U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2002
[ ] Transition repohrt under Section 13 or 15(d) of the Exchange Act for
the transition period from to
Commission File No. 0-30483
DUTCHFORK BANCSHARES, INC.
--------------------------
(Exact name of Small Business Issuer as Specified in its Charter)
Delaware 57-1094236
-------- ----------
State of Incorporation I.R.S. Employer Identification
1735 Wilson Road, Newberry, South Carolina 29108
------------------------------------------------
(Address of Principal Executive Office)
(803) 321-3200
--------------
(Issuer's Telephone Number, Including Area Code)
N/A
-------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
1,119,459 shares of common stock, par value $0.01 per share, were issued
and outstanding as of August 8, 2002.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
1
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets at June 30, 2002 and September 30, 2001 (unaudited)
Consolidated Statements of Income for the Three Months and Nine Months Ended
June 30, 2002 and 2001 (unaudited)
Consolidated Statements of Changes in Equity for the Nine Months Ended June 30,
2002 (unaudited)
Consolidated Statements of Comprehensive Operations for the Three Months and
Nine Months Ended June 30, 2002 and 2001 (unaudited)
Consolidated Statements of Cash Flows for the Three Months and Nine Months Ended
June 30, 2002 and 2001 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2: Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements of DutchFork Banchshares, Inc. (the "Company" or
"DutchFork Bancshares") are set forth in the following pages.
3
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Balance Sheets
June 30, September 30,
2002 2001
(unaudited) (unaudited)
----------- -----------
Assets
Cash and cash equivalents $ 11,341,939 $ 5,065,459
Investments and mortgage-backed securities:
Available-for-sale:
Investments (cost of $42,783,791 and
$49,340,193 at June 30, 2002 and
September 30, 2001, respectively) 42,037,150 49,560,617
Mortgage-backed securities (cost of
$115,508,346 and $111,774,654 at
June 30, 2002 and September 30,
2001, respectively) 115,198,850 111,688,476
Held-to-maturity:
Investments (fair value of $50,000 at
June 30, 2002 and September 30,
2001, respectively) 50,000 50,000
Mortgage-backed securities (fair
value of $2,977,154 and $3,379,484
at June 30, 2002 and September 30,
2001, respectively) 2,929,222 3,373,893
Loans receivable 63,542,869 73,087,925
Premises, furniture and equipment, net 3,882,411 3,997,932
Accrued interest receivable:
Loans and mortgage-backed securities 435,837 555,574
Investments and other property 671,397 506,155
Prepaid assets 659,954 486,219
Deferred tax asset 565,516 710,450
Other 722,397 749,202
------------ ------------
Total assets $242,037,542 $249,831,902
============ ============
4
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Balance Sheets (continued)
June 30, September 30,
2002 2001
---- ----
(unaudited) (unaudited)
Liabilities and stockholders' equity
Liabilities:
Deposit accounts $ 147,770,530 $ 147,257,904
Federal Home Loan Bank advances 60,000,000 60,000,000
Advances from borrowers for taxes
and insurance 50,519 76,449
Accrued income taxes payable 608,361 2,389,519
Accounts payable - securities -- 4,854,687
Accrued expenses 152,643 454,844
Accrued interest payable 227,504 716,440
Other 28,376 16,237
----------- -----------
Total liabilities 208,837,933 215,766,080
----------- -----------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.01 par value, 500,000 shares
authorized and unissued -- --
Common stock, $.01 par value,
4,000,000 shares authorized, 1,119,459 and
1,328,628 issued and outstanding at June 30,
2002 and September 30, 2001, respectively 15,605 15,605
Additional paid-in capital 14,739,067 14,585,071
Retained earnings, substantially restricted 27,350,379 25,602,497
Accumulated other comprehensive income (loss) (656,042) 87,391
Treasury stock (281,700 and 177,500 shares at
June 30, 2002 and September 30, 2001,
respectively) (6,127,340) (3,851,845)
Unearned 2001 Stock-Based Incentive Plan shares
(51,187 and 62,422 shares at June 30, 2002 and
September 30, 2001, respectively) (962,070) (1,173,175)
Unearned employee stock ownership plan shares (1,160,000) (1,199,722)
----------- -----------
Total stockholders' equity 33,199,599 34,065,822
----------- -----------
Total liabilities and stockholders' equity $ 242,037,532 $ 249,831,902
============= =============
5
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Income
Three Months Ended Nine Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Interest income:
Loans receivable $ 1,163,910 $ 1,422,616 $ 3,816,834 $ 4,632,979
Investments 336,045 282,102 1,555,453 534,424
Mortgage-backed and related securities 1,634,469 2,068,745 4,400,394 6,562,843
Other interest-earning assets 7,247 47,398 199,590 145,348
--------- --------- --------- ---------
Total interest income 3,141,671 3,820,861 9,972,271 11,875,594
--------- --------- --------- ---------
Interest expense:
Interest expense on deposit accounts 943,779 1,577,664 3,299,309 5,132,868
Federal Home Loan Bank advances 619,041 670,555 1,911,16 1,674,055
Other borrowings 17,534 14,910 21,195 63,578
--------- --------- --------- ---------
Total interest expense 1,580,354 2,263,129 5,231,665 6,870,501
--------- --------- --------- ---------
Net interest income 1,561,317 1,557,732 4,740,606 5,005,093
Provision for loan losses -- -- -- 41,000
--------- --------- --------- ---------
Net interest income after
provision for loan losses 1,561,317 1,557,732 4,740,606 4,964,093
--------- --------- --------- ---------
Noninterest income:
Loan servicing fees 1,288 59,720 5,045 118,022
Bank service charges 137,010 141,981 398,657 502,076
Gain on sales of securities 390,964 238,706 1,022,573 1,215,875
Gain on sale of branch -- -- -- 1,828,762
Other 74,906 47,378 315,509 318,790
--------- --------- --------- ---------
Total noninterest income 604,168 487,785 1,741,784 3,983,525
--------- --------- --------- ---------
Noninterest expense:
Salaries and employee benefits 652,125 696,985 2,084,159 2,026,379
Occupancy and equipment 148,984 126,760 419,273 380,278
Marketing 31,438 34,131 91,696 91,355
Other 365,748 530,991 1,198,277 1,729,141
--------- --------- --------- ---------
Total noninterest expense 1,198,295 1,388,867 3,793,405 4,227,153
--------- --------- --------- ---------
Income before income taxes 967,190 656,650 2,688,985 4,720,465
Income taxes 348,939 214,055 941,103 1,839,581
--------- --------- --------- ---------
Net income $ 618,251 $ 442,595 $ 1,747,882 $ 2,880,884
=========== =========== =========== ===========
Net income per share (basic) $ .54 $ .31 $ 1.53 $ 2.00
=========== =========== =========== ===========
Net income per share (diluted) $ .52 $ .30 $ 1.48 $ 1.99
=========== =========== =========== ===========
6
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Comprehensive Operations
Three Months Ended Nine Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Net income $ 618,251 $ 442,595 $ 1,747,882 $ 2,880,884
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) arising during
the period, net of tax effect of
$(137,851), $279,479, $323,432 and
$(2,150,448) for the three
months ended June 30, 2002 and
2001 and the nine months ended June
30, 2002 and 2001, respectively 131,986 (457,159) (743,433) 3,515,027
----------- ----------- ----------- -----------
Comprehensive income (loss) $ 750,237 $ (14,564) $ 1,004,449 $ 6,395,911
=========== =========== =========== ===========
7
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Accumulated
Additional Other
Number of Common Paid-in Retained Comprehensive Treasury Incentive Stockholders'
Shares Stock Capital Earnings Income (Loss) Stock Plan ESOP Loan equity
------ ----- ------- -------- ------------- ----- ---- --------- ------
(unaudited) (unuaudited)
Balance at September
30, 2001 1,320,628 $15,605 $14,585,071 $25,602,497 $87,391 $(3,851,845) $(1,173,175) $(1,199,722) $34,065,822
Net income 1,747,882 1,747,882
Release of 11,768 ESOP
shares 180,426 39,722 220,148
Issuance of 11,235
shares in a 2001
incentive plan 11,235 (26,430) 211,105 184,675
Purchase of treasury
stock (104,200) (2,275,495) (2,275,495)
Change in net
unrealized
depreciation on
investments
available for sale
(net of deferred and
current income taxes
of $323,432) (743,433) (743,433)
--------- ------- ----------- ----------- --------- ----------- --------- ----------- -----------
Balance at June
30, 2002 1,227,663 $15,605 $14,739,067 $27,350,379 $(656,042) $(6,127,340) $(962,070) $(1,160,000) $33,199,599
========= ======= =========== =========== ========= =========== ========= =========== ===========
8
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended June 30,
2002 2001
---- ----
(unaudited) (unaudited)
Operating Activities
Net income $ 1,747,882 $ 2,880,884
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 214,694 184,952
Provision for losses -- 41,000
(Gain) loss on sales of investments and mortgage-
backed securities (1,022,573) (2,172,894)
Net (gain) loss on sales on loans (43,101) (38,881)
(Gain) on sale of branch -- (1,828,762)
Increase (decrease) in deferred loan origination fees (1,100) 288
Proceeds from sales of investments held for trading -- 5,600,000
Purchases of investments held for trading -- (6,000,000)
Amortization of premiums (discounts) on investments,
mortgage-backed securities and loans (164,138) (1,078,180)
Decrease (increase) in accrued interest receivable (45,505) 351,233
Decrease (increase) in prepaid and other assets (146,930) 181,531
Decrease (increase) in deferred tax asset 370,531 10,726
Increase (decrease) in accrued interest payable (488,936) (222,617)
Increase (decrease) in accounts payable and accrued
expenses (4,615,863) (5,358,202)
Increase (decrease) in other liabilities (2,122,114) (398,384)
---------- ----------
Net cash provided (used) by operating activities (6,317,153) (7,847,306)
---------- ----------
9
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Nine Months Ended June 30,
2002 2001
---- ----
(unaudited) (unaudited)
Investing Activities
Principal payments on mortgage-backed securities 37,279,529 30,050,211
Decrease in deposits and accrued interest due to sale of branch -- (13,295,590)
Proceeds from maturities of securities -- 828,179
Purchases of available-for-sale securities (144,087,026) (156,733,117)
Proceeds from sales of available-for-sale securities 111,295,032 113,815,602
Net (increase) decrease in loans receivable 6,054,368 (3,751,137)
Proceeds from sales of repossessed assets -- 22,246
Proceeds from sales of branch assets -- 1,772,346
Proceeds from sales of loans 3,534,889 11,642,400
Proceeds from disposal of premises, furniture and equipment -- 16,632
Purchases of premises, furniture and equipment (99,183) (1,045,290)
---------- -----------
Net cash provided (used) by investing activities 13,977,609 (16,677,518)
---------- -----------
Financing Activities
Net increase (decrease) in deposit accounts 512,626 6,767,216
Proceeds from Federal Home Loan Bank advances -- 25,000,000
Proceeds from other borrowings 42,522,000 40,035,041
Repayments of other borrowings (42,522,000) (42,790,082)
Release of ESOP shares 107,399 9,777
Repayment of ESOP loan 112,749 18,867
Purchase of shares for incentive plan -- (1,173,176)
Purchase of treasury stock (2,275,495) --
Unallocated incentive plan 184,675 --
Increase (decrease) in advances from borrowers for
taxes and insurance (25,930) (8,403)
---------- -----------
Net cash provided by financing activities (1,383,976) 27,859,240
---------- -----------
Net increase (decrease) in cash and cash equivalents 6,276,480 3,334,416
Cash and cash equivalents at beginning of period 5,065,459 2,834,538
------------- -------------
Cash and cash equivalents at end of period $ 11,341,939 $ 6,168,954
============= =============
Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during the period for:
Interest $ 5,825,641 $ 4,709,574
Taxes $ 4,122,663 $ 3,497,880
10
DutchFork Bancshares, Inc.
Notes to Financial Statements
June 30, 2002
Note 1 - Organization
-----------
DutchFork Bancshares, Inc. (the "Company") was incorporated under the laws
of Delaware in February 2000 for the purpose of serving as the holding company
of Newberry Federal Savings Bank ("Newberry Federal" or the "Bank") as part of
the Bank's conversion from the mutual to stock form of organization. The
conversion, completed on July 5, 2000, resulted in the Company issuing an
aggregate of 1,560,550 shares of its common stock, par value $.01 per share, at
a price of $10 per share. Prior to the conversion, the Company had not engaged
in any material operations and had no assets or income. The Company is a savings
and loan holding company and subject to regulation by the Office of Thrift
Supervision and the Securities and Exchange Commission.
Note 2 - Accounting Principles
--------------------
The accompanying unaudited consolidated financial statements of the Company
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with instruction to Form 10-QSB and of
Regulation S-B. Accordingly, the financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of a normal recurring nature) considered necessary for a fair
presentation have been included. Operating results for the periods presented are
not necessarily indicative of the results that may be expected for the current
fiscal year.
11
Note 3 - Earnings Per Share
-----------------
The following reconciles the numerator and denominator of the basic and
diluted earnings per share computation:
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------- ----------------------------
2002 2001 2002 2001
---- ---- ---- ----
Basic EPS computation:
Numerator $ 618,251 $ 442,595 $1,747,882 $2,880,884
Denominator 1,136,192 1,441,948 1,140,267 1,439,506
--------- --------- --------- ---------
Basic EPS $ 0.54 $ 0.31 $ 1.53 $ 2.00
========= ========= ========= =========
Diluted EPS computation:
Numerator $ 618,251 $ 442,595 $1,747,882 $2,880,884
Denominator:
Common shares outstanding 1,136,192 1,441,948 1,140,267 1,439,508
Dilutive securities:
Stock options - treasury stock
method 39,153 9,483 30,346 4,516
Incentive plan - treasury stock
method 11,634 3,793 10,652 1,807
--------- --------- --------- ---------
1,186,979 1,455,224 1,181,265 1,445,831
--------- --------- --------- ---------
$ 0.52 $ 0.30 $ 1.48 $ 1.99
========= ========= ========= =========
The average market price used in calculating the assumed number of shares
issued for the three months and nine months ended June 30, 2002 was $25.62 per
share and $22.76 per share, respectively.
12
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward Looking Statements
- --------------------------
This prospectus contains forward-looking statements that are based on
assumptions and describe future plans, strategies and expectations of DutchFork
Bancshares and its wholly owned subsidiary, Newberry Federal. These forward
looking statements are generally identified by use of the words "believe",
"expect", "intend", "anticipate", "estimate", "project", or similar expressions.
DutchFork Bancshares and Newberry Federal's ability to predict results or the
actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse effect on the operations of DutchFork
Bancshares and Newberry Federal include, but are not limited to, changes in
interest rates, general economic conditions, legislative/regulatory changes,
monetary and fiscal policies of the U.S. Reserve Board, the quality and
composition of the loan or investment portfolios, demand for loan products,
deposits flow, competition, demand for financial services in DutchFork
Bancshares' and Newberry Federal's market area and accounting principles. These
risks and uncertainties should be considered in evaluating forward looking
statements and undue reliance should not be placed on such statements. Except as
required by law or regulation, the Company disclaims any obligation to update
such forward-looking financial statements.
Operating Strategy
- ------------------
DutchFork Bancshares' wholly owned subsidiary, Newberry Federal, is an
independent community-oriented savings bank, delivering quality customer service
and offering a wide range of deposit and loan products to its customers. Because
of weak loan demand in Newberry Federal's primary market area, management has
maintained a substantial investment in investment securities and mortgage-backed
securities classified as available-for-sale. Management's objective in managing
the securities portfolio is to maintain a portfolio of high quality, highly
liquid investments with competitive returns in order to maximize current income
without compromising credit quality.
Comparison of Financial Condition at June 30, 2002 and September 30, 2001:
Total assets decreased by $7.8 million from $249.8 million at September 30,
2001 to $242.0 million at June 30, 2002. This decrease is attributable to the
continued high percentage of refinancing of mortgage loans and sale of certain
fixed rate loans to the secondary market. During the nine months ended June 30,
2002, the market values of investments and mortgage-backed securities decreased
by $1.1 million, and after the tax effect of $323,432, equity decreased by
$743,433 from this decrease in market values.
At June 30, 2002, total equity was $33.2 million, after a $700,000
unrealized loss, net of taxes, on the investment and mortgage-backed securities
portfolios classified as available-for-sale. This compares with total equity at
September 30, 2001 of $34.1 million, including a $100,000 unrealized gain, net
of taxes, on the investment and mortgage-backed securities portfolios classified
as available-for-sale. The decline in total equity resulted from the purchase of
$2.3 million in treasury stock and an increase in the unrealized loss on
investments of $700,000.
13
Comparison of Operating Results for the Three Months Ended June 30, 2002 and
June 30, 2001:
Net Income
- ----------
Net income for the three months ended June 30, 2002 increased by $176,000
to $618,000 when compared to the same period for the prior year. Net interest
income, after the provision for loan losses, increased by $3,000, and
non-interest income increased by $116,000 as compared to the same period for the
prior year. The increase in non-interest income was primarily due to an increase
in the gain on sale of securities of $152,000.
Net Interest Income
- -------------------
Net interest income increased from $1,558,000 for the three months ended
June 30, 2001 to $1,561,000 for the same period in 2002. While the change in net
interest income was relatively small, total interest income decreased by
$679,000 from $3,824,000 for the three months ended June 30, 2001 to $3,142,000
for the three months ended June 30, 2002, primarily due to a decrease in the
yield from 6.65% to 5.49%. Total interest expense decreased by $683,000 for the
same period due to a decline in the cost of funds from 4.60% for the three
months ended June 30, 2001 to 3.05% for the three months ended June 30, 2002.
Provision for Loan Losses
- -------------------------
The provision for loan losses for the three months ended June 30, 2002 and
2001 was $0. The allowance was carefully evaluated and determined to be adequate
at its current level in relation to the current size, mix and quality of the
portfolio. The loan portfolio is periodically reviewed to evaluate the
outstanding loans and to measure both the performance of the portfolio and the
adequacy of the allowance for loan losses. This analysis includes a review of
delinquency trends, actual losses and internal credit ratings. Management's
judgment as to the adequacy of the allowance is based upon a number of
assumptions about future events which it believes to be reasonable, but which
may or may not be reasonable. Although management uses the best information
available, future adjustments to the allowance may be necessary due to changes
in economic, operating, regulatory and other conditions that may be beyond the
Company's control. While the Company maintains its allowance for loan losses at
a level which it considers adequate to provide for estimated losses, there can
be no assurance that further additions will not be made to the allowance for
loan losses and that actual losses will not exceed estimated losses.
Non-Interest Income
- -------------------
Non-interest income increased by $116,000, primarily as a result of an
increase of $152,000 in gains on the sale of securities. As fixed rate loans
continue to be sold and servicing released, servicing income will decrease over
time.
14
Comparison of Operating Results for the Three Months Ended June 30, 2002
and June 30, 2001 (continued):
Provision for Income Taxes
- --------------------------
Income tax increased by $135,000 due to the increase in income before
income taxes.
Non-Interest Expense
- --------------------
Non-interest expense decreased from $1.4 million for the three months ended
June 30, 2001 to $1.2 million for the three months ended June 30, 2002. The
decrease was primarily a result of a decrease in expenses related to data
processing expenses of $149,000.
Comparison of Operating Results for the Nine Months Ended June 30, 2002 and
June 30, 2001:
Net Income
- ----------
Net income for the nine months ended June 30, 2002 decreased by $1.1
million to $1.7 million when compared to the same period for the prior year. Net
interest income, after the provision for loan losses, decreased by $224,000, and
non-interest income decreased by $2.2 million, with these decreases being
partially offset by a decrease in income taxes of $0.9 million. The decrease in
non-interest income was primarily due to a $1.8 million gain on the sale of a
branch during the period ended June 30, 2001 and a decrease in the gain on sale
of securities of $193,000 during the period ended June 30, 2002. Excluding the
effect of the sale of the branch, net income decreased $36,000 from the nine
months ended June 30, 2001 to the nine months ended June 30, 2002. Basic net
income per share, excluding the impact of the branch sale, was $1.21 for the
nine months ended June 30, 2001, compared to $1.53 for the nine months ended
June 30, 2002.
Net Interest Income
- -------------------
Net interest income decreased from $5.0 million for the nine months ended
June 30, 2001 to $4.7 million for the same period in 2002. While the decrease in
net interest income was only $264,000 for the nine months, total interest income
decreased by $1,904,000 from $11,876,000 for the nine months ended June 30, 2001
to $9,972,000 for the nine months ended June 30, 2002, primarily due to a
decrease in the yield from 7.27% to 5.67% for the comparative periods. Total
interest expense decreased by $1,639,000 for the same period due to a decline in
the cost of funds from 4.93% for the nine months ended June 30, 2001 to 3.31%
for the nine months ended June 30, 2002.
15
Comparison of Operating Results for the Nine Months Ended June 30, 2002 and June
30, 2001 (continued):
Provision for Loan Losses
- -------------------------
The provision for loan losses for the nine months ended June 30, 2002 was
$0, compared to $41,000 for the same period in 2001 due to lower charge-offs.
The allowance was carefully evaluated and determined to be adequate at its
current level in relation to the current size, mix and quality of the portfolio.
The loan portfolio is periodically reviewed to evaluate the outstanding loans
and to measure both the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses and internal credit ratings. Management's judgment as to
the adequacy of the allowance is based upon a number of assumptions about future
events which it believes to be reasonable, but which may or may not be
reasonable. Although management uses the best information available, future
adjustments to the allowance may be necessary due to changes in economic,
operating, regulatory and other conditions that may be beyond the Company's
control. While the Company maintains its allowance for loan losses at a level
which it considers adequate to provide for estimated losses, there can be no
assurance that further additions will not be made to the allowance for loan
losses and that actual losses will not exceed estimated losses.
Non-Interest Income
- -------------------
Non-interest income decreased by $2.2 million, primarily as a result of a
decrease of $193,000 in gains on the sale of securities, a $103,000 decrease in
bank service charges and the gain of $1.8 million on the branch sale in the
period ended June 30, 2001.
Non-Interest Expense
- --------------------
Non-interest expense decreased from $4.2 million for the nine months ended
June 30, 2001 to $3.8 million for the nine months ended June 30, 2002. The
decrease was primarily a result of expenses relating to a new data processing
system conversion in 2001.
Provision for Income Taxes
- --------------------------
Income tax decreased by $0.9 million due to the decrease in income before
income taxes.
16
Liquidity and Capital Resources
- -------------------------------
Management believes that the Company's liquidity remains adequate to meet
operating, investment and loan funding requirements. Cash and cash equivalents,
along with investments and mortgage-backed securities available for sale
represented 69.6% of assets at June 30, 2002.
Liquidity management is both a daily and long-term responsibility of
management. The Company adjusts its investments in liquid assets based upon
management's assessment of expected loan demand, expected deposit flows, yields
available on interest-earning deposits and investment securities and the
objectives of its asset/liability management program. Excess liquid assets are
invested generally in interest-earning overnight deposits and short- and
intermediate-term U.S. Government and agency obligations and mortgage-backed
securities. If the Company requires funds beyond its ability to generate them
internally, it has additional borrowing capacity with the Federal Home Loan Bank
of Atlanta and through credit lines of $12 million through two correspondent
banks.
The desired level of liquidity for the Company is determined by management
in conjunction with the Asset/Liability Committees of the Bank. The level of
liquidity is based on management's strategic direction for the Company's
commitments to make loans and the Committees' assessment of the Bank's ability
to generate funds. Historically, sources of liquidity have included net deposits
to savings accounts, amortization and prepayments of loans, Federal Home Loan
Bank advances, reverse repurchase agreements and sales of securities and loans
held for sale.
The Bank is subject to various regulatory capital requirements imposed by
the Office of Thrift Supervision. At June 30, 2002, the Bank was in compliance
with all applicable capital requirements.
17
Newberry Federal Savings Bank
Yields on Average Interest Earning Assets and Rates
On Average Interest Bearing Liabilities
(Dollars in Thousands)
Three Months Ended June 30, Three Months Ended June 30,
2002 2001
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
Interest earning assets:
Loans receivable $ 64,579 $ 1,164 7.21% $ 69,678 1,423 8.17%
Interest-bearing deposits 831 7 3.37% 794 13 6.55%
Investment securities 37,693 330 3.50% 42,039 212 6.43%
Mortgage-backed securities 118,642 1,634 5.51% 112,568 2,069 6.48%
Federal funds sold 6,989 6 0.34% 848 70 33.02%
Other -- -- -- 3,995 33 3.30%
-------- -------- ---- -------- ----- ----
Total interest earning assets 228,734 3,141 5.49% 229,922 3,820 6.65%
Non-interest earning assets 12,208 5,969
-------- --------
Total assets $240,942 $235,891
======== ========
Interest bearing liabilities:
Deposits:
Passbook accounts $ 16,963 $ 14,682
NOW and Money Market
accounts 32,025 26,896
Certificates of deposit 98,406 94,945
-------- --------
Total deposits 147,394 943 2.56% 136,523 1,577 4.62%
Federal Home Loan Bank
advances 60,000 619 4.13% 60,000 670 4.47%
Other borrowings -- 17 -- -- 15 --
-------- -------- ---- -------- ----- ----
Total interest bearing
liabilities 207,394 1,579 3.05% 196,523 2,262 4.60%
Non-interest bearing liabilities 2,054 4,951
-------- --------
Total liabilities 209,448 201,474
Total equity 31,494 34,417
-------- --------
Total liabilities and equity $240,942 $235,891
======== ========
Net interest spread $ 1,562 2.45% $ 1,558 2.04%
Net interest margin as a percentage
of interest-earning assets 2.73% 2.71%
18
Newberry Federal Savings Bank
Yields on Average Interest Earning Assets and Rates
On Average Interest Bearing Liabilities
(Dollars in Thousands)
Nine Months Ended June 30, Nine Months Ended June 30,
2002 2001
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- ------
Interest earning assets:
Loans receivable $ 68,576 $ 3,817 7.42% $72,148 $ 4,633 8.56%
Interest-bearing deposits 806 18 2.98% 818 37 6.03%
Investment securities 39,599 1,470 4.95% 28,907 2,442 11.26%
Mortgage-backed securities 121,383 4,400 4.83% 110,789 4,563 5.49%
Federal funds sold 2,851 82 3.83% 1,869 92 6.56%
Other 1,348 185 18.30% 3,251 108 4.43%
-------- -------- ----- ------- -------- -----
Total interest earning assets 234,563 9,972 5.67% 217,782 11,875 7.27%
Non-interest earning assets 12,522 7,169
-------- --------
Total assets $247,085 $224,951
======== ========
Interest bearing liabilities:
Deposits:
Passbook accounts $ 16,025 $ 15,148
NOW and Money Market
accounts 30,929 28,512
Certificates of deposit 100,858 96,134
-------- --------
Total deposits 147,812 3,299 2.98% 139,794 5,133 4.90%
Federal Home Loan Bank
advances 60,000 1,911 4.25% 43,333 1,674 5.15%
Other borrowings 2,932 21 0.95% 2,522 63 3.33%
-------- -------- ----- -------- -------- -----
Total interest bearing
liabilities 210,744 5,231 3.31% 185,649 6,870 4.93%
Non-interest bearing liabilities 4,154 5,157
-------- --------
Total liabilities 214,898 190,806
Total equity 32,187 34,145
-------- --------
Total liabilities and equity $247,085 $224,951
======== ========
Net interest spread $ 4,741 2.36% $ 5,005 2.34%
Net interest margin as a percentage
of interest-earning assets 2.69% 3.06%
19
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or any of its
subsidiaries is a party or which any of their property is the subject.
Item 2. Changes in Securities
NONE
Item 3. Defaults upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
20
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of DutchFork Bancshares, Inc. (1)
3.2 Bylaws of DutchFork Bancshares, Inc. (1)
4.0 Specimen Stock Certificate of DutchFork Bancshares, Inc. (1)
10.1 Newberry Federal Savings Bank Employment Agreement with
J. Thomas Johnson (2)
10.2 Newberry Federal Savings Bank Employment Agreement with
Steve P. Sligh (2)
10.3 DutchFork Bancshares, Inc. Employment Agreement with
J. Thomas Johnson (2)
10.4 DutchFork Bancshares, Inc. Employment Agreement with
Steve P. Sligh (2)
10.5 Newberry Federal Savings Bank Employee Severance Compensation Plan(2)
10.6 Adoption Agreement for Employees' Savings & Profit Sharing
Plan & Trust (1)
10.7 DutchFork Bancshares, Inc. 2001 Stock-Based Incentive Plan (3)
10.8 Newberry Federal Savings Bank Director Deferred Compensation Plan (4)
99.1 Certificate of the Chief Executive Officer
99.2 Certificate of the Chief Financial Officer
(b) Reports on Form 8-K
NONE
- ---------------------
(1) Incorporated herein by reference from the Exhibits to Form SB-2,
Registration Statement and amendments thereto, initially filed on
March 8, 2000, Registration No. 333-31986.
(2) Incorporated herein by reference from the Exhibits to the Annual
Report on Form 10-KSB for the fiscal year ended September 30, 2000.
(3) Incorporated herein by reference from the Definitive Proxy Statement
for the 2001 Annual Meeting of Stockholders.
(4) Incorporated herein by reference from the Exhibits to Form S-8
Registration Statement, filed on August 23, 2001, Registration No.
333-68214.
21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DUTCHFORK BANCSHARES, INC.
--------------------------
(Registrant)
Date: August 14, 2002
/s/ J. Thomas Johnson
---------------------
J. Thomas Johnson
President and Chief Executive Officer
/s/ Steve P. Sligh
------------------
Steve P. Sligh
Executive Vice President and Chief
Financial Officer