-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JUQSVxburHWdtdgFIQXccBe5TCdiFsxljGkxbE3isbDD7ecJoCqXzD674Nbu21Mm aRLXeT636/jkdi1zCFdjyA== 0000946275-98-000448.txt : 19980807 0000946275-98-000448.hdr.sgml : 19980807 ACCESSION NUMBER: 0000946275-98-000448 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980806 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDMARK BANCSHARES INC CENTRAL INDEX KEY: 0000915800 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 481142260 STATE OF INCORPORATION: KS FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23164 FILM NUMBER: 98678257 BUSINESS ADDRESS: STREET 1: CENTRAL & SPRUCE STS CITY: DODGE CITY STATE: KS ZIP: 67801 BUSINESS PHONE: 3162278111 MAIL ADDRESS: STREET 2: CENTRAL & SPRUCE STREETS CITY: DODGE CITY STATE: KS ZIP: 67801 10QSB 1 FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 1998 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 0-23164 LANDMARK BANCSHARES, INC. (Exact name of registrant as specified in its charter) Kansas 48-1142260 (State or other jurisdiction I.R.S. Employer of incorporation or organization) Identification Number CENTRAL AND SPRUCE STREETS, DODGE CITY, KANSAS 67801 (Address and Zip Code of principal executive offices) (316) 227-8111 (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 [X] No The number of shares outstanding of each of the issuer's classes of common stock, as of June 30, 1998: $.10 par value common stock 1,549,363 shares (Class) (Outstanding) Transitional Small Business Disclosure Format: Yes [ ] No [X] LANDMARK BANCSHARES, INC. INDEX Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements Statements of Financial Condition as of June 30, 1998 (unaudited) and September 30, 1997 1 Statements of Income for the Three and Nine Months Ended June 30, 1998 and 1997 (unaudited) 2 Statements of Cash Flows for the Nine Months Ended June 30, 1998 and 1997 (unaudited) 3 - 4 Notes to Financial Statements 5 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 12 PART II - OTHER INFORMATION Item 2. Changes in Securities 13 Item 4. Submission of Matter to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6(b). Reports on Form 8-K 13 SIGNATURES 14 1 LANDMARK BANCSHARES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY, LANDMARK FEDERAL SAVINGS BANK Consolidated Statements of Financial Condition
June 30, 1998 September 30, 1997 (Unaudited) --------------------------------- ASSETS Cash and cash equivalents: Interest bearing $ 0 $ 2,062,879 Non-interest bearing 856,202 678,173 Time deposits in other financial institutions 218,779 110,580 Securities held to maturity 17,325,334 18,837,942 Securities available for sale 9,617,071 7,122,785 Mortgage-backed securities held to maturity 25,506,646 36,689,551 Loans receivable, net 167,769,174 157,672,603 Loans held for sale 3,087,709 490,234 Accrued income receivable 1,396,069 1,446,605 Real estate owned or in judgment and other repossessed property, net 140,249 251,950 Office properties and equipment, at cost less accumulated depreciation 1,709,554 1,188,250 Prepaid expenses and other assets 1,708,251 1,233,038 Income taxes receivable, current 2,117 65,564 ------------------------------ TOTAL ASSETS $ 229,337,155 $ 227,850,154 ------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits 148,128,486 144,734,739 Outstanding checks in excess of bank balance 292,738 0 Other Borrowed Money 47,200,000 46,200,000 Advances from borrowers for taxes and insurance 1,330,740 1,673,057 Accrued expenses and other Liabilities 1,530,257 2,304,593 Deferred income taxes 887,479 692,435 Income taxes Current 0 0 ------------------------------ TOTAL LIABILITIES $ 199,369,700 $ 195,604,824 ------------------------------ Stockholders' Equity Common Stock 228,131 228,131 $.10 par value; 10,000,000 shares authorized; 2,281,312 shares issued June 30, 1998 Additional Paid-in Capital 22,229,153 22,173,827 Treasury Stock; at cost 731,949 and 592,671 shares at September 30, 1998 and 1997 respectively (12,876,516) (9,249,935) Retained income (substantially restricted) 20,382,453 19,305,087 Employee Stock Ownership Plan (844,597) (844,597) Management Stock Bonus Plan (144,784) (289,567) Net unrealized gain/losses on equity securities 989,615 922,384 ------------------------------ Total Stockholders' Equity 29,967,455 32,245,330 ------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 229,337,155 $ 227,850,154 ------------------------------
2 LANDMARK BANCSHARES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY, LANDMARK FEDERAL SAVINGS BANK Consolidated Statements of Income
Three Months Ended June 30 Nine Months Ended June 30 1997 1998 1997 1998 ------------------------------------------------------- (unaudited) (unaudited) INTEREST INCOME Interest on loans 3,012,389 3,444,654 8,616,830 10,202,549 Interest and dividends on investment securities 558,159 369,600 1,642,057 1,171,761 Interest on mortgage-backed securities 653,538 446,840 2,081,862 1,553,548 ------------------------------------------------------- Total interest income 4,224,086 4,261,094 12,340,749 12,927,858 INTEREST EXPENSE Deposits 1,831,927 1,899,275 5,444,109 5,617,476 Borrowed funds 654,651 638,437 1,747,448 2,022,085 ------------------------------------------------------- Total interest expense 2,486,578 2,537,712 7,191,557 7,639,561 Net interest income 1,737,508 1,723,382 5,149,192 5,288,297 PROVISION FOR LOSSES ON LOANS 110,000 60,000 210,000 205,000 ------------------------------------------------------- Net interest income after provision for losses 1,627,508 1,663,382 4,939,192 5,083,297 NON-INTEREST INCOME Service charges and late fees 73,506 92,985 197,258 247,600 Net gain (loss) on sale of available for sale investments 0 82,043 172,916 177,085 Net gain (loss) on sale of loans 121,055 145,167 185,718 309,356 Service fees on loans sold 29,530 24,195 110,578 82,218 Other income 33,979 51,720 101,480 125,292 ------------------------------------------------------- 258,070 396,110 767,950 941,551 NON-INTEREST EXPENSE Compensation and related expenses 530,630 657,792 1,542,408 1,854,733 Occupancy expense 43,436 79,156 126,088 175,830 Advertising 18,240 17,483 50,187 46,504 Federal insurance premium 39,078 39,102 158,892 116,941 Loss (gain) from real estate operations 3,343 2,827 4,332 5,586 Data processing 41,565 45,971 137,379 155,214 Other expense 164,279 244,011 580,499 681,866 ------------------------------------------------------- 840,571 1,086,342 2,599,785 3,036,674 Income before income taxes 1,045,007 973,150 3,107,357 2,988,174 INCOME TAXES EXPENSES 417,800 389,500 1,247,600 1,195,950 ------------------------------------------------------- Net income 627,207 583,650 1,859,757 1,792,224 ------------------------------------------------------- Basic earnings per share $ 0.38 $ 0.38 $ 1.11 $ 1.15 Fully diluted earnings per share $ 0.35 $ 0.35 $ 1.04 $ 1.05 Dividends per share $ 0.10 $ 0.15 $ 0.30 $ 0.45
3 LANDMARK BANCSHARES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY LANDMARK FEDERAL SAVINGS BANK Consolidated Statements of Cash Flows
Nine Months Ended June 30 1997 1998 (unaudited) (unaudited) --------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,859,757 $ 1,792,224 Adjustments to reconcile net income to net cash provided by operating activities: Amortization and impairment of mortgage servicing rights 10,175 0 Depreciation 84,546 115,596 Decrease (increase) in accrued interest receivable (160,962) 47,791 Increase (decrease) in outstanding checks in excess of bank balance (143,808) 292,738 Increase (decrease) in accrued and deferred income taxes 572,739 258,491 Increase (decrease) in accounts payable and accrued expenses (939,130) (771,592) Amortization of premiums and discounts on investments and loans 19,291 (25,676) Provision for losses on loans 210,000 205,000 Gain (loss) on sale of available for sale securities (172,916) (177,085) Other non-cash items, net (43,901) (198,444) Sale of loans held for sale 10,799,582 14,911,596 Gain on sale of loans held for sale (185,718) (309,356) Origination of loans held for sale (7,911,802) (13,192,615) Purchase of loans held for sale (1,076,500) (4,014,135) --------------------------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 2,921,353 $ (1,065,467) --------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Loan originations and principal payment on loans held for investment (1,041,365) (1,794,193) Principal repayments on mortgage-backed securities 6,370,727 11,168,844 Additions to mortgage servicing rights (94,875) (182,936) Loans purchased for investment (24,282,931) (10,604,217) Acquisition of investment securities held to maturity (3,300,000) (11,885,625) Acquisition of investment securities available for sale (1,921,525) (2,949,611) Proceeds from sale of available for sale investment securities 485,205 379,600 Proceeds from maturities or calls of investment securities held to maturity 8,290,000 13,650,204 Net (increase) decrease in time deposits 279,005 (107,000) Sale of real estate acquired in settlement of loans 135,990 284,233 Acquisition of fixed assets (119,540) (637,456) --------------------------- NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (15,199,309) (2,678,157) ---------------------------
4 LANDMARK BANCSHARES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY, LANDMARK FEDERAL SAVINGS BANK Consolidated Statements of Cash Flows (Continued)
Nine Months Ended June 30 1997 1998 (unaudited) (unaudited) --------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits $ (401,767) $ 3,393,747 Net increase (decrease) in escrow accounts (432,439) (342,317) Proceeds from FHLB advance and other borrowings 95,123,000 66,600,000 Repayment of FHLB advance and other borrowings (78,456,333) (63,600,000) Acquisition of Treasury Stock (2,756,970) (3,626,581) Other Financing Activities 144,783 144,783 Dividend Payment (517,558) (710,858) --------------------------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 12,702,716 1,858,774 --------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 424,760 (1,884,850) BEGINNING CASH AND CASH EQUIVALENTS 473,710 2,741,052 --------------------------- ENDING CASH AND CASH EQUIVALENTS 898,470 856,202 --------------------------- SUPPLEMENTAL DISCLOSURES Cash paid during the year for: Interest on deposits, advances, and other borrowings 7,265,526 7,605,017 Income taxes 906,504 1,132,103 Transfers from loans to real estate acquired through foreclosure 134,731 90,141
5 LANDMARK BANCSHARES, INC. PART I - FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS LANDMARK FEDERAL SAVINGS BANK NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited financial statements were prepared in accordance with the instructions for form 10-QSB and, accordingly, do not include all information and disclosures necessary to present financial condition, results of operations and cash flows of Landmark Bancshares, Inc. (the "Company") and its wholly-owned subsidiary Landmark Federal Savings Bank (the "Bank") in conformity with generally accepted accounting principles. However, all normal recurring adjustments have been made which, in the opinion of management, are necessary for the fair presentation of the financial statements. The results of operation for the three and nine months ending June 30, 1998, are not necessarily indicative of the results which may be expected for the fiscal year ending September 30, 1998. 2. On March 28, 1994, the Bank segregated and restricted $15,144,357 of retained earnings in a liquidation account for the benefit of eligible savings account holders who continue to maintain their accounts at the bank after the conversion of the bank from mutual to stock form. In the event of a complete liquidation of the Bank, and only in such event, each eligible account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the current adjusted balances of all qualifying deposits then held. The liquidation account will be reduced annually at September 30th to the extent that eligible account holders have reduced their qualifying deposits. 3. INVESTMENTS AND MORTGAGE - BACKED SECURITIES A summary of the Bank's carrying value of investment and mortgage - backed securities as of June 30, 1998 and September 30, 1997, is as follows: Investment Securities June 30, 1998 September 30, 1997 --------------------------------- Held to maturity: Government Agency Securities 15,500,334 17,297,942 Municipal Obligations 1,575,000 1,540,000 Other 250,000 0 --------------------------------- $17,325,334 $18,837,942 Available for sale: Common Stock 6,242,946 4,086,785 Stock in Federal Home Loan Bank 3,151,000 2,976,000 Other 223,125 60,000 --------------------------------- $ 9,617,071 $ 7,122,785 Mortgage - Backed Securities held to maturity: FNMA - Arms $ 9,908,018 $13,157,644 FHLMC -Arms 3,319,760 4,768,042 FHLMC -Fixed Rate 184,541 245,443 CMO Government Agency 8,439,716 13,310,277 CMO Private Issue 2,944,297 4,245,057 FNMA - Fixed Rate 458,566 589,777 GNMA - Fixed Rate 251,748 373,311 --------------------------------- $25,506,646 $36,689,551 6 4. Loan Receivable, Net A summary of the Bank's loans receivable at June 30, 1998 and September 30, 1997, is as follows:
June 30, 1998 September 30, 1997 ----------------------------------- Mortgage Loans Secured by One to Four Family Residences 124,970,282 122,015,418 Secured by Other Properties 3,414,366 3,452,789 Construction Loans 1,352,258 1,936,517 Other 4,762,611 2,666,395 ---------------------------------- 134,499,517 130,071,119 Plus (Less): Unamortized Premium on Loan Purchase 35,561 29,460 Unearned Discount and Loan Fees (305,939) (348,405) Undisbursed Loan Proceeds (89,215) (1,724) Allowance for Loan Losses (688,566) (615,049) ---------------------------------- Total Mortgage Loans 133,451,358 129,135,401 ---------------------------------- Consumer and Other Loans: Automobile 17,250,776 13,309,943 Commercial Loans 6,023,533 4,049,950 Loans on Deposits 278,595 573,654 Home Equity and Second Mortgage 10,134,888 9,986,176 Mobile Home 35,249 46,900 Other 1,034,982 924,153 ---------------------------------- 34,758,023 28,890,776 Less: Allowance for Loan Losses (440,207) (353,574) ---------------------------------- Total Consumer and Other Loans 34,317,816 28,537,202 ---------------------------------- Net Loans Receivable $ 167,769,174 $ 157,672,603
A summary of the Bank's allowance for loan losses for the three and nine months ended June 30, 1998 and 1997, are as follows:
Three Months Ended Nine Months Ended June 30 June 30 1997 1998 1997 1998 ---------------------------------------------------------- Balance Beginning $ 829,438 $ 1,067,354 $ 740,346 $ 968,623 Provisions Charged to Operations 110,000 60,000 210,000 205,000 Loans Charged Off Net of Recoveries (58,217) (1,419) (69,125) (44,850) ---------------------------------------------------------- Balance Ending $ 881,221 $ 1,128,773 $ 881,221 $ 1,128,773
There has been no significant change in the level of non performing loans from September 30, 1997 to June 30, 1998. 7 5. Real Estate owned or in judgment: June 30, 1998 September 30, 1997 ------------------------------------- Real Estate Acquired by Foreclosure $ 80,467 $232,851 Real Estate Loans in Judgment and Subject to Redemption 57,010 19,099 Other Repossessed Assets 2,772 0 ------------------------------------- $140,249 $251,950 6. The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financial needs of its customers and to reduce its own exposure to fluctuations in interest rates. The financial instruments include commitments to extend credit and commitments to sell loans. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial condition. The contract or notional amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The Bank's exposure to credit loss in the event of non-performance by the other party to the financial instrument for loan commitments is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making commitments as it does for on-balance-sheet instruments. On June 30, 1998, the Bank had outstanding commitments to fund real estate loans of $2,829,894. Of the commitments outstanding, $2,315,644 are for fixed rate loans at rates of 6.75% to 9.00%. Commitments for adjustable rate loans amount to $514,250 with initial rates of 6.375% to 8.25%. Outstanding loan commitments to sell as of June 30, 1998 were $1,928,459. In addition the Bank had outstanding commercial loan commitments of $4,092,483 with initial rates of 7.90 to 9.50 7. EARNINGS PER SHARE Basic earnings per share (EPS) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issued common stock (potential common stock) were exercised or converted to common stock. For periods presented potential common stock includes outstanding stock options and nonvested stock awarded under the management stock bonus plan. Earnings per share for the three and nine months ending June 30, 1998 and 1997, was determined as follows; STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Basic Earnings Per Share Three months ended Nine months ended June 30 June 30 1998 1997 1998 1997 ----------------------------------------------------- Weighted average common shares outstanding Net of Treasury shares 1,688,641 1,852,996 1,688,641 1,852,996 Average unallocated ESOP shares (77,578) (92,588) (81,000) (96,010) Weighted average treasury shares purchased (75,461) (82,549) (31,623) (41,010) Nonvested MSBP shares (15,965) (34,212) (20,529) (38,776) ----------------------------------------------------- Weighted Average Shares for Basic EPS 1,519,637 1,643,648 1,555,489 1,677,200 ----------------------------------------------------- Net Earnings 583,650 627,207 1,792,224 1,859,757 ----------------------------------------------------- Per share amount $ 0.38 $ 0.38 $ 1.15 $ 1.11
8
Diluted Earnings Per Share Three months ended Nine months ended June 30 June 30 1998 1997 1998 1997 ----------------------------------------------- Weighted average shares for Basic EPS 1,519,637 1,643,648 1,555,489 1,677,200 Dilutive stock options 150,838 113,526 141,228 104,423 Dilutive MSBP shares 6,010 9,663 7,191 9,985 ----------------------------------------------- Weighted Average Shares for Diluted EPS 1,676,425 1,766,837 1,703,842 1,791,608 ----------------------------------------------- Net Earnings 583,650 627,207 1,792,224 1,859,757 ----------------------------------------------- Per share amount $ 0.35 $ 0.35 $ 1.05 $ 1.04
8. DIVIDENDS At a April 1998 board meeting, the Directors of the Company declared a .15 per share dividend. The dividend was payable to all stockholders of record as of May 1, 1998. 9 LANDMARK BANCSHARES, INC. PART I - FINANCIAL INFORMATION ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General: Landmark Bancshares, Inc. ("Company") is the holding company for Landmark Federal Savings Bank ("Bank"). Apart from the operations of the Bank, the Company did not engage in any significant operations during the quarter ended June 30, 1998. The Bank is primarily engaged in the business of accepting deposit accounts from the general public, using such funds to originate mortgage loans for the purchase and refinancing of single-family homes located in Central and Southwestern Kansas and for the purchase of mortgage-backed and investment securities. In addition, the Bank also offers and purchases loans through correspondent lending relationships in Wichita, Kansas City, and other cities in Kansas and in Albuquerque and Santa Fe, New Mexico and Madison, Wisconsin. To a lesser extent, the Bank will purchase adjustable rate mortgages loans, to manage its interest rate risk as deemed necessary. The Bank also makes automobile loans, second mortgage loans, home equity loans and savings deposit loans. Landmark Bancshares, Inc. may from time to time make written or oral "forward-looking statements", including statements contained in the Company's filings with the Securities and Exchange Commission (including this report on Form 10-QSB), in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations, estimates and intentions, that are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, among others, could cause the Company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in forward-looking statements; the strength of the United States economy in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate and market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the willingness of users to substitute competitors' products and services for the Company's products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes, acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks described above involved in the foregoing. The Company cautions that these important factors are not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company. Management Strategy: Management's strategy has been to maintain profitability and increase capital. The Bank's lending strategy has historically focused on the origination of traditional, conforming one to four-family mortgage loans with the primary emphasis on single-family residences. The Bank's secondary focus has been on consumer loans, commercial loans, second mortgage loans, home equity loans and savings deposit loans. This focus, and the application of strict underwriting standards, are designed to reduce the risk of loss on the Bank's loan portfolio. However, this lack of diversification in its portfolio structure does increase the Bank's portfolio concentration risk by making the value of the portfolio more susceptible to declines in real estate values in its market area. This has been mitigated in recent years, through the investment in mortgage-backed securities and the continued sales of loans in the secondary market. 10 Certain risks are inherent in the sales of loans in the secondary market. There is a risk that the Bank will not be able to sell all the loans that it has originated, or conversely, will be unable to fulfill its commitment to deliver loans pursuant to a firm commitment to sell loans. In addition, in periods of rising interest rates, loans originated by the bank may decline in value. Exposure to market and interest rate risk is significant during the period between the time the interest rate on a customer's mortgage loan application is established and the time the mortgage loan closes, and also during the period between the time the interest rate is established and the time the Bank commits to sell the loan. If interest rates change in an unanticipated fashion, the actual percentage of loans that close may differ from projected percentages. The resultant mismatching of commitments to closed loans and commitments to deliver sold loans may have an adverse effect on the profitability of loan originations. A sudden increase in interest rates can cause a higher percentage of loans to close than projected. To the degree that this was not anticipated, the Bank will not have made commitments to sell these loans and may incur significant mark to market losses, adversely affecting results of operations. The Bank historically sells 30 year fixed rate mortgages in the secondary market, however the Bank is keeping all 15 and 20 year or shorter mortgages with fixed rates above 7.0% and 7.25% for investment and selling all other fixed rate loans. Through out the first nine months of fiscal year 1998 rates continued with moderate decline. As a result of the rates at the end of June 1998, the Bank reflected an unrealized gain of $31,144 in loans held for sale. Sustained levels of gain on sale of loans is dependent on continued stable or downward interest rate movement and would likely be adversely affected by a continued rise in interest rates. Changes in financial condition between June 30, 1998 and September 30, 1997: As of June 30, 1998, total assets were $229,337,155, which represents a $1.4 million growth over the September 30, 1997 fiscal year end totals. This growth is mainly attributed to a $12.7 million increase in loan receivables, which was offset by a $10.1 million decrease in investments and mortgage-baked securities. Results of operations: comparison between the three and nine months ended June 30, 1998 and 1997: Net income for the three-month period ended June 30, 1998 of $583,650 represents a decrease of $43,557 or a 6.99% decrease from the net income reported for the three-month period ended June 30, 1997. The decrease is mainly attributed to an increase in non interest expense associated with the opening of a new branch office. Net income for the nine-month period ended June 30, 1998 of $1,792,224 represents a decrease of $67,533 or a 3.63% decrease from the net income reported for the nine-month period ended June 30, 1997. This decrease is mainly attributed to an increase in non interest expense associated with the opening of a new branch office. Net interest income before provision for losses on loans for the three-month period ended June 30, 1998 decreased $14,126 or approximately 0.08% to $1,723,382 as compared with $1,737,508 for the same period ended June 30, 1997. This decrease is associated with the increased interest expense on deposit accounts. Net interest income before provision for losses on loans for the nine-month period ended June 30, 1998 increased $139,105 or 2.70 to $5,288,297 as compared with $5,149,192 for the same period ended June 30, 1997. This increase is associated with the increased interest received on the mortgage loans. Interest expense for the three-month period ended June 30, 1998 increased $51,134 or 2.05% to $2,537,712 as compared with $2,426,578 for the same period ended June 30, 1997. This increase is due to the increased costs associated with savings rates and increased savings volume. 11 Interest expense for the nine-month period ended June 30, 1998 increased $448,004 or 6.22% to $7,639,561 as compared with $7,191,557 for the same period ended June 30, 1997. This increase is due to the increased costs associated with savings rates and increased rates on adjustable advance from FHLB. The Bank added $60,000 for the three month period ending June 30, 1998 and $205,000 for the nine month period ending June 30, 1998 to the provision for loan losses. These additions are due to increased loan production during this period and related credit risk. Other income including non operating items for the three-month period ended June 30, 1998 increased $138,040 or 53.48% to $396,110 as compared with $258,090 for the same period ended June 30, 1997. This increase primarily was due to $24,112 on gains of sale of loans from favorable rate environment and a $82,043 gain on sale of investment during the quarter ending June 30, 1998. Other income including non operating items for the nine-month period ended June 30, 1998 increased $173,601 or 22.60% to $941,551 as compared with $767,950 for the same period ended June 30, 1997. This increase was primarily due to a $123,638 increase in net gains on sale of loans from favorable rate environment. Gain on sale of available for sale investment securities increased in 1998 over 1997 by $4,169. Service charges and late fees increased over $50,342 due to increased late fees on installment loans. Non interest expenses for the three-month period ended June 30, 1998 increased $245,771 or 29.23% to $1,086,342 as compared with $840,571 for the same period ended June 30, 1997. This increase is primarily due to increased compensation expense of $127,162, an increase of $35,720 in occupancy expense and a increase of $79,732 in other expenses associated with the opening of the new branch. Non interest expenses for the nine-month period ended June 30, 1998 increased $436,889 or 16.80% to $3,036,674 as compared with $2,599,785 for the same period ended June 30, 1997. This increase is primarily due to increased compensation expense of $312,325, an increase of $101,367 in other expenses and a $49,742 in occupancy expense associated with the opening of the new branch. Earnings per share: Effective with the quarter ended December 31, 1997, the Company adopted the provisions of Statement of Financial Accounting Standards No. 128, Earnings per Share. The Statement is to be applied to financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application is not permitted. The Statement requires restatement of all prior-period earnings per share (EPS) data presented. FAS No. 128 simplifies the standards for computing EPS and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the company. Diluted EPS is computed similarly to the previously presented fully diluted earnings per share. Y2K Compliance: The Bank has developed a plan to attain Y2K compliance of critical operation systems. That plan includes assessment and testing of vendors systems including external data processing center and equipment and software upgrades. The plan currently calls for testing of mission critical systems by August 1998. The Y2K costs are projected to be approximately $75,000 - $100,000 for conversions cost and approximately $300,000 for hardware and software upgrades. 12 Liquidity and Capital Resources: The Bank is required to maintain minimum levels of liquid assets, as defined by the Office of Thrift Supervision ("OTS") regulations. This requirement, which may be varied from time to time depending upon economic conditions and deposit flows, is based upon a percentage of deposits and short-term borrowing. The required minimum ratio is currently 4 percent. The Bank's liquidity ratio averaged 4.65% during June 1998. The Bank manages its liquidity ratio to meet its funding needs, including: deposit outflows, disbursement of payments collected from borrowers for taxes and insurance, and loan principal disbursements. The Bank also manages its liquidity ratio to meet its asset/liability management objectives. In addition to funds provided from operations, the Bank's primary sources of funds are: savings deposits, principal repayments on loans and mortgage-backed securities, and matured or called investment securities. In addition, the Bank may borrow funds from time to time from the Federal Home Loan Bank of Topeka. Scheduled loan repayments and maturing investment securities are a relatively predictable source of funds. However, savings deposit flows and prepayments on loans and mortgage-backed securities are significantly influenced by changes in market interest rates, economic conditions and competition. The Bank strives to manage the pricing of its deposits to maintain a balanced stream of cash flows commensurate with its loan commitments. When applicable, cash in excess of immediate funding needs is invested into longer-term investments and mortgage-backed securities which typically earn a higher yield than overnight deposits, some of which may also qualify as liquid investments under current OTS regulations. As required by the financial institutions reform, recovery and enforcement act of 1989 ("FIRREA"), OTS prescribed three separate standards of capital adequacy. The regulations require financial institutions to have minimum regulatory capital equal to 2.00 percent of tangible assets; minimum core capital equal to 4.00 percent of adjusted tangible assets; and risk-based capital equal to 8.00 percent of risk-based assets. The Bank's capital requirements and actual capital under the OTS regulations are as follows at June 30, 1998: Amount (Thousands) Percent of Assets Core Capital: Actual $22,633 10.12% Required 8,943 4.00% Excess 13,690 6.12% Risk-Based Capital: Actual 23,762 20.12% Required 9,449 8.00% Excess $14,313 16.12% 13 LANDMARK BANCSHARES, INC. PART II - OTHER INFORMATION Item 2. - Changes in Securities NONE Item 4. - Submission of Matter to a Vote of Security Holders NONE Item 5. - Other Information NONE Item 6(b). - Reports on Form 8-K NONE 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. Date July 30, 1998 LANDMARK BANCSHARES, INC. By /S/ Larry Schugart ----------------------------------------------- LARRY SCHUGART President and Chief Executive Officer (Duly Authorized Representative) By /S/ James F. Strovas ----------------------------------------------- JAMES F. STROVAS Senior Vice President and Chief Financial Officer (Duly Authorized Representative) EX-27 2 FDS 10QSB
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION. 1,000 9-MOS SEP-30-1998 JUN-30-1998 856 219 0 0 9,617 42,832 42,834 170,857 1,129 229,337 148,129 47,200 4,041 0 0 0 228 29,739 229,337 10,202 2,725 0 12,927 5,617 2,022 5,288 205 0 3,037 2,988 0 0 0 1,792 1.15 1.05 286 3 435 140 1,428 967 3 5 1,129 1,129 0 0
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