U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 December 31, 1997
[ ] 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 0-26510
NCF FINANCIAL CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 61-1285330
------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
106A West John Rowan Boulevard, Bardstown, Kentucky 40004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 348-9278
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.
X Yes No
--- ---
Class Outstanding
As of December 31, 1997, there were 792,609 shares of the Registrant's
common stock, par value $0.10 per share, outstanding. The Registrant has no
other classes of common equity outstanding.
<PAGE>
NCF FINANCIAL CORPORATION
AND SUBSIDIARY
Bardstown, Kentucky
Index
PART I.
FINANCIAL INFORMATION Page(s)
Item 1.
Financial Statements
Consolidated Balance Sheets - (Unaudited) as of December 31, 1997
and June 30, 1997...................................................3
Consolidated Statements of Income - (Unaudited) for the three
and six month periods ended December 31, 1997 and 1996..............4
Consolidated Statements of Stockholders' Equity (Unaudited) ...........5
Consolidated Statements of Cash Flows - (Unaudited) for the
six months ended December 31, 1997 and 1996 ......................6-7
Notes to Consolidated Financial Statements (Unaudited) ..............8-9
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations .........................................10-11
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings ...........................................12
Item 2. Changes in Securities .......................................12
Item 3. Defaults Upon Senior Securities .............................12
Item 4. Submission of Matters to a Vote of Security Holders .........12
Item 5. Other Information ...........................................12
Item 6. Exhibits and Reports on Form 8-K ............................12
Signatures ...........................................................13
<PAGE>
<TABLE>
<CAPTION>
NCF FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
(in thousands)
December 31, June 30,
1997 1997
-------- --------
<S> <C> <C>
Assets
Cash and due from banks ...................................................... $ 450 $ 200
Interest-earning deposits .................................................... 5,415 4,995
Loans receivable, net ........................................................ 28,010 27,046
Mortgage-backed securities
(market value - $130 and $153, respectively) .............................. 111 132
Real estate owned ............................................................ 287 725
Premises and equipment, net .................................................. 583 519
Federal Home Loan Bank stock ................................................. 458 442
Interest receivable .......................................................... 225 245
Deferred tax asset ........................................................... 40 58
Other ........................................................................ 48 41
-------- --------
Total assets ................................................................. $ 35,627 $ 34,403
======== ========
Liabilities and Stockholders' Equity
Deposits ..................................................................... $ 22,984 $ 21,970
Accrued expenses and other liabilities ....................................... 346 380
Income taxes payable ......................................................... 17 3
-------- --------
Total liabilities ............................................................ 23,347 22,353
Preferred stock ($.01 par value, 100,000 shares
authorized; none issued and outstanding) ..................................... -- --
Common stock ($.10 par value, 1,400,000 shares
authorized; 792,609 shares issued and outstanding) ........................... 79 79
Additional paid-in capital ................................................... 7,595 7,581
Retained earnings, substantially restricted .................................. 5,181 5,018
Less unearned compensation:
Employee stock ownership plan ............................................. (388) (413)
Unearned stock compensation plan .......................................... (187) (215)
-------- --------
Total stockholders' equity ................................................... 12,280 12,050
-------- --------
Total liabilities and stockholders' equity ................................... $ 35,627 $ 34,403
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
NCF FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
December 31, December 31,
------ ------ ------ ------
1997 1996 1997 1996
------ ------ ------ ------
Interest income:
<S> <C> <C> <C> <C>
Loans ............................................................. $ 612 $ 571 $1,250 $1,145
Mortgage-backed securities ........................................ 3 4 7 8
Interest-earning deposits ......................................... 77 78 155 152
------ ------ ------ ------
Total interest income ............................................. 692 653 1,412 1,305
Interest expense:
Deposits .......................................................... 272 264 535 533
------ ------ ------ ------
Total interest expense ............................................ 272 264 535 533
------ ------ ------ ------
Net interest income ............................................... 420 389 877 772
Provision for loan losses ......................................... 4 4 8 8
------ ------ ------ ------
Net interest income after provision
for loan losses ................................................... 416 385 869 764
Non-interest income:
Loan fees and service charges ..................................... 14 6 20 11
Non-interest expenses:
Compensation and employee benefits ................................ 141 111 278 236
Net occupancy expense ............................................. 11 7 26 14
Deposit insurance premiums ........................................ 5 14 10 181
Data processing ................................................... 9 8 23 19
State franchise and other taxes ................................... 14 14 25 22
Professional fees ................................................. 39 17 54 35
Other ............................................................. 23 22 53 46
------ ------ ------ ------
Total non-interest expenses ....................................... 242 193 469 553
------ ------ ------ ------
Income before income taxes ........................................ 188 198 420 222
Income tax expense ................................................ 74 82 144 73
Net income ........................................................ $ 114 $ 116 $ 276 $ 149
====== ====== ====== ======
Basic earnings per share .......................................... $ 0.15 $ 0.15 $ 0.37 $ 0.20
====== ====== ====== ======
Dilutive earnings per share ....................................... $ 0.15 $ 0.15 $ 0.37 $ 0.20
====== ====== ====== ======
Cash dividend per share ........................................... $ 0.15 $ 0.15 $ 0.15 $ 0.15
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
NCF FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
(Unaudited)
(In Thousands)
Unearned
Employee Unearned
Additional Stock Stock
Common Paid-in Retained Ownership Compensation
Stock Capital Earnings Plan Plan Total
------------ --------------- -------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1996 $ 77 $ 7,270 $ 4,918 $ (462) $ - $ 11,803
------------ --------------- -------------- --------------- ---------------- --------------
Net income - - 328 - - 328
Issuance of shares for stock
compensation plan 2 298 - - (300) -
Compensation expense under
stock compensation plan - (7) - - 85 78
Fair value of shares committed
to be released from ESOP plan - 20 - 50 - 70
Cash dividends paid - - (229) - - (229)
------------ --------------- -------------- --------------- ---------------- --------------
BALANCE, June 30, 1997 $ 79 $ 7,581 $ 5,017 $ (412) $ (215) $ 12,050
============ =============== ============== =============== ================ ==============
Net income - - 276 - - 276
Issuance of shares for stock
compensation plan - - - - - -
Compensation expense under
stock compensation plan - 2 - - 28 30
Fair value of shares committed
to be released from ESOP plan - 12 - 25 - 37
Cash dividends paid - - (113) - - (113)
------------ --------------- -------------- --------------- ---------------- --------------
BALANCE, December 31, 1997 $ 79 $ 7,595 $ 5,180 $ (387) $ (187) $ 12,280
============ =============== ============== =============== ================ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
NCF FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Six Months Ended
December 31,
-------------------------------
1997 1996
--------------- ---------------
Operating Activities:
<S> <C> <C>
Net income $ 276 $ 149
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 14 7
Provision for loan losses 8 8
Deferred income taxes (benefit) 18 (27)
FHLB dividends received in stock (16) (15)
Amortization of deferred loan origination fees, net (7) -
Accretion of discounts on mortgage-backed securities - -
Increase (decrease) in allowance for uncollectible interest (56) 55
Decrease (increase) in interest receivable 76 (134)
Decrease (increase) in other assets (7) (21)
Increase (decrease) in accrued expenses and other liabilities (34) (49)
Increase (decrease) in current income taxes payable 13 (143)
ESOP and stock compensation plan expense 67 33
--------------- ---------------
Net Cash Provided By (Used In) Operating Activities 352 (137)
Investing Activities:
Principal payments on mortgage-backed securities 22 5
Net decrease (increase) in loans originated (964) 972
Proceeds from sale of foreclosed assets 438 -
Acquisition of premises and equipment (79) -
--------------- ---------------
Net Cash Provided By (Used In) Investing Activities (583) 977
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NCF FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
Financing Activities:
<S> <C> <C>
Net increase (decrease) in deposits 1,015 (378)
Proceeds from (Repayments of) FHLB advances - -
Stock conversion cost - -
Common stock issued - -
ESOP loan - -
Dividends paid (113) (109)
--------------- ---------------
Net Cash Provided By (Used In) Financing Activities 902 (487)
--------------- ---------------
Increase (Decrease) In Cash and Cash Equivalents 671 353
Cash and Cash Equivalents, beginning of period 5,195 5,163
--------------- ---------------
Cash and Cash Equivalents, end of period 5,866 5,516
=============== ===============
Supplemental Disclosures:
Noncash investing and financing activities:
Cash paid during the period for:
Interest $ 602 $ 613
=============== ===============
Income taxes $ 113 $ 242
=============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
NCF FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. NCF Financial Corporation
NCF Financial Corporation (the "Company") was incorporated under the laws
of the State of Delaware for the purpose of becoming the holding company of
NCF Bank and Trust Co. ("the Bank"), formerly Nelson County Federal Savings
Bank in connection with the conversion from a mutual to stock form of
ownership. The Company commenced on August 24, 1995, a Subscription
Offering of its shares in connection with the conversion of the Association
(the "Conversion"). At October 12, 1995, the Conversion was complete.
Effective April 2, 1997, the Bank was approved as a commercial state bank
and changed its name to NCF Bank and Trust Co. The financial statements of
the Bank are presented on a consolidated basis with those of the Company.
The consolidated financial statements included herein are for the Company,
the Bank and the Bank's wholly owned subsidiary, Nelson Service
Corporation. The impact of Nelson Service Corporation (NSC) on the
consolidated financial statements is insignificant. NSC has no operating
activity other than to own stock in the third-party service bureau,
Intrieve.
2. Basis of Preparation
The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-QSB and therefore, do not
include all disclosures necessary for a complete presentation of the
consolidated statements of financial condition, consolidated statements of
income, consolidated statements of stockholders' equity, and consolidated
statements of cash flows in conformity with generally accepted accounting
principles. However, all adjustments which are, in the opinion of
management, necessary for the fair presentation of the interim financial
statements have been included. The statements of income for the three and
six month periods ended December 31, 1997 are not necessarily indicative of
the results which may be expected for the entire year.
<PAGE>
3. Earnings Per Share
Basic earnings per share amounts for the three and six month periods ended
December 31, 1997 and 1996 are based on the average number of shares
outstanding throughout the period. Dilutive earnings per share amounts for
the three and six month periods ended December 31, 1997 and 1996 are based
on the average number of common shares outstanding and the average effect
of dilutive securities available for exercise throughout the period.
Unallocated ESOP shares are not considered as outstanding for this
calculation. The following table details the number of shares used in
computing both the basic and dilutive earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------------- ----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average number
of common shares used in basic EPS 753,234 749,261 752,609 748,640
Effect of dilutive securities:
Stock options 3,527 330 2,455 330
------------- ------------- ------------- -------------
Weighted average number of
common shares and dilutive
potential common stock
used in dilutive EPS 756,761 749,591 755,064 748,970
============= ============= ============= =============
</TABLE>
4. New Accounting Standards
Management has determined that no new accounting standards have been issued
or will imminently be issued that will materially affect the presentation
of the accompanying unaudited consolidated financial statements.
5. Impact of New Legislation
Management has determined that no new legislation has been passed or is
pending before any relevant body that will materially affect the
presentation of the accompanying unaudited consolidated financial
statements.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The following discussion and analysis is intended to assist in understanding the
financial condition and the results of operations of the Company. References to
the "Company" include NCF Financial Corporation and/or NCF Bank & Trust Co., as
appropriate.
Comparison of Financial Condition at June 30, 1997 and December 31, 1997
Total consolidated assets of the Company at December 31, 1997 increased by
approximately $1.2 million since June 30, 1997. Total consolidated assets were
approximately $35.6 million and $34.4 million at December 31, 1997 and June 30,
1997, respectively.
The primary change in the balance sheet is attributable to increases in net
loans receivable and interest-earning deposits of $963,000 and $420,000,
respectively. Real estate owned decreased by $438,000.
There was an increase in deposits of approximately $1.0million or 4.62% from
$22.0 million at June 30, 1997 to $23.0 million at December 31, 1997. Management
attributes this growth to expanded customer account services designed to provide
future deposit growth.
Comparison of Results of Operations for the Three and Six Month Periods Ended
December 31, 1997 and 1996
Net Income. Net income decreased $2,000 for the three month period ended
December 31, 1997 when compared against the same period last year. Net income
increased $127,000 for the six months ended December 31, 1997 when compared to
the same period for December 31, 1996. However, this increase for the six month
period is primarily attributed to the payment of the FDIC special assessment of
approximately $101,000 (net of tax) in the 1996 period. Without this special
assessment accrual, net income would have increased by approximately $26,000 or
10.4% for the six month period as compared to last year. Net income of $114,000
for the three months ended December 31, 1997 resulted in earnings per share of
$0.17. Net income of $276,020 for the six months ended December 31, 1997
resulted in earnings per share of $0.37.
Net Interest Income. Net interest income increased $31,000 for the three months
ended December 31, 1997 when compared to the last calendar quarter of 1996, and
$105,000 or 13.62% from $773,000 for the six months ended December 31, 1996 to
$877,000 for the six months ended December 31, 1997. The improvement in net
interest income primarily reflects an increase in the interest rate spread from
2.91% for the six months ended December 31, 1996 to 3.57% for the six months
ended December 31, 1997. The main factor contributing to this increase was an
increase in the average yield on loans between the two periods of 81 basis
points. These reasons are also applicable to the increase between the last
quarter of 1997 and the last quarter of 1996.
Interest Income. Total interest income increased $39,000 from the last quarter
of 1996 to the same period in 1996, and $238,000 from $1,305,000 for the six
months ended December 31, 1996 to $1,412,000 for the six months ended December
31, 1997. Interest on loans increased $105,000 or 9.19%. Most of the increase
was due to the average yield on the loan portfolio increasing from 8.06% during
the six months ended December 31, 1996 to 8.87% during the six months ended
December 31, 1997.
Interest income from other sources did not change materially from the three and
six months ended December 31, 1997 when compared to the same periods in 1996.
<PAGE>
Interest Expense. Interest expense increased $8,000 from the last quarter of
1996 to the same quarter in 1997, attributable entirely to an increase in
average balances between the two periods. There was an increase in interest
expense of only $2,000 between the two six month periods ending December 31,
1997 and 1996, from $533,000 for the six months ended December 31, 1996 to
$535,000 for the six months ended December 31, 1997. This increase was
attributable entirely to a rise in the average balance on deposits of $170,000
from $22,385,000 for the six months ended December 31, 1996 to $22,555,000 for
the same period in 1997. The cost on deposits actually fell from one period to
the next from 4.76% in 1996 to 4.74% in 1997. There were no borrowings other
than deposits in either period.
Provision for Loan Losses. The provision for loan losses for the six months
ended December 31, 1997 was $8,000, and was also $8,000 for the six months ended
December 31, 1997. The provision for loan losses was $4,000 for both the last
quarter of 1997 and the last quarter of 1996. Historically, management has
emphasized the Company's loss experience over other factors in establishing
provisions for loan losses. However, management also reviews the allowance for
loan losses in relation to the Company's composition of its loan portfolio and
observations of the general economic climate and loan loss expectations.
Non-Interest Income. Fee income and other service charges of $19,000 for the six
months ended December 31, 1997 increased $8,000 or 72.58% from the same period
in 1996. Fee income also increased from the last three months of 1996 to the
same period in 1997, from $6,000 to $14,000. These increases were primarily
attributable to the inclusion of previously deferred loan fees into income due
to a recalculation of the amortization on the interest level yield method.
Non-Interest Expense. Non-interest expense decreased by $84,000 from $553,000
for the six months ended December 31, 1996 to $469,410 for the six months ended
December 31, 1997. This decrease is the direct result of the special one-time
FDIC assessment accrual of approximately $153,000 ($101,000 after tax).
Increases in compensation and employee benefits, professional fees, and net
occupancy expense of $42,000, $19,000, and $12,000, respectively, were the major
increases in non-interest expense between the two periods. The increase in
compensation and employee benefits was attributable to expenses related to the
Management Stock Bonus Plan and Trust Agreement. Professional fees increased
primarily due to expenses incurred for the due diligence relating to the
analysis of the proposed merger with Community Bank Shares of Indiana, Inc. Net
occupancy expense increased due to relocation into a new corporate headquarters
and bank facility. The Company owns the building, which results in increased
depreciation expenses, and leases the land, which results in lease expense. The
previous corporate headquarters and bank facility (including the land) is still
owned by the Company. Other non-interest expense items remained relatively
stable with minor absolute dollar changes.
Non-interest expense increased $49,000 from $193,000 for the three months ended
December 31, 1996 to $242,000 for the three months ended December 31, 1997. This
increase was attributable to the reasons described above relating to the
Management Stock Bonus Plan and Trust Agreement, proposed merger with Community
Bank Shares of Indiana, Inc., and the relocation into a new corporate
headquarters.
Income Taxes. The effective tax rate for the six months ending December 31, 1997
and 1996 was approximately 34%. Since there are no state income taxes imposed on
the Bank, the effective tax rate remained at approximately the federal statutory
percentage.
Liquidity and Capital Resources. The Company's primary sources of funds are
deposits and proceeds from principal and interest payments on loans and
investment securities. While maturities and scheduled amortization of loans and
investment securities are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates, economic
conditions and competition. The Company's primary investing activity is loan
originations. The Company maintains liquidity levels adequate to fund loan
commitments, investment opportunities, deposit withdrawals and other financial
commitments. Management has no knowledge of any trends, events or uncertainties
that will have or are reasonably likely to have material effects on the
liquidity, capital resources or operations of the Company. Further, management
is not aware of any current recommendations by the regulatory authorities which,
if implemented, would have such an effect.
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company and any subsidiaries may be a party to
various legal proceedings incident to its or their business. At
December 31, 1997, there were no legal proceedings to which the
Company or any subsidiary was a party, or to which of any of their
property was subject, which were expected by management to result in a
material loss.
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
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27 (financial data schedule)
<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 there unto duly authorized.
NCF FINANCIAL CORPORATION
Date: February 13, 1997 By /s/ Dan R. Biggs
------------------------ ----------------------------
Dan R. Biggs
(Vice President and Principal
Financial Officer and duly
authorized representative)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 450
<INT-BEARING-DEPOSITS> 5,415
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 111
<INVESTMENTS-MARKET> 130
<LOANS> 28,010
<ALLOWANCE> 185
<TOTAL-ASSETS> 35,627
<DEPOSITS> 22,984
<SHORT-TERM> 0
<LIABILITIES-OTHER> 363
<LONG-TERM> 0
0
0
<COMMON> 79
<OTHER-SE> 12,201
<TOTAL-LIABILITIES-AND-EQUITY> 35,627
<INTEREST-LOAN> 1,250
<INTEREST-INVEST> 7
<INTEREST-OTHER> 155
<INTEREST-TOTAL> 1,412
<INTEREST-DEPOSIT> 535
<INTEREST-EXPENSE> 535
<INTEREST-INCOME-NET> 877
<LOAN-LOSSES> 8
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 469
<INCOME-PRETAX> 420
<INCOME-PRE-EXTRAORDINARY> 420
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 276
<EPS-PRIMARY> .37
<EPS-DILUTED> .15
<YIELD-ACTUAL> 4.52
<LOANS-NON> 107
<LOANS-PAST> 551
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 191
<ALLOWANCE-OPEN> 177
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 185
<ALLOWANCE-DOMESTIC> 185
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
