UNITED STATES 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 December 31,
2003
|_| Transition report 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 or Other Jurisdication of I.R.S. Employer Identification No.
Incorporation or Organization
1735 Wilson Road, Newberry, South Carolina 29108
(Address of Principal Executive Offices)
(803) 321-3200
(Issuer's Telephone Number)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 requirements for the past 90 days. Yes |X| No
|_|
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
1,127,841 shares of common stock, par value $0.01 per share, were issued
and outstanding as of January 30, 2004.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
1
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets at December 31, 2003 and September 30, 2003
(unaudited)
Consolidated Statements of Income for the Three Months Ended December 31, 2003
and 2002 (unaudited)
Consolidated Statements of Comprehensive Operations for the Three Months Ended
December 31, 2003 and 2002 (unaudited)
Consolidated Statements of Changes in Stockholders' Equity for the Three Months
Ended December 31, 2003 (unaudited)
Consolidated Statements of Cash Flows for the Three Months Ended December 31,
2003 and 2002 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2: Management's Discussion and Analysis or Plan of Operation
Item 3: Controls and Procedures
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
December 31, September 30,
2003 2003
------------ ------------
(unaudited) (unaudited)
Assets
Cash and cash equivalents $ 14,346,193 $ 2,653,640
Investments and mortgage-backed securities:
Available-for-sale:
Investments (cost of $107,033,769 and
$143,998,688 at December 31, 2003 and
September 30, 2003, respectively) 104,658,277 141,851,562
Mortgage-backed securities (cost of
$38,073,015 and $19,117,095 at
December 31, 2003 and September 30,
2003, respectively) 36,863,101 18,908,681
Held-to-maturity:
Investments (fair value of $50,000 at
December 31, 2003 and September 30,
2003, respectively) 50,000 50,000
Mortgage-backed securities (fair
value of $1,244,261 and $1,368,324
at December 31, 2003 and September 30,
2003 respectively) 1,226,552 1,355,226
Loans receivable 57,104,691 58,371,056
Premises, furniture and equipment, net 3,114,717 3,179,428
Accrued interest receivable:
Loans and mortgage-backed securities 340,843 346,945
Investments and other property 589,624 690,454
Prepaid assets 231,686 408,299
Prepaid income taxes and taxes receivable 1,036,384 518,585
Deferred tax asset 619,240 936,622
Other 5,403,865 5,782,861
------------ ------------
Total assets $225,585,173 $235,053,359
============ ============
4
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Balance Sheets (continued)
December 31, September 30,
2003 2003
------------- -------------
(unaudited) (unaudited)
Liabilities and stockholders' equity
Liabilities:
Deposit accounts $ 142,585,484 $ 143,429,056
Federal Home Loan Bank advances 35,000,000 55,000,000
Advances from borrowers for taxes
and insurance 19,795 62,316
Federal funds purchased 14,621,000 2,613,022
Accrued income taxes payable -- 317,382
Accrued expenses 759,030 748,729
Accrued interest payable 147,279 234,581
Other 67,951 90,502
------------- -------------
Total liabilities 193,200,539 202,495,588
------------- -------------
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, 1,560,550 issued
and outstanding at December 31, 2003 and
September 30, 2003 15,605 15,605
Additional paid-in capital 15,089,781 15,022,479
Retained earnings, substantially restricted 32,167,405 31,446,192
Accumulated other comprehensive income (loss) (2,445,439) (1,470,979)
Treasury stock (432,709 shares at December 31,
2003 and September 30, 2003) (10,543,034) (10,543,034)
Unearned 2001 Stock-Based Incentive Plan shares
(43,079 shares at December 31, 2003 and
September 30, 2003, respectively) (809,608) (809,608)
Unearned employee stock ownership plan shares (1,090,076) (1,102,884)
------------- -------------
Total stockholders' equity 32,384,634 32,557,771
------------- -------------
Total liabilities and stockholders' equity $ 225,585,173 $ 235,053,359
============= =============
5
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Income
Three Months Ended
December 31,
2003 2002
----------- -----------
(unaudited) (unaudited)
Interest income:
Loans receivable $ 910,359 $ 1,090,644
Investments 1,275,393 849,895
Mortgage-backed and related securities 729,802 725,547
Other interest-earning assets 107,472 53,789
----------- -----------
Total interest income 3,023,026 2,719,875
----------- -----------
Interest expense:
Interest expense on deposit accounts 482,969 870,581
Federal Home Loan Bank advances 554,273 505,874
Other borrowings purchased 32,832 --
----------- -----------
Total interest expense 1,070,074 1,376,455
----------- -----------
Net interest income 1,952,952 1,343,420
Provision for loan losses -- --
----------- -----------
Net interest income after provision for loan losses 1,952,952 1,343,420
----------- -----------
Noninterest income:
Gain (loss) on sale of securities, net 71,091 406,693
Loan origination and commitment fees 18,048 47,993
Profit on sale of loans 3,906 16,207
Loan servicing fees 544 1,863
Bank service charges 135,591 138,091
Loan late charges 15,665 12,285
Other 22,064 25,073
----------- -----------
Total noninterest income 266,909 648,205
----------- -----------
6
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Income (continued)
Three Months Ended
December 31,
2003 2002
------------ ------------
(unaudited) (unaudited)
Noninterest expense:
Compensation and benefits 838,415 850,754
Occupancy 103,444 116,765
Furniture and equipment 17,580 12,215
Marketing 22,859 27,577
Other 427,162 345,561
------------ ------------
Total noninterest expense 1,409,460 1,352,872
------------ ------------
Income before income taxes 810,401 638,753
Provision for income taxes 89,188 72,312
------------ ------------
Net income $ 721,213 $ 566,441
============ ============
Basic net income per share $ 0.73 $ 0.53
============ ============
Diluted net income per share $ 0.68 $ 0.50
============ ============
7
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Comprehensive Operations
Three Months Ended December 31,
2003 2002
----------- -----------
(unaudited) (unaudited)
Net income $ 721,213 $ 566,441
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) arising during the
period, net of tax effect of $(599,178) and
$(428,438) for the three months ended
December 31, 2003 and 2002, respectively (974,460) (700,812)
----------- -----------
Comprehensive income (loss) $ (253,247) $ (134,371)
=========== ===========
8
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Accumulated
Additional Other
Number of Common Paid-in Retained Comprehensive
Shares Stock Capital Earnings Income (Loss)
---------- -------- ------------ ------------ -------------
(unaudited)
Balance at September
30, 2003 1,084,768 $ 15,605 $ 15,022,479 $ 31,446,192 $ (1,470,979)
Net income 721,213
Release of 2,080 ESOP
shares 67,302
Release of Incentive
Plan shares
Change in net
unrealized
depreciation on
investments
available for sale
(net of deferred and
current income taxes
of $598,178) (974,460)
---------- -------- ------------ ------------ ------------
Balance at December
31, 2003 1,084,768 $ 15,605 $ 15,089,781 $ 32,167,405 $ (2,445,439)
========== ======== ============ ============ ============
Treasury Incentive Stockholders'
Stock Plan ESOP Loan equity
------------ ------------ ------------ -------------
(unuaudited)
Balance at September
30, 2003 $(10,543,034) $ (809,608) $ (1,102,884) $ 32,557,771
Net income 721,213
Release of 2,080 ESOP
shares 12,808 80,110
Release of Incentive
Plan shares
Change in net
unrealized
depreciation on
investments
available for sale
(net of deferred and
current income taxes
of $598,178) (974,460)
------------ ------------ ------------ ------------
Balance at December
31, 2003 $(10,543,034) $ (809,608) $ (1,090,076) $ 32,384,634
============ ============ ============ ============
9
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended December 31,
2003 2002
------------ ------------
(unaudited) (unaudited)
Operating Activities
Net income $ 721,213 $ 566,441
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 69,906 79,230
Provision for losses -- --
(Gain) loss on sales of investments and mortgage-
backed securities (71,091) (406,693)
Net (gain) loss on sales on loans (3,906) (16,207)
Increase (decrease) in deferred loan origination fees -- (9,300)
Amortization of premiums (discounts) on investments,
mortgage-backed securities and loans (317,886) (21,493)
Decrease (increase) in accrued interest receivable 106,932 38,221
Decrease (increase) in prepaid and other assets 37,810 (4,681,334)
Decrease (increase) in deferred tax asset 317,382 278,391
Origination of loans held for sale (496,650) (2,976,897)
Proceeds from sales of loans held for sale 517,256 2,604,825
Increase (decrease) in accrued interest payable (87,302) 133,956
Increase (decrease) in accounts payable and accrued
expenses 10,301 --
Increase (decrease) in other liabilities (2,334,428) (144,850)
------------ ------------
Net cash provided (used) by operating activities (1,530,463) (4,555,710)
------------ ------------
10
DutchFork Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Three Months Ended December 31,
2003 2002
------------ ------------
(unaudited) (unaudited)
Investing Activities
Principal payments on mortgage-backed securities 3,471,930 37,711,418
Loan proceeds -- --
Purchases of available-for-sale securities (9,709,145) (92,157,076)
Proceeds from sales of available-for-sale securities 24,400,754 50,454,488
Net (increase) decrease in loans receivable 1,249,665 2,056,314
Purchases of premises, furniture and equipment (5,195) (32,783)
------------ ------------
Net cash provided (used) by investing activities 19,408,009 (1,967,639)
------------ ------------
Financing Activities
Net increase (decrease) in deposit accounts (843,572) 4,841,230
Proceeds from Federal Home Loan Bank advances (20,000,000) --
Proceeds from other borrowing 25,840,000 --
Repayments of other borrowings 11,219,000 --
Release of ESOP shares 12,808 --
Repayment of ESOP loan -- 11,630
Purchase of treasury stock 67,292 45,008
Increase (decrease) in advances from borrowers for
taxes and insurance (42,521) (16,516)
------------ ------------
Net cash provided (used) by financing activities (6,184,993) 4,881,352
------------ ------------
Net increase (decrease) in cash and cash equivalents 11,692,553 (1,641,997)
Cash and cash equivalents at beginning of year 2,653,640 21,130,629
------------ ------------
Cash and cash equivalents at end of year $ 14,346,193 $ 19,488,632
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during the year for:
Interest $ 1,451,934 $ 2,274,211
Taxes $ 8,807 $ --
11
DutchFork Bancshares, Inc.
Notes to Financial Statements
December 31, 2003
Note 1 - Organization
DutchFork Bancshares 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 the requirements 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.
12
Note 3 - Earnings Per Share
The following reconciles the numerator and denominator of the basic and
diluted earnings per share computation:
Three Months Ended
December 31
---------- ----------
2003 2002
---------- ----------
Basic EPS computation:
Numerator $ 721,213 $ 566,441
Denominator
Common shares outstanding 989,444 1,073,942
---------- ----------
Basic EPS $ 0.73 $ 0.53
========== ==========
Diluted EPS computation:
Numerator $ 721,213 $ 566,441
Denominator:
Common shares outstanding 989,444 1,073,942
Dilutive securities:
Stock options-treasury stock method 59,818 48,777
Incentive plan-treasury stock method 14,190 12,409
---------- ----------
1,063,452 1,135,128
---------- ----------
$ 0.68 $ 0.50
========== ==========
The average market price used in calculating the assumed number of shares
issued for the three months ended December 31, 2003 and 2002 was $39.48 and
$26.61 per share, respectively.
13
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward Looking Statements
This quarterly report 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 December 31, 2003 and September 30, 2003:
Total assets decreased by $9.5 million from $235.1 million at September
30, 2003 to $225.6 million at December 31, 2003. The decrease was due to a
repayment of a $20,000,000 advance, offset by a $12,000,000 increase in federal
funds purchased and a decrease in investments and mortgage-related securities.
During the three months ended December 31, 2003, approximately $18.0 million of
investments were reinvested in mortgage-backed securities as part of the Bank's
overall plan to manage interest rate risk.
At December 31, 2003, the Bank did not have any investments held for
trading. Depending on market volatility and the elements of supply and demand
certain investments are purchased with the expressed intent of selling them
prior to their stated maturity and are placed in a trading account. Prevailing
market conditions and risk exposure determine when this procedure is followed.
14
Comparison of Financial Condition at December 31, 2003 and September 30, 2003
(continued):
Loans receivable at December 31, 2003 and September 30, 2003 were as
follows:
December 31, September 30,
2003 2003
------------ ------------
Commercial real estate $ 10,909,789 $ 10,966,123
Commercial - other 9,456,886 8,719,151
Real estate construction 901,000 811,000
Residential mortgage - 1-4 family 24,463,288 25,192,999
Multi-family 793,497 812,001
Consumer loans 5,903,176 7,064,593
Second mortgage loans, home equity loans
and lines of credit 5,624,154 5,671,360
------------ ------------
58,051,790 59,237,227
------------ ------------
Less:
Allowance for loan losses 371,234 400,892
Loans in process 575,600 464,996
Deferred loan origination fees, net 265 283
------------ ------------
947,099 866,171
------------ ------------
Loans receivable, net $ 57,104,691 $ 58,371,056
============ ============
Loans receivable declined by $1,266,000 during the three months ended
December 31, 2003 due to loan pay-offs largely due to the declining interest
rate environment.
Non-accrual loans totaled $674,000 at December 31, 2003 compared to
$550,000 at September 30, 2003. When a loan becomes 90 days past due, it is
converted to non-accrual status. The Bank had no loans past due 90 days or more
still accruing interest at December 31, 2003 and September 30, 2003. Loans
receivable that were troubled debt restructurings totaled $375,000 at December
31, 2003 and $173,000 at September 30, 2003. Interest income that would have
been recorded for the three months ended December 31, 2003, had nonaccruing
loans been current according to their original terms, amounted to approximately
$27,988. The Bank included income on such loans of $15,757 in total interest
income for the three months ended December 31, 2003. There are no loans which
are not discussed above where known information about possible credit problems
of borrowers causes management to have serious doubts as to the ability of such
borrowers to comply with the present loan repayment terms.
Other assets at December 31, 2003 and September 30, 2003 include
$5,392,000 and $5,340,000, respectively, of cash surrender value of Bank-owned
life insurance on directors, officers and employees.
15
Comparison of Financial Condition at December 31, 2003 and September 30, 2003
(continued):
At December 31, 2003, total equity was $32.4 million, after a $2,445,000
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, 2003 of $32.6 million, including a $1,471,000 unrealized loss, net
of taxes, on the investment and mortgage-backed securities portfolios classified
as available-for-sale. During the three months ended December 31, 2003, the
market values of investments and mortgage-backed securities decreased by
$1,572,000, and after the tax effect of $598,000, equity decreased by $974,000
from this decrease in market values.
Due to the size of the Bank's investment portfolio, extreme volatility in
the rate environment requires extensive restructuring when call options by
issuers are exercised and prepayments reach new highs. These two occurrences
heavily impact cash flows and reinvestment opportunities. In an attempt to
manage current and future interest rate spreads, investments must be
restructured when rate changes occur in rapid and possibly sustained periods. It
is essential to control liquidity while preserving investment value. The
restructuring undertaken has resulted in positive income gains for the quarter.
This, however, complicates the prediction of future income capabilities due to
the low rates of return afforded from investment opportunities.
Comparison of Operating Results for the Three Months Ended December 31, 2003 and
December 31, 2002:
Net Income
Net income for the three months ended December 31, 2003 increased by
$155,000 to $721,000 when compared to the same period for the prior year. Net
interest income, after the provision for loan losses, increased by $610,000, and
non-interest income decreased by $381,000. The decrease in non-interest income
was primarily due to a $336,000 decrease in gains on the sale of securities.
Net Interest Income
Net interest income increased from $1.3 million for the three months ended
December 31, 2002 to $2.0 million for the same period in 2003. This was a result
of a $306,000 decrease in total interest expense and a $303,000 increase in
total interest income.
Total interest income increased due to a $14.1 million increase in average
earning assets, which was partially offset by a 0.24% decrease in average yield.
Total interest expense decreased due to a 0.79% decline in the rate paid
on average interest-bearing liabilities, which was partially offset by a $12.3
million increase in average interest-bearing liabilities.
16
Comparison of Operating Results for the Three Months Ended December 31, 2003 and
December 31, 2002 (continued):
Provision for Loan Losses
The provision for loan losses for the three months ended December 31, 2003
and 2002 was $0 for each period. The allowance was carefully evaluated and
determined to be adequate at its current level based upon current market trends.
The Bank evaluated individual larger loans (those in excess of $500,000) for
impairment and determined that none of these loans were impaired. The changes in
concentration of loans between September 30, 2003 and December 31, 2003 were
relatively insignificant. 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.
The table on page 20 presents an analysis on the Bank's allowance for loan
losses.
Non-Interest Income
Non-interest income decreased by $381,000, primarily as a result of a
decrease of $336,000 in gains on the sale of securities.
Non-Interest Expense
Non-interest expense increased by $56,000 primarily due to an $82,000
increase in other expenses, which included a $28,000 increase in costs
associated with interest rate swap agreements and a $59,000 increase in
miscellaneous expenses.
Provision for Income Taxes
Income tax decreased by $17,000 due to an increase in income before income
taxes.
17
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% of assets at December 31, 2003.
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.
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 December 31, 2003, the Bank was in
compliance with all applicable capital requirements.
The Bank's actual capital amounts and ratios are presented in the
following table:
To Be Well
Capitalized
Minimum For Prompt
For Capital Corrective
Adequacy Action
Actual Purposes Provisions
--------------- --------------- ----------------
Ratio Amount Ratio Amount Ratio Amount
----- ------ ----- ------ ----- ------
(dollars in thousands)
December 31, 2003:
Tangible capital 14.44% $33,141 2.00% $ 4,590 N/A N/A
Core capital 14.44% $33,141 4.00% $ 9,180 5.00% $11,475
Risk-based capital 17.78% $33,392 8.00% $14,908 10.00% $18,635
18
DutchFork Bancshares, Inc.
Yields on Average Interest Earning Assets and Rates
On Average Interest Bearing Liabilities
(In Thousands)
Three Months Ended December 31, Three Months Ended December 31,
2003 2002
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
--------- -------- ------ --------- -------- ------
Interest earning assets:
Loans receivable (1) $ 57,443 $ 910 6.34% $ 61,232 $ 1,091 7.13%
Interest-bearing deposits (2) 2,514 20 3.18% 3,274 5 0.61%
Investment securities (3) 115,846 1,274 4.40% 60,911 792 5.20%
Mortgage-backed securities 40,980 730 7.13% 65,721 726 4.42%
Federal funds sold 143 1 2.80% 15,286 56 1.47%
Other 3,585 87 9.71% -- 49 --
--------- -------- ------ --------- -------- ------
Total interest earning assets 220,511 3,022 5.48% 206,424 2,719 5.72%
Non-interest earning assets 17,027 16,194
--------- ---------
Total assets $ 237,538 $ 222,618
========= =========
Interest bearing liabilities:
Deposit accounts $ 140,724 483 1.37% $ 153,364 871 2.27%
Federal Home Loan Bank
advances 48,978 554 4.52% 35,000 506 5.78%
Other borrowings 10,996 33 1.20% -- -- --
--------- -------- ------ --------- -------- ------
Total interest bearing
liabilities 200,698 1,070 2.13% 188,364 1,377 2.92%
Non-interest bearing liabilities 4,901 2,003
--------- ---------
Total liabilities 205,599 190,367
Total equity 31,939 32,251
--------- ---------
Total liabilities and equity $ 237,538 $ 222,618
========= =========
Net interest spread (4) $ 1,952 3.35% $ 1,342 2.34%
Net interest margin as a percentage
of interest-earning assets (5) 3.54% 2.60%
- ----------
(1) Balances are net of deferred loan origination costs, undisbursed proceeds
of construction loans in process, and include nonaccrual loans.
(2) Includes mortgage-backed securities available-for-sale and
held-to-maturity.
(3) Includes investment securities available-for-sale and held-to-maturity.
(4) Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(5) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
19
DutchFork Bancshares, Inc.
Analysis of Allowance for Loan Losses
Three Months Ended December 31,
-------------------------------
2003 2002
---------- ----------
Allowance for loan losses, beginning of period $ 400,892 $ 424,322
Charged-off loans:
One- to four-family real estate -- --
Multi-family -- --
Commercial real estate -- --
Construction -- --
Land -- --
Commercial -- 41,222
Consumer 33,664 81,106
---------- ----------
Total charged-off loans 33,664 122,328
---------- ----------
Recoveries on loans previously charged off:
One- to four-family real estate -- --
Multi-family -- --
Commercial real estate -- --
Construction -- --
Land -- --
Commercial -- --
Consumer 4,006 16,060
---------- ----------
Total recoveries 4,006 16,060
---------- ----------
Net loans charged-off 29,658 106,268
---------- ----------
Provision for loan losses -- --
---------- ----------
Allowance for loan losses, end of period $ 371,234 $ 318,054
========== ==========
Net loans charged-off to average interest-earning
loans 0.05% 0.17%
Allowance for loan losses to total loans 0.64% 0.53%
Allowance for loan losses to nonperforming loans
and troubled debt restructurings 35.40% 35.18%
Net loans charged-off to allowance for loan losses 9.07% 38.46%
Recoveries to charge-offs 11.90% 13.13%
20
Item 3. Controls and Procedures
The Company's management, including the Company's principal executive
officer and principal financial officer, have evaluated the effectiveness
of the Company's "disclosure controls and procedures," as such term is
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Based upon their evaluation, the principal
executive officer and principal financial officer concluded that, as of
the end of the period covered by this report, the Company's disclosure
controls and procedures were effective for the purpose of ensuring that
the information required to be disclosed in the reports that the Company
files or submits under the Exchange Act with the Securities and Exchange
Commission (the "SEC") (1) is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and (2) is
accumulated and communicated to the Company's management, including its
principal executive and principal financial officers, as appropriate to
allow timely decisions regarding required disclosure. In addition, based
on that evaluation, no change in the Company's internal control over
financial reporting occurred during the three months ended December 31,
2003 that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
21
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
22
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)
10.9 Form of Newberry Federal Savings Bank Split Dollar Agreement
(5)
10.10 Newberry Federal Savings Bank Salary Continuation Agreement
with J. Thomas Johnson (5)
10.11 Newberry Federal Savings Bank Salary Continuation Agreement
with Steve P. Sligh (5)
10.12 DutchFork Bancshares, Inc. Noncompetition Agreement with J.
Thomas Johnson (5)
10.13 DutchFork Bancshares, Inc. Noncompetition Agreement with Steve
P. Sligh (5)
10.14 Form of Newberry Federal Savings Bank Director Retirement
Agreement (5)
31.1 Rule 13a-14(a)/15d-14(a) Certification (President and Chief
Executive Officer)
31.2 Rule 13a-14(a)/15d-14(a) Certification (Chief Financial
Officer)
32.0 Section 1350 Certifications
(b) Reports on Form 8-K
The Company furnished a Current Report on Form 8-K on October 28,
2003 announcing its financial results for the year ended September
30, 2003. The press release was included as an exhibit to the Form
8-K.
The Company filed a Current Report on Form 8-K on December 4, 2003
announcing the date of its annual meeting. The press release was
included as an exhibit to the Form 8-K.
- ----------
(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.
(5) Incorporated herein by reference from the Exhibits to the Annual Report on
Form 10-KSB for the fiscal year ended September 30, 2003.
23
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: February 13, 2004
/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
24