<PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1997
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _________
Commission file number: 0-25750
-------
PENFED BANCORP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 61-1275478
---------------------------- ------------------
State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
215 W. Shelby Street, Falmouth, KY 41040
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(606) 654-6961
---------------------------------------------------
Registrant's telephone number, including area code)
N/A
---------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
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 [ ] No[x]
Indicate the number of share outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at July 11,1997
----------------------------- ---------------------------
Common Stock, $0.01 Par Value 297,370 Common Share
<PAGE>
<PAGE>
PENFED BANCORP, INC.
INDEX
Part I Financial Information Page
Item 1 Unaudited Consolidated Financial Statements
Consolidated Statements of Financial Condition,
March 31, 1997 and December 31, 1996 1
Consolidated Statements of Income, Three Months
Ended March 31, 1997 and 1996 2
Consolidated Statements of Cash Flows,
Three Months Ended March 31, 1997 and 1996 3
Notes to Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II Other Information 13
Signatures 14
<PAGE>
<PAGE>
PENFED BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
<TABLE>
<CAPTION>
March 31 *December 31
1997 1996
----------------------
(unaudited)(unaudited)
<S> <C> <C>
Cash and balances with banks $ 644,958 $ 270,794
Interest-bearing deposits
in other depository institutions 887,464 1,474,583
Investment securities, held to maturity 621,878 367,239
Mortgage-backed securities,
held to maturity 533,613 644,250
Federal Home Loan Bank capital stock 248,100 243,900
Intrieve stock 15,000 15,000
Loans receivable, net 27,339,839 27,090,955
Office property and equipment, at cost,
less accumulated depreciation 85,710 339,239
Other real estate owned 0 31,464
Mortgage servicing rights 23,408 19,289
Other assets 85,137 8,716
----------- ----------
Total Assets $ 30,485,107 $30,505,429
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings deposits $ 3,976,052 $ 3,437,818
Certificates of deposit 20,063,941 19,646,039
Advances from Federal Home Loan Bank 1,500,000 2,200,000
Dividend payable 47,723 0
Other liabilities 132,626 195,532
---------- ----------
Total liabilities 25,720,342 25,479,389
Stockholders' equity:
Preferred stock, 500,000 shares
authorized and unissued
Common stock, $.01 par value, 2,000,000
shares authorized; 345,000 shares issued;
296,680 shares outstanding at
March 31, 1997 and 306,387 shares
outstanding at December 31, 1996 3,450 3,450
Additional paid in capital 3,119,842 3,117,084
Retained income,
substantially restricted 2,195,123 2,329,856
Employee stock ownership plan (197,558) (208,491)
Treasury stock (356,092) (215,859)
---------- ----------
Total stockholders' equity 4,764,765 5,026,040
---------- ----------
Total liabilities and $30,485,107 $30,505,429
stockholders' equity ========== ===========
</TABLE>
*See Notes to Consolidated Financial Statements-"General."
1<PAGE>
<PAGE>
PENFED BANCORP,INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
---------------------
1997 1996
-------- --------
<S> <C> <C>
Interest on loans $ 560,954 $ 547,862
Interest on investment securities 12,441 13,276
Interest on interest-bearing deposits
in other depository institutions 11,139 5,382
Other interest income 13,127 3,907
----------- --------
Total interest income 597,661 570,427
----------- --------
Interest on savings deposits and advances:
NOW accounts 4,832 2,967
Savings accounts 24,792 19,179
Certificates 272,313 250,008
Federal Home Loan Bank advances 22,799 20,573
---------- --------
Total interest expen 324,736 292,727
---------- --------
Net interest income 272,925 277,700
Provision for loan losses 25,937 3,000
---------- --------
Net interest income after
provision of loan losses 246,988 274,700
---------- --------
Noninterest income 26,527 31,069
---------- --------
Other expenses:
Salaries and benefits 83,663 78,444
Occupancy expense 3,815 18,502
Equipment and data processing 14,282 14,141
Professional services 16,000 21,527
Federal insurance premium 674 10,564
State ad valorem taxes 7,002 4,959
Other 27,379 21,610
----------- --------
Total other expenses 152,815 169,746
----------- --------
Income before income taxes
and extraordinary item 120,700 136,022
Income tax expense 40,387 41,988
----------- --------
Income before extraordinary item 80,313 94,035
Extraordinary item-flood loss net of
income tax benefit of $86,200 (167,329) 0
----------- --------
Net(loss) income $ (87,016) $ 94,035
=========== ========
Income per share before
extraordinary item $ 0.26 $ 0.29
Loss per share from extraordinary item $ (0.54) 0.00
----------- --------
Net loss (income) per share $ (0.28) $ 0.29
Weighted average common share =========== ========
outstanding 311,155 325,518
</TABLE>
*See Notes to Consolidated Financial Statements-"General."
2
<PAGE>
<PAGE>
PENFED BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1997 1996
--------- --------
<S> <C> <C>
Cash flows from
operating activities: $ 32,564 $ (39,470)
--------- ---------
Cash flows from investing activities:
Securities (144,002) ( 81,290)
Loans receivable (217,420) (459,848)
--------- ---------
Net cash used investing activities: (361,422) (541,138)
Cash flows from financing activities:
Deposits 956,136 873,105
Payments on advances from FHLB (700,000) (50,000)
Purchases of treasury stock (140,233) 0
---------- ----------
Net cash used in financing
activities 115,903 823,105
Increase(Decrease) in cash and
cash equivalents (212,955) 242,497
Cash and cash equivalents at
beginning of period 1,745,377 595,960
---------- ---------
Cash and cash equivalents at
end of period $1,532,422 $ 838,457
========= =========
</TABLE>
*See Notes to Consolidated Financial Statements-"General."
3<PAGE>
<PAGE>
PENFED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
The accompanying consolidated financial statements of Penfed
Bancorp, Inc. (the "Corporation") and Pendleton Federal Savings
Bank (the subsidiary, "Savings Bank") have been prepared in
accordance with the instructions for Form 10-QSB and therefore
do not include certain information or footnotes necessary for
the presentation of financial position in accordance with
generally accepted accounting principles. However, in the
opinion of management, the consolidated financial statements
reflect all adjustments (which consist of normal recurring
accruals) necessary for a fair presentation of the results for
the unaudited periods. The results of operations for the three
months ended March 31, 1997 are not necessarily indicative of
the results which may be expected for the entire year.
Statement of Financial Condition information at December 31,
1996 is unaudited. As previously reported by the Corporation,
audit of the Corporation's financial statements for the fiscal
year ended December 31, 1996 has been delayed due to the
flooding, in March 1997, of the Licking River in Northern
Kentucky, which resulted in significant damage to the
properties of the Corporation and the Savings Bank, including
numerous financial records necessary to complete the audit.
See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Impact of Recent
Flooding." There can be no assurance that the information
presented for December 31, 1996 in this Form 10-QSB will not
require revision as a result of the completion of the audit,
which is currently in process. In the event such revision is
necessary, the Corporation will file an amendment to this Form
10-QSB incorporating such revision.
Allowance for Loan Losses:
An analysis of the changes in the loan loss allowance for the
three months ended March 31, 1997 follows:
<TABLE>
<CAPTION>
Three Months Ended
1997 1996
<S> <C> <C>
Beginning balance $124,063 $106,063
Provision 25,937 3,000
--------- --------
Ending balance $150,000 $109,063
======== ========
</TABLE>
4<PAGE>
<PAGE>
Effect of Implementing New Accounting Standards
In June 1996, the FASB issued Statement of Financial Standards
(SFAS) No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." Under
this standard, accounting for transfers and servicing of
financial assets and extinguishments of liabilities is based on
control. After a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and
the liabilities it has incurred, derecognizes financial assets
when control has been surrendered and derecognizes liabilities
when extinguished. This statement applies prospectively in
fiscal years beginning after December 31, 1996. The
Corporation does not expect the implementation of this
statement to have a material affect on the financial
statements.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per
Share" (EPS). This statement specifies the computation,
presentation, and disclosure requirements for EPS and is
substantially similar to the standard recently issued by the
International Accounting Standards Committee entitled
International Accounting Standards, "Earnings Per Share" (IAS
33).
SFAS No. 128 is designed to improve the EPS information
provided in financial statements by simplifying the existing
computational guidelines, revising the disclosure requirements,
and increasing the comparability of EPS data on an
international basis. Some of the changes made to simplify the
EPS computations include: (a) eliminating the presentation of
primary EPS and replacing it with basic EPS, with the principal
difference being that common stock equivalents (CSEs) are not
considered in computing basic EPS, (b) eliminating the
modified treasury stock method and three percent materiality
provision, and (c) revising the contingent share provisions and
the supplemental EPS data requirements. SFAS No. 128 requires
presentation of basic EPS amounts from income for continuing
operations and net income on the face of the income statement
for entities with simple capital structures and dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures
regardless of whether basic and diluted EPS are the same. The
statement also requires a reconciliation of the numerator and
denominator used on computing basic and diluted EPS and is
applicable to all entities with publicly held common stock or
potential common stock.
SFAS No. 128 is effective for periods ending, including interim
periods after December 15, 1997. Earlier application is not
permitted. EPS calculated under SFAS No. 128 are not expected
to be materially different from EPS calculated under the
current method.
5<PAGE>
<PAGE>
Impact of Deposit Insurance Funds Act of 1996
As a result of the Deposit Insurance Funds Act of 1996, the
Secretary of the Treasury has made recommendations for
financial modernization involving two options for Congress to
consider, one of which would eliminate the thrift charter after
two years. Accordingly, the Bank may be required to convert its
federal savings bank charter to either a national bank charter,
a state depository institution charter, or a new designed
charter. The Savings Bank may also become regulated at the
holding company level by the Board of Governors of the Federal
Reserve System ("Federal Reserve") rather than by the Office of
Thrift Supervision ("OTS"). Regulation by the Federal Reserve
could subject the Bank to capital requirements that are not
currently applicable to the Company as a holding company level,
which business activities currently are not restricted. The
Bank is unable to predict whether such initiatives will result
in enacted legislation requiring a charter and if so whether
the charter change would significantly impact the Company's
operations.
Impact of Recent Flooding
On March 2, 1997 a severe storm created flooding on the Licking
River in Northern Kentucky. As a result, the Corporation's
wholly owned subsidiary, the Savings Bank, experienced
significant property damage. The sixty-one inches of water in
the Savings Bank's office in the Falmouth, Kentucky severely
damaged the internal fixtures of the Savings Bank and numerous
financial documents. Collateral properties on several loans
held by the Savings Bank were also damaged.
The Savings Bank's office and many of the documents have been
reconstructed. The Savings Bank recognized an extraordinary
loss of $167,329, which is net of a related income tax benefit
of $86,200, as a result of uninsured flood loss. Management
estimates that less than 10% of the loans in the Savings Bank's
portfolio were adversely affected by the flood. Management
attributes this to the geographic diversity of the Savings
Bank's loans, in that an increasing percentage of the Savings
Bank's loans have been collateralized by properties located
outside of Pendleton County in recent years. On the basis of
management's assessment of all information currently available
to it regarding the Savings Bank's loan portfolio, including
the loans affected by the flood, the Corporation added $25,937
to the loan loss allowance during the quarter ended March 31,
1997. Management does not believe that the impact of the flood
on the Corporation's future financial condition or results of
operations will be material.
6<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The primary business of Pendleton Federal Savings Bank is the
origination of residential real estate loans and funding such
loans through deposits and other borrowings. The largest
component of the Bank's net income is net interest income,
which is the difference between interest income and interest
expense. Consequently, the Bank's earnings are primarily
dependent on its interest income, which is determined by (1)
the difference ("interest rate spread") between rates of
interest earned on interest-earning assets and rates paid on
interest-bearing liabilities, and (2) the relative amounts of
interest-earning assets and interest-bearing liabilities.
Because most deposit accounts react more quickly to market
interest rate movements than do traditional mortgage loans,
sharp increases in rates can adversely affect the Bank's
earnings over time.
Impact of Recent Flooding
On March 2, 1997 a severe storm created flooding on the Licking
River in Northern Kentucky. As a result, the Corporation's
wholly owned subsidiary, the Savings Bank, experienced
significant property damage. The sixty-one inches of water in
the Savings Bank's office in Falmouth, Kentucky severely
damaged the internal fixtures of the Savings Bank and numerous
financial documents. Collateral properties on several loans
held by the Savings Bank were also damaged.
The Savings Bank's office and many of the documents have been
reconstructed. The Savings Bank recognized an extraordinary
loss of $167,329, which is net of a related income tax benefit
of $86,200, as a result of uninsured flood loss. Management
estimates that less than 10% of the loans in the Savings Bank's
portfolio were adversely affected by the flood. Management
attributes this to the geographic diversity of the Savings
Bank's loans, in that an increasing percentage of the loans
have been collateralized by properties located outside of
Pendleton County in recent years. On the basis of management's
assessment of all information currently available to it
regarding the Savings Bank's loan portfolio, including the
loans affected by the flood, the Corporation added $25,937 to
the loan loss allowance during the quarter ended March 31,
1997. Management does not believe that the impact of the flood
on the Corporation's future financial condition or results of
operations will be material.
Financial Condition
Total assets decreased by .1% during the quarter ended March
31, 1997. Loans receivable and investment securities increased
.9% and 69.3%, respectively. Mortgage-backed securities
decreased 17.2%. Deposits increased 4.2% and Federal Home Loan
Bank advances decreased 31.8%. Increase in deposits were used
to repay Federal Home Loan Bank advances, and fund a portion of
the increase in securities and loan receivable.
7<PAGE>
<PAGE>
Due to the continuing marketing efforts of the Bank to take
advantage of opportunities for lending growth in its market
areas, the Bank's loans receivable balance increased during the
first quarter. Fixed rate loans are generally sold in the
secondary market; therefore their origination does not result
in increases to the Bank's loan portfolio. During the quarter,
the Bank was able
to increase its loans receivable balance by originating
adjustable rate mortgage loans that are retained in the Bank's
loan portfolio. Future increases in the Bank's loans receivable
balances will be funded through increased deposits or Federal
Home Loan Bank advances, if required. Investment securities
increased due to a purchase of a FNMA callable bond.
The Bank experienced an increase in deposits due to new
depositors opening accounts. Management will continue to
monitor deposit levels in light of prevailing interest rates
and other factors and may choose to increase deposit rates in
the future to preserve market share or obtain required levels
of cash flows. To the extent that the Bank elects to increase
deposit rates in order to attract and/or maintain deposits and
to fund future loan growth and other operating needs, interest
income may be adversely affected. Currently, however,
management does not anticipate the necessity of offering above-
market interest rates on deposits.
Stockholders' equity for March 31, 1997 was 15.6% as compared
to 16.5% at December 31, 1996. The reduction is attributable
primarily to the net loss for the March 31, 1997 quarter and to
the effects of the Corporation's stock repurchases during the
quarter. During the March 31, 1997 quarter, the Corporation
repurchased 10,800 shares of common stock for the total price
of $140,233 out of existing cash reserves.
The level of nonperforming loans decreased for the first
quarter as compared to the same quarter of the prior year. (see
table on the next page) The following table sets forth
information with respect to the Bank's nonperforming assets for
the periods indicated. During the periods shown, the Bank had
no restructured loans with the meaning of Statement of
Financial Accounting Standards No. 15.
8<PAGE>
<PAGE>
<TABLE>
<CAPTION>
At March 31,
---------------------
1997 1996
---------- ---------
(Dollars in thousands)
<S> <C> <C>
Loans accounted for on a
non-accrual basis $ 625 $ 712
Accruing loans which are
contractually past due 90 days
or more 0 0
------- --------
Total of non-accrual and 90 days
past due loans $ 625 $ 712
======= ========
Other real estate owned 0 85
------- --------
Total nonperforming assets $ 625 $ 797
======= ========
Ratio of nonperforming loans
to total loans 2.3% 2.9%
======== ========
Ratio of nonperforming assets
to total assets 2.1% 2.9%
======== ========
Ratio of allowance for loan losses
to total loans 0.6% 0.4%
======== ========
Ratio of allowance for loan losses
to nonperforming loans 24.0% 15.3%
======== ========
</TABLE>
The Bank's total nonperforming loans and total nonperforming
assets at March 31, 1997 decreased 12.2% and 21.6%,
respectively, as compared to March 31, 1996. Nonperforming
loans at March 31, 1997 decreased due to some of the non-
accrual loans becoming current. Properties were taken into real
estate owned and sold at no loss to the bank. All
nonperforming loans are collateralized by residential property.
Based on management's review of the value of the underlying
collateral and other factors, no losses are expected.
Results of Operations
Three Months Ended March 31, 1997, Compared to March 31, 1996.
The Corporation's net income for the quarter ended March 31,
1997 decreased 192.5% as compared to the same quarter of 1996
due to a increase in interest expense of 10.9%, a decrease in
noninterest income of 14.6%, and an extraordinary item-flood
loss of $167,329, offset by an increase in interest income of
4.8%.
Net interest income before provision for loan losses decreased
by 10.1%. Total interest income increased 4.8%, due to an
increase in the volume of outstanding loans. Total interest
expense increased 10.9% as a result of an increase in the
effective rate paid on interest-bearing liabilities, and also
due to the increase in the balance of interest-bearing
deposits. The Savings Bank during this quarter started paying
interest on a promotional certificate of deposit offering that
was held in the last quarter of 1996.
9
<PAGE>
<PAGE>
The Bank's allowance for loan losses increased 37.5% from March
31, 1996 to March 31, 1997. An additional $23,000 was added to
the provision for loan losses during the first quarter in order
to increase the ratio of allowance for loan losses to
nonperforming loans, and to provide for losses associated with
loans affected by the recent flood. See "Impact of Recent
Flooding" herein.
Noninterest income decreased 14.6% for the three months ended
March 31, 1997 as compared to the same quarter of 1996. The
gain on sale of mortgage loans decreased 42.6%, mortgage late
charges decreased 18.5%, offset by an increase in Freddie Mac
servicing income of 42.2%.
Other expenses decreased by 10.0% for the three months ended
March 31, 1997 as compared to the same quarter of 1996.
Professional services decreased 25.7%, occupancy expense
decreased 79.4%, federal insurance premium decreased 93.6%,
offset by an increase in state ad valorem taxes of 41.2%, and
other expenses increased 26.7%.
For a discussion of the extraordinary item, see "Impact of
Recent Flooding" herein.
The net effect of the extraordinary item-flood loss combined
with the increase in interest expense, decrease in noninterest
income, and offset by the increase in net interest income
resulted in a decrease in net income of 192.5%.
Liquidity and Capital Resources
Liquidity
Pendleton Federal is required by federal regulations to
maintain specified levels of "liquid" assets consisting of cash
and other eligible investments. The current level of liquidity
required by the OTS is 5% of the sum of net withdrawable
savings and borrowings due within one year. The Savings Bank's
regulatory liquidity at March 31, 1997 and December 31, 1996
was 9.01% and 10.68%, respectively. Management believes that
the Bank has an adequate level of liquidity to meet anticipated
cash flow needs.
Capital Resources
The Office of Thrift Supervision ("OTS") imposes regulations
which provide that savings associations must maintain certain
levels of capital. The regulations include a leverage limit, a
tangible capital requirement and a risk-based capital
requirement. Specifically, the regulations provide that
savings associations must maintain tangible capital equal to
1.5% of adjusted total assets, core capital equal to 3% of
adjusted total assets and a combination of core and
supplementary capital equal to 8% of risk weighted assets.
Pendleton Federal is in compliance with these capital
regulations.
10
<PAGE>
<PAGE>
The OTS capital regulations also require savings associations
to maintain capital based on the amount of their exposure to
losses from changes in market interest rates ("interest rate
risk"). The calculation performed by the OTS indicates that
the Bank has no additional capital requirement resulting from
excessive exposure to interest rate risk.
The following table summarizes the Bank's capital requirements
and position at March 31, 1997, and December 31, 1996 in
accordance with the capital standards imposed by the OTS.
Amounts are in thousands.
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------------- ---------------
Amount % Amount %
------- ------ -------- -----
<S> <C> <C> <C> <C>
Tangible capital $ 4,447 14.6 $ 4,704 15.4
Tangible capital
requirement 457 1.5 458 1.5
------- ------ -------- ------
Excess $ 3,990 13.1 $ 4,246 13.9
======= ====== ======== ======
Core capital $ 4,447 14.6 $ 4,704 15.4
Core capital
requirement 915 3.0 915 3.0
------- ------ -------- ------
Excess $ 3,532 11.6 $ 3,789 12.4
======= ====== ======== ======
Tangible capital $ 4,447 $ 4,704
Allowance for loan loss 150 124
------- --------
Total capital
(core and supplemental) 4,597 26.1 4,828 27.8
Risk-based requirement 1,410 8.0 1,392 8.0
------- ------ -------- ------
Excess $ 3,187 18.1 $ 3,436 19.8
======= ====== ======== ======
</TABLE>
Impact of Inflation and Changing Prices
The Consolidated Financial Statements and Notes presented
herein have been prepared in accordance with generally accepted
accounting principles, which require the measurement of
financial position and operating results in terms of historical
dollars without considering the change in the relative
purchasing power of money over time due to inflation. The
impact of inflation is reflected in the increased cost of the
Company's operations. Unlike most industrial companies, nearly
all the assets and liabilities of the Company are monetary in
nature. As a result, interest rates have a greater impact on
the Company's performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the
same direction or to the same extent as the price of goods and
services.
Effect of Implementing New Accounting Standards
See "Notes to the Consolidated Financial Statements" for
discussion of new accounting standards.
11
<PAGE>
<PAGE>
Asset/Liability Management
Pendleton Federal's future financial performance depends to a
large extent on how successful the Bank is in limiting the
sensitivity of the Bank's earnings and net asset value to
changes in interest rates. Such sensitivity may be analyzed by
examining the amount by which the market value of the Bank's
portfolio equity changes given an immediate and sustained
change in interest rates. At March 31, 1997, (the most recent
report available) the Bank's market value of portfolio equity
would decrease by $756,000 or 15.0% and increase by $647,000 or
12.0% given a 200 basis point immediate and sustained increase
or decrease, respectively, in interest rates. Based on this
analysis, management believes that the Bank has an acceptable
level of interest rate risk and is adequately protected from
the effects of interest rate fluctuations.
Management believes that interest rate risk is one of the most
significant factors affecting the Bank's future ability to
generate earnings consistently. Accordingly, management has
focused on strategies to reduce the Bank's interest risk in
recent years. These strategies include the origination of its
portfolio of adjustable rate mortgage loans with greater
interest rate sensitivity than long term fixed rate mortgage
loans, the sale of long term fixed rate loans in the secondary
market and increasing the balance of transaction accounts.
Sources of non-interest income such as loan servicing fees and
service charges on deposits are also emphasized.
12
<PAGE>
<PAGE>
PENFED BANCORP, INC.
PART II
OTHER INFORMATION
ITEM 1 Legal Proceedings
None
ITEM 2 Changes in Securities
None
ITEM 3 Defaults Upon Senior Securities
None
ITEM 4 Submission of Matters to a Vote of Security Holders
None
ITEM 5 Other Information
See Item 6 for an update of management's estimated time for
completion of the Corporation's fiscal 1996 audit and filing of
its 1996 Form 10-KSB.
ITEM 6 Exhibits and Reports on Form 8-K
Report Item 5 on Form 8-K
Penfed Bancorp, Inc. filed a Form 8-K announcing that the audit
of its financial statements for the fiscal year ended December
31, 1996 had been delayed due to the recent flooding of the
Licking River in Northern Kentucky, which resulted in
significant damage to the properties of the Registrant's wholly
owned subsidiary, Pendleton Federal Savings Bank.
The Registrant is in the process of reconstructing the records
needed to complete the audit but estimates that the audit will
not be completed until the end of July 1997. The Registrant
estimates that its Annual Report on Form 10-KSB will be filed
with the Securities and Exchange Commission by the end of
August 1997.
Exhibits
Exhibit 11 - Computation of Earnings per share
Exhibit 27 - Financial Data Schedule
13
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
PENFED BANCORP, INC.
June 25, 1997 /s/ David C. Wills
- ------------- --------------------
Date David C. Wills
President and Chief Executive Officer
(Duly Authorized Officer)
14
COMPUTATION OF EARNINGS PER SHARE
for the Three Months ended March 31, 1997
<TABLE>
<CAPTION>
Three
Months
------
<S> <C>
Primary
Average shares outstanding 303,983
Net effect of dilutive stock options-based
on the treasury stock method using average
market price 6,979
---------
Total 310,962
=========
Income before extraordinary item $ 80,313
Extraordinary item-flood loss (167,329)
=========
Net loss $ (87,016)
=========
Income per share before extraordinary item $ 0.26
Loss per share from extraordinary item (0.54)
=========
Net loss per share $ (0.28)
Fully Diluted
Average shares outstanding 303,983
Net effect of dilutive stock options-based
on the treasury stock method using the
period-end market price, if higher than
average market price 7,172
---------
Total 311,155
=========
Income before extraordinary item $ 80,313
Extraordinary item-flood loss (167,329)
=========
Net loss $ (87,016)
=========
Income per share before extraordinary item $ 0.26
Loss per share from extraordinary item (0.54)
=========
Net loss per share $ (0.28)
</TABLE>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
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0
0
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</TABLE>
