Item 2.02 Results of Operations and Financial Condition
Madison County Financial, Inc. (Nasdaq Capital Market: MCBK) (the "Company"),
the holding company for Madison County Bank (the "Bank"), announced net income
of $3.0 million for the year ended December 31, 2013, a decrease of $611,000, or
16.8%, from net income of $3.6 million for the year ended December 31, 2012. The
decrease in net income resulted primarily from decreases in interest income and
noninterest income, and increases in provision for loan losses and noninterest
expense, offset by decreases in interest expense and income tax expense.
For the year ended December 31, 2013, net interest income increased $58,000, or
0.6%, to $9.9 million from $9.9 million for the year ended December 31, 2012.
The increase reflected a $207,000 increase in interest income on securities, and
a $125,000 decrease in interest expense on deposits and an $8,000 decrease in
interest expense on borrowings, offset by a $293,000 decrease in interest income
on loans, resulting primarily from continued lower market interest rates.
Provision for loan losses was $1.3 million for the year ended December 31, 2013,
compared to provision for loan losses of $830,000 for the year ended December
31, 2012, which is an increase of $420,000, or 50.6%. There are various factors
which necessitate upward adjustments in the allowance for loan losses, and a
major reason for the upward adjustment throughout 2013 was management's
determination that a possible asset bubble in agricultural real estate may be
forming due to the continued increase in farmland prices at a double-digit rate
over the past several years and the corresponding decline noted in 2013 in gross
operating income on most farming operations.
Noninterest income decreased $120,000, or 6.1%, to $1.9 million for the year
ended December 31, 2013, from $2.0 million for the year ended December 31, 2012.
The decrease was due primarily to a $230,000 decrease in gains on sales of
mortgage loans, offset by a $33,000 increase in service charges on deposit
accounts, a $55,000 increase in loan servicing income, and a $41,000 increase in
insurance commission income.
For the year ended December 31, 2013, noninterest expense increased $507,000, or
8.5%, to $6.5 million, from $6.0 million for the year ended December 31, 2012.
The increase was due primarily to a $48,000 increase in salaries and employee
benefits, a $163,000 increase in director fees and benefits and a $195,000
increase in professional fees. Salaries and employee benefits and director fees
and benefits increased due to an increase in ESOP-related expense, and other
normal annual salary increases and payouts under our benefits plans.
Professional fees increased as a result of additional public company-required
costs and the timing of such services.
The provision for income taxes was $1.1 million for 2013 compared to $1.4
million for 2012, reflecting a decrease in pretax income. Our effective tax rate
was 26.1% for 2013 compared to 28.4% for 2012. This difference resulted
primarily from the levels of tax-exempt income derived from our municipal bond
investment portfolio and from bank-owned life insurance.
Comparison of Financial Condition at December 31, 2013 and December 31, 2012
Total assets increased $22.8 million, or 8.5%, to $290.1 million at December 31,
2013, from $267.3 million at December 31, 2012. The increase was primarily the
result of increases in investment securities classified as available for sale,
investment securities classified as held to maturity and net loans receivable,
offset in part by decreases in cash and cash equivalents, certificates of
deposit and investment in Federal Home Loan Bank stock.
Cash and cash equivalents decreased $3.8 million, or 48.0%, to $4.1 million at
December 31, 2013, from $7.9 million at December 31, 2012, securities classified
as available for sale increased by $737,000, or 8.2%, to $9.7 million at
December 31, 2013, from $9.0 million at December 31, 2012, and securities
classified as held to maturity increased by $9.1 million, or 36.4%, to $34.1
million at December 31, 2013, from $25.0 million at December 31, 2012, resulting
from the additional capital raised in the public stock offering which closed
October 3, 2012, that was reinvested in cash and cash equivalents and
subsequently used to purchase investment securities. Investment in Federal Home
Loan Bank stock decreased $604,000, or 29.1%, to $1.5 million at December 31,
2013, from $2.1 million at December 31, 2012, due to the Federal Home Loan Bank
of Topeka's repurchase of our excess Class A and Class B common stock.
Net loans increased $17.1 million, or 8.3%, to $224.3 million at December 31,
2013, from $207.2 million at December 31, 2012. The increase in our loan
portfolio during 2013 resulted from a $13.9 million increase in agricultural
real estate loans, to $110.5 million from $96.6 million, a $2.3 million increase
in our one- to four-family residential mortgages, to $38.3 million from $36.0
million and a $4.1 million increase in our agricultural and commercial non-real
estate loans to $57.7 million from $53.6 million. In contrast, our commercial
and multi-family real estate loans decreased $1.5 million to $19.7 million from
$21.2 million, and our consumer loans decreased $500,000 to $4.2 million from
Deposits increased $10.5 million, or 5.4%, to $205.7 million at December 31,
2013, from $195.2 million at December 31, 2012, due primarily to a net increase
in core deposits.
Borrowings increased $13.7 million, or 217.5%, to $20.0 million at December 31,
2013, from $6.3 million at December 31, 2012, resulting primarily from an
increase in short-term advances.
Total stockholders' equity decreased $672,000, or 1.1%, to $61.4 million at
December 31, 2013, from $62.1 million at December 31, 2012. The decrease
resulted primarily from the stock repurchase of 157,210 shares for a total of
$2.7 million and an annual cash dividend of $0.28 per share, for an aggregate of
$826,000, that was declared and paid during the period, offset by net income of
$3.0 million for the year ended December 31, 2013.
This Current Report on Form 8-K may contain statements that are forward-looking,
as that term is defined by the Private Securities Litigation Reform Act of 1995.
The Bank and Company
intend that such forward-looking statements be subject to
the safe harbors created thereby. All forward-looking statements are based on
current expectations regarding important risk factors including, but not limited
to, real estate values, including the value of agricultural real estate in our
market area, the price of commodities, and particularly #2 Yellow Corn
, and the
impact of interest rates on financing. Accordingly, actual results may differ
from those expressed in the forward-looking statements, and the making of such
statements should not be regarded as a representation by the Bank or Company or
any other person that results expressed therein will be achieved.
Forward-looking statements speak only as of the date they are made, and the
Company undertakes no obligation to update them in light of new information of
Years Ended December 31,
(In thousands, except per
SELECTED OPERATING DATA:
Interest income $ 11,668$ 11,743
Interest expense 1,722 1,855
Net interest income 9,946 9,888
Provision for loan losses 1,250 830
Net interest income after provision for loan losses 8,696 9,058
Noninterest income 1,856 1,976
Noninterest expense 6,469 5,962
Income before income tax expense 4,083 5,072
Income tax expense 1,064 1,442
Net income $ 3,019$ 3,630
Basic earnings per share (1) $ 1.03$ 0.84
Diluted earnings per share (1) 1.03 0.84
Dividends per share 0.28 -
(1) Calculated from October 3, 2012
, the effective date of the conversion and stock offering, to the
end of the period, for the year ending December 31, 2012
SELECTED FINANCIAL CONDITION DATA:
Total assets $ 290,095$ 267,257
Total cash and cash equivalents 4,119 7,918
Investments in available for sale securities, at fair value 9,719 8,982
Investments in held to maturity securities, at amortized cost 34,144 25,026
Loans held for sale
Loans, net 224,345 207,157
Bank-owned life insurance 4,750 4,598
Federal Home Loan Bank of Topeka stock, at cost 1,472 2,076
Deposits 205,706 195,187
Borrowings 20,000 6,300
Total Equity 61,392 62,064
ASSET QUALITY RATIOS:
Nonperforming loans to total loans 0.17 % 0.14 %
Nonperforming assets to total assets 0.14 % 0.11 %
Net charge-offs (recoveries) to average loans outstanding 0.01 % -0.05 %
Allowance for loan losses to non-performing loans 1535.07 % 1692.12 %
Allowance for loan losses to total loans 2.68 % 2.33 %
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired. Not Applicable.
(b) Pro Forma Financial Information
(c) Shell Company Transactions Not Applicable.
(d) Exhibits. Not Applicable.