Independence Federal Savings Bank ("Independence Federal") (NASDAQ:IFSB) announced that the applications previously filed with the Office of Thrift Supervision (the "OTS") to approve the merger of Independence Federal and Colombo Bank have been withdrawn. As reported by Independence Federal in its Annual Report on Form 10-K for the year ended December 31, 2009, the regulatory approvals needed for the merger had been delayed indefinitely because of cease and desist orders imposed by the OTS against both Independence Federal and Colombo Bank and due to Independence Federal's "undercapitalized" status under regulatory capital guidelines. As of December 31, 2009, Independence Federal's ratios of total capital to risk-weighted assets, Tier 1 capital to risk-weighted assets and Tier 1 capital to adjusted total assets were 7.4%, 6.2% and 3.2%, respectively, and these ratios were 7.9%, 6.6% and 3.8%, respectively, as of March 31, 2010. In order to be "adequately capitalized" under regulatory capital guidelines, these ratios must be at least 8.0%, 4.0% and 4.0%, respectively, and in order to be "well-capitalized" these ratios must be at least 10.0%, 6.0% and 5.0%, respectively. Subsequent to filing its 2009 Form 10-K, Independence Federal was informed by the OTS that the OTS would not grant the approvals needed for the merger absent the receipt by Independence Federal of a substantial capital infusion. At this time, Independence Federal does not have an identified source for such a capital infusion.
Independence Federal plans to review all options available to it, which may include terminating the merger agreement; attempting to raise additional capital, regardless of whether the merger agreement is terminated; and/or pursuing a sale to, or a merger with, a third party. No assurance can be given, however, as to whether Independence Federal would be successful in any efforts to raise additional capital or to negotiate a definitive agreement with a third party for a merger or sale of the institution. As discussed in its 2009 Form 10-K, Independence Federal has been taking steps to improve its regulatory capital ratios by reducing the size of its balance sheet, primarily through the disposition of assets and corresponding reduction in liabilities. These measures resulted in the improvements noted above in Independence Federal's regulatory capital ratios from December 31, 2009 to March 31, 2010. Independence further reduced it investment securities and deposits by approximately $10 million in April 2010. However, no assurance can be given as to whether the improvements in Independence Federal's regulatory capital ratios will continue.
About Independence Federal Savings Bank
Independence Federal Savings Bank was chartered in 1968 and became a publicly traded company in 1985. A minority-run institution, Independence Federal is committed to serving all segments of the population. Headquartered in Washington, D.C., Independence Federal has two office locations in the District of Columbia and two in Maryland (Chevy Chase and Silver Spring). As of December 31, 2009, Independence Federal had total assets of approximately $156.9 million.
Forward-Looking Statements
When used in this press release and in documents filed or furnished by Independence Federal with the OTS, in other press releases or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "could," "would," "will," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "plans," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made. These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (i) the possibility that after Independence Federal's financial statements for the quarter ended March 31, 2010 have been completed, Independence Federal's regulatory capital ratios as of March 31, 2010 will differ materially from the ratios stated in this press release; (ii) the requirements and restrictions that have been placed on Independence Federal under the cease and desist order imposed on Independence Federal by the OTS on August 3, 2009, as described in Independence Federal's 2009 Form 10-K, and the possibility that Independence Federal will be unable to fully comply with the order, which could result in the taking of additional actions against Independence Federal by the OTS and the imposition of further restrictions on Independence Federal's operations; (iii) the additional restrictions Independence Federal will operate under so long as it remains "undercapitalized" under regulatory capital guidelines, as described in Independence Federal's 2009 Form 10-K; (iv) the possible benefits of the merger of Independence Federal and Colombo Bank that would be lost in the event the merger agreement is terminated; (v) the credit risks of lending activities, including changes in the level of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (vi) changes in the quality or composition of Independence Federal's loan and investment portfolios; (vii) competitive pressures among depository institutions; (viii) interest rate movements and their impact on customer behavior and net interest margin; (ix) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (x) the ability to adapt successfully to technological changes to meet customers' needs and developments in the market place; (xi) the ability to access cost-effective funding; (xii) changes in financial markets; (xiii) changes in economic conditions in general and in the District of Columbia and the state of Maryland in particular; (xiv) the costs, effects and outcomes of litigation; (xv) new legislation or regulatory changes and other governmental initiatives affecting the financial services industry; and (xvi) changes in accounting principles, policies or guidelines.
Independence Federal does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
Contacts:
Independence Federal Savings Bank
Robert B. Isard, 202-628-5500