<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 September 30, 1996
----- 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 1-13824
CITISAVE FINANCIAL CORPORATION
(Exact name of issuer as specified in its charter)
Louisiana 72-1289214
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
665 Florida Street, Baton Rouge, Louisiana 70801
(Address of principal executive offices)
Issuer's telephone number, including area code: (504)383-4102
Indicate by check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 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
----- -----
Shares of common stock, par value $.01 per share, outstanding as of Sept 30,
1996: 962,207. Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE>
CITISAVE FINANCIAL CORPORATION
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1996
PART I - FINANCIAL INFORMATION
Interim Financial Information required by Rule 10-01 of Regulation S-X and
Item 303 of Regulation S-B is included in this Form 10-QSB as referenced
below:
ITEM 1 - FINANCIAL STATEMENTS PAGE
Consolidated Statements of Financial Condition at
September 30, 1996 and December 31, 1995 3
Consolidated Statements of Income For the Three and Nine Months
Ended September 30, 1996 and 1995 4
Consolidated Statements of Stockholders' Equity for
the Nine Months Ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows For the Nine Months Ended
September 30, 1996 and 1995 6 - 7
Notes to Consolidated Financial Statements 8 - 11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 18
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 19
Item 2 - Changes in Securities 19
Item 3 - Defaults Upon Senior Securities 19
Item 4 - Submission of Matters to a Vote of Security Holders 19
Item 5 - Other Information 19
Item 6 - Exhibits and Reports on Form 8-K 20
Signatures 21
<PAGE>
CITISAVE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1996 AND DECEMBER 1995
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
September 30, December 31,
1996 1995
<S> -------------------------------
Assets: (In Thousands)
<C> <C>
Cash and Cash Equivalents $ 1,322 $ 1,022
Interest-Bearing Deposits in
Other Institutions 288 2,914
-------------------------------
Total Cash and Cash Equivalents 1,610 3,936
Federal Funds Sold 2,675 5,000
Securities:
Investment Securities held to maturity 21,738 22,521
(Market Value $21,509, and $22,525)
Mortgage-Backed Securities held to
maturity (Market Value $2,353,
and $2,575) 2,358 2,565
Federal Home Loan Bank Stock 374 358
-----------------------------
Total Securities 24,470 25,444
Insurance Accounts Receivable 43 56
Loans Held for Sale 379 0
Real Estate Owned 73 39
Loans Receivable 43,862 41,792
Less: Allowance for Loan Losses (67) (82)
------------------------------
Total Loans Receivable 43,795 41,710
Accrued Interest Receivable 512 531
Premises and Equipment 1,797 1,369
Other Assets 277 116
Costs in Excess of Net Assets of
Business Acquired 4 17
------------------------------
Total Assets $75,635 $78,218
===============================
Liabilities & Stockholders' Equity:
Deposits $61,889 $62,514
Accounts Payable 171 243
Advances from Borrowers for Taxes & Insurance 191 94
Federal Income Taxes:
Current 0 16
Deferred 160 160
Accrued Expenses & Other Liabilities 1,092 854
------------------------------
Total Liabilities 63,503 63,881
Minority Interest in Subsidiary 31 37
Stockholders' Equity:
Common Stock, $.01 Par Value; Authorized
10,000,000 Shares, 964,707 Issued Shares 10 10
Paid-in Capital in Excess of Par 7,285 9,144
Retained Earnings 6,036 5,879
Unearned ESOP Shares (675) (733)
Unearned Compensation-MRP Shares (520) 0
Treasury Stock at Cost, 2,500 and
0 shares, respectively (35) 0
------------------------------
Total Stockholders' Equity 12,101 14,300
------------------------------
Total Liabilities & Stockholders Equity $75,635 $78,218
==============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
CITISAVE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Quarter Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1996 1995 1996 1995
--------------------------- -------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 946 $ 880 $ 2,782 $ 2,490
Investment Securities 356 371 1,020 1,039
Mortgage-Backed Securities 39 43 119 130
Other Interest-earning Assets 44 107 250 165
------------------------- ------------------------
Total Interest Income 1,385 1,401 4,171 3,824
------------------------- ------------------------
Interest Expense:
Deposits 629 657 1,906 1,855
Other Interest-bearing Liabilities 0 0 0 4
------------------------- ------------------------
Total Interest Expense 629 657 1,906 1,859
------------------------- ------------------------
Net Interest Income 756 744 2,265 1,965
Provision for Loan Losses 9 5 24 15
------------------------- ------------------------
Net Interest Income After Provision
for Loan Losses 747 739 2,241 1,950
------------------------- ------------------------
Noninterest Income:
Insurance Agency Commissions 156 175 546 529
Rent Income 2 2 5 5
Loan Fees and Service Charges 84 86 246 254
Gain on Sales of Loans 33 32 86 39
Other 5 5 15 14
------------------------- ------------------------
Total Noninterest Income 280 300 898 841
------------------------- ------------------------
Noninterest Expense:
Compensation and Benefits 409 401 1,202 1,153
Occupancy and Equipment Exp 86 97 254 278
Federal Insurance Premium 450 37 526 109
Net Real Estate Owned Exp 2 (26) 1 (27)
Other 206 115 582 342
Goodwill Amortization 5 4 13 13
------------------------- -------------------------
Total Noninterest Expense 1,158 628 2,578 1,868
------------------------- -------------------------
Income (Loss) Before Provision for Taxes &
Minority Interest (131) 411 561 923
Income Tax Expense (51) 146 173 305
------------------------- ------------------------
Net Income (Loss) Before
Minority Interest (80) 265 388 618
Minority Interest in Subsidiary 5 10 31 31
------------------------- ------------------------
Net Income (Loss) $ (85) $ 255 $ 357 $ 587
------------------------- ------------------------
Per Share:
Net Income (Loss) - Note 5 $ (0.09) $ 0.25 $ 0.39 NA
Dividends - Note 5 0.075 0.075 0.225 NA
Special Distribution - Note 5 NA NA 2.00 NA
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
CITISAVE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Sept 30, Sept 30,
1996 1995
-------------------------------
(In Thousands)
<S> <C> <C>
Common Stock:
Balance-Beginning of Period $ 10 $ 0
Issuance of Common Stock-Note 2 0 10
-------------------------------
Balance-End of Period 10 10
-------------------------------
-------------------------------
Paid-In Capital in Excess of Par:
Balance-Beginning of Period $ 9,144 $ 0
Issuance of Common Stock-Note 2 0 9,128
Special Distribution-Note 5 (1,929) 0
ESOP Shares Released for Allocation-Note 3 70 6
------------------------------
Balance-End of Period 7,285 9,134
------------------------------
------------------------------
Retained Earnings:
Balance-Beginning of Period $ 5,879 $ 5,178
Net Income 357 587
Cash Dividends-Note 5 (200) (66)
------------------------------
Balance-End of Period 6,036 5,699
------------------------------
------------------------------
Unearned ESOP Shares:
Balance-Beginning of Period $ (733) $ 0
Establishment of ESOP-Note 3 0 (772)
Shares Released for Allocation-Note 3 58 20
------------------------------
Balance-End of Period (675) (752)
------------------------------
------------------------------
Unearned Compensation-MRP Shares:
Balance-Beginning of Period 0 0
Shares Acquired by MRP Trust-Note 4 (535) 0
Shares Earned by Participants of MRP-Note 4 15 0
------------------------------
Balance-End of Period (520) 0
------------------------------
------------------------------
Treasury Stock:
Balance-Beginning of Period 0 0
Shares Acquired - 2,500 at Cost (35) 0
------------------------------
Balance - End of Period (35) 0
------------------------------
Total Stockholders' Equity $ 12,101 $ 14,091
------------------------------
------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
CITISAVE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Sept 30, Sept 30,
1996 1995
---------------------------------------
(In Thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 357 $ 587
Adjustments to Reconcile Net Income
to Net Cash Provided by (Used in)
Operating Activities:
Provision for Loan Losses 24 15
Gain on Sale of Real Estate Owned 0 (27)
Provision for Depreciation and Amortization 86 84
Other 6 25
Increase (Decrease) in Minority Interest, Net (6) 6
Stock Dividends on Federal Home Loan Bank Stock (16) (16)
Loans Originated for Sale (6,568) (3,443)
Sale of Loans 6,189 3,202
Amortization (Accretion) of Securities
Premiums (Discounts) (43) (160)
Changes in Assets and Liabilities:
(Increase) Decrease in Insurance
Accounts Receivable 13 (6)
(Increase) Decrease in Accrued Interest Receivable 19 (62)
(Increase) Decrease in Other Assets (161) (4)
Increase (Decrease) in Accounts Payable (72) 66
Increase (Decrease) in Income Taxes Payable (16) (27)
Increase (Decrease) in Accrued
Expenses and Other Liabilities 238 483
-----------------------------------
Net Cash Provided by (Used in) Operating Activities 50 723
-----------------------------------
Cash Flows from Investing Activities:
Proceeds from Sale of Premises and Equipment 48 0
Purchase of Premises and Equipment (549) (98)
Maturities of Investment Securities 14,190 12,250
Purchase of Investment Securities (13,364) (11,303)
Maturities of Mortgage-Backed Securities 207 209
Net (Increase) Decrease in Federal Funds Sold 2 ,325 (1,175)
Net (Increase) Decrease in Loans (2,191) (6,061)
Net Proceeds from Sales of Foreclosed Real Estate 64 135
Foreclosure Added (6) 0
-----------------------------------
Net Cash Provided by (Used in) Investing Activities 724 (6,043)
-----------------------------------
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C>
Cash Flows from Financing Activities:
MRP (535) 0
Treasury Stock (35) 0
ESOP 128 0
Dividends (200) (66)
Special Distribution (1,929) 0
Net Proceeds from the Issuance of Common Stock 0 8,367
Net Increase (Decrease) in Demand
Accounts, Ready Cash Accounts and
Passbook Savings Accounts 625 (132)
Net Increase (Decrease) in
Certificates of Deposit (1,251) 982
Net Increase (Decrease) in Advances from Borrowers
for Taxes and Insurance 97 83
--------------------------------------
Net Cash Provided by (Used in) Investing Activities (3,100) 9,234
--------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (2,326) 3,914
Cash and Cash Equivalents-Beginning of Period 3,936 1,045
--------------------------------------
Cash and Cash Equivalents-End of Period $ 1,610 $ 4,959
--------------------------------------
--------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash Payments for:
Interest Paid to Depositors $ 1,906 $ 1,859
--------------------------------------
--------------------------------------
Income Taxes 123 268
--------------------------------------
--------------------------------------
Supplemental Schedules of Noncash Investing
and Financing Activities:
Transfers from Loans to Real Estate
Acquired through Foreclosure 67 0
--------------------------------------
--------------------------------------
Loans to Facilitate the Sale of Real Estate Owned 0 102
--------------------------------------
--------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
CITISAVE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements for the nine-month
period ended September 30, 1996 include the accounts of CitiSave Financial
Corporation and its wholly owned subsidiary, Citizens Savings Association,
F.A. (Association). The Association has been consolidated with its wholly
owned subsidiary, 665 Florida Street Corp. 665 Florida Street Corp. has been
consolidated with Roberts and Eastland (a Louisiana partnership), of which it
owns an 80% interest. Currently, the business and management of CitiSave
Financial Corporation is primarily the business and management of the
Association. All significant intercompany transactions and balances have
been eliminated in the consolidation. The minority interest's share of the
net income of Roberts and Eastland has been properly reflected in these
financial statements.
The accompanying unaudited financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all adjustments (consisting only of
normal recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the financial statements have been included.
NOTE 2 - REORGANIZATION AND CHANGE OF CORPORATE FORM
In July 1995, Citizens Savings and Loan Association completed its
reorganization into a holding company structure whereby Citizens Savings and
Loan Association (i) converted its charter to a federal stock savings and
loan association known as Citizens Savings Association, F.A., and (ii)
concurrently issued all of its outstanding capital stock to the newly formed
holding company, CitiSave Financial Corporation (the Company). As part of
the Reorganization, which was accounted for by the pooling of interests
method of accounting, the Company issued 964,707 shares of common stock,
77,177 shares of which were acquired by its Employee Stock Ownership Plan,
and the Association issued 1,000 shares of $.01 par value common stock to the
Company.
NOTE 3 - EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a leveraged employee stock ownership plan (ESOP)
that covers all employees who have at least one year of service with the
Company. The ESOP is accounted for in accordance with AICPA SOP 93-6,
"Employers' Accounting for Employee Stock Ownership Plans". The ESOP shares
initially were pledged as collateral for its debt. The debt is being repaid
based on a ten-year amortization and the shares are being released for
allocation to active employees annually over the ten-year period. The shares
pledged as collateral are deducted from stockholders' equity as unearned ESOP
shares in the accompanying balance sheets.
-8-
<PAGE>
As shares are released from collateral, the Company reports compensation
expense equal to the current market price of the shares. Dividends on
allocated ESOP shares are recorded as a reduction of retained earnings.
Compensation expense of the ESOP was $86,000 for the nine months ended
September 30, 1996 based on the release of 5,813 shares. As of September 30,
1996, there were 3,876 allocated shares, 5,813 shares had been committed to
be released and 67,488 shares were uncommitted and held in suspense by the
ESOP.
NOTE 4 - MANAGEMENT RECOGNITION PLAN AND STOCK OPTION PLANS
A special stockholders' meeting was held on July 23, 1996 for the purpose
of approving the following stock benefit plans: (1) 1996 Key Employee Stock
Compensation Program; (2) 1996 Directors' Stock Option Plan; and (3) 1996
Management Recognition Plan for Officers and Trust Agreement. At that
meeting, all of the above proposals were adopted and approved by the
stockholders. In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," which is effective for
transactions entered into after December 15, 1995. This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. This Statement defines a fair value method of accounting
for an employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the fair value method, compensation cost is measured at
the grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. Under the intrinsic
value method, compensation cost is the excess, if any, of the quoted market
price of the stock at grant date or other measurement date over the amount an
employee must pay to acquire the stock. The Company uses the intrinsic value
method.
1996 KEY EMPLOYEE STOCK COMPENSATION PROGRAM
This program was designed to attract and retain qualified personnel in
key positions, provide key employees with a proprietary interest in the
Company as an incentive to contribute to the success of the Company and
reward key employees for outstanding performance. An aggregate of 67,529
shares of authorized but unissued Common Stock of the Company has been
reserved for future issuance under the Program. A total of 60,567 stock
options were granted at July 23, 1996. These grants represented 89.7% of the
total stock options approved. The exercise price for the key employee stock
options was set at $13.875 per share on the date of the stockholder approval.
These stock options are exercisable at anytime following the date the
options were granted until ten years after the grant date.
1996 DIRECTORS' STOCK OPTION PLAN
In order to attract and retain qualified directors for the Company and
the Association, the Board of Directors and stockholders of the Company have
adopted the 1996 Directors' Stock Option Plan. An aggregate of 28,941 shares
of authorized but unissued Common Stock
-9-
<PAGE>
of the Company has been reserved for issuance under the Directors' Option
Plan. On July 23, 1996, there were eight non-employee directors who were
each granted 3,255 options. The exercise price for the stock options was set
at $13.875 per share on the date of the stockholder approval. The directors'
options will be exercisable at any time on or after six months following the
date the options were granted until ten years after the date of the grant.
1996 MANAGEMENT RECOGNITION PLAN FOR OFFICERS AND TRUST AGREEMENT
The objective of this plan is to enable the Company to provide officers
and key employees with a proprietary interest in the Company as compensation
for their contributions to the Company and its subsidiaries and as an
incentive to contribute to the Company's future success. The approval of the
stockholders allowed the Company to acquire 38,588 shares of Common Stock on
behalf of the Officers' MRP in the open market on August 1, 1996 at $13.875
per share. The 32,847 shares of Common Stock granted pursuant to the
Officers' MRP are in the form of restricted stock payable over a five year
period at a rate of 20% per year, on each annual anniversary of the date the
award was granted. The Company will recognize compensation expense as
shares of Common Stock granted under this plan vest. The amount of
compensation expense recognized is based upon the fair market value of the
Common Stock at the date of grant to recipients ($13.875 per share).
NOTE 5 - DIVIDENDS AND EARNINGS PER SHARE
During the nine-month period ended September 30, 1996, the Company paid
dividends of $0.075 per share to shareholders of record on March 15, 1996,
June 15, 1996 and September 15, 1996. The dividends were paid to
shareholders on March 31, 1996, June 28, 1996 and September 30, 1996. The
Company also declared a special return of capital cash distribution of $2.00
per share paid to shareholders of record on June 15, 1996. The special
return of capital distribution was paid on June 28, 1996.
This special distribution was authorized by a favorable private letter
ruling received from the Internal Revenue Service whereby the portion of the
distribution which exceeds the amount of the current or accumulated earnings
and profits of CitiSave Financial Corporation for 1996, the taxable year of
the distribution, is not a dividend, and will reduce the shareholders'
adjusted basis in the stock of CitiSave Financial Corporation. This
distribution has been recorded as a reduction in Paid-In Capital and its
final disposition will be determined at December 31, 1996.
The Company had a net loss of $85,000 or $.09 per share for the
three-month period ending September 30, 1996 based on weighted average shares
outstanding for the quarter of 959,460 shares. For the nine-month period
from January 1, 1996 through September 30, 1996, the Company earned $0.39 per
share based on the weighted average shares outstanding of 914,914.
-10-
<PAGE>
The weighted average shares outstanding calculation was based on the
issuance of 964,707 shares less the unreleased ESOP shares held in the
collateral account in each period. 1,938 ESOP shares were released from the
collateral account on March 31, 1996, on June 30, 1996 and on September 30,
1996. The allocation to ESOP participants is done on an annual basis. The
calculation also includes the 86,607 directors and employee stock options
approved at the July 23, 1996 special stockholders meeting, less Treasury
Stock of 2,500 shares purchased.
NOTE 6 - RECENT DEVELOPMENTS
Deposit accounts at commercial banks and savings institutions are insured
up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). The FDIC
maintains two separate funds: insuring bank customer deposits using the Bank
Insurance Fund (BIF) and insuring savings institution customer deposits with
the Savings Association Insurance Fund (SAIF). Each institution pays deposit
insurance premiums into the fund covering their deposits. On September 30,
1996 President Clinton signed into law, legislation passed by Congress
charging a one-time special assessment of 65.7 basis points to all depository
institutions with SAIF insured deposits in order to recapitalize the SAIF.
This assessment has been charged to operating expense for the third quarter
of 1996 and will be paid to the SAIF on November 29, 1996. The FDIC used the
March 1995 SAIF assessable base to compute the charge for all affected
institutions and Citizens Savings Association has received its assessment
notice from the FDIC totaling $414,000. As a result of this legislation,
the FDIC will lower SAIF premiums to its members to as low as 6.4 basis
points for 1997, 1998, and 1999. Based on its current deposit base, this
action will reduce the future FDIC/SAIF annual premiums by approximately
$100,000 per year for Citizens.
NOTE 7 - ALLOWANCE FOR LOAN LOSSES
The following is a summary of the activity in the allowance for loan losses.
<TABLE>
<CAPTION>
(Unaudited)
Nine months Ended
Sept 30, 1996 Sept 30, 1995
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Balance at Beginning of Period 82 139
Provision for Loan Losses 24 15
(Recovery of Loan Losses) (20) 0
Charged-Off Loans (19) (13)
------- -------
Balance at End of Period 67 141
======= =======
</TABLE>
The Association had non-performing loans contractually past due 90 days
or more totaling approximately $91,000 and $143,000 at September 30, 1996 and
1995 respectively. Impairment of loans having recorded investments of
$91,000 at September 30, 1996 has been recognized in conformity with SFAS No.
114 as amended by SFAS No. 118. The total allowance for loan losses related
to these loans was $9,100. The allowance for loan loss of $67,000 as of
September 30, 1996 was .15% of the total loan portfolio and was 73.5% of the
non-performing loan balance.
-11-
<PAGE>
CITISAVE FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the consolidated financial condition of
CitiSave Financial Corporation and Subsidiary at September 30, 1996 to
December 31, 1995 and the results of operations for the three and nine months
ended September 30, 1996 with the same periods in 1995. Currently, the
business and management of CitiSave Financial Corporation is primarily the
business and management of the Association. This discussion should be read in
conjunction with the interim consolidated financial statements and footnotes
included herein.
CHANGES IN FINANCIAL CONDITION
Total assets decreased $2.6 million or 3.4% from $78.2 million at
December 31, 1995 to $75.6 million at September 30, 1996. The decrease in
total assets is primarily due to a special return of capital cash
distribution of $1.9 million paid on June 28, 1996 to the stockholders of the
Company. The decrease in assets reflected decreases in total cash and cash
equivalents and in federal funds sold, offset by an increase in loans
receivable and in premises and equipment at September 30, 1996.
Interest-earning assets in other institutions decreased from $2.9 million
at December 31, 1995 to $288,000 at September 30, 1996, as the excess
liquidity was used to pay the $2 per share special distribution and also
partially fund the increase in loans. Federal funds sold decreased 46.5%
from $5.0 million at December 31, 1995 to $2.7 million at September 30, 1996.
The securities portfolio decreased 3.8% from $25.4 million at December
31, 1995 to $24.5 million at September 30, 1996, as the amount of investment
securities maturing or called exceeded the amount purchased.
The net loan portfolio increased $2.1 million or 5.0% from $41.7 million
at December 31, 1995 to $43.8 million at September 30, 1996 and in addition,
loans held for sale were $379,000 at September 30, 1996. These increases
were primarily due to a strong loan demand in the Association's market area
and increased marketing efforts on the part of the Association in its lending
area. The loans added were mainly single-family mortgage loans funded
through the decrease in the federal funds sold and decrease in other
interest-bearing deposits.
The premises and equipment of the Company increased by $428,000 or 31.3%
as the Company continued construction of a new full service branch office.
The Company completed construction of the branch at the end of September and
opened it to customers on October 1. An estimated final cost of $575,000 is
expected for the building. The Company also installed two automated teller
machines in the past ninety days.
Total deposits decreased $625,000 or 1.0% to $61.9 million at September
30, 1996 from $62.5 million at December 31, 1995.
-12-
<PAGE>
Total stockholders' equity decreased by $2.2 million or 15.4%, to $12.1
million at September 30, 1996 compared to $14.3 million at December 31, 1995.
The decrease was the result of cash dividends on common stock paid to
stockholders of $200,000, a special return of capital cash distribution of
$2 per share or $1.9 million and $535,000 used to acquire Common Stock in the
establishment of the Company's Management Recognition Plan. Net income of
$357,000, release of ESOP shares of $128,000 and $15,000 MRP stock earned,
partially offset the decrease during the period.
REGULATORY CAPITAL
As of September 30, 1996, the Association meets the criteria for a "well
capitalized" institution following the Office of Thrift Institution's three
capital requirements. The Association's management believes that under the
current regulations, the Association will continue to meet its minimum
capital requirements in the foreseeable future.
<TABLE>
<CAPTION>
Regulatory Tangible Core Risk-Based
Capital Requirements: Capital Capital Capital
-------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
GAAP Capital $10,281 $10,281 $10,281
Nonallowable Capital:
Costs in Excess of Net Assets
of Business Acquired (4) (4) (4)
Additional Capital Items:
General Valuation Allowances --- --- 67
---------- -------- ---------
Regulatory Capital Computed - 10,277 10,277 10,344
Minimum Capital Requirement 1,119 2,237 2,760
---------- -------- ---------
Regulatory Capital Excess $ 9,158 $ 8,040 $ 7,584
======== ======= =======
Regulatory Capital as a Percentage 13.78% 13.78% 29.99%
Minimum Capital Required
as a Percentage 1.50% 3.00% 8.00%
------ ------ -------
Regulatory Capital as a
Percentage in Excess
of Requirements 12.28% 10.78% 21.99%
====== ====== ======
</TABLE>
LIQUIDITY
The Association is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of U.S.
Government, federal agency and other investments having maturities of five
years or less. Current OTS regulations require that a savings institution
maintain liquid assets of not less than 5% of its average daily balance of
net withdrawable deposit accounts and borrowings payable in one year or less,
of which short-term liquid assets must consist of not less than 1%. At
September 30, 1996, the Association's regulatory liquidity was 40.0% or $22.3
million in excess of the minimum OTS requirement.
-13-
<PAGE>
RESULTS OF OPERATIONS
The Company reported a net loss of $85,000 or $.09 per share for the
three months ended September 30, 1996, compared to net income of $255,000 or
$.25 per share during the three month period ended September 30, 1995. The
one-time special FDIC assessment of $414,000 charged to operating expense in
the third quarter 1996 was the reason for this loss. The net after tax effect
of this assessment reduced income by $272,000. Without this special
assessment, the Company would have earned a net income of $188,000 or $.20
per share for the quarter.
For the nine months ended September 30, 1996 the Company earned $357,000
or $.39 per share compared to $587,000 for the same period of 1995, or a
decrease of 39.3%. Without the FDIC assessment, year to date income would
have been $630,000 or $.69 per share, an increase of 7.3%. Net interest
income for the nine months ended September 30, 1996 increased by $300,000 or
15.3% compared to the same period of 1995 and non-interest income in 1996
increased $57,000 or 6.8% over the 1995 results. The increase in income was
offset by an increase in total non-interest expense (excluding the FDIC
assessment of $414,000) of $296,000 or 15.8% for the nine months ended
September 30, 1996.
NET INTEREST INCOME
The primary source of earnings for the Company is net interest income,
which is the difference between income generated from interest-earning assets
and interest expense from interest-bearing liabilities. The major factors
that affect net interest income are changes in the volume and type of
interest-earning assets and interest-bearing liabilities, along with changes
in market rates.
Net interest income for the three months ending September 30, 1996
increased $12,000 or 1.6% for the quarter ended September 30, 1996 to
$756,000 as compared to $744,000 for the third quarter of 1995. This slight
increase was due to a decrease of $28,000 in interest expense offset by a
$16,000 decrease in interest income. The decrease in interest expense was
the result of a $1.9 million or 3.1% decrease in the average balance of
interest-bearing liabilities and a decrease in the average cost of those
liabilities from 4.32% to 4.26%. The decrease in interest income was the
result of a decrease of $2.3 million or 3.0% in the average balance of
interest-earning assets partially offset by an increase in the average yield
of those assets from 7.49% to 7.63%.
Net interest income for the first nine months of 1996 increased $300,000
or 15.3%, to $2.3 million compared to $2.0 million in the same period for
1995. This increase was primarily due to an increase of $4.5 million or 6.5%
in the average balance of the Association's loan portfolio and other
interest-earning assets and an increase in the average yield of those assets
from 7.33% to 7.50%. Also contributing to the increase in net interest
income was a decrease of $1.3 million or 2.2% in the average balance of
interest-bearing liabilities offset by an increase in the average cost of
those liabilities from 4.06% to 4.25%.
-14-
<PAGE>
Average interest rate spread is the average yield of interest-earning
assets minus the average cost of interest-bearing liabilities. The
Association's average interest rate spread for the nine months ended
September 30, 1996 was 3.25% compared to 3.27% for the same period in 1995.
Net interest margin represents net interest income as a percent of average
interest-earning assets. Net interest margin was 4.07% for the nine months
ended September 30, 1996 as compared to the 3.77% for the nine months ended
September 30, 1995.
The table of Average Balance Sheets and Interest Rate Analysis for the
nine months period ended September 30, 1996 and 1995 on page 16 and the
corresponding table of Rate/Volume Analysis on page 17 detail the effect the
change in average balances and the change in interest rates had on net
interest income during the respective periods.
-15-
<PAGE>
CitiSave Financial Corporation
Average Balance Sheets and Interest Rate Analysis
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Nine Months Ended Sept 30, 1996 Nine Months Ended Sept 30, 1995
------------------------------- -------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interst Rate Balance Interest Rate
------------------------------- -------------------------------
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Loans $ 43,340 $ 2,782 8.56 % $ 37,527 $ 2,490 8.85 %
Investment Securities 21,738 1,020 6.26 25,302 1,039 5.48
Mortgage-Backed Securities 2,434 119 6.52 2,753 130 6.30
Other Interest-Earning Assets 6,614 250 5.04 3,997 165 5.47
-------- ------ ------ ------- ------ ------
Total Interest-Earning Assets 74,126 4,171 7.50 69,579 3,824 7.33
------ ------ ------ ------
Noninterest-Earning Assets 3,382 3,601
------- -------
Total Assets $ 77,508 $ 73,180
======= =======
Interest-Bearing Liabilities:
Passbook, NOW and Money
Market Accounts $ 18,400 288 2.09 $ 17,863 299 2.23
Certificates 41,356 1,618 5.22 42,400 1,556 4.89
Other Interest-Bearing
Liabilities 0 0 0 826 4 0.65
-------- ------ ------ ------- ------ ------
Total Interest-Bearing
Liabilities 59,756 1,906 4.25 61,089 1,859 4.06
Noninterest-Bearing Liabilities 3,960 ------ ------ 4,294 ------ ------
-------- ------
Total Liabilities 63,716 65,383
Stockholders' Equity 13,792 7,797
-------- ------
Total Liabilities and
Stockholders' Equity $ 77,508 $ 73,180
======== =======
Net Interest-Earning Assets $ 14,370 $ 8,490
======== =======
Net Interest Income; Average
Interest Rate Spread $ 2,265 3.25 % $1,965 3.27 %
======== ======= ======= =======
Net Interest Margin 4.07 % 3.77 %
======== ========
Average Interest-Earning Assets to
Average Interest-Bearing Liabilities 124.05 % 113.90 %
========= ===========
</TABLE>
-16-
<PAGE>
CITISAVE FINANCIAL CORPORATION
RATE/VOLUME ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------
Increase (Decrease) Total
Due To Increase
----------------------------
Rate Volume (Decrease)
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest-Earning Assets:
Loans $ (84) $ 376 $ 292
Investment Securities 137 (157) (20)
Mortgage-Backed Securities 4 (15) (11)
Other Interest-Earning Assets (14) 100 86
-------------------------------------------
Total Interest-Earning Assets 43 304 347
-------------------------------------------
Interest-Bearing Liabilities:
Passbook, NOW & Money
Market Accounts (20) 9 (11)
Certificates of Deposit 101 (39) 62
Other --- (4) (4)
-----------------------------------------
Total Interest-Bearing Liabilities 81 (34) 47
-----------------------------------------
Increase (Decrease) in Net Interest
Income (38) 338 300
=========================================
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses increased $4,000 for the three months ended
September 30, 1996 compared to the same period in 1995. For the nine months
ended September 30, 1996, the Association recorded a provision for loan
losses in the amount of $24,000 compared to $15,000 for the nine months ended
September 30, 1995. The allowance for loan losses is maintained at a level
which, in management's judgment, is adequate to absorb credit losses inherent
in the loan portfolio. The amount of the allowance is based on management's
quarterly evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans, and economic conditions. Allowances for
impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased by a
provision for loan losses, which is charged to expense, and reduced by
charge-offs, net of recoveries. The allowance for loan loss was $67,000 at
September 30, 1996 or .15% of the total loan portfolio. The allowance for
loan loss as a percentage of non-performing loans at September 30, 1996 was
67.8%.
- 17 -
<PAGE>
NON-INTEREST INCOME
Non-interest income decreased by $20,000 or 6.7% to $280,000 for the
three months ended September 30, 1996 compared to $300,000 for the same three
month period in 1995.
For the nine months ended September 30, 1996, non-interest income
increased by $57,000, or 6.8% to $898,000 compared to $841,000 over the same
nine month period in 1995.
NON-INTEREST EXPENSE
Non-interest expense increased $530,000 to $1.2 million for the third
quarter of 1996 as compared to $628,000 for the third quarter of 1995. The
increase in 1996 is primarily attributable to the one-time special FDIC SAIF
assessment of $414,000, the additional expenses related to the special
stockholders meeting and other expenses of being a public company.
Compensation and benefits increased by $49,000 or 4.3% for the nine
months ended September 30, 1996 from the comparable 1995 period due to the
cost of additional benefit plans approved by stockholders. Other
non-interest expense increased $240,000 in the nine month period ending
September 30, 1996 compared to the same period in 1995, primarily due to
increased legal, accounting and other expenses related to becoming a public
company. Because the Company became subject to the Louisiana Shares Tax and
Louisiana Franchise Tax in 1996, non-interest expense increased $55,000
during the nine-month period ending September 30, 1996 compared to the nine
months of 1995. The Association also increased its advertising expense by
$30,000 in order to increase name recognition and product awareness.
INCOME TAX EXPENSE
The decrease in income tax expense for the quarter ended September 30,
1996 was $197,000 compared to the same quarter in 1995. This decrease is
primarily due to the increase in non-interest expense incurred during the
third quarter of 1996.
For the nine months ended September 30, 1996, income tax expense
decreased $132,000 to $173,000 compared to $305,000 for the same period in
1995. The decrease was due to a decrease in pre-tax income caused by the
one-time FDIC special assessment of $414,000 being treated as operating
expense for the third quarter.
-18-
<PAGE>
CITISAVE FINANCIAL CORPORATION
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1996
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS:
There are no matters required to be reported under this item.
ITEM 2 - CHANGES IN SECURITIES:
There are no matters required to be reported under this item.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES:
There are no matters required to be reported under this item.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
a) A special meeting of stockholders was held on July 23, 1996 to
consider proposals regarding the Company's stock benefit plans.
b) Proposals to approve the 1996 Key Employee Stock Compensation
Program, the 1996 Directors' Stock Option Plan, and the 1996
Management Recognition Plan for Officers and Trust Agreement
all received a majority of the total votes eligible to be cast
at the Special Meeting and all the matters were adopted by the
stockholders of the Company.
c) There were a total of 964,707 shares which could have been voted
at the special meeting, and 648,319 votes were represented at the
meeting in person or by proxy. On proposal 1 to approve the 1996
Key Employee Stock Compensation Program, the result of the vote was
as follows: 621,564 votes for the proposal; 20,705 votes against;
6,050 votes abstained; and 316,388 shares were not voted. On
proposal 2 to approve the 1996 Directors' Stock Option Plan, the
result of the vote was as follows: 581,651 votes for the
proposal; 63,168 votes against; 3,500 votes abstained; and 316,388
shares not voting. On Proposal 3 to approve the 1996 Management
Recognition Plan for Officers and Trust Agreement, the result of
the vote was as follows: 582,054 votes for the proposal;
64,915 votes against; 1,350 votes abstained; and 316,388 shares were
not voted.
ITEM 5 - OTHER INFORMATION
There are no matters required to be reported under this item.
-19-
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
a) Exhibits:
The following exhibit is filed herewith:
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule
b) Reports:
No reports on Form 8-K were filed by the
Registrant during the quarter ended September 30, 1996.
-20-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CITISAVE FINANCIAL CORPORATION
Registrant
Date: November 7, 1996 /s/ Lee F. Nettles
----------------------- --------------------
Lee F. Nettles
Chairman of the Board,
President and Chief Executive
Officer
Date: November 7, 1996 /s/ J. Larry Bellard
----------------------- ---------------------
J. Larry Bellard
Sr. Vice-President and
Controller
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,322
<INT-BEARING-DEPOSITS> 288
<FED-FUNDS-SOLD> 2,675
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 24,096
<INVESTMENTS-MARKET> 23,911
<LOANS> 43,862
<ALLOWANCE> (67)
<TOTAL-ASSETS> 75,635
<DEPOSITS> 61,889
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,645
<LONG-TERM> 0
0
0
<COMMON> 10
<OTHER-SE> 12,091
<TOTAL-LIABILITIES-AND-EQUITY> 75,635
<INTEREST-LOAN> 2,782
<INTEREST-INVEST> 1,139
<INTEREST-OTHER> 250
<INTEREST-TOTAL> 4,171
<INTEREST-DEPOSIT> 1,906
<INTEREST-EXPENSE> 1,906
<INTEREST-INCOME-NET> 2,265
<LOAN-LOSSES> 24
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,578
<INCOME-PRETAX> 561
<INCOME-PRE-EXTRAORDINARY> 561
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 357
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
<YIELD-ACTUAL> 7.50
<LOANS-NON> 0
<LOANS-PAST> 91
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 82
<CHARGE-OFFS> (19)
<RECOVERIES> 20
<ALLOWANCE-CLOSE> 67
<ALLOWANCE-DOMESTIC> 67
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
