UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20529
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended September 30, 2003
[ ] Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the transition period from to
Commission File Number 000-32955
LSB Corporation
(Exact name of Registrant as specified in its Charter)
| Massachusetts (State or other jurisdiction of incorporation or organization) |
04-3557612 (I.R.S. Employer Identification Number) |
|
| 30 Massachusetts Avenue, North Andover, MA (Address of principal executive offices) |
01845 (Zip Code) |
(978) 725-7500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days.
| Yes X | No |
Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes | No X |
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
| Class | Outstanding as of September 30, 2003 | |
| Common Stock, par value $.10 per share | 4,220,462 shares |
LSB CORPORATION AND SUBSIDIARY
INDEX
PART I – FINANCIAL INFORMATION
| Page | ||||
| ITEM 1 | FINANCIAL STATEMENTS: | |||
| Consolidated Balance Sheets | 3 | |||
| Consolidated Statements of Income | 4 | |||
| Consolidated Statements of Changes in Stockholders’ Equity | 5 | |||
| Consolidated Statements of Cash Flows | 6 | |||
| Notes to Consolidated Financial Statements | 7-8 | |||
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: | |||
| Financial Condition: | ||||
| Investment Portfolio | 9-10 | |||
| Loan Portfolio | 10 | |||
| Loan Interest Income | 11 | |||
| Allowance for Loan Losses | 11 | |||
| Risk Assets | 11-12 | |||
| Deposit Portfolio | 12 | |||
| Deposit Interest Expense | 12 | |||
| Results of Operations: | ||||
| Three Months ended September 30, 2003 and 2002 | 13-14 | |||
| Nine Months ended September 30, 2003 and 2002 | 15-16 | |||
| Liquidity and Capital Resources | 17 | |||
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK | 18 | ||
| ITEM 4 | CONTROLS AND PROCEDURES | 18 | ||
| PART II – OTHER INFORMATION | ||||
| ITEM 1 | LEGAL PROCEEDINGS | 19 | ||
| ITEM 2 | CHANGES IN SECURITIES | 19 | ||
| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 19 | ||
| ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 19 | ||
| ITEM 5 | OTHER INFORMATION | 19 | ||
| ITEM 6 | EXHIBITS AND REPORTS ON FORM 8-K | 20 | ||
| SIGNATURES | 21 | |||
| EXHIBIT INDEX | 22 | |||
2
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| September 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (In Thousands) | ||||||||||
ASSETS |
||||||||||
Assets: |
||||||||||
Cash and due from banks |
$ | 8,017 | 7,136 | |||||||
Federal funds sold |
— | 9,633 | ||||||||
Total cash and cash equivalents |
8,017 | 16,769 | ||||||||
Investment securities held to maturity (market value of
$145,488 in 2003 and $116,321 in 2002) |
144,505 | 113,325 | ||||||||
Investment securities available for sale (amortized
cost of $57,680 in 2003 and $52,055 in 2002) |
57,774 | 53,084 | ||||||||
Federal Home Loan Bank stock, at cost |
5,950 | 5,950 | ||||||||
Loans, net of allowance for loan losses |
201,573 | 238,960 | ||||||||
Bank premises and equipment |
2,808 | 3,050 | ||||||||
Accrued interest receivable |
2,522 | 2,459 | ||||||||
Deferred income tax asset |
3,120 | 3,686 | ||||||||
Other assets |
1,592 | 1,851 | ||||||||
Total assets |
$ | 427,861 | $ | 439,134 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||
Liabilities: |
||||||||||
Interest bearing deposits |
$ | 266,679 | $ | 265,283 | ||||||
Non-interest bearing deposits |
13,852 | 14,182 | ||||||||
Federal Home Loan Bank advances |
82,346 | 94,237 | ||||||||
Securities Sold under Agreements to Repurchase |
2,005 | 3,950 | ||||||||
Other borrowed funds |
5,933 | 3,404 | ||||||||
Advance payments by borrowers for taxes and insurance |
538 | 518 | ||||||||
Other liabilities |
3,489 | 3,501 | ||||||||
Total liabilities |
374,842 | 385,075 | ||||||||
Stockholders’ equity: |
||||||||||
Preferred stock, $.10 par value per share: |
||||||||||
5,000,000 shares authorized, none issued |
– | – | ||||||||
Common stock, $.10 par value per share;
20,000,000 shares authorized;
4,439,762 and 4,389,705 shares issued at
September 30, 2003 and December 31, 2002,
respectively, and 4,220,462 and 4,253,205 shares
outstanding at September 30, 2003 and
December 31, 2002 |
444 | 439 | ||||||||
Additional paid-in capital |
58,115 | 57,845 | ||||||||
Accumulated deficit |
(2,844 | ) | (3,168 | ) | ||||||
Treasury stock, at cost (219,300 and
136,500 shares at September 30, 2003
and December 31, 2002, respectively) |
(2,758 | ) | (1,736 | ) | ||||||
Accumulated other comprehensive income |
62 | 679 | ||||||||
Total stockholders’ equity |
53,019 | 54,059 | ||||||||
Total liabilities and stockholders’ equity |
$ | 427,861 | $ | 439,134 | ||||||
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
3
LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three months ended | Nine months ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| (In Thousands, except share data) | |||||||||||||||||
Interest and dividend income: |
|||||||||||||||||
Loans |
$ | 3,381 | $ | 4,268 | $ | 11,069 | $ | 12,700 | |||||||||
Investment securities held to maturity |
1,176 | 1,381 | 3,353 | 4,763 | |||||||||||||
Investment securities available for sale |
367 | 410 | 1,323 | 1,325 | |||||||||||||
Federal Home Loan Bank stock |
45 | 56 | 140 | 167 | |||||||||||||
Other interest and dividend income |
8 | 43 | 68 | 104 | |||||||||||||
Total interest and dividend income |
4,977 | 6,158 | 15,953 | 19,059 | |||||||||||||
Interest expense: |
|||||||||||||||||
Deposits |
1,013 | 1,433 | 3,259 | 4,510 | |||||||||||||
Borrowed funds |
1,117 | 1,417 | 3,502 | 4,218 | |||||||||||||
Securities sold under agreements to repurchase |
4 | 5 | 14 | 15 | |||||||||||||
Other borrowed funds |
31 | 68 | 105 | 219 | |||||||||||||
Total interest expense |
2,165 | 2,923 | 6,880 | 8,962 | |||||||||||||
Net interest income |
2,812 | 3,235 | 9,073 | 10,097 | |||||||||||||
Provision for loan losses |
– | – | – | – | |||||||||||||
Net interest income after provision for loan losses |
2,812 | 3,235 | 9,073 | 10,097 | |||||||||||||
Non-interest income: |
|||||||||||||||||
Loan servicing fees |
233 | (102 | ) | 53 | (14 | ) | |||||||||||
Deposit account fees |
183 | 172 | 526 | 491 | |||||||||||||
Gains on sales of mortgage loans |
143 | 147 | 457 | 323 | |||||||||||||
Other income |
99 | 106 | 285 | 301 | |||||||||||||
Total non-interest income |
658 | 323 | 1,321 | 1,101 | |||||||||||||
Non-interest expense: |
|||||||||||||||||
Salaries and employee benefits |
1,417 | 1,507 | 4,488 | 4,526 | |||||||||||||
Occupancy and equipment expenses |
159 | 182 | 581 | 595 | |||||||||||||
Professional expenses |
187 | 170 | 550 | 537 | |||||||||||||
Data processing expenses |
186 | 200 | 547 | 566 | |||||||||||||
Other expenses |
468 | 470 | 1,295 | 1,365 | |||||||||||||
Total non-interest expenses |
2,417 | 2,529 | 7,461 | 7,589 | |||||||||||||
Income before income tax expense |
1,053 | 1,029 | 2,933 | 3,609 | |||||||||||||
Income tax expense |
399 | 334 | 1,094 | 1,279 | |||||||||||||
Net income |
$ | 654 | $ | 695 | $ | 1,839 | $ | 2,330 | |||||||||
Average shares outstanding |
4,214,501 | 4,343,045 | 4,211,435 | 4,369,759 | |||||||||||||
Average diluted shares outstanding |
4,412,909 | 4,515,517 | 4,378,550 | 4,544,412 | |||||||||||||
Basic earnings per share |
$ | 0.16 | $ | 0.16 | $ | 0.44 | $ | 0.53 | |||||||||
Diluted earnings per share |
$ | 0.15 | $ | 0.15 | $ | 0.42 | $ | 0.51 | |||||||||
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
4
LSB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
| Accumulated | ||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||
| Common | Paid-In | (Accumulated | Treasury | Comprehensive | Stockholders’ | |||||||||||||||||||||
| Stock | Capital | Deficit) | Stock | Income | Equity | |||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||
Balance at December 31, 2001 |
$ | 438 | $ | 57,813 | $ | (4,348 | ) | $ | – | $ | 189 | $ | 54,092 | |||||||||||||
Net income |
– | – | 2,330 | – | – | 2,330 | ||||||||||||||||||||
Other comprehensive income: |
||||||||||||||||||||||||||
Unrealized gain on securities |
||||||||||||||||||||||||||
available for sale (tax effect $310) |
– | – | – | – | 602 | 602 | ||||||||||||||||||||
Total comprehensive income |
2,932 | |||||||||||||||||||||||||
Exercise of stock options |
1 | 14 | — | — | — | 15 | ||||||||||||||||||||
Dividends declared and paid
($0.33 per share) |
– | – | (1,447 | ) | – | – | (1,447 | ) | ||||||||||||||||||
Purchase of 82,500 shares of Treasury
Stock, at cost |
— | — | — | (1,080 | ) | — | (1,080 | ) | ||||||||||||||||||
Balance at September 30, 2002 |
$ | 439 | $ | 57,827 | $ | (3,465 | ) | $ | (1,080 | ) | $ | 791 | $ | 54,512 | ||||||||||||
| Accumulated | ||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||
| Common | Paid-In | (Accumulated | Treasury | Comprehensive | Stockholders’ | |||||||||||||||||||||
| Stock | Capital | Deficit) | Stock | Income | Equity | |||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||
Balance at December 31, 2002 |
$ | 439 | $ | 57,845 | $ | (3,168 | ) | $ | (1,736 | ) | $ | 679 | $ | 54,059 | ||||||||||||
Net income |
– | – | 1,839 | – | – | 1,839 | ||||||||||||||||||||
Other comprehensive income: |
||||||||||||||||||||||||||
Unrealized loss on securities |
||||||||||||||||||||||||||
available for sale (tax effect $318) |
– | – | – | – | (617 | ) | $ | (617 | ) | |||||||||||||||||