notes to Consolidated Financial Statements (unaudited)
</FN>
</TABLE>
<PAGE>
<TABLE>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Nine Months
Ended Ended
March 31, March 31,
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 964,521 $ 1,370,509
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred loan origination fees (34,966) (45,599)
Amortization of premiums and accretion
of discounts on mortgage-backed, investment
securities and securities held for sale 48,654 (66,606)
Depreciation 254,563 192,072
Provision for loan losses 90,000 90,000
Loss(gain) on sale of real estate
owned held for sale 0 (10,066)
Compensation Expense-RRP 44,034 35,934
Compensation Expense-ESOP 223,982 176,037
Origination of loans receivable
originated for sale to FHLMC 0 (11,573,102)
Proceeds from loans receivable
originated for sale to FHLMC 0 11,573,102
Cash provided (used) by:
Other assets 90,057 (49,311)
Accrued expenses and other liabilities (69,481) 269,251
Income taxes payable 442,324 320,840
-------------- --------------
Net cash provided by operating activities $ 2,053,688 $ 2,283,061
-------------- --------------
<CAPTION>
CASH FLOWS FROM INVESTING ACTIVITIES
<S> <C> <C>
(Loan origination) and principal
payment on loans receivable, net ($21,646,407) ($ 5,546,073)
Principal payments on mortgage-backed securities 4,487,000 3,104,042
Purchases of:
Securities available-for-sale (2,121,463) (13,322,874)
Securities held-to-maturity (2,000,000) (3,200,000)
Proceeds from maturities of:
Securities available for-sale 1,000,000 4,382,349
Securities held-to-maturity 4,000,000 1,001,916
Sales of securities available for sale 784,915 0
Purchase of Federal Home Loan Bank stock (925,000) 0
Proceeds from sale of real estate owned
held for sale 0 107,204
Cash outflows for premises and equipment (63,473) (410,795)
-------------- --------------
Net cash provided (used) by investing activities ($16,484,428) ($13,884,231)
-------------- --------------
<PAGE>
<CAPTION>
CAPITAL SAVINGS BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
Nine Months Nine Months
Ended Ended
March 31, March 31,
1997 1996
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C>
Net increase (decrease) in deposits $16,895,810 $ 4,948,156
Net increase (decrease) in borrowed funds 3,000,000 9,500,000
Net increase (decrease) in advances
from borrowers for taxes and insurance (433,378) (599,791)
Acquisition of treasury stock (940,513) 0
-------------- --------------
Net cash provided (used) by
financing activities $18,521,919 $13,848,365
-------------- --------------
Net increase (decrease) in
cash and cash equivalents 4,091,179 2,247,195
Cash and cash equivalents at
beginning of the period 2,973,489 2,739,296
Cash and cash equivalents at
end of the period $ 7,064,668 $ 4,986,491
============== ==============
<CAPTION>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
<S> <C> <C>
Cash paid during the periodfor:
Interest $ 7,092,970 $ 5,235,688
Income taxes $ 268,892 $ 779,569
Non-cash transactions:
Transfers from loans receivable to
real estate owned held for sale $ 40,049 $ 89,704
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 and nine months ended March 31, 1997 are not
necessarily indicative of results that may be expected for the entire fiscal
year ending June 30, 1997.
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 and nine months ended
March 31, 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 March 31, 1997, the
remaining balance of the ESOP loan was $528,000 ($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 March 31, 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 and nine month periods ended March 31, 1997 by the weighted
average number of shares of common stock and common stock equivalents
outstanding for those respective periods. 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
March 31, 1997, totalled 96,693 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 March 31, 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 $2.7 million (of which $1.3 million
were adjustable-rate commitments) at March 31, 1997 represent amounts which the
Company plans to fund within the normal commitment period of sixty to ninety
days. As of March 31, 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 March
31, 1997 the outstanding lines of credit available totalled $4.4 million.
(6) Subsequent Events
The Company declared a cash dividend of 6.0 cents per share for the quarter
ended March 31, 1997. The cash dividend is payable to stockholders of record as
of May 5, 1997, and will be paid on May 15, 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 March 31, 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 6.73% at March 31, 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 nine months ended March 31, 1997 and 1996, the Company
originated mortgage loans in the aggregate amount of $30.0 million and $34.3
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.
<PAGE>
At March 31, 1997 the Company had outstanding loan commitments to originate $7.1
million of loans, including $4.4 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 March 31, 1997, certificates of deposits
scheduled to mature in one year or less, totalled $94.0 million. Management
believes based on its experience to date, that a significant portion of these
funds will remain with the Company.
At March 31, 1997 the Bank exceeded each of the three regulatory capital ratio
requirements. The Bank's tangible, core and risk-based capital ratios were
7.85%, 7.85%, and 16.51%, respectively. These regulatory capital ratio
requirements at March 31, 1997 were 1.5%, 3.0%, and 8.0%, respectively.
Changes in Financial Condition
Total assets increased $19.9 million, or 9.2%, to $237.9 million at March 31,
1997 from $218.0 million at June 30, 1996. The growth was primarily attributed
to an increase in the Company's loan portfolio and interest-earning deposits,
offset by a decrease in securities available for sale. Loans receivable
increased $20.8 million, or 12.5%, to $187.4 million at March 31, 1997 from
$166.6 million at June 30, 1996 and interest-earning deposits increased $3.7
million to $3.9 million at March 31, 1997 from $220,000 at June 30, 1996.
Securities available-for-sale, consisting primarily of mortgage-backed
securities, decreased $4.0 million from June 30, 1996 to March 31, 1997. The
asset increase was primarily funded with an increase in borrowed funds and a
growth in deposits.
Total liabilities increased $19.8 million, or 10.0%, to $217.3 million at March
31, 1997 from $197.5 million at June 30, 1996. Deposits increased $16.9
million, or 11.1%, to $169.2 million at March 31, 1997 from $152.3 million at
June 30, 1996 due primarily to a $10.0 million increase in short-term deposits,
including $4.7 million in public funds and a $5.1 million increase in Jumbo
certificates of deposits, during the period. Borrowed funds increased $3.0
million, or 7.1%, during the same period to $45.0 million from $42.0 million,
primarily to provide additional funds for loan originations, loan purchases, and
purchases of securities.
Stockholder's equity increased $126,000, or .6%, to $20.6 million at March 31,
1997 from $20.5 million at June 30, 1996. The increase was primarily a result
of net income of $965,000 for the nine months ended March 31, 1997 offset by the
repurchase of the Company's common stock completed in September 1996.
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.
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 60% of the Bank's mortgage loan and
mortgage backed security portfolio as of March 31, 1997, consisted of ARMs and
adjustable rate mortgage backed securities, and approximately 6.6% of the Bank's
total loan portfolio consisted of consumer loans.
<PAGE>
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 $97,000, or 21.4%, to $553,000 for the three
months ended March 31, 1997 compared to net income of $455,000 for the same
period in 1996. For the nine months ended March 31, 1997, net income decreased
$406,000, or 29.6%, to $965,000 compared to $1.4 million for the same period in
1996. The reduction in net income for the nine month period was due to the
payment of the one-time SAIF special assessment of $592,000 or $.63 per share,
after tax. Net income, without the SAIF assessment, for the nine months ended
March 31, 1997 was $1.6 million, an increase of $186,000 or 13.6% over the same
period in 1996.
Interest Income
Interest income increased $709,000, or 19.0%, to $4.4 million for the three
months and $2.2 million, or 19.8%, to $13.2 million for the nine months ended
March 31, 1997 from $3.7 million and $11.0 million for the same periods in 1996,
respectively. The increase in interest income was due primarily to an increase
in volume of loans and investment securities. Interest income on loans
receivable increased $551,000, or 17.3%, for the three months and $1.4 million,
or 15.4%, for the nine months ended March 31, 1997. This increase reflects an
increase in loans receivable at March 31, 1997 which were approximately $30.4
million greater than at March 31, 1996. Interest from investment securities
increased $127,000, or 132.3%, for the three months and $498,000, or 140.4%, for
the nine months ended March 31, 1997. The improvement was due to a $6.4 million
increase in the Company's balance of investment securities, including stock in
the FHLB, to $14.3 million at March 31, 1997 from $7.9 million at March 31,
1996.
Interest Expense
Interest expense increased $472,000, or 22.4%, to $2.6 million for the three
months and $1.5 million, or 24.5%, to $7.7 million for the nine months ended
March 31, 1997 from $2.1 million and $6.2 million for the same periods in 1996,
respectively. The increases were due primarily to an increase in the average
level of borrowed funds and deposits from the previous periods. The weighted
average rate paid on deposits decreased 7 basis points to 4.75% for the three
months and increased 1 basis point to 4.75% for the nine months ended March 31,
1997. The weighted average rate paid on borrowed funds decreased 23 basis
points to 5.58% for the three months and 39 basis points to 5.57% for the nine
months ended March 31, 1997.
Net Interest Income
Net interest income increased $237,000, or 14.6%, to $1.9 million for the three
months and $660,000, or 13.7%, to $5.4 million for the nine months ended March
31, 1997 compared to the same periods in 1996, respectively, due to an increase
in assets, principally loans. The Bank's net interest margin (interest income
less interest expense, expressed as a percentage of average interest-earning
assets) decreased to 3.23% for the three months and to 3.27% for the nine months
ended March 31, 1997 from 3.37% and 3.43% for the same periods in 1996,
respectively.
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 and $90,000 for both the three and nine months ended March 31, 1997
and 1996. At March 31, 1997 the Company's allowance for loan losses totaled
$720,000, or .38% of the total loan portfolio and 117.8% of total non-performing
assets.
<PAGE>
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 loan servicing income and fee income
from checking accounts increased by $155,000, or 77.1%, to $355,000 during the
three months and $293,000, or 51.2%, to $511,000 during the nine months ended
March 31, 1997. The increases were primarily attributed to increases in other
noninterest income consisting primarily of checking account fee income which
increased $105,000 to $163,000 for the quarter and $277,000 to $448,000 for the
nine months ended March 31, 1997 from the same respective periods in 1996.
Management intends to continue marketing of this program.
Noninterest Expense
Noninterest expense consists primarily of compensation and benefits, occupancy
and equipment, federal insurance premiums, and service bureau charges.
Noninterest expense totalled $1.2 million for the three months ended March 31,
1997 compared to $1.0 million for the same period in 1996, an increase of
$221,000 or 21.1%. Noninterest expense for the nine months ended March 31, 1997
was $4.7 million, including the non-recurring SAIF assessment of $959,000.
Noninterest expense without the SAIF assessment was $3.7 million for the nine
months ended March 31, 1997, compared to $3.1 million for the same period in
1996, an increase of $642,000 or 20.9%. The increases were primarily
attributable to the increases in compensation and benefits and other expenses.
Compensation and benefits increased $110,000 , or 20.3%, and $229,000, or 14.7%,
for the three and nine months ended March 31, 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. Other expenses, which increased $164,000, or 59.3%,
and $417,000 or 48.0%, for the three and nine months respectively, consisted
primarily of marketing expenses related to the checking account program.
Income Tax
The provision for income taxes increased $73,000 for the three months ended
March 31, 1997 over the same period in 1996 due to higher pre-tax income. The
provision for income taxes decreased $241,000 to $628,000 for the nine months
ended March 31, 1997 compared to the same period in 1996, due to lower pre-tax
income relating primarily to the one-time SAIF assessment in the period.
<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: May 2, 1997 /s/ Larry Schepers
Larry Schepers
President and Chief Executive Officer
(Duly Authorized Officer)
____________________________________________________
Date: May 2, 1997 /s/ Arthur Wankum
Arthur Wankum
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT 11
Statement re: Computation of Per Share Earnings
Three Months Nine Months
Ended Ended
March 31, 1997 March 31, 1997
-------------- --------------
1. Net income $ 552,748 $ 964,521
============== ==============
2. Weighted average common shares 1,696,073 1,705,790
outstanding*
3. Common stock equivalents due to dilutive
effect of:
Recognition and Retention Plan 92,978 92,978
Stock Options 104,142 94,997
4. Total weighted average common shares and
equivalents outstanding for primary
earnings per share computation 1,893,193 1,893,765
============== ==============
5. Primary earnings per share* $ 0.29 $ 0.51
============== ==============
6. Weighted average common shares and
equivalents outstanding 1,893,193 1,893,765
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 0 8,760
8. Total weighted average common shares and
equivalents outstanding for fully diluted
earnings per share computation 1,883,193 1,902,525
============== ==============
9. Fully diluted earnings per share $ 0.29 $ 0.51
============== ==============
*The weighted average common shares outstanding has been computed in
accordance with SOP 93-6, which requires the exclusion of ESOP shares,
totaling 96,693 at March 31, 1997 that have not been committed to be
released, from earnings per share computations. All shares above reflect
the 2-for-1 stock split, effective in the form of a 100% stock dividend
completed November 22, 1996.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,162,602
<INT-BEARING-DEPOSITS> 3,902,066
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,274,812
<INVESTMENTS-CARRYING> 13,005,566
<INVESTMENTS-MARKET> 12,905,700
<LOANS> 187,453,122
<ALLOWANCE> 712,000
<TOTAL-ASSETS> 237,915,057
<DEPOSITS> 169,240,601
<SHORT-TERM> 32,000,000
<LIABILITIES-OTHER> 3,067,483
<LONG-TERM> 13,000,000
0
0
<COMMON> 12,116
<OTHER-SE> 20,594,857
<TOTAL-LIABILITIES-AND-EQUITY> 237,915,057
<INTEREST-LOAN> 10,863,500
<INTEREST-INVEST> 2,225,526
<INTEREST-OTHER> 78,425
<INTEREST-TOTAL> 13,167,451
<INTEREST-DEPOSIT> 5,579,289
<INTEREST-EXPENSE> 7,685,733
<INTEREST-INCOME-NET> 5,481,718
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,665,652
<INCOME-PRETAX> 1,592,114
<INCOME-PRE-EXTRAORDINARY> 964,521
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 964,521
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
<YIELD-ACTUAL> 7.90
<LOANS-NON> 303,000
<LOANS-PAST> 236,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 634,000
<CHARGE-OFFS> 12,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 712,000
<ALLOWANCE-DOMESTIC> 712,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
