10-K 1 g10k-25786.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-22790 STATEFED FINANCIAL CORPORATION -------------------------------------------------------------------------------- (Name of small business issuer in its charter) Delaware 42-1410788 -------------------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13523 University Avenue Clive, Iowa 50325 -------------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (515) 223-8484 ------------------- Securities Registered Pursuant to Section 12(b) of the Act: None -------------------------------------------------------------------------------- Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 per share -------------------------------------------------------------------------------- (Title of class) Check whether the issuer (1) 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 ___. Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained herein, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State the issuer's revenue for the most recent fiscal year: $8.8 million. The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of the bid and asked prices of such stock on the NASDAQ System as of September 4, 2001, was $11.9 million. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.) As of September 4, 2001, there were issued and outstanding 1,277,326 shares of the Registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Part II of Form 10-KSB - Annual Report to Stockholders for the fiscal year ended June 30, 2001. Part III of Form 10-KSB - Proxy Statement for 2001 Annual Meeting of Stockholders. PART I ITEM 1. DESCRIPTION OF BUSINESS -------------------------------- GENERAL THE COMPANY. StateFed Financial Corporation (the "Company" or the "Holding Company"), a Delaware corporation, was formed in September, 1993 to act as the holding company for State Federal Savings and Loan Association of Des Moines ("State Federal" or the "Association") upon the completion of the Association's conversion from the mutual to the stock form (the "Conversion"). The Company received approval from the Office of Thrift Supervision (the "OTS") to acquire all of the common stock of the Association to be outstanding upon completion of the Conversion. The Conversion was completed on January 4, 1994. Unless the context otherwise requires, all references to the Company include the Company and the Association on a consolidated basis. At June 30, 2001, the Company had $107.5 million of assets and stockholders' equity of $14.1 million (or 13.1% of total assets). State Federal is a federally chartered savings and loan association headquartered in Des Moines, Iowa. Its deposits are insured up to applicable limits by the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC"), which is backed by the full faith and credit of the United States. The principal business of the Association consists of attracting retail deposits from the general public and investing those funds primarily in one-to-four family residential mortgage and commercial and multi-family real estate loans, and, to a lesser extent, construction and consumer loans primarily in the Association's market area. The Association also invests in U.S. Government and agency obligations and other permissible investments. At June 30, 2001, substantially all of the Association's real estate mortgage loans were secured by properties located in Iowa. The Association's revenues are derived primarily from interest on mortgage loans and investments, income from service charges and loan originations, and income from real estate operations. The Association does not originate loans to fund leveraged buyouts and has no loans to foreign corporations or governments. The Association offers a variety of accounts having a wide range of interest rates and terms. The Association's deposits include savings accounts, money market savings accounts, checking accounts and certificate accounts with terms of three months to 60 months. Currently, the Association only solicits deposits in its primary market area and does not accept brokered deposits, although management may on occasion accept brokered deposits in the future as market conditions may dictate. The main office of the Association is located at 13523 University Avenue Clive, Iowa 50325, which is located in Polk County. Its telephone number at that address is (515) 223-8484. The Association maintains two other offices in Des Moines, Iowa. The Association considers its primary market area to comprise parts of Polk, Dallas and Warren Counties. FORWARD-LOOKING STATEMENTS When used in this Form 10-KSB and in future filings by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to 1 place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake--and specifically declines any obligation--to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. LENDING ACTIVITIES GENERAL. Historically, the Association has originated fixed-rate, one-to-four family residential mortgage loans. In the early 1980's, the Association began to focus on the origination of adjustable-rate mortgage ("ARM") loans, in order to increase the percentage of loans in its portfolio with more frequent repricing than fixed-rate mortgage loans. While the Association has continued to originate fixed-rate mortgage loans in response to customer demand, it also continues to offer ARMs. The Association also, from time to time, purchases loans. While the Association primarily focuses its lending activities on the origination of loans secured by first mortgages on owner-occupied one-to-four family residences, it also originates multi-family and commercial real estate and, to a lesser extent, construction and consumer loans in its primary market area. At June 30, 2001, the Association's net loan portfolio totaled $87.9 million. The Loan Committee of the Association, comprised of executive officers Wood and Black and Chairman Bray has the immediate responsibility for the supervision of the Association's loan portfolio. The Association's loan policy requires full Board approval on all loans. The Board of Directors has responsibility for the overall supervision of the Association's loan portfolio and in addition, reviews all foreclosure actions or the taking of deeds-in-lieu of foreclosure. The aggregate amount of loans that the Association is permitted to make under applicable federal regulations to any one borrower, including related entities, or the aggregate amount that the Association could have invested in any one real estate project is generally the greater of 15% of unimpaired capital and surplus or $500,000. See "Regulation - Federal Regulation of Savings Associations." At June 30, 2001, the maximum amount which the Association could have lent to any one borrower and the borrower's related entities was approximately $1.6 million. At that date the largest loan to one borrower or group of related borrowers consisted of 57 loans to one borrower totaling $1.4 million. All of such loans were performing in accordance with their terms. Currently, it is the Association's policy to limit its loans to one borrower to the maximum regulatory limit. The Association reserves the right to discontinue, adjust or create new lending programs to respond to its needs and to competitive factors, and on occasion the Association's holding company has participated in loans with the Association, which loans would have exceeded the limit on loans to one borrower had such loans been made by the Association. 2 LOAN PORTFOLIO COMPOSITION. The following table presents the composition of the Company's loan portfolio in dollar amounts and in percentages (before deductions for loans in process, deferred fees and discounts and the allowances for loan losses) of total loans as of the dates indicated.
June 30, ----------------------------------------------------------------------------------- 2001 2000 1999 ----------------------------------------------------------------------------------- Amount Percent Amount Percent Amount Percent ----------------------------------------------------------------------------------- (Dollars in Thousands) Real Estate Loans ----------------- One-to-four family ............................. $55,179 61.77 % $54,078 61.95 % $46,178 62.55 % Multi-family and Commercial .................... 31,243 34.97 31,071 35.59 24,340 32.91 Construction or development .................... 1,309 1.46 719 0.83 2,025 2.74 ------- ------- ------- ------- ------- ------- Total real estate loans .................... $87,731 98.20 85,868 98.37 72,543 98.26 Other Loans: ------------ Consumer Loans: Deposit account ............................... 117 0.13 186 0.21 141 0.19 Other ......................................... 1,489 1.67 1,240 1.42 1,140 1.55 ------- ------- ------- ------- ------- ------- Total consumer loans ....................... 1,606 1.80 1,426 1.63 1,281 1.74 ------- ------- ------- ------- ------- ------- Total loans ................................ 89,337 100.00 % 87,294 100.00 % 73,824 100.00 % ======= ======= ======= Less: ---- Loans in process ............................... (717) (141) (963) Deferred fees and discounts .................... (339) (321) (288) Allowance for losses ........................... (382) 259 (242) ------- ------- ------- Total loans receivable, net .................... $87,899 $86,573 $72,331 ======= ======= -------
3 The following table shows the composition of the Company's loan portfolio by fixed and adjustable rate at the dates indicated.
JUNE 30, -------------------------------------------------------------------------------- 2001 2000 1999 -------------------------------------------------------------------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT -------------------------------------------------------------------------------- (Dollars in Thousands) Fixed Rate Loans: ---------------- Real estate: One-to-four family ............................. $ 42,100 47.13% $37,398 42.84% $28,310 38.35% Multi-family and Commercial .................... 15,402 17.24 15,286 17.51 14,330 19.41 Construction or development .................... 1,309 1.46 719 .83 2,025 2.74 --------- -------- --------- -------- ------- ------- Total real estate loans ..................... 58,811 65.83 53,403 61.18 44,665 60.50 Consumer ........................................ 1,606 1.80 1,426 1.63 1,281 1.74 --------- -------- --------- -------- ------- ------- Total fixed-rate loans ...................... 60,417 67.63 54,829 62.81 45,946 62.24 Adjustable Rate Loans: --------------------- Real estate: One-to-four family ............................. 13,079 14.64 16,680 19.11 17,868 24.20 Multi-family and Commercial .................... 15,841 17.73 15,785 18.08 10,010 13.56 --------- -------- --------- -------- ------- ------- Total real estate loans ..................... 28,920 32.37 32,465 37.19 27,878 37.76 Consumer ........................................ --- --- --- --- --- --- --------- -------- --------- -------- ------- ------- Total adjustable rate loans ................. 28,920 32.37 32,465 37.19 27,878 --- --------- -------- --------- -------- ------- ------- Total loans ................................. 89,337 100.00% 87,294 100.00% 73,824 100.00% ====== ====== ====== LESS: ---- Loans in process ................................ (717) (141) (963) Deferred fees and discounts ..................... (339) (321) (288) Allowance for loan losses ....................... (382) (259) (242) ------- ------- ------- Total loans receivable, net .................. $87,899 $86,573 $72,331 ======= ======= =======
4 The following schedule illustrates the interest rate sensitivity of the Company's loan portfolio at June 30, 2001. Mortgages which have fixed, adjustable or renegotiable interest rates are shown as maturing at the contractual maturity date. The schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses.
Real Estate ----------------------------------------------------------------------------------------------- Multi-family and Construction One-to-four family Commercial or Development Consumer Total ------------------ ------------------- ------------------ ------------------ ------------------ Weighted Weighted Weighted Weighted Weighted Average Average Average Average Average Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- (Dollars in Thousands) Due During Years Ending June 30, (1) 2002 ............................. $ 1,205 8.82% $9,967 8.93% $1,309 9.49% $223 9.45% $12,704 8.99% 2003 ............................. 5,276 8.56 4,900 8.53 --- --- 237 9.47 10,413 8.57 2004 ............................. 9,407 8.34 3,314 8.86 --- --- 277 9.20 12,998 8.49 2005-2009 ........................ 11,377 8.30 7,110 8.86 --- --- 829 9.13 19,316 8.54 After 2009 ....................... $27,914 8.28% $5,952 8.64% $ --- ---% $ 40 9.50% $33,906 8.34%
------------- (1) Includes construction loans which the Association reclassifies as permanent loans once the construction phase is completed. The total amount of loans due after June 30, 2002 which have fixed interest rates is $56.9 million, while the total amount of loans due after such dates which have floating or adjustable interest rates is $19.7 million. 5 ONE-TO-FOUR FAMILY RESIDENTIAL MORTGAGE LENDING. Loans of this type are generated by the Company's marketing efforts, its present customers, walk-in customers and referrals from real estate agents and builders. The Company focuses its lending efforts primarily on the origination of loans secured by first mortgages on owner-occupied, one-to-four family residences. At June 30, 2001, the Company's one-to-four family residential mortgage loans totaled $55.2 million, or approximately 61.8% of the Company's total gross loan portfolio. The Company currently offers ARM payment and fixed-rate mortgage loans. During the year ended June 30, 2001, the Association originated $1.0 million of adjustable-rate real estate loans, which were secured by one-to-four family residential real estate. During the same period, the Company originated $12.1 million of fixed-rate real estate loans, secured by one-to-four family residential real estate. The Company's one-to-four family residential mortgage originations are primarily in its market and surrounding areas, and no such loans were sold during the three year period ended June 30, 2001. The Company currently originates up to a maximum of 30-year, fixed-rate, one-to-four family residential mortgage loans in amounts up to 90% of the appraised value of the security property provided that private mortgage insurance is obtained in an amount sufficient to reduce the Company's exposure to at or below the 80% loan-to-value level. The Company may consider raising the loan-to-value ratio in the future as regulations permit. Due to consumer demand, the Company also has offered fixed-rate 10- through 15-year mortgage loans, most of which conform to secondary market standards (i.e., Federal National Mortgage Association ("FNMA"), Government National Mortgage Association ("GNMA"), and Federal Home Loan Mortgage Corporation ("FHLMC") standards). Interest rates charged on these fixed-rate loans are priced according to market conditions, although management does not currently anticipate offering rates at the most competitive end of the market. Residential loans generally do not include prepayment penalties. As with all loans the Company originates, the Company retains its fixed-rate loans in its portfolio. The Company also currently offers thirty year amortization ARM loans with interest rate adjustments occurring after one, and to a lesser extent, three, five and seven year terms with an interest rate margin generally 300 basis points over one year Treasury rates. These loans have a fixed-rate for the stated period and, thereafter, such loans adjust periodically, pursuant to the contractual term. These loans provide for up to a 100 basis point annual cap and a lifetime cap of 600 basis points over the initial rate although the bulk of the Association's ARMs are estimated by management to have 500 basis point lifetime caps. Under the current ARM program, a 500 basis point lifetime cap is being utilized. Under the contractual terms, the majority of such loans do not adjust below the initial rate. As a consequence of using an initial fixed-rate and caps, the interest rates on these loans may not be as rate sensitive as is the Association's cost of funds. The Company's ARMs do not permit negative amortization of principal. The Association generally qualifies borrowers above the fully indexed rate. In underwriting one-to-four family residential real estate loans, State Federal evaluates, among other things, both the borrower's ability to make monthly payments and the value of the property securing the loan. Currently, all properties securing real estate loans made by State Federal are appraised by independent fee appraisers approved by the Board of Directors or by in-house appraisers. State Federal generally requires borrowers to obtain an attorney's title opinion, and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. State Federal now requires title insurance. Real estate loans originated by the Association generally contain a "due on sale" clause allowing the Association to declare the unpaid principal balance due and payable upon the sale of the security property. MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING. The Company has also engaged in commercial and multi-family real estate lending in its market area and surrounding areas and has purchased participation interests in such loans from other financial institutions throughout Iowa. At June 30, 2001, the Company had $31.2 million of commercial and multi-family real estate loans, which represented 35.0% of the Company's gross loan portfolio. There were four multi-family and commercial real estate loans 30-89 days delinquent and three non-performing loans totaling $1.1 million and $517,000, respective (five of the loans were on properties located in the Des Moines area, one in Iowa City and one commercial property located in Illinois). The commercial property in Illinois for 6 $705,000 is paying as agreed and now current. The Company had multi-family and commercial real estate loans, with an aggregate balance of $9.5 million at June 30, 2001, secured by real estate located in Texas, Colorado, Nebraska, Minnesota, Nevada, California, Illinois, Wisconsin and Florida. Loans secured by commercial and multi-family real estate properties are generally larger and involve a greater degree of credit risk than one-to-four family residential mortgage loans. Because payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed), the borrower's ability to repay the loan may be impaired. The Company's commercial and multi-family real estate loan portfolio is secured primarily by apartment buildings and office buildings and, to a lesser extent, strip shopping centers, motels, nursing homes and churches. Multi-family and commercial real estate loans generally have terms that do not exceed 30 years. The Company has a variety of rate adjustment features and other terms in its commercial and multi-family real estate loan portfolio. Generally, the loans are made in amounts up to 80% of the appraised value of the security property. Multi-family and commercial real estate loans provide for a margin over a designated index which is generally the one-year Treasury bill rate. The Company currently analyzes the financial condition of the borrower, the borrower's credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. The Company requires personal guaranties of the borrowers. Appraisals on properties securing commercial real estate loans originated by the Association are performed by independent appraisers. The following table breaks out the Company's commercial loan portfolio by type of loan at the dates indicated.
June 30, --------------------------------------------------------- 2001 2000 1999 ------------------- ------------------ ---------------- (In Thousands) Multi-family .............. $10,956 $9,388 $9,222 Nursing homes ............. 2,030 1,653 1,697 Churches .................. 525 598 1,129 Motels .................... 6,037 5,097 3,321 Shopping Centers .......... 1,305 2,056 1,136 Commercial Buildings ...... 10,390 12,279 7,835 ------- ------- ------- Total ................ $31,243 $31,071 $24,340 ======= ======= =======
This portfolio grew by $172,000 from fiscal 2000 to fiscal 2001, and the portfolio comprised 35 percent of total loans in fiscal 2001 compared to 36 percent of total loans in fiscal 2000. CONSTRUCTION LENDING. The Company engages in limited amounts of construction lending to individuals for the construction of their residences as well as to builders for the construction of single family homes and commercial properties in the Company's primary market area and surrounding areas. At June 30, 2001, the Company had $1.3 million of gross construction loans. Construction loans to individuals for their residences are structured to be converted to permanent loans at the end of the construction phase, which typically runs for twelve months. During the construction phase, the borrower pays interest only. Residential construction loans are generally underwritten pursuant to the same guidelines used for originating permanent residential loans. All construction loans to builders require payment of interest only for up to 12 months. At June 30, 2001, all of the Company's construction loans were performing in accordance with their repayment terms. 7 Because of the uncertainties inherent in estimating construction costs and the market for the project upon completion, it is relatively difficult to evaluate accurately the total loan funds required to complete a project, the related loan-to-value ratios and the likelihood of ultimate success of the project. Construction loans to borrowers other than owner-occupants also involve many of the same risks discussed above regarding multi-family and commercial real estate loans and tend to be more sensitive to general economic conditions than many other types of loans. Also, the funding of loan fees and interest during the construction phase makes the monitoring of the progress of the project particularly important, as customary early warning signals of project difficulties may not be present. CONSUMER LENDING. To a lesser extent, State Federal offers secured consumer loans, including auto loans, home equity loans, and loans secured by savings deposits. The Association currently originates all of its consumer loans in its primary market area. The Association originates consumer loans on a direct basis by extending credit directly to the borrower. Consumer loans may entail greater credit risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. At June 30, 2001, eight auto loans totaling $52,600 in the consumer loan portfolio were non-performing. There can be no assurance as to the delinquencies in the future. The largest component of State Federal's consumer loan portfolio consists of auto loans. At June 30, 2001, such loans totaled $1.3 million or approximately 1.5% of the Association's gross loan portfolio. During the fiscal year ended June 30, 2001, the Association originated $1.1 million in auto loans as compared to $814,000 originated in the same period ended June 30, 2000. At June 30, 2001, the Association's consumer loan portfolio totaled $1.6 million or 1.8% of its total gross loan portfolio. Consumer loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. Loans secured by deposit accounts at the Association are currently originated for up to 90% of the account balance with a hold placed on the account restricting the withdrawal of the account balance. The interest rate on such loans is typically equal to 200 basis points above the deposit contract rate. The underwriting standards employed by the Association for consumer loans, other than loans secured by deposits, include an application, a determination of the applicant's payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount. ORIGINATIONS AND PURCHASES OF LOANS Real estate loans are generally originated by State Federal's staff of salaried loan officers. Loan applications are taken and processed in the office and the branch of the Association. While the Company originates both adjustable-rate and fixed-rate loans, its ability to originate loans is dependent upon the relative customer demand for loans in its market. Demand is affected by the interest rate environment. The Company is currently a portfolio lender. In fiscal 2001, the Company originated $18.2 million of loans, compared to $18.0 million and $16.6 million in fiscal 2000 and 1999, respectively. Principal repayments in fiscal 2001 increased by $10.5 million from $8.2 million in fiscal 2000. 8 In periods of economic uncertainty, the ability of financial institutions, including State Federal, to originate large dollar volumes of real estate loans may be substantially reduced or restricted, with a resultant decrease in related loan origination fees, other fee income and operating earnings. The following table shows the loan origination, purchase and repayment activities of the Company for the periods indicated.
Year Ended June 30, ------------------------------------------ 2001 2000 1999 -------------- -------------- ------------ (In Thousands) Originations by type: --------------------- Adjustable rate: Real estate - one-to-four family ................ $ 896 $ 1,585 $ 2,093 - multifamily and commercial ........ 1,416 --- --- Non-real estate - consumer ...................... --- --- --- ------- ------- ------- Total adjustable-rate .................... 2,312 1,585 2,093 Fixed rate: Real estate - one-to-four family ................ 12,069 12,873 9,077 - multifamily and commercial ........ 2,486 2,236 4,396 Non-real estate - consumer ...................... 1,314 1,317 1,034 Total fixed-rate ......................... 15,869 16,426 14,507 ------- ------- ------- Total loans originated ................... 18,181 18,011 16,600 Purchases: --------- Real estate - one-to-four family $ --- $ --- $ --- - commercial ........................ 2,472 5,238 2,416 Non-real estate - consumer ...................... --- --- --- ------- ------- ------- Total loans .............................. 2,472 5,238 2,416 Mortgage-backed securities ...................... --- --- --- ------- ------- ------- Total purchases .......................... 2,472 5,238 2,416 ------- ------- ------- Repayments: ---------- Principal repayments ............................ $ 18,713 $ 8,232 $17,650 -------- ------- ------- Total reductions ......................... 18,713 8,232 17,650 -------- ------- ------- Increase (decrease) in other items, net .............................................. (614) (775) 1,985 -------- ------- ------- Net increase (decrease) .................. $ 1,326 $14,242 $ 3,351 ======== ======= =======
NON-PERFORMING ASSETS AND CLASSIFIED ASSETS When a borrower fails to make a required payment on real estate secured loans and consumer loans at fifteen days a late charge is automatically assessed and a notice is sent. At 30 days after the payment is due, the Company generally institutes collection procedures by mailing a delinquency notice. The customer is contacted again, by notice and/or telephone, when the payment is 60 days past due. In most cases, delinquencies are cured promptly; however, if a loan secured by real estate or other collateral has been delinquent for more than 90 days, satisfactory payment arrangements must be adhered to or the Company will initiate foreclosure or repossession. Generally, when a loan becomes delinquent 90 days or more or when the collection of principal or interest becomes doubtful, the Company will place the loan on a non-accrual status and, as a result, previously accrued interest income on the loan is taken out of current income. The loan will remain on a non-accrual status as long as the loan is 90 days delinquent. 9 The following table sets forth information concerning delinquent mortgage and other loans at June 30, 2001. The amounts presented represent the total remaining principal balances of the related loans, rather than the actual payment amounts which are overdue.
Real Estate ----------------------------------------------------------------------- Commercial and One-to-four family Multi-family ---------------------------------- ----------------------------------- Number Amount Percent Number Amount Percent ---------- ---------- ----------- ---------- ---------- ----------- (Dollars in Thousands) Loans delinquent for: 30-59 days .............................. 27 $ 1,742 3.16% 3 $392 1.25% 60-89 days .............................. 10 725 1.31 1 705 2.26 90 days and over ........................ 19 1,580 2.86 3 517 1.65 -- ------- ---- -- ---- Total delinquent loans .............. 56 $ 4,047 7.33% 7 $1,614 5.16% === ======= ----- == ====== -----
At June 30, 2001 there were 8 delinquent consumer loans totaling $52,600. The ratio of delinquent loans to total loans (net) was 0.06% at June 30, 2001. The table below sets forth the amounts and categories of non-performing assets in the Association's loan portfolio at the dates indicated. Loans are generally placed on non-accrual status when the collection of principal and/or interest become doubtful or when the loan is in excess of 90 days delinquent. Foreclosed assets include assets acquired in settlement of loans.
June 30, ----------------------------------------------- 2001 2000 1999 ------------- ------------ ------------- (Dollars in Thousands) Non-accruing loans: One-to-four family $ 1,218 $ 717 $ --- Multi-family and commercial real estate 48 --- --- Consumer 53 14 --- --------- -------- ------- Total 1,319 731 --- Accruing loans delinquent more than 90 days: One-to-four family 362 244 353 Multi-family and commercial real estate 469 --- 525 --------- -------- ------- Total 831 244 878 Foreclosed assets: One-to-four family --- --- 345 Multi-family and commercial real estate 1,320 1,338 788 --------- -------- ------- Total 1,320 1,338 1,133 Total non-performing assets $ 3,470 $ 2,313 $ 2,011 ========= ======== ======= Total as a percentage of total assets 3.23% 2.30% 2.21% ========= ======== =======
NON-PERFORMING ASSETS. Included in total non-performing assets are 19 mortgage loans secured by one-to-four family dwellings totaling $1.6 million and eight consumer auto loans for $52,600. One loan totaling $1.3 million on a commercial building acquired in settlement of loans, and has been sold on contract with closing scheduled for July 2001. CLASSIFIED ASSETS. Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered by the OTS to be of lesser quality as "substandard," "doubtful" or "loss." An asset 10 is considered "substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. "Substandard" assets include those characterized by the "distinct possibility" that the savings association will sustain "some loss" if the deficiencies are not corrected. Assets classified as "doubtful" have all of the weaknesses inherent in those classified "substandard," with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions, and values, "highly questionable and improbable." Assets classified as "loss" are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. When a savings association classifies problem assets as either substandard or doubtful, it may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When a savings association classifies problem assets as "loss," it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An association's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the association's District Director at the regional OTS office, who may order the establishment of additional general or specific loss allowances. In connection with the filing of its periodic reports with the OTS and in accordance with its classification of assets policy, the Association regularly reviews the loans in its portfolio to determine whether any loans require classification in accordance with applicable regulations. On the basis of management's review of its assets, at June 30, 2001, the Association had classified a total of $1.6 million of its assets as substandard, none were classified as doubtful, and none were classified as loss. At June 30, 2001, total classified assets comprised $1.6 million or 22.6% of the Association's capital, or 1.6% of the Association's total assets. At June 30, 2001 the Association had a total of $1.3 million in property acquired in settlement of loans, which consisted of commercial real estate. The property has been sold on contract with closing scheduled for July 2001. ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in its loan portfolio and changes in the nature and volume of its loan activity. Such evaluation, which includes a review of loans for which full collectibility may not be reasonably assured, considers among other matters the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an adequate loan allowance. Real estate properties acquired through foreclosure are recorded at fair value. If fair value at the date of foreclosure is lower than the balance of the related loan, the difference will be charged-off to the allowance at the time of transfer. Valuations are periodically updated by management and if the value declines, a specific provision for losses on such property is established by a charge to operations. Although management believes that it uses the best information available to determine the allowances, unforeseen market conditions could result in adjustments and net earnings could be significantly affected if circumstances differ substantially from the assumptions used in making the final determination. Future additions to the Company's allowances will be the result of periodic loan, property and collateral reviews and thus cannot be predicted in advance. At June 30, 2001, the Company had a total allowance for loan losses of $382,000 or 0.43% of loans receivable, net. See Notes A and E of the Notes to Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report to Stockholders attached hereto as Exhibit 13. 11 The following table sets forth an analysis of the Association's allowance for loan losses.
Year Ended June 30, --------------------------------------------------------------- 2001 2000 1999 --------------------- -------------------- ------------------ (Dollars in Thousands) Balance at beginning of period ........................ $259 $242 $206 Charge-offs ........................................... (28) (19) --- Recoveries ............................................ --- --- --- ---- ---- ---- Net charge-offs ....................................... (28) (19) --- Transfer to allowance for decline in value of foreclosed real estate .................... --- --- --- Additions charged to operations ....................... 151 36 36 ---- ---- ---- Balance at end of period .............................. $382 $259 $242 ==== ==== ==== Ratio of net charge-offs during the period to average loans outstanding during the period ................ 0.03% 0.02% ---% ==== ==== ==== Ratio of net charge-offs during the period to average non-performing assets .............................. 0.96% 1.04% ---% ==== ==== ====
The distribution of the Association's allowance for losses on loans at the dates indicated is summarized as follows:
June 30 -------------------------------------------------------------------------------------- 2001 2000 1999 ---------------------- ---------------------- --------------------- Percent Percent Percent of Loans of Loans of Loans in Each in Each in Each Category Category Category to Total to Total to Total Amount Loans Amount Loans Amount Loans --------- --------- --------- --------- --------- --------- (Dollars In thousands) One- to four- family ..... $165 61.77% $99 61.95% $69 62.55% Multi-family and commercial real estate ................ 198 34.97 144 35.59 61 32.97 Construction --- 1.46 --- 0.83 -- 2.74 Consumer and unsecured ............. 19 1.80 16 1.63 12 1.74 Unallocated .............. --- --- --- --- 100 --- ----- ------ ----- ------ ---- ------ Total ............... $ 382 100.00% $ 259 100.00% $242 100.00% ===== ====== ===== ====== ==== ======
12 INVESTMENT ACTIVITIES State Federal must maintain minimum levels of investments that qualify as liquid assets under OTS regulations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, the Association has generally maintained its liquid assets above the minimum requirements imposed by the OTS regulations and at a level believed adequate to meet requirements of normal daily activities, repayment of maturing debt and potential deposit outflows. The Association's investment policy objective in this regard sets the Association's desired liquidity between 6% and 12%. As of June 30, 2001, the Association's liquidity ratio (liquid assets as a percentage of net withdrawable savings deposits and current borrowings) was 11.2%. See "Regulation - Liquidity." Federally chartered savings institutions have the authority to invest in various types of liquid assets, including United States Treasury obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, certain bankers' acceptances, repurchase agreements and federal funds. Subject to various restrictions, federally chartered savings institutions may also invest their assets in commercial paper, investment grade corporate debt securities and mutual funds whose assets conform to the investments that a federally chartered savings institution is otherwise authorized to make directly. Generally, the investment policy of the Association is to invest funds among various categories of investments and maturities based upon the Association's need for liquidity, to achieve the proper balance between its desire to minimize risk and maximize yield, to provide collateral for borrowings, and to fulfill the Association's asset/liability management policies. CASH AND INVESTMENTS IN CERTIFICATES OF DEPOSIT AND OTHER INVESTMENTS. At June 30, 2001, the Company's cash and interest-bearing deposits in other financial institutions totaled $7.3 million, or 6.78% of its total assets. Certificates of deposits invested in other institutions totaled $297,000 or .27% of its total assets. The Association has a $1.8 million investment in the common stock of the FHLB of Des Moines in order to satisfy the requirement for membership in such institution. The Company has $1.6 million or 1.48% of its total assets invested in corporate securities, which includes preferred common stocks. The Company has $306,000 or .28% of its assets invested in federal agency securities and municipal bonds. See Note D of Notes to Consolidated Financial Statements in the Annual Report to Stockholders attached hereto as Exhibit 13. OTS regulations restrict investments in corporate debt and most equity securities by the Association. These restrictions include prohibitions against investments in the federal agency debt securities of any one issuer in excess of 15% of the Association's unimpaired capital and unimpaired surplus as defined by federal regulations, plus an additional 10% if the investments are fully secured by readily marketable collateral. See "Regulation - Federal Regulation of Savings Associations" for a discussion of additional restrictions on the Association's investment activities. 13 The following table sets forth the composition of the Bank's investment portfolio at the dates indicated.
June 30, --------------------------------------------------------------------------------- 2001 2000 1999 --------------------- --------------------- ---------------------- Book % of Book % of Book % of Value Value Value Value Value Value --------------------- --------------------- ---------------------- (Dollars in Thousands) Investment Securities: Corporate equity securities ................. $1,619 43.92% $1,685 45.59% $1,438 46.51% Federal agency debt securities .............. 204 5.54 446 12.07 406 13.13 Municipal bonds ............................. 101 2.74 100 2.70 100 3.23 FHLB stock ....................................... 1,762 47.80 1,465 39.64 1,148 37.13 ----- ----- ----- ----- ----- ----- Total investment securities and FHLB stock ...................................... $3,686 100.00% $3,696 100.00% $3,092 100.00% ====== ====== ====== ====== ====== ====== Other Interest-Earning Assets: Interest-bearing deposits with banks ........... $6,691 95.75% $2,196 81.58% $8,212 90.28% Certificates of deposit invested in other institutions ......................... 297 4.25 496 18.42 884 9.72 ----- ----- ----- ----- ----- ----- Total ....................................... $6,988 100.00% $2,692 100.00% $9,096 100.00% ====== ====== ====== ====== ====== ====== Average remaining life or term to repricing of certificates of deposit ...................... 1-1/2 years 2 years 1 year
Contractual maturities of federal agency debt securities and municipal bonds are shown below: June 30, 2001 ---------------------- Weighted Book Average Value Yield ----------- ---------- (Dollars in Thousands) Due in one year or less $ --- ---% Due after one year through five years --- --- Due after five years through ten years 305 6.48 Due after ten years --- ----- $ 305 ===== 14 SOURCES OF FUNDS GENERAL. The Company's primary sources of funds are deposits, borrowings, repayment of loan principal, sales of loan participations, maturing investments in certificates of deposit, and funds provided from operations. Borrowings, consisting of FHLB advances, may be used at times to compensate for seasonal reductions in deposits or deposit inflows at less than projected levels, and may be used on a longer-term basis to support expanded lending activities. DEPOSITS. State Federal offers a variety of deposit accounts having a wide range of interest rates and terms. The Association's deposits consist of passbook savings accounts, NOW and money market accounts, and certificate accounts ranging in terms from three months to 60 months. The Association only solicits deposits from its market area and does not currently use brokers to obtain deposits. The Association relies primarily on competitive pricing policies, advertising and customer service to attract and retain these deposits. The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates, and competition. The variety of deposit accounts offered by the Association has allowed it to be competitive in obtaining funds and to respond with flexibility to changes in consumer demand. The Association has become more susceptible to short-term fluctuations in deposit flows, as customers have become more interest rate conscious. The ability of the Association to attract and maintain certificate of deposit accounts and the rates paid on these deposits has been and will continue to be significantly affected by market conditions. The following table sets forth the savings flows at the Association during the periods indicated.
Year Ended June 30, --------------------------------------------------------------- 2001 2000 1999 --------------------------------------------------------------- (Dollars in Thousands) Opening balance ........................ $53,648 $54,713 $53,672 Deposits ............................... 80,230 66,932 66,888 Withdrawals ............................ (73,984) (70,762) (68,735) Interest credited ...................... 3,093 2,765 2,888 ----- ----- ----- Ending balance ......................... $62,987 $53,648 $54,713 ======= ======= ======= Net increase (decrease) ................ $9,339 $(1,065) $1,041 ====== ======= ====== Percent increase (decrease) ............ 17.4% (1.95%) 1.94% ==== ==== ====
15 The following table indicates the amount of the Association's certificates of deposit and other deposits by time remaining until maturity as of June 30, 2001.
Maturity ---------------------------------------------------- Over Over 3 Months 3 to 6 6 to 12 Over or Less Months Months 12 Months Total ------------ ----------- ----------- ----------- ----------- (Dollars in Thousands) Certificates of deposit less than $100,000 ............................... $6,097 $11,183 $10,292 $14,986 $42,558 Certificates of deposit of $100,000 or more .. 1,345 3,254 1,843 2,736 9,178 ------ ------- ------- ------- ------- Total certificates of deposit ................ $7,442 $14,437 $12,135 $17,722 $51,736 ====== ======= ======= ======= =======
BORROWINGS. Although deposits are the Association's primary source of funds, the Association's policy has been to utilize borrowings when they are a less costly source of funds, can be invested at a positive interest rate spread or when the Association desires additional capacity to fund loan demand. State Federal's borrowings historically have consisted of advances from the FHLB of Des Moines upon the security of a blanket collateral agreement of a percentage of unencumbered loans. Such advances can be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. At June 30, 2001, the Association had $29.2 million in FHLB advances. At June 30, 2001, the Association had no repurchase agreements or other borrowings not mentioned above outstanding. The following table sets forth certain information including the maximum month-end balance and average balance of FHLB advances at the dates indicated.
Year Ended June 30, ----------------------------------------------- 2001 2000 1999 ----------------------------------------------- (Dollars In Thousands) Maximum Balance: --------------- FHLB advances $35,235 $29,284 $19,000 ======= ======= ======= Average Balance: --------------- FHLB advances $32,543 $21,716 $18,918 ======= ======= ======= Weighted average interest rate of FHLB advances 5.21% 6.31% 5.70% ==== ==== ====
16 SERVICE CORPORATION ACTIVITIES Federal associations generally may invest up to 2% of their assets in service corporations plus an additional 1% of assets if used for community purposes. In addition, federal associations may invest up to 50% of their regulatory capital in conforming loans to their service corporations. In addition to investments in service corporations, federal associations are permitted to invest an unlimited amount in operating subsidiaries engaged solely in activities in which a federal association may engage directly. State Federal has one subsidiary which is a service corporation, State Service Corporation, located in Des Moines, Iowa. State Service Corporation was organized by State Federal in 1976. State Service Corporation owns and operates a 60-unit apartment complex, in Pleasant Hill, Iowa. During the fiscal year ended June 30, 2001, State Service Corporation's gross revenues from property management activities (consisting of rental income) totaled approximately $331,700 and expenses (consisting of depreciation, interest, property taxes, insurance, management fees, and maintenance) were $270,450. Income tax expense totaled $30,000 for 2001. State Service Corporation has not had significant capital expenditures with regard to its real estate operation over the past three fiscal years. Revenues from State Service Corporation's interest income on real estate contracts totaled $17,650. REGULATION GENERAL State Federal is a federally chartered savings and loan association, the deposits of which are federally insured and backed by the full faith and credit of the United States Government. Accordingly, State Federal is subject to broad federal regulation and oversight extending to all its operations. The Association is a member of the FHLB of Des Moines and is subject to certain limited regulation by the Board of Governors of the Federal Reserve System ("Federal Reserve Board"). As the savings and loan holding company of State Federal, the Holding Company also is subject to federal regulation and oversight. The purpose of the regulation of the Holding Company and other holding companies is to protect subsidiary savings associations. The Association is a member of the Savings Association Insurance Fund ("SAIF"), which together with the Bank Insurance Fund (the "BIF") are the two deposit insurance funds administered by the FDIC, and the deposits of the Association are insured by the FDIC. As a result, the FDIC has certain regulatory and examination authority over State Federal. Certain of these regulatory requirements and restrictions are discussed below or elsewhere in this document. FEDERAL REGULATION OF SAVINGS ASSOCIATIONS The OTS has extensive authority over the operations of savings associations. As part of this authority, State Federal is required to file periodic reports with the OTS and is subject to periodic examinations by the OTS and the FDIC. The last regular examination of State Federal was as of March 31, 2001. When these examinations are conducted by the OTS and the FDIC, the examiners may require the Association to provide for higher general or specific loan loss reserves. All savings associations are subject to a semi-annual assessment, based upon the savings association's total assets, to fund the operations of the OTS. The Association's OTS assessment for the fiscal year ended June 30, 2001 was approximately $27,800. The OTS also has extensive enforcement authority over all savings institutions and their holding companies, including State Federal and the Holding Company. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and 17 unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the OTS. Except under certain circumstances, public disclosure of final enforcement actions by the OTS is required. In addition, the investment, lending and branching authority of the Association is prescribed by federal law and it is prohibited from engaging in any activities not permitted by such laws. For instance, no savings institution may invest in non-investment grade corporate debt securities. In addition, the permissible level of investment by federal associations in loans secured by non-residential real property may not exceed 400% of total capital, except with approval of the OTS. Federal savings associations are also generally authorized to branch nationwide. State Federal is in compliance with the noted restrictions. The Association's general permissible lending limit for loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus). At June 30, 2001, the Association's lending limit under this restriction was approximately $1.6 million. The OTS, as well as the other federal banking agencies, has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, internal controls and audit systems, interest rate risk exposure and compensation and other employee benefits. Any institution which fails to comply with these standards must submit a compliance plan. A failure to submit a plan or to comply with an approved plan will subject the institution to further enforcement action. INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC State Federal is a member of the SAIF, which is administered by the FDIC. Deposits are insured up to applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the SAIF or the BIF. The FDIC also has the authority to initiate enforcement actions against savings associations, after giving the OTS an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices, or is in an unsafe or unsound condition. The FDIC's deposit insurance premiums are assessed through a risk-based system, under which all insured depository institutions are placed into one of nine categories and assessed insurance premiums based upon their level of capital and supervisory evaluation. Under the system, institutions classified as well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1 or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at least 6% and a risk-based capital ratio of at least 10%) and considered healthy pay the lowest premium while institutions that are less than adequately capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a risk-based capital ratio of less than 8%) and considered of substantial supervisory concern pay the highest premium. Risk classification of all insured institutions will be made by the FDIC for each semi-annual assessment period. As of June 30, 2001, the Association met the requirements of a well-capitalized institution. The premium schedule for BIF and SAIF insured institutions ranged from 0 to 27 basis points. However, SAIF insured institutions and BIF insured institutions are required to pay a Financing Corporation assessment in order to fund the interest on bonds issued to resolve thrift failures in the 1980s. This amount is currently equal to about 1.88 points for each $100 in domestic deposits for BIF and SAIF insured institutions. These assessments, which may be revised based upon the level of BIF and SAIF deposits, will continue until the bonds mature in 2017 through 2019. REGULATORY CAPITAL REQUIREMENTS Federally insured savings associations, such as the Association, are required to maintain a minimum level of regulatory capital. The OTS has established capital standards, including a tangible capital requirement, a 18 leverage ratio (or core capital) requirement and a risk-based capital requirement applicable to such savings associations. These capital requirements must be generally as stringent as the comparable capital requirements for national banks. The OTS is also authorized to impose capital requirements in excess of these standards on individual associations on a case-by-case basis. The capital regulations require tangible capital of at least 1.5% of adjusted total assets (as defined by regulation). Tangible capital generally includes common stockholders' equity and retained income, and certain noncumulative perpetual preferred stock and related income. In addition, all intangible assets, other than a limited amount of purchased mortgage servicing rights, must be deducted from tangible capital for calculating compliance with the requirement. The OTS regulations establish special capitalization requirements for savings associations that own subsidiaries. In determining compliance with the capital requirements, all subsidiaries engaged solely in activities permissible for national banks or engaged in certain other activities solely as agent for its customers are "includable" subsidiaries that are consolidated for capital purposes in proportion to the association's level of ownership. For excludable subsidiaries, the debt and equity investments in such subsidiaries are deducted from assets and capital. At June 30, 2001 the Association had tangible capital of $6.0 million, or 5.87% of adjusted total assets, which is approximately $4.4 million above the minimum requirement of 1.5% of adjusted total assets in effect on that date. The capital standards also require core capital equal to at least 3% to 4% of adjusted total assets depending on an institution's rating. Core capital generally consists of tangible capital plus certain intangible assets, including a limited amount of purchased credit card relationships. As a result of the prompt corrective action provisions discussed below, however, a savings association must maintain a core capital ratio of at least 4% to be considered adequately capitalized unless its supervisory condition is such to allow it to maintain a 3% ratio. At June 30, 2001, the Association had core capital equal to $6.0 million, or 5.87% of adjusted total assets, which is $1.9 million above the minimum leverage ratio requirement of 4% as in effect on that date. The OTS risk-based requirement requires savings associations to have total capital of at least 8% of risk-weighted assets. Total capital consists of core capital, as defined above, and supplementary capital. Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used to satisfy the risk-based requirement only to the extent of core capital. The OTS is also authorized to require a savings association to maintain an additional amount of total capital to account for concentration of credit risk and the risk of non-traditional activities. At June 30, 2001, State Federal had no capital instruments that qualify as supplementary capital but had $382,000 of general loss reserves, which was less than .59% of risk-weighted assets. Certain exclusions from capital and assets are required to be made for the purpose of calculating total capital. Such exclusions consist of equity investments (as defined by regulation) and that portion of land loans and nonresidential construction loans in excess of an 80% loan-to-value ratio and reciprocal holdings of qualifying capital instruments. State Federal had no such exclusions from capital and assets at June 30, 2001. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet items, will be multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent in the type of asset. For example, the OTS has assigned a risk weight of 50% for prudently underwritten permanent one- to four-family first lien mortgage loans not more than 90 days delinquent and having a loan to value ratio of not more than 80% at origination unless insured to such ratio by an insurer approved by the FNMA or FHLMC. OTS regulations also require that every savings association with more than normal interest rate risk exposure to deduct from its total capital, for purposes of determining compliance with such requirement, an amount 19 equal to 50% of its interest-rate risk exposure multiplied by the present value of its assets. This exposure is a measure of the potential decline in the net portfolio value of a savings association, greater than 2% of the present value of its assets, based upon a hypothetical 200 basis point increase or decrease in interest rates (whichever results in a greater decline). Net portfolio value is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The rule will not become effective until the OTS evaluates the process by which savings associations may appeal an interest rate risk deduction determination. It is uncertain when this evaluation may be completed. Any savings association with less than $300 million in assets and a total capital ratio in excess of 12% is exempt from this requirement unless the OTS determines otherwise. On June 30, 2001, the Association had total risk-based capital of $6.3 million (including $6.0 million in core capital and $382,000 in qualifying supplementary capital) and risk-weighted assets of $64.0 million or total risk-based capital of 9.91% of risk-weighted assets. This amount was $1.2 million above the 8% requirement in effect on that date. The OTS and the FDIC are authorized and, under certain circumstances required, to take certain actions against savings associations that fail to meet their capital requirements. The OTS is generally required to take action to restrict the activities of an "undercapitalized association" (generally defined to be one with less than either a 4% core capital ratio, a 4% Tier 1 risk-based capital ratio or an 8% risk-based capital ratio). Any such association must submit a capital restoration plan and until such plan is approved by the OTS may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions. The OTS is authorized to impose the additional restrictions that are applicable to significantly undercapitalized associations. Any savings association that fails to comply with its capital plan or is "significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios of less than 3% or a risk-based capital ratio of less than 6%) must be made subject to one or more of additional specified actions and operating restrictions which may cover all aspects of its operations and include a forced merger or acquisition of the association. An association that becomes "critically undercapitalized" (i.e., a tangible capital ratio of 2% or less) is subject to further mandatory restrictions on its activities in addition to those applicable to significantly undercapitalized associations. In addition, the OTS must appoint a receiver (or conservator with the concurrence of the FDIC) for a savings association, with certain limited exceptions, within 90 days after it becomes critically undercapitalized. Any undercapitalized association is also subject to the general enforcement authorities of the OTS or FDIC, including the appointment of a conservator or a receiver. The OTS is also generally authorized to reclassify an association into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition. The imposition by the OTS or the FDIC of any of these measures on the Association may have a substantial adverse effect on the Association's operations and profitability. Holding Company shareholders do not have preemptive rights, and therefore, if the Holding Company is directed by the OTS or the FDIC to issue additional shares of Common Stock, such issuance may result in the dilution in the percentage of ownership of the Holding Company. LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS OTS regulations impose various restrictions or requirements on savings associations with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account. OTS regulations permit a federal savings association to pay dividends in any calendar year equal to net income for that year plus retained earnings for the preceding two years. 20 ACCOUNTING An OTS policy statement applicable to all savings associations clarifies and re-emphasizes that the investment activities of a savings association must be in compliance with approved and documented investment policies and strategies, and must be accounted for in accordance with GAAP. Under the policy statement, management must support its classification of and accounting for loans and securities (i.e., whether held for investment, sale or trading) with appropriate documentation. The Association is in compliance with these amended rules. The OTS has adopted an amendment to its accounting regulations, which may be made more stringent than GAAP by the OTS, to require that transactions be reported in a manner that best reflects their underlying economic substance and inherent risk and that financial reports must incorporate any other accounting regulations or orders prescribed by the OTS. QUALIFIED THRIFT LENDER TEST All savings associations, including the Association, are required to meet a qualified thrift lender ("QTL") test to avoid certain restrictions on their operations. This test requires a savings association to have at least 65% of its portfolio assets (as defined by regulation) in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis. As an alternative, the Savings Association may maintain 60% of its assets specified in Section 770(a)(19) of the Internal Revenue Code. Under either test, such assets primarily consist of residential housing related loans and investments. At June 30, 2001, the Association met the test and has always met the test since its effectiveness. Any savings association that fails to meet the QTL test must convert to a national bank charter, unless it requalifies as a QTL and thereafter remains a QTL. If an association does not requalify and converts to a national bank charter, it must remain SAIF-insured until the FDIC permits it to transfer to the BIF. If such an association has not yet requalified or converted to a national bank, its new investments and activities are limited to those permissible for both a savings association and a national bank, and it is limited to national bank branching rights in its home state. In addition, the association is immediately ineligible to receive any new FHLB borrowings and is subject to national bank limits for payment of dividends. If such association has not requalified or converted to a national bank within three years after the failure, it must divest of all investments and cease all activities not permissible for a national bank. In addition, it must repay promptly any outstanding FHLB borrowings, which may result in prepayment penalties. If any association that fails the QTL test is controlled by a holding company, then within one year after the failure, the holding company must register as a bank holding company and become subject to all restrictions on bank holding companies. See "- Holding Company Regulation." COMMUNITY REINVESTMENT ACT Under the Community Reinvestment Act ("CRA"), every FDIC insured institution has a continuing and affirmative obligation consistent with safe and sound banking practices to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the OTS, in connection with the examination of State Federal to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications, such as a merger or the establishment of a branch, by State Federal. An unsatisfactory rating may be used as the basis for the denial of an application by the OTS. The federal banking agencies, including the OTS, have recently revised the CRA regulations and the methodology for determining an institution's compliance with the CRA. Due to the heightened attention being given to the CRA in the past few years, the Association may be required to devote additional funds for investment and lending in its local community. The Association examined for CRA compliance in December 1999 and received a rating of satisfactory. 21 TRANSACTIONS WITH AFFILIATES Generally, transactions between a savings association or its subsidiaries and its affiliates are required to be on terms as favorable to the association as transactions with non-affiliates. In addition, certain of these transactions such as loans to an affiliate, are restricted to a percentage of the association's capital. Affiliates of State Federal include the Holding Company and any company which is under common control with the Association. In addition, a savings association may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the securities of most affiliates. The Association's subsidiaries are not deemed affiliates, however; the OTS has the discretion to treat subsidiaries of savings associations as affiliates on a case by case basis. Certain transactions with directors, officers or controlling persons are also subject to conflict of interest regulations enforced by the OTS. These conflict of interest regulations and other statutes also impose restrictions on loans to such persons and their related interests. Among other things, such loans must be made on terms substantially the same as for loans to unaffiliated individuals. HOLDING COMPANY REGULATION The Holding Company is a unitary savings and loan holding company subject to regulatory oversight by the OTS. As such, the Holding Company is required to register and file reports with the OTS and is subject to regulation and examination by the OTS. In addition, the OTS has enforcement authority over the Holding Company and its non-savings association subsidiaries which also permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings association. As a unitary savings and loan holding company, the Holding Company generally is not subject to activity restrictions. If the Holding Company acquires control of another savings association as a separate subsidiary, it would become a multiple savings and loan holding company, and the activities of the Holding Company and any of its subsidiaries (other than the Association or any other SAIF-insured savings association) would become subject to such restrictions unless such other associations each qualify as a QTL and were acquired in a supervisory acquisition. If the Association fails the QTL test, the Holding Company must obtain the approval of the OTS prior to continuing after such failure, directly or through its other subsidiaries, any business activity other than those approved for multiple savings and loan holding companies or their subsidiaries. In addition, within one year of such failure the Holding Company must register as, and will become subject to, the restrictions applicable to bank holding companies. The activities authorized for a bank holding company are more limited than are the activities authorized for a unitary or multiple savings and loan holding company. See "--Qualified Thrift Lender Test." The Holding Company must obtain approval from the OTS before acquiring control of any other SAIF-insured association. Such acquisitions are generally prohibited if they result in a multiple savings and loan holding company controlling savings associations in more than one state. However, such interstate acquisitions are permitted based on specific state authorization or in a supervisory acquisition of a failing savings association. FEDERAL SECURITIES LAW The stock of the Holding Company is registered with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Holding Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the SEC under the Exchange Act. Holding Company stock held by persons who are affiliates (generally officers, directors and principal stockholders) of the Holding Company may not be resold without registration or unless sold in accordance with certain resale restrictions. If the Holding Company meets specified current public information requirements, each affiliate of the Holding Company is able to sell in the public market, without registration, a limited number of shares in any three-month period. 22 FEDERAL RESERVE SYSTEM The Federal Reserve Board requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (primarily checking, NOW and Super NOW checking accounts). At June 30, 2001, the Association was in compliance with these reserve requirements. The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements that may be imposed by the OTS. See "-- Liquidity." Savings associations are authorized to borrow from the Federal Reserve Bank "discount window," but Federal Reserve Board regulations require associations to exhaust other reasonable alternative sources of funds, including FHLB borrowings, before borrowing from the Federal Reserve Bank. FEDERAL HOME LOAN BANK SYSTEM The Association is a member of the FHLB of Des Moines, which is one of 12 regional FHLBs, that administers the home financing credit function of savings associations. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with policies and procedures, established by the board of directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide funds for residential home financing. As a member, State Federal is required to purchase and maintain stock in the FHLB of Des Moines. At June 30, 2001, State Federal had $1.8 million in FHLB stock, which was in compliance with this requirement. In past years, the Association has received substantial dividends on its FHLB stock. Over the past five fiscal years such dividends have averaged 6.59 % and were 6.07% for fiscal year 2001. Under federal law the FHLBs are required to provide funds for the resolution of troubled savings associations and to contribute to low- and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions have affected adversely the level of FHLB dividends paid and could continue to do so in the future. These contributions could also have an adverse effect on the value of FHLB stock in the future. A reduction in value of the Association's FHLB stock may result in a corresponding reduction in State Federal's capital. For the fiscal year ended June 30, 2001, dividends paid by the FHLB of Des Moines to State Federal totaled $98,900 which constitutes a $20,700 increase from the amount of dividends received in the fiscal year ended June 30, 2000. The $20,300 dividend received for the period ended May 31, 2001 and paid June 15, 2001 reflects an annualized rate of 4.56%, which decreased 2.30% from the same quarter ended June 30, 2000, which was a rate of 6.86%. FEDERAL AND STATE TAXATION In addition to the regular income tax, corporations, including savings associations such as the Association, generally are subject to a minimum tax. An alternative minimum tax is imposed at a minimum tax rate of 20% on alternative minimum taxable income, which is the sum of a corporation's regular taxable income (with certain adjustments) and tax preference items, less any available exemption. The alternative minimum tax is imposed to the extent it exceeds the corporation's regular income tax and net operating losses can offset no more than 90% of alternative minimum taxable income. A portion of the Association's reserves for losses on loans may not, without adverse tax consequences, be utilized for the payment of cash dividends or other distributions to a shareholder (including distributions on redemption, dissolution or liquidation) or for any other purpose (except to absorb bad debt losses). As of June 30, 23 2001, the portion of the Association's reserves subject to this treatment for tax purposes totaled approximately $1.35 million. State Federal and its subsidiaries file consolidated federal income tax returns on a fiscal year basis using the accrual method of accounting. State Federal and its subsidiaries have not been audited by the IRS within the last ten years. IOWA TAXATION. The Holding Company and the Association's subsidiaries file Iowa corporation tax returns while the Association files an Iowa franchise tax return. Iowa imposes a franchise tax on the taxable income for both mutual and stock savings and loan associations. The tax rate is 5%, which may effectively be increased, in individual cases, by application of a minimum tax provision. Taxable income under the franchise tax is generally similar to taxable income under the federal corporate income tax, except that, under the Iowa franchise tax, no deduction is allowed for Iowa franchise tax and taxable income includes interest on state and municipal obligations. Interest on U.S. obligations is taxable under the Iowa franchise tax and under the federal corporate income tax. Taxable income under the Iowa corporate income tax is generally similar to taxable income under the federal corporate income tax, except that, under the Iowa tax, no deduction is allowed for Iowa income tax payments; interest from state and municipal obligations is included in income; interest from U.S. obligations is excluded from income; and 50% of federal corporate income tax is excluded from income. The Iowa corporate income tax rates range from 6% to 12% and may be effectively increased, in individual cases, by application of a minimum tax provision. DELAWARE TAXATION. As a Delaware holding company, the Holding Company is exempted from Delaware corporate income tax but is required to file an annual report with and pay an annual fee to the State of Delaware. The Holding Company is also subject to an annual franchise tax imposed by the State of Delaware. COMPETITION State Federal faces strong competition, both in originating real estate and other loans and in attracting deposits. Competition in originating real estate loans comes primarily from other commercial banks, savings associations, credit unions and mortgage bankers making loans secured by real estate located in the Association's market area. The Association competes for real estate and other loans principally on the basis of the quality of services it provides to borrowers, and loan fees it charges, and the types of loans it originates. The Association attracts all of its deposits through its retail banking offices, primarily from the communities in which those retail banking offices are located; therefore, competition for those deposits is principally from other commercial banks, savings associations and credit unions located in the same communities. The Association competes for these deposits by offering a variety of deposit accounts at competitive rates, convenient business hours, and convenient branch locations with interbranch deposit and withdrawal privileges at each. The Association's primary concentration is Des Moines, Iowa. There are over 30 commercial banks and approximately 30 credit unions in the Association's market area. The Association estimates its share of the savings market in its primary market area to be approximately 1.0%. EMPLOYEES At June 30, 2001, the Company and its subsidiary had a total of 25 full- time employees. The Association's employees are not represented by any collective bargaining group. Management considers its employee relations to be good. ITEM 2. PROPERTIES ---------- 24 The Association conducts its business at its main office and one other location in its primary market area. The following table sets forth information relating to each of the Association's offices as of June 30, 2001. The Association owns two branch offices and its main office. The total net book value of the Association's premises and equipment (including land, building, furniture, fixtures and equipment) at June 30, 2001 was $3.9 million. See Note H of Notes to Consolidated Financial Statements in the Annual Report to Stockholders attached hereto as Exhibit 13.
Total Approximate Date Square Net Book Value at Location Acquired Footage June 30, 2001 ------------------ -------------------- ----------------- ------------------------ Main Office: 13523 University Avenue 2001 12,000 $ 2,630,000 Clive, Iowa Branch Offices: 4018 University Avenue 1985 4,000 $ 280,000 Des Moines, Iowa 519 Sixth Avenue January 3, 1995 3,300 $ 710,000 Des Moines, Iowa
The Association conducts its data processing through a service bureau, NCR Corporation. The net book value of the data processing and computer equipment utilized by the Association at June 30, 2001 was $74,000. The net book value of other furniture and equipment at June 30, 2001 was $234,000 ITEM 3. LEGAL PROCEEDINGS ----------------- State Federal is involved from time to time as plaintiff or defendant in various legal actions arising in the normal course of its business. Neither the Company nor State Service Corporation, the Association's wholly-owned subsidiary, is a party to any legal action. While the ultimate outcome of these proceedings cannot be predicted with certainty, it is the opinion of management, after consultation with counsel representing State Federal in the proceedings, that the resolution of these proceedings should not have a material effect on State Federal's consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended June 30, 2001. 25 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ------------------------------------------------- Page 37 of the attached 2001 Annual Report to Stockholders is herein incorporated by reference. The dividend payout ratio for June 30, 2001 was 87.5%. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION AND SELECTED FINANCIAL DATA ----------------------------------------------------------- Pages 7 through 16 of the attached 2001 Annual Report to Stockholders are herein incorporated by reference. ITEM 7. FINANCIAL STATEMENTS -------------------- The following information appearing in the Company's Annual Report to Stockholders for the year ended June 30, 2001 is incorporated by reference in this Annual Report on Form 10-KSB as Exhibit 13.
PAGES IN ANNUAL REPORT SECTION ANNUAL REPORT --------------------------------------------------------------------------------------------- ---------------- Independent Auditors' Report ................................................................ 17 Consolidated Balance Sheets as of June 30, 2001 and 2000 .................................... 18 Consolidated Statements of Income for the Years Ended June 30, 2001, 2000 and 1999 ........................................................... 19 Consolidated Statements of Stockholders' Equity for Years Ended June 30, 2001, 2000 and 1999 ........................................................... 21 Consolidated Statements of Cash Flows for Years Ended June 30, 2001, 2000 and 1999 .......... 22 Notes to Consolidated Financial Statements .................................................. 23 through 36
With the exception of the aforementioned information, the Company's Annual Report to Stockholders for the year ended June 30, 2001 is not deemed filed as part of this Annual Report on Form 10-KSB. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ------------------------------------------------ There has been no Current Report on Form 8-K filed within 24 months prior to the date of the most recent financial statements reporting a change of accountants and/or reporting disagreements on any matter of accounting principle or financial statement disclosure. 26 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT ------------------------------------------------------------- DIRECTORS --------- Information concerning directors and executive officers of the Company is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held in 2001, except for information contained under the heading "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year. ITEM 10. EXECUTIVE COMPENSATION ---------------------- Information concerning executive compensation is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held in 2001, except for information contained under the heading "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ---------------------------------------- Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held in 2001, except for information contained under the heading "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- Information concerning certain relationships and related transactions is incorporated herein by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held in 2001, except for information contained under the heading "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year. 27 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) 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. STATEFED FINANCIAL CORPORATION Date: September 28, 2001 By: /s/ Randall C. Bray ----------------------- ------------------------------- Randall C. Bray (DULY AUTHORIZED REPRESENTATIVE) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/Randall C. Bray /s/ Craig Wood --------------------------- ------------------------------- RANDALL C. BRAY CRAIG WOOD Chairman of the Board Director and Co- President Officer Date: September 28, 2001 Date: September 28, 2001 ---------------------- -------------------------------- --------------------------- ------------------------------------- HARRY A. WINEGAR EUGENE M. MCCORMICK Director Director Date: September 28, 2001 Date: September 28, 2001 ---------------------- -------------------------------- /s/ Sidney M. Ramey /s/ Kevin J. Kruse --------------------------- ------------------------------------- SIDNEY M. RAMEY KEVIN J. KRUSE Director Director Date: September 28, 2001 Date: September 28, 2001 ---------------------- -------------------------------- /s/ Andra K. Black --------------------------- ------------------------------------- WILLIAM T. NASSIF ANDRA K. BLACK Director Director, Co-President, Secretary and Chief Financial and Accounting Officer Date: September 28, 2001 Date: September 28, 2001 ---------------------- -------------------------------- 28 PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (A) EXHIBITS REFERENCE TO PRIOR FILING OR EXHIBIT NUMBER EXHIBIT NUMBER DOCUMENT ATTACHED HERETO ---------------- ---------------------------------------------------------------------- ----------------- 3(I) Articles of Incorporation, including amendments thereto * 3(II) By-Laws ** 4 Instruments Defining the Rights of Security Holders, including indentures * 9 Voting Trust Agreement None 10 Executive Compensation plans and Arrangements (a) Employment Contract Between: (i) Randall C. Bray and the Association 10.1 (ii) Andra K. Black and the Association * (iii) Craig Wood and the Association * (B) 1993 Stock Option and Incentive Plan * (C) 1993 Management Recognition and Retention Plan * (D) Deferred Compensation Agreement (John Golden) * (E) Severance Agreement (John Golden) 10.2 11 Statement Regarding Computation of Per Share Earnings None 13 Annual Report to Security Holders 13 16 Letter Regarding Change in Certifying Accountant None 18 Letter Regarding Change in Accounting Principles None 21 Subsidiaries of Registrant 21 22 Published Report Regarding Matters Submitted to None Vote of Security Holders 23 Consents of Experts and Counsel 23 24 Power of Attorney Not Required 99 Additional Exhibits None
---------------- * Filed as exhibits to the Company's Form S-1 registration statement filed on September 23, 1993 (File No. 33-69314) pursuant to Section 5 of the Securities Act of 1933. All of such previously filed documents are hereby incorporated herein by reference in accordance with Item 601 of Regulation S-K. ** Filed as exhibits to the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 2000. 29 (B) REPORTS ON FORM 8-K THE FOLLOWING REPORTS ON FORM 8-K WERE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION DURING THE QUARTER ENDING JUNE 30, 2001:
Regarding Event Date Filed: Occurring On: Nature of Event ----------- ------------------- ------------------------------------------------------------------ 04/30/2001 04/24/2001 Chairman John F. Golden announces retirement from Board of Directors of Registrant 05/08/2001 05/03/2001 Announcement of Registrant's third quarter earnings 05/10/2001 05/08/2001 Registrant announces new Chairman; announces Annual Meeting date 05/11/2001 05/11/2001 Announcement of offer to buy up to 230,770 Shares "Dutch Auction." 06/15/2001 06/14/2001 Announcement of preliminary results of modified dutch auction tender offer 06/21/2001 06/19/2001 Announcement of final results of modified dutch auction tender offer
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