SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25446
LCS BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 37-1337116
State or other jurisdiction of incorporation (I.R.S. Employer or
organization) I.D.)
501 North State, Litchfield, Illinois 62056
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (217) 324-2576
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of Class)
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 May 13, 1996, the Company had 107,640 shares of $0.01
par value common stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements Page No.
Consolidated Statement of Financial Condition
as of March 31, 1996 and December 31, 1995 3
Consolidated Statement of Income for the Three Months
Ended March 31, 1996 and March 31, 1995 4
Consolidated Statement of Stockholders' Equity for the
Three Months Ended March 31, 1996 and March 31, 1995 5
Consolidated Statement of Cash Flows for the Three
Months Ended March 31, 1996 and March 31, 1995 6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 17
Item 2 - Changes in Securities 17
Item 3 - Default upon Senior Securities 17
Item 4 - Submission of Matters to Vote of Security-Holders 17
Item 5 - Other Information 17
Item 6 - Exhibits and Reports on Form 8-K 17
Signature Page 18
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
LCS Bancorp, Inc.
03-31-96 12-31-95
(Unaudited) (Audited)
(In Thousands)
Assets:
Cash and due from banks $ 203 $ 126
Short-term int-bearing deposits 2,254 1,882
Total cash and cash equivalents 2,457 2,008
Interest bearing deposits 485 485
Investment sec. held to maturity 1,589 1,908
Investment sec. available for sale 4,480 4,509
Mortg.-backed sec.held to maturity 95 99
Mortg.-backed sec.available sale 1,479 1,528
Loans receivable, net 8,028 8,277
Office property and equipment, net 210 208
Other assets 187 159
TOTAL ASSETS $ 19,010 $ 19,181
Liabilities:
Deposits $ 16,934 $ 17,068
Other Liabilities 118 142
Deferred income taxes 22 22
TOTAL LIABILITIES 17,074 17,232
Stockholders' Equity
Common stock, $.01 par value
(400,000 shares auth., 107,640 shares
issued and oustanding) 1 1
Paid-in capital 855 855
Unrealized holding gains (losses)
on securities avail. sale, net tax ( 43) ( 7)
Retained earnings 1,214 1,200
Less unearned ESOP shares
(1996-4,529; 1995-4,658) ( 45) ( 46)
Less stock held for MRP
(1996-3,568; 1995-4,140) ( 46) ( 54)
Total stockholders' equity 1,936 1,949
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 19,010 $ 19,181
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
LCS Bancorp, Inc.
For the three months ended
03-31-96 03-31-95
(In 000's Except Per Share Data)
Interest Income:
Loans $ 174 142
Investments 94 106
Mortgage-backed securities 28 31
Interest on deposits with banks 36 50
Total interest income 332 329
Interest expense on deposit accounts 214 215
Net interest income 118 114
Provision for losses on loans ( 2) 2
Net interest income after provision
for credit losses 120 112
Other Income 3 5
Other Expenses:
Compensation 51 46
Occupancy 9 8
Federal Deposit Insurance Premiums 10 11
Other general and administrative 37 29
Total other expenses 107 94
Income before income taxes 16 23
Income taxes 2 3
Net income $ 14 $ 20
Earnings per share $ 0.13 $ 0.20
Weighted average shares of common stock
and common stock equivalents 107,640 98,325
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
LCS Bancorp, Inc.
For the three months ended
03-31-96 12-31-95
(in thousands)
Common stock:
Beginning of the period $ 1 $ 0
Proceeds of initial stock offering 0 1
Proceeds of option stock issued 0 0
End of period 1 1
Additional paid-in-capital:
Beginning of period 855 0
Net proceeds of common stock offering
upon conversion from mutual to stock 0 802
Proceeds of option stock issued 0 0
End of period 855 802
Unrealized holding gains or (losses) on
available-for-sale securities, net of tax
Beginning of period ( 7) (289)
Change in unrealized gains, net tax ( 36) 122
End of period ( 43) (167)
Retained earnings:
Beginning of period 1,200 1,124
Net income 14 20
End of period 1,214 1,144
Unearned ESOP Shares:
Beginning of period ( 46) ( 0)
Shares set aside in conversion 0 ( 52)
Shares realized 1 1
End of period ( 45) ( 51)
Shares held for MRP:
Beginning of period ( 54) ( 0)
MRP Plan shares issued 0 ( 0)
MRP Plan shares awarded 8 0
End of period ( 46) ( 0)
TOTAL STOCKHOLDERS' EQUITY $ 1,936 $ 1,729
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
LCS Bancorp, Inc.
For the three months ended
03-31-96 12-31-95
CASH FLOWS FROM OPERATING ACTIVITIES: (in thousands)
Net Income $ 14 $ 20
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 4 4
Premium and discount amortization 2 3
Provision (recovery) credit losses ( 2) 2
(Increase) decrease in accrued
income and other assets ( 17) 148
Increase (decr) in accr. expenses
and other liabilities ( 17) 1
Total adjustments ( 30) 158
Net cash provided by operating activ. ( 16) 178
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change-interest bearing deposits 0 1
Proceeds from sales/maturities of
investment securities:
Available for sale 0 972
Held to maturity 565 0
Proceeds from sale of common stock 0 754
Purchases of investment securities:
Held to maturity (249) (617)
(Purchase) sale of FHLB Stock 4 ( 1)
Net (increase) decrease-loans receiv. 251 (343)
Payments on mortgage backed securities 34 66
Purchase of property and equipment ( 6) ( 1)
Net cash provided by investing activ. 599 831
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decr.) in non-int. bearing
demand, NOW, Money Mkt, Savings 196 ( 868)
Net incr. (decr.) in time deposits ( 330) 134
Net cash provided by financ. activ. ( 134) ( 734)
Net change in cash and cash equivalents 449 275
Cash & cash equivalents-beg. of period 2,008 2,304
Cash & cash equivalents-end of period $2,457 $2,579
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits 95 100
Income taxes 25 0
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - 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-Q and Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for
fair presentation have been included. The results of operations
for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ended
December 31, 1996.
The Company adopted Statement of Financial Accounting Standards
No. 115 (SFAS No. 115), "Accounting for Certain Investments in Debt
and Equity Securities" for investments held as of or acquired after
December 31, 1993. All financial statements presented reflect the
adoption of this accounting standard.
Note B - Conversion to Stock Ownership
In January, 1995, the Company converted from a state-chartered
mutual savings bank to a state-chartered stock savings bank with
the concurrent formation of LCS Bancorp, Inc., the "Holding
Company." On January 27, 1995, the Holding Company sold 103,500
shares of common stock at $10.00 per share to depositors, employees
and residents of the State of Illinois. Total proceeds from the
conversion of $802,000 was recorded as common stock and additional
paid-in-capital. The Holding Company utilized $615,000 of the net
proceeds to acquire all of the capital stock of the Company.
At the time of conversion, the Company established a liquidation
account in the amount of $835,000 for the benefit of eligible
account holders who continue to maintain their accounts at the
Company after the conversion. The liquidation account will be
reduced annually to the extent that eligible account holders have
reduced their qualifying deposits. Subsequent increases will not
restore an eligible account holders interest in the liquidation
account. In the event of a complete liquidation, each account
holder will be entitled to receive a distribution from the
liquidation account in an amount proportionate to the current
adjusted qualifying balances for accounts then held. At December
31, 1995, the liquidation account had been reduced to approximately
$487,000.
The Company may not declare or pay dividends on or repurchase
any of its shares of common stock if the effect thereof would cause
stockholders' equity to be reduced below the balance of the
liquidation account or if such declaration would otherwise violate
regulatory requirements.
In connection with the conversion to stock ownership, the
Company formed an Employee Stock Ownership Plan ("ESOP") for
eligible employees. The ESOP borrowed funds from the Holding
Company in the amount of $51,750 in order to purchase 5% of the
common stock to be issued in the conversion (5,175 shares at $10.00
per share). Shares committed to be released as principal payments
are made on the loan are expensed as compensation during the period
based on original cost. The loan is scheduled to be repaid in
forty quarterly installments of principal, plus interest at the
prime rate. The Company has adopted the AICPA Statement of
Position ("SOP") 93-6 "Employers Accounting For Employee Stock
Ownership Plans". The Company has made scheduled cash
contributions to the third party trustee sufficient to service the
amounts borrowed. During the first three months of 1996, principal
of $1,294 and interest of $970 was contributed towards the ESOP
debt. During the same three month period of 1995, principal of
$1,294 and interest of $2,135 was contributed towards the ESOP
debt. During the first quarter of 1996 and 1995, respectively,
uncommitted ESOP shares averaged 4,658 shares and 5,175 shares, and
were included in the weighted average number of common shares
outstanding. At March 31, 1996 and 1995, 4,529 shares and 5,046
shares, respectively, were uncommitted.
Additionally, the Company's stockholders approved a Management
Development and Recognition Plan ("MRP") at the first annual
stockholders' meeting held on April 11, 1995. This plan provides
for up to an additional 4,140 shares to be awarded to management,
directors, and certain key employees. An initial grant of 1,750 of
these shares has been awarded since the approval by the
stockholders. The aggregate purchase price of these shares will be
amortized to expense as a portion of annual compensation and the
unamortized cost will be reflected as a reduction of stockholders'
equity. For the three months ended March 31, 1996, $2,264 was
amortized to compensation expense. These shares were included in
the weighted average number of common shares outstanding for the
first quarter of 1996.
Note C - Regulatory Capital
Pursuant to the Office of the Commissioner of Savings and
Residential Finance for the State of Illinois ("OCSRF") and the
Federal Deposit Insurance Corporation ("FDIC") regulations, a
savings bank must meet two separate minimum capital-to-assets
requirements: (1) a risk-based capital requirement of 8% of risk-
weighted assets, and (2) a leverage (core) ratio of 4% core capital
to total adjusted assets. The following table summarizes, as of
March 31, 1996, the Bank's capital requirements under FIRREA and
its actual capital ratios at that date:
Required Actual Required Actual Excess
Capital Capital Capital Capital Capital
% % Balance Balance Balance
(Amounts in Thousands)
Risk-based 8.0% 21.1% $ 723 $1,906 $1,183
Core Capital 4.0% 9.6% $ 755 $1,817 $1,062
Note D - Change in Method of Accounting for Income Taxes
On February 11, 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." The Company adopted the
provisions of the new standards in its financial statements
effective for the year ended December 31, 1993. The cumulative
effect of the change in accounting principle was immaterial and was
included in other income for 1993. Financial statements for prior
years were not restated.
Under SFAS 109, the liability method is used in accounting for
income taxes. Under this method a deferred tax asset or liability
is calculated by applying the provisions of existing laws to
measure the deferred tax consequence of temporary differences that
resulted in net taxable or deductible amounts in each future year.
SFAS 109 allows the Company to record a tax benefit on its general
loan loss allowance that was previously not tax benefitted. Prior
to the adoption of SFAS 109, income tax expense was based on items
of income and expense that were reported in different years in the
financial statements and tax returns and was measured at the rate
in effect in the year the difference originated.
Significant components of the deferred tax liabilities and assets
at March 31, 1996 and 1995, are as follows (in thousands):
3-31-96 3-31-95
Deferred Tax Liabilities:
Depreciation $ 22 $ 14
Deferred Tax Assets (See Note E):
Mark-to-Market Loss on
Debt and Equity Securities
Available for Sale $ 13 $ 30
Net deferred tax (asset) liability $ 9 ($ 16)
Current tax liability $ 4 $ 1
Total tax liability $ 13 ($ 15)
Note E - Accounting for Certain Investments in Debt and Equity
Securities
Effective December 31, 1993, the Bank adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This statement
requires that securities be classified in three categories and
provides specific accounting treatment for each as noted below:
Trading account securities - Securities which the Company
intends to sell in the near term. These securities are
carried at fair market value. Gains and losses are included in
other income.
Securities available for sale - Securities which the Bank may
sell to meet liquidity or other investment needs. These are
carried at market value. Realized gains and losses on sales
are included in other income. Unrealized changes in market
values are included in retained income.
Securities held to maturity - Securities which the Bank has
the ability and intent to hold to maturity. These securities
are carried at cost, adjusted for amortization or premium and
accretion of discount, computed by a method that approximates
level yield.
At March 31, 1996, the carrying amounts of investment securities as
shown in the balance sheet of the Company and their approximate
market values were as follows (in thousands):
Carrying Market
Value Value
U.S. Government and agency securities:
Available for sale $ 1,247 $ 1,247
Held to maturity 922 926
Corporate Bonds
Available for sale 1,394 1,394
Held to maturity 594 583
Federal Home Loan Bank Stock 73 73
Mutual Fund-ARM loans % securities 1,839 1,839
$ 6,069 $ 6,062
At March 31, 1996, there were no realized gains or losses on sales
of investment securities.
At March 31, 1996, the carrying amounts of mortgage-backed
securities as shown in the balance sheet of the Company and their
approximate market values were as follows (in thousands):
Carrying Market
Value Value
Federal National Mortgage Asso.:
Available for Sale $ 970 $ 970
Government National Mortgage Asso.:
Available for Sale 509 509
Held to maturity 95 95
$ 1,574 $1,574
At March 31, 1996, there were no realized gains or losses on sales
of mortgage backed securities.
Note F - Earnings Per Share
Earnings per share of Common Stock outstanding for the three
months ended March 31, 1996, 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. Common
stock equivalents assume the exercise of stock options and use of
proceeds to purchase Treasury Stock at the average market price for
the period (See Note B for effect of SOP 93-6). At the Company's
annual stockholders meeting held April 11, 1995, 10,350 stock
options were approved of which 5,570 shares were awarded during the
second quarter of 1995 at an exercise price of $11 per share.
During the three months ended March 31, 1996, none of the options
were exercised. Weighted average shares of common stock and
common stock equivalents for the three months ended March 31, 1996,
consisted of 107,640 shares outstanding during the quarter under
SOP 93-6. At March 31, 1996, there was a total of 5,570 stock
options outstanding and not exercised.
Note G - Commitments and Contingencies
At March 31, 1996, the Company had approved loan commitments
totalling $516,000 to originate loans and $375,000 in unused lines
of credit. Commitments to fund loans have credit risk essentially
the same as that involved in extending loans to customers and are
subject to the Company's normal credit policies.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GENERAL
LCS Bancorp, Inc. (the "Company") completed its initial public
offering of Common Stock on January 27, 1995. It is the Holding
Company of Litchfield Community Savings, S.B., Litchfield, Illinois
(the "Bank"), a state-chartered savings bank which operates from
one office in Litchfield, Illinois. The Bank has no subsidiary
companies.
The Company's business activities in its first fifteen months
of operation consist of investment in short-term interest bearing
deposits and investments and operation of the Bank. The Bank's
principal business consists of attracting deposits from the public
and investing these deposits, together with funds generated from
operations, primarily in one-to-four family mortgage loans,
commercial and agricultural real estate loans, and consumer and
commercial loans. Excess funds are primarily invested in mortgage-
backed securities, corporate bonds, U.S. governments and agencies
and an mutual fund that invests in adjustable rate mortgages. The
Bank's deposit accounts are insured to the maximum allowable by the
FDIC.
The Bank's results of operations are dependent primarily on
net interest income, which is the difference between the interest
income earned on its loan, mortgage-backed securities and
investment securities portfolios, and its cost of funds, consisting
of interest paid on its deposits. The Bank has not utilized
borrowed funds during the last five years. The Bank's operating
results are also affected, to a lesser extent, by loan fees,
customer service charges and other income. Operating expenses of
the Bank are employee compensation and benefits, equipment and
occupancy costs, federal deposit insurance premiums and other
administrative expenses. The Bank's results of operations are
further affected by economic and competitive conditions,
particularly changes in market interest rates, government policies
and actions of regulatory authorities.
FINANCIAL CONDITION
As of March 31, 1996, total assets decreased $171,000, or
0.9%, to $19,010,000 from $19,181,000 at December 31, 1995. The
decrease primarily resulted from a net savings deposit outflow of
$134,000, a decrease in other liabilities $17,000, a decrease in
the market value of investments available for sale, net of tax of
$35,000, as partially offset by net income of $14,000.
Net loans receivable decreased by $249,000, or 3.0% during the
three months ended March 31, 1996. During the three months ended
March 31, 1996, loan originations of $437,000 were offset by loan
repayments of $684,000. The Company's lending activities have been
concentrated primarily in residential real property secured by
first liens. At March 31, 1996, approximately 84% of the Company's
mortgage loans were secured primarily by one-to-four family
residential dwellings and 16% were secured by commercial and
agricultural real estate. The Company generally maintains loan-to-
value ratios on mortgage loans no greater than 80%. The Company is
continuing its expansion of the loan portfolio into commercial and
agricultural products. During the first three months of 1996,
commercial and agricultural loans accounted for $45,000 of the
$437,000 in originations. Virtually all loans originated by the
Company are in the local lending area, which is comprised of the
area within a 20-mile radius surrounding the Company office.
Within that territory, most loans are originated in Montgomery and
Macoupin counties in Illinois.
ASSET QUALITY
Non-performing assets (those 90 days or more past due and non-
accrual loans, foreclosures, and in-substance foreclosures), were
0.03% and 0.02% of total assets at March 31, 1996, and December 31,
1995, respectively. As of March 31, 1996, non-accrual loans were
$5,000, or 0.06% of total loans, compared to $3,000, or 0.04% of
total loans at December 31, 1995. There was no real estate owned
as a result of foreclosure or in-substance foreclosure at March 31,
1996, or December 31, 1995.
As a percentage of total non-performing assets, the loan loss
allowance decreased from 2,803% at December 31, 1995 to 1,738% at
March 31, 1996. As of March 31, 1996, the loan loss allowance was
$90,000, an decrease of $4,000 from $94,000 at December 31, 1995.
As a percentage of total loans, the allowance for loan losses
decreased from 1.12% at December 31, 1995 to 1.11% at March 31,
1996. The decrease was primarily the result of the decline in the
loan portfolio in the first three months of 1996 and the historical
loss experience of the Company. Management believes that the level
of loan loss allowances is adequate, based on its evaluation which
includes a review of all loans on which full collectibility may not
be reasonably assured, the estimated fair value of the underlying
collateral, economic conditions, historical loss experience and the
Association's internal credit review process.
NET INTEREST INCOME
Net interest income increased $4,000, or 3.5%, during the
three months ended March 31, 1996, compared to the same period in
1995. The average yield on interest earning assets for the three
months ended March 31, 1996 was 7.12%, as compared to 6.85% for the
three months ended March 31, 1995. The average cost of funds for
the three months ended March 31, 1996 was 5.07%, as compared to
4.86% for the three months ended March 31, 1996, resulting in an
increase in the rate spread to 2.05 at March 31, 1996, from 1.99%
at March 31, 1995.
ASSET/LIABILITY MANAGEMENT
The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are
"interest rate sensitive" and by monitoring an institution's
interest rate sensitivity "gap". An asset or liability is said to
be interest rate sensitive within a specific time period it if will
mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest earning assets anticipated, based upon certain
assumptions, to mature or reprice within a specific time period and
the amount of interest bearing liabilities anticipated, based upon
certain assumptions, to mature or reprice within that time period.
A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of
interest rate sensitive liabilities exceeds the amount of interest
rate sensitive assets. During a period of rising interest rates,
a negative gap would tend to adversely affect net interest income,
while a positive gap would tend to result in an increase in net
interest income.
At March 31, 1996, total interest earning assets maturing or
repricing within one year exceeded total interest bearing
liabilities maturing or repricing within one year, as adjusted for
certain prepayment assumptions, by $1,692,000, representing a
positive cumulative one-year gap of 9.12%. At December 31, 1995,
total interest earning assets maturing or repricing within one year
exceeded total interest bearing liabilities maturing or repricing
within one year, as adjusted for certain prepayment assumptions, by
$183,000, representing a positive cumulative one-year gap of 0.97%.
Although the Company has significantly increased its
adjustable rate loan portfolio in recent years, the level of the
Company's portfolio of fixed rate mortgages and fixed rate
investment securities maturing in three to five years continues to
affect the Company's gap position. However, management believes
that, given the high level of capital of the Company, and the
excess of interest earning assets over interest bearing
liabilities, the increased net interest income resulting from a
mismatch in the maturity of its asset and liability portfolios
provides sufficient returns to justify the increased vulnerability
to sudden and unexpected changes in interest rates. Nonetheless,
the Company carefully monitors its interest rate risk as such risk
relates to management's strategy.
PROVISION FOR LOAN LOSSES
The allowance for loan losses is established through a
provision for loan losses based on management's evaluation of the
risk inherent in its loan portfolio and the general economy.
Management's evaluation includes a review of all loans on which
full collectibility may not be reasonably assured, the estimated
fair value of the underlying collateral, economic conditions,
historical loan loss experience and the Company's internal credit
review process.
The Company has decreased its allowance in the first three
months of 1996 to correspond to the decrease in the loan portfolio
and the Company's actual loss experience. During the first quarter
of 1996, a recovery of $2,000 was credited to income. Management
believes that the current provision is adequate, based on its
evaluation of the portfolio.
OTHER INCOME
Other income decreased $2,000, or 40%, for the three months
ended March 31, 1996, as compared to the three months ended March
31, 1995. This was primarily the result of a decline in deposit
account service charges as a result of the Bank's aggresive stance
on checking accounts with continued non-sufficient funds activity.
OPERATING EXPENSES
Operating expenses increased $13,000, or 13.8%, from $94,000
for the three months ended March 31, 1995, to $107,000 for the
three months ended March 31, 1996, primarily due to a $5,000
increase in compensation expense, and an $8,000 increase in general
and administrative expenses. This increase was partially due to
the increased costs of operating the Company as a Holding Company
and subsidiary. Included in general and administrative expenses
were franchise taxes, registrar/trustee fees, and other expenses
not incurred in the first quarter of 1995, the first reporting
period of the new Company. Operating expenses as a percent of
average assets increased to 2.27% in the first three months of
1996, compared to 1.96% for the first three months of 1995.
INCOME TAXES
The income tax provisions for the first quarter of 1996 and
the first quarter of 1995 were 15% and 15%, respectively, and
reflect the estimated combined federal and state tax rates
applicable to the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds include deposits,
principal and interest payments on loans and mortgage-backed
securities, maturing investment securities and sales of securities
from the available-for-sale portfolio. While maturities and
scheduled amortization of loans and mortgage-backed securities are
a predictable source of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates,
economic conditions, and competition.
The primary investing activity of the Company is the
origination of mortgage loans and other commercial and consumer
loans, as well as the purchase of securities. During the first
three months of 1996, the Company originated loans in the amount of
$437,000, compared to $1,035,000 in the first three months of 1995.
During the first three months of 1996, the Company purchased
$249,000 of securities, primarily U.S. Treasury and agency
securities. During the first three months of 1995, the Company
purchased $617,000 of securities, primarily U.S. Treasury and
agency securities.
During the first three months of 1996, the Company funded the
origination of loans in part with the proceeds from the maturities
of investment securities from the held-to-maturity portfolio in the
amount of $565,000.
Financing activities during the first three months of 1996
included a decrease in deposits of $134,000. There were no
borrowings.
Federal regulations require a savings institution to maintain
an average daily balance of liquid assets (cash and eligible
investments) equal to at least 5% of the average daily balance of
its net withdrawable deposits and short-term borrowings. In
addition, short-term liquid assets currently must constitute 1% of
the sum of net withdrawable deposit accounts plus short-term
borrowings. Management's objectives and strategies for the Bank
have consistently maintained liquidity levels in excess of
regulatory requirements. The Bank's liquidity ratios at March 31,
1996 and 1995 were 48% and 45%, respectively. The Bank's short-
term liquidity ratios for March 31, 1996 and 1995 were 27% and
27%, respectively.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Holding Company and 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. 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
None.
SIGNATURES
Pursuant to the requirement 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.
LCS BANCORP, INC.
s/Carol Radtke
President
Chief Executive Officer
s/Carol Radtke
Chief Financial Officer
Date: May 13, 1996
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