SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended June 30, 2002.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
Commission File Number: 0-25180
CKF BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 61-1267810
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
340 WEST MAIN STREET, DANVILLE, KENTUCKY 40422
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (859) 236-4181
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Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 requirement for the past 90 days.
Yes X No
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As of August 13, 2002, 735,843 shares of the registrant's common stock were
issued and outstanding.
Transitional Small Business Disclosure Format: Yes No X
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Page 1 of 17 Pages Exhibit Index at Page n/a
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2002 (unaudited)
and December 31, 2001.....................................3
Consolidated Statements of Income for the Six-Month Periods
Ended June 30, 2002 and 2001 (unaudited) and for the
Three-Month Periods Ended June 30, 2002 and 2001
(unaudited)...............................................4
Consolidated Statement of Changes in Stockholders' Equity
for the Six Month Periods Ended June 30, 2002
and 2001 (unaudited)......................................5
Consolidated Statements of Cash Flows for the Six-Month
Periods Ended June 30, 2002 and 2001 (unaudited)..........6
Notes to Consolidated Financial Statements....................8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................16
Item 2. Changes in Securities and Use of Proceeds.....................16
Item 3. Defaults Upon Senior Securities...............................16
Item 4. Submission of Matters to a Vote of Security Holders...........16
Item 5. Other Information.............................................16
Item 6. Exhibits and Reports on Form 8-K..............................16
SIGNATURES ..............................................................17
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF AS OF
JUNE 30, DECEMBER 31,
2002 2001
--------------- -------------
(Unaudited)
ASSETS
Cash and due from banks $ 731,989 $ 1,653,515
Interest bearing deposits 8,722,781 3,867,477
Investment securities:
Securities available-for-sale 1,999,526 2,136,749
Securities held-to-maturity (market values of $1,715,934 and
$1,715,269 at June 30, 2002 and December 31, 2001,
respectively) 1,658,888 1,662,518
FHLB Stock 1,627,500 1,590,900
Loans receivable, net 121,562,597 123,488,713
Accrued interest receivable 998,832 997,077
Real estate owned 83,823 --
Office property and equipment, net 2,005,631 2,054,217
Goodwill, net of amortization of $44,492 1,099,588 1,099,588
Prepaid federal income tax -- 369,027
Other assets 201,098 183,010
------------ ------------
Total assets $140,692,253 $139,102,791
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $118,826,231 $113,642,079
Advances from Federal Home Loan Bank 6,802,469 10,921,675
Accrued interest payable 74,072 58,605
Advance payment by borrowers for taxes and insurance 139,538 40,482
Accrued and deferred federal income tax 936,173 832,431
Other liabilities 507,968 604,717
------------ ------------
Total liabilities 127,286,451 126,099,989
------------ ------------
Commitments and contingencies
Preferred stock, 100,000 shares, authorized and unissued
Common stock, $.01 par value, 4,000,000 shares authorized;
656,327 and 651,083, issued and outstanding at June 30,
2002 and December 31, 2001, respectively 10,000 10,000
Additional paid-in capital 9,542,952 9,555,941
Retained earnings, substantially restricted 9,151,863 8,727,481
Accumulated other comprehensive income 236,550 327,117
Treasury stock, 264,157 and 261,085 shares, respectively, at cost (4,354,309) (4,301,010)
Incentive Plan Trust, 40,600 and 46,100 shares, respectively, at cost (792,106) (899,411)
Unearned Employee Stock Ownership Plan (ESOP) stock (389,148) (417,316)
------------ ------------
Total stockholders' equity 13,405,802 13,002,802
------------ ------------
Total liabilities and stockholders' equity $140,692,253 $139,102,791
============ ============
See accompanying notes to consolidated financial statements.
3
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE SIX-MONTH PERIODS FOR THE THREE-MONTH PERIODS
ENDED JUNE 30 ENDED JUNE 30
------------------------------- ------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
INTEREST INCOME:
Interest on loans $ 4,554,243 $ 3,340,321 $ 2,266,157 $ 1,848,758
Interest and dividends on investments 97,127 76,239 48,915 44,750
Other interest income 67,635 75,324 35,562 47,384
------------- ------------- ------------- -------------
Total interest income 4,719,005 3,491,884 2,350,634 1,940,892
------------- ------------- ------------- -------------
INTEREST EXPENSE:
Interest on deposits 2,458,388 1,947,362 1,207,591 1,086,417
Other interest expense 240,852 154,593 113,312 79,741
------------- ------------- ------------- -------------
Total interest expense 2,699,240 2,101,955 1,320,903 1,166,158
------------- ------------- ------------- -------------
NET INTEREST INCOME 2,019,765 1,389,929 1,029,731 774,734
Provision for loan losses 60,000 20,000 30,000 11,000
------------- ------------- ------------- -------------
Net interest income after provision
for loan losses 1,959,765 1,369,929 999,731 763,734
------------- ------------- ------------- -------------
NON-INTEREST INCOME:
Loan and other service fees 90,788 75,407 47,231 41,170
Gain on foreclosed real estate 5,876 15,544 4,923 15,544
Other non-interest income, net 4,473 11,261 2,251 5,955
------------- ------------- ------------- -------------
Total non-interest income 101,137 102,212 54,405 62,669
------------- ------------- ------------- -------------
NON-INTEREST EXPENSE:
Compensation and benefits 571,257 363,033 281,006 203,343
Occupancy expense, net 104,091 65,631 51,700 39,495
Data Processing 116,128 105,254 59,512 69,163
Legal and professional fees 54,449 32,639 37,812 15,152
State franchise tax 71,996 34,275 38,328 15,766
Other non-interest expense 154,588 132,674 76,129 102,911
------------- ------------- ------------- -------------
Total non-interest expense 1,072,509 733,506 544,487 445,830
------------- ------------- ------------- -------------
Income before income tax expense 988,393 738,635 509,649 380,573
Provision for income taxes 336,054 251,136 173,281 126,463
------------- ------------- ------------- -------------
Net income $ 652,339 $ 487,499 $ 336,368 $ 254,110
============= ============= ============= =============
Basic earnings per common share $ 1.00 $ .76 $ .52 $ .40
============= ============= ============= =============
Diluted earnings per common share $ .98 $ .76 $ .50 $ .40
============= ============= ============= =============
Weighted average common shares
outstanding during the period 653,807 637,859 655,462 638,156
============= ============= ============= =============
Weighted average common shares
outstanding after dilutive effect
during the period 663,518 640,192 666,626 640,489
============= ============= ============= =============
See accompanying notes to consolidated financial statements.
4
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY
STOCK CAPITAL EARNINGS INCOME STOCK
--------- ----------- ----------- ------------- ------------
Balance, December 31, 2000 $ 10,000 $ 9,578,665 $ 8,091,071 $ 348,909 $ (4,136,260)
Comprehensive income:
Net income 487,499
Other comprehensive loss, net 12,711
of tax
Unrealized loss on securities
Total comprehensive income
Dividend declared (203,643)
ESOP shares earned 9,966
Issue of common stock
Purchase of common stock, 12,000 (164,750)
shares
-------- ----------- ------------ --------- ------------
Balance, June 30, 2001 $ 10,000 $ 9,588,631 $ 8,374,927 $ 361,620 $ (4,301,010)
======== =========== ============ ========= ============
Balance, December 31, 2001 $ 10,000 $ 9,555,941 $ 8,727,481 $ 327,117 $ (4,301,010)
Comprehensive income:
Net income 652,339
Other comprehensive loss, net (90,567)
of tax
Unrealized loss on securities
Total comprehensive income
Dividend declared (227,957)
ESOP shares earned 22,128
Purchase of common stock, 3,072 (53,299)
shares
Shares issued upon exercise of (35,117)
options
-------- ----------- ------------ ---------- ------------
Balance, June 30, 2002 $ 10,000 $ 9,542,952 $ 9,151,863 $ 236,550 $ (4,354,309)
======== =========== =========== ========== ============
INCENTIVE UNEARNED TOTAL
PLAN ESOP STOCKHOLDERS'
TRUST SHARES EQUITY
------------ ----------- ------------
Balance, December 31, 2000 $ (1,093,433) $ (472,086) $ 12,326,866
Comprehensive income:
Net income 487,499
Other comprehensive loss, net 12,711
of tax ------------
Unrealized loss on securities
Total comprehensive income 500,210
Dividend declared (203,643)
ESOP shares earned 28,782 38,748
Issue of common stock 21,000 21,000
Purchase of common stock, 12,000 (164,750)
shares
------------ ---------- ------------
Balance, June 30, 2001 $ (1,072,433) $ (443,304) $ 12,518,431
============ ========== ============
Balance, December 31, 2001 $ (899,411) $ (417,316) $ 13,002,802
Comprehensive income:
Net income 652,339
Other comprehensive loss, net (90,567)
of tax ------------
Unrealized loss on securities
Total comprehensive income 561,772
Dividend declared (227,957)
ESOP shares earned 28,168 50,296
Purchase of common stock, 3,072 (53,299)
shares
Shares issued upon exercise of 107,305 72,188
options
------------ ---------- ------------
Balance, June 30, 2002 $ (792,106) $ (389,148) $ 13,405,802
============ ========== ============
See accompanying notes to consolidated financial statements
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX-MONTH PERIODS
ENDED JUNE 30
-----------------------------
2002 2001
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 652,339 $ 487,499
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Amortization of discounts and premiums on investments (101) 29,496
Federal Home Loan Bank stock dividends (36,600) (27,300)
Amortization of premiums on loans 48,476 --
Amortization of deferred loan origination fees (21,029) (7,218)
Provision for losses on loans 60,000 20,000
ESOP benefit expense 50,296 38,748
Provision for depreciation 66,618 46,320
Amortization of premiums on deposits and FHLB advances (164,550) --
Non-cash compensation under stock based benefit plan -- 21,000
Increase (decrease) in cash due to changes in:
Accrued interest receivable (1,755) (127,613)
Other assets (18,088) 21,503
Accrued interest payable 15,467 73,253
Other liabilities (96,749) (266,647)
Federal income taxes 519,425 56,136
------------ ------------
Net cash provided by operating activities 1,073,749 365,177
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CASH FLOWS FROM INVESTING ACTIVITIES:
Cash consideration in the acquisition of First Lancaster, net -- (10,795,858)
Proceeds from maturity of government agency bonds 500,000 --
Purchase of government agency bonds (532,422) (992,468)
Principal repayments on mortgage back securities 36,153 66,559
Loan originations and principal payments on loans, net 1,694,044 (4,472,626)
Proceeds from sale of real estate owned 60,802 --
Purchase of office property and equipment (18,032) (4,307)
Investment in service corporation -- (76,320)
------------ ------------
Net cash (used) by investing activities 1,740,545 (16,275,020)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts 5,991,931 2,434,587
Net increase (decrease) in certificates of deposit (658,767) 19,770,572
Proceeds from FHLB advances -- 12,000,000
Payments on FHLB advances (4,103,668) (14,536,379)
Net increase (decrease) in custodial accounts 99,056 84,197
Proceeds from the exercise of stock options 72,188 --
Purchase of treasury stock (53,299) (164,750)
Payment of dividends to shareholders (227,957) (203,643)
------------ ------------
Net cash provided (used) by financing activities 1,119,484 19,384,584
------------ ------------
Increase (decrease) in cash and cash equivalents 3,933,778 3,474,741
Cash and cash equivalents, beginning of period 5,520,992 3,266,707
------------ ------------
Cash and cash equivalents, end of period $ 9,454,770 $ 6,741,448
============ ============
6
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
FOR THE SIX-MONTH PERIODS
ENDED JUNE 30
-----------------------------
2002 2001
------------ -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for federal income taxes $ 80,925 $ 195,000
============ ============
Cash paid for interest on deposits and FHLB advances $ 2,848,323 $ 2,063,233
============ ============
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Real estate owned acquired by foreclosure $ 144,625 $ 93,333
============ ============
Mortgage loans originated to finance sale of real estate owned
acquired by foreclosure $ 70,500 $ 110,000
============ ============
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
CKF Bancorp, Inc. (the "Company") was formed in August 1994 at the
direction of Central Kentucky Federal Savings Bank (the "Bank") to become
the holding company of the Bank upon the conversion of the Bank from mutual
to stock form (the "Conversion"). Since the Conversion, the Company's
primary assets have been the outstanding capital stock of the Bank, cash on
deposit with the Bank, and a note receivable from the Company's Employee
Stock Ownership Plan ("ESOP"), and its sole business is that of the Bank.
Accordingly, the consolidated financial statements and discussions herein
include both the Company and the Bank. On December 29, 1994, the Bank
converted from mutual to stock form as a wholly owned subsidiary of the
Company. In conjunction with the Conversion, the Company issued 1,000,000
shares of its common stock to the public.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) necessary for fair
presentation have been included. The results of operations and other data
for the three month period ended June 30, 2002 are not necessarily
indicative of results that may be expected for the entire fiscal year
ending December 31, 2002.
2. REGULATORY CAPITAL
The Bank's actual capital and its statutory required capital levels based
on the consolidated financial statements accompanying these notes are as
follows (in thousands):
JUNE 30, 2002
------------------------------------------------------------------------------
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ADEQUACY PURPOSES ACTION PROVISIONS
--------------------- ------------------- ---------------------
ACTUAL REQUIRED REQUIRED
--------------------- ------------------- ---------------------
AMOUNT % AMOUNT % AMOUNT %
--------------------- ------------------- ---------------------
Core capital $ 10,639 7.6% $5,568 4.0% $8,352 6.0%
Tangible capital 10,639 7.6% 5,568 4.0% n/a n/a
Total Risk based capital 11,390 12.2% 7,439 8.0% 9,299 10.0%
Tier 1 Risk based capital 10,639 11.4% n/a n/a 4,649 5.0%
3. DIVIDENDS
A cash dividend of $0.35 per share was paid on February 11, 2002 to
stockholders of record as of January 28, 2002. The total dividends paid by
the Company for the six-month period ended June 30, 2002 amounted to
$227,957.
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. COMMON STOCK
The Company purchased 3,072 shares of treasury stock at a cost of $53,299
during the six-month period ended June 30, 2002. In addition, the Company
issued 5,500 shares of stock at a price of $13.13 per share, or total
proceeds of $72,188, related the exercise of stock options during the
six-month period.
5. BUSINESS COMBINATION
On May 31, 2001, the Company acquired First Lancaster Bancshares, Inc.
(First Lancaster), the holding company of First Lancaster Federal Savings
Bank (Lancaster), a federally chartered savings bank, located in Lancaster,
Kentucky. Under the Agreement and Plan of Merger dated as of December 14,
2000, the Company acquired First Lancaster for a cash purchase price of
$13.6 million, which represented $16.27 per share for each outstanding
share of First Lancaster common stock. An additional payment of $130,371
was made for the cancellation of all outstanding First Lancaster stock
options. As a result of the merger, Lancaster was merged into Central
Kentucky Federal Savings Bank.
The combination was accounted for under the purchase method of accounting,
and accordingly, the net assets were recorded at their estimated fair
values at the date of acquisition, May 31, 2001. The net assets acquired at
May 31, 2001 totaled $13.7 million, with total assets amounting to $56.1
million, which included net loans of $47.8 million and goodwill of $1.1
million, and with total liabilities assumed amounting to $42.4 million,
which included deposits of $31.6 million and FHLB advances of $10.1
million. Fair value adjustments on the assets and liabilities included in
the purchase are being amortized over the estimated lives of the related
assets and liabilities. The excess of the purchase price over the estimated
fair value of the underlying net assets of $1,144,080 was allocated to
goodwill and was amortized over 15 years using the straight-line method
through December 31, 2001 (See Note 6).
6. GOODWILL
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 141, "Business Combinations" and Statement No. 142, "Goodwill
and Other Intangible Assets." Statement No. 141 pertains to business
combinations initiated after June 30, 2001 and requires all business
combinations after this date to be accounted for using the purchase method
of accounting. The Statement further provided that goodwill recorded in
purchase accounting transactions occurring prior to June 30, 2001 would
continue to be amortized against earnings until the effective date of
Statement No. 142. Statement No. 142 pertains to the accounting for
goodwill and other intangible assets and is effective for the Company
beginning January 1, 2002. Beginning in January 2002, the Company is
required to cease amortizing goodwill. In accordance with Statement No.
142, and subsequent to the effective date, the Company is required to test
the goodwill carrying value for impairment at the reporting unit level,
which is the operating segment or component of the business identified with
the goodwill. If the carrying amount of goodwill exceeds the implied
goodwill determined as a result of the test then an impairment loss is
immediately recognized for the excess amount. Further, after the initial
evaluation of goodwill, the Company must annually evaluate the recorded
goodwill for impairment. For the six-month period ended June 30, 2002, the
Company did not record any loss due to the impairment of goodwill, and the
carrying value of goodwill at June 30, 2002 totals $1,099,588.
9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-QSB, 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 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, competition, and
information provided by third-party vendors that could cause actual results to
differ materially from historical earnings and those presently anticipated and
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made.
The Company does not undertake, and specifically disclaims 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.
CHANGES IN FINANCIAL CONDITION FROM DECEMBER 31, 2001 TO JUNE 30, 2002
At June 30, 2002, total assets amounted to $140.7 million, an increase of $1.6
million, or 1.1%, from $139.1 million at December 31, 2001. The increase in
assets includes a $3.9 million increase in cash and interest-bearing deposits, a
$1.9 million decrease in net loans receivable and a $141,000 decrease in the
investment securities. The increase in total assets was funded by a $5.2 million
increase in deposits, which was offset by a decrease in borrowed funds of $4.1
million.
Investment securities decreased $141,000, or 3.7%, to $3.7 million, during the
six-month period ended June 30, 2002. Securities classified as
available-for-sale and recorded at market value decreased $137,000 due solely to
the decrease in the market value of such securities. Investment securities
classified as held to maturity decreased by $4,000 due to the maturity of a
$500,000 federal agency bond and $36,000 in principal repayments on mortgage
backed securities which were offset by the purchase of a federal agency bond of
$532,000.
Loans receivable decreased by $1.9 million, or 1.6%, to $121.6 million, during
the six-month period ended June 30, 2002. The decrease was primarily due to loan
principal repayments of $30.5 million, which were offset by loan originations of
$24.7 million and by loan purchases of $4.1 million. Loans transferred to real
estate owned during the period equaled $145,000. The allowance for losses on
loans totaled $514,000 at June 30, 2002 compared to $458,000 at December 31,
2001. The allowance as a percentage of total loans outstanding, net of unearned
loan origination fees, was 0.42% at June 30, 2002 and 0.37% at December 31,
2001. Although management believes that its allowance for loan losses at June
30, 2002 is adequate based upon the available facts and circumstances, there can
be no assurance that additions to such allowance will not be necessary in future
periods, which could adversely affect the results of operations.
Deposits increased by $5.2 million, or 4.6%, to $118.8 million, during the
six-month period ended June 30, 2002. This increase reflects the Company's
competitively priced product line within the local market area, plus the
reaction of customers to the increased risk in alternative investments as
evidenced by the recent decline in the stock market indexes. During the period,
Advances from the Federal Home Loan Bank decreased by $4.1 million, or 37.7%, to
$6.8 million at June 30, 2002.
Stockholders' equity increased by $403,000, or 3.1%, to $13.4 million, during
the six-month period ended June 30, 2002. The increase was due to earnings of
$652,000, the release of shares related to the employee stock ownership plan of
$50,000 and the issuance of shares upon the exercise of stock options of
$72,000, which were partially offset by the payments of dividends to
stockholders of $228,000, a decrease in the unrealized gains on available for
sale securities of $91,000 and the purchase of treasury stock of $53,000.
10
RESULTS OF OPERATIONS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
NET INCOME
Net income for the six-month period ended June 30, 2002 was $652,000 compared to
$487,000 for the corresponding period in 2001, an increase of $165,000, or
33.8%. The increase resulted from an increase in net interest income of $630,000
offset by increases in provision for loan losses of $40,000, non-interest
expense of $339,000 and income tax expense of $85,000 and by a decrease in
non-interest income of $1,000. The increases in net income items were largely
related to the Company's acquisition of First Lancaster Bancshares, Inc. on May
31, 2001.
INTEREST INCOME
Interest income increased by $1.2 million, or 35.1%, to $4.7 million for the
six-month period ended June 30, 2002 compared to the six-month period ended June
30, 2001. The increase was due to a $49.5 million, or 56.0%, increase from 2001
to 2002 in the weighted-average balance of interest-earning assets, offset by a
106 basis point decrease in the average yield of interest-earning assets, from
7.90% in 2001 to 6.84% in 2002. The increase in the average interest-earning
assets was primarily due to the Company's acquisition of First Lancaster
Bancshares, Inc. on May 31, 2001.
INTEREST EXPENSE
Interest expense increased by $597,000, or 28.4%, to $2.7 million for the
six-month period ended June 30, 2002 compared to the six-month period ended June
30, 2001. The increase was due to a $49.7 million, or 63.4%, increase from 2001
to 2002 in the weighted-average balance of interest-bearing liabilities, offset
by a 115 basis point decrease in the average cost of funds, from 5.36% in 2001
to 4.21% in 2002. The increase in average interest-bearing liabilities was
primarily due to the acquisition of First Lancaster Bancshares on May 31, 2001.
NET INTEREST INCOME
As a result of the changes in interest income and in interest expense, net
interest income increased by $630,000, or 45.3%, to $2.0 million for the
six-month period ended June 30, 2002 compared to the six-month period ended June
30, 2001. The increase in net interest income was attributable to increases in
interest-earning assets and in interest-bearing liabilities, which were
primarily due to the acquisition of First Lancaster Bancshares on May 31, 2001.
The interest rate spread was 2.63% and 2.54% during the six-month periods ended
June 30, 2002 and 2001, respectively.
PROVISION FOR LOAN LOSSES
The Company recorded a provision for loan losses of $60,000 and $20,000 in the
six-month periods ended June 30, 2002 and 2001, respectively. Management
established the Company's existing level of its allowance for loan losses based
upon its analysis of various factors, including the market value of the
underlying collateral, composition of the loan portfolio, the Company's
historical loss experience, delinquency trends and prevailing and projected
economic conditions in the Company's market area.
NON-INTEREST INCOME
Non-interest income amounted to $101,000 and $102,000 for the six-month periods
ended June 30, 2002 and 2001, respectively, a decrease of $1,000, or 1.1%.
Non-interest income included primarily fees charged in connection with loans and
service charges on deposit accounts of $91,000 and $75,000 for the six-month
periods ended June 30, 2002 and 2001, respectively.
11
NON-INTEREST EXPENSE
Non-interest expense totaled $1.1 million and $734,000 for the six-month periods
ended June 30, 2002 and 2001, respectively, an increase of $339,000, or 46.2%,
and such expense amounted to 1.50% and 1.61% of average assets on an annualized
basis for the periods ended June 30, 2002 and 2001, respectively. The increase
was due to increases in compensation and benefits of $208,000, occupancy expense
of $38,000, data processing expense of $11,000, legal and professional fees of
$22,000, state franchise tax of $38,000, and other operating expenses of
$22,000. The increases in the various non-interest expenses were primarily due
to the Company's acquisition of First Lancaster Bancshares, Inc. on May 31,
2001.
INCOME TAXES
The provision for income taxes for the six month periods ended June 30, 2002 and
2001 was $336,000 and $251,000, respectively, which as a percentage of income
before income taxes was 34.0% for each of the six-month periods ended June 30,
2002 and 2001.
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
NET INCOME
Net income for the three-month period ended June 30, 2002 was $336,000 compared
to $254,000 for the corresponding period in 2001, an increase of $82,000, or
32.4%. The increase resulted from an increase in net interest income of $255,000
offset by increases in provision for loan losses of $19,000, non-interest
expense of $99,000 and income tax expense of $47,000 and by a decrease in
non-interest income of $8,000. The increases in net income items were largely
related to the Company's acquisition of First Lancaster Bancshares, Inc. on May
31, 2001.
INTEREST INCOME
Interest income increased by $410,000, or 21.1%, to $2.4 million for the
three-month period ended June 30, 2002 compared to the three-month period ended
June 30, 2001. The increase was due to a $39.2 million, or 39.6%, increase from
2001 to 2002 in the weighted-average balance of interest-earning assets, offset
by a 104 basis point decrease in the average yield of interest-earning assets,
from 7.84% in 2001 to 6.80% in 2002. The increase in the average
interest-earning assets was primarily due to the Company's acquisition of First
Lancaster Bancshares, Inc. on May 31, 2001.
INTEREST EXPENSE
Interest expense increased by $155,000, or 13.3%, to $1.3 million for the
three-month period ended June 30, 2002 compared to the three-month period ended
June 30, 2001. The increase was due to a $38.3 million, or 42.7%, increase from
2001 to 2002 in the weighted-average balance of interest-bearing liabilities,
offset by a 107 basis point decrease in the average cost of funds, from 5.20% to
4.13%. The increase in average interest-bearing liabilities was primarily due to
the acquisition of First Lancaster Bancshares on May 31, 2001.
NET INTEREST INCOME
As a result of the changes in interest income and in interest expense, net
interest income increased by $255,000, or 32.9%, to $1.0 million for the
three-month period ended June 30, 2002 compared to the three-month period ended
June 30, 2001. The increase in net interest income was attributable to increases
in interest-earning assets and in interest-bearing liabilities, which were
primarily due to the acquisition of First Lancaster Bancshares on May 31, 2001.
The interest rate spread was 2.67% and 2.64% during the three-month periods
ended June 30, 2002 and 2001, respectively.
12
PROVISION FOR LOAN LOSSES
The Company recorded a provision for loan losses of $30,000 and $11,000 in the
three-month periods ended June 30, 2002 and 2001, respectively. Management
established the Company's existing level of its allowance for loan losses based
upon its analysis of various factors, including the market value of the
underlying collateral, composition of the loan portfolio, the Company's
historical loss experience, delinquency trends and prevailing and projected
economic conditions in the Company's market area.
NON-INTEREST INCOME
Non-interest income amounted to $54,000 and $63,000 for the three-month periods
ended June 30, 2002 and 2001, respectively, a decrease of $9,000, or 13.2%.
Non-interest income included primarily fees charged in connection with loans and
service charges on deposit accounts of $47,000 and $41,000 for the three-month
periods ended June 30, 2002 and 2001, respectively.
NON-INTEREST EXPENSE
Non-interest expense totaled $544,000 and $446,000 for the three-month periods
ended June 30, 2002 and 2001, respectively, an increase of $98,000, or 22.1%,
and such expense amounted to 1.52% and 1.76% of average assets on an annualized
basis for the periods ended June 30, 2002 and 2001, respectively. The increase
was due to increases in compensation and benefits of $78,000, occupancy expense
of $12,000, legal and professional fees of $23,000 and state franchise tax of
$22,000, which were offset by a decreases in data processing of $10,000 and
other operating expenses of $27,000. The increases in the various non-interest
expenses were primarily due to the Company's acquisition of First Lancaster
Bancshares, Inc. on May 31, 2001.
INCOME TAXES
The provision for income taxes for the three-month periods ended June 30, 2002
and 2001 was $173,000 and $126,000, respectively, which as a percentage of
income before income taxes was 34.0% for each of the three-month periods ended
June 30, 2002 and 2001.
13
NON-PERFORMING ASSETS
The following table sets forth information with respect to the Bank's
non-performing assets at the dates indicated. No loans were recorded as
restructured loans within the meaning of SFAS No. 15 at the dates indicated.
JUNE 30, DECEMBER 31,
2002 2001
------------- ------------
Loans accounted for on a non-accrual basis:(1)
Real estate mortgage:
One-to-four family residential $ 246,864 $ 332,141
Multi-family residential, non-residential, and land -- --
Commercial non-mortgage -- --
Consumer 40,916 40,532
------------- -----------
Total $ 287,780 $ 373,673
============= ===========
Accruing loans which are contractually past due 90 days or more:
Real estate mortgage:
One-to-four family residential $ 1,720,064 $ 1,739,818
Multi-family residential, non-residential, and land 29,976 --
Commercial non-mortgage -- --
Consumer 33,699 30,100
------------- -----------
Total $ 1,783,739 $ 1,769,918
============= ===========
Total of loans accounted for as non-accrual or as accruing past
due 90 days or more $ 2,071,519 $ 2,142,591
============= ===========
Percentage of loans receivable, net 1.70% 1.74%
============= ===========
Other non-performing assets (2) $ 83,823 $ 9,500
============= ===========
<FN>
(1) Non-accrual status denotes any mortgage loan past due 90 days and whose
loan balance, plus accrued interest exceeds 90% of the estimated loan
collateral value, and any consumer or commercial loan more than 90 days
past due. Payments received on a non-accrual loan are either applied to the
outstanding principal balance or recorded as interest income, or both,
depending on assessment of the collectibility of the loan.
(2) Other non-performing assets represent property acquired by the Bank through
foreclosure or repossession. Such property is carried at the lower of its
fair market value or the principal balance of the related loan.
</FN>
During the six-month period ended June 30, 2002, additional interest income of
$6,588 would have been recorded on loans accounted for on a non-accrual basis if
the loans had been current throughout the year. Interest on such loans actually
included in income during the six-month period ended June 30, 2002 totaled
$13,653.
At June 30, 2002, there were no loans, identified by management, which were not
reflected in the preceding table, but as to which known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of the borrowers to comply with present loan repayment terms.
14
LIQUIDITY AND CAPITAL RESOURCES
The Bank's principal sources of funds for operations are deposits from its
primary market area, principal and interest payments on loans, and proceeds from
maturing investment securities. The principal uses of funds by the Bank include
the origination and purchase of mortgage, commercial and consumer loans and the
purchase of investment securities. The Bank must satisfy two capital standards,
as set by the OTS. These standards include a ratio of core capital to adjusted
total assets of 4.0%, and a combination of core and "supplementary" capital
equal to 8.0% of risk-weighted assets. The Bank's capital exceeded these capital
standards at June 30, 2002.
At June 30, 2002, the Bank had outstanding commitments to originate loans
totaling $1.7 million and to purchase loans totaling $1.3 million, excluding
$1.6 million in unused home equity lines of credit and $1.1 million in other
lines of credit and standby letters of credit. Additionally, the Bank had
undisbursed commitments on construction loans closed totaling $3.6 million.
Management believes that the Bank's sources of funds are sufficient to fund all
of its outstanding commitments. Certificates of deposit, which are scheduled to
mature in one year or less from June 30, 2002, totaled $68.5 million. Management
believes that a significant percentage of such deposits will remain with the
Bank.
15
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS None
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None
Item 3. DEFAULTS UPON SENIOR SECURITIES None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None
The Company's Annual Meeting of Stockholders was held on April 16,
2002. 618,294 shares of CKF Bancorp, Inc. common stock were
represented at the Annual Meeting in person or by proxy.
Stockholders voted in favor of the election of three nominees for
director. The voting results for each nominee were as follows:
Votes In Votes
Nominee Favor of Election Withheld
------- ----------------- --------
Jack L. Bosley, Jr. 618,294 0
Yvonne York Morley 618,294 0
Virginia R.S. Stump 618,294 0
Item 5. OTHER INFORMATION None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
99 Certification
b) No reports on Form 8-K were filed during the quarter ended
June 30, 2002.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CKF BANCORP, INC.
Date: August 13, 2002 /s/ John H. Stigall
---------------------------------------------
John H. Stigall, President and Chief
Executive Officer
(Duly Authorized Officer)
Date: August 13, 2002 /s/ Russell M. Brooks
---------------------------------------------
Russell M. Brooks, Vice President and Treasurer
(Principal Financial and Accounting Officer)
17