SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 2001
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.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 61-1267810
- ------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
340 West Main Street, Danville, Kentucky 40422
- ---------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (606) 236-4181
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 ninety days.
Yes X No
--------------- ---------------
As of November 9, 2001, 738,915 shares of the registrant's common stock were
issued and outstanding.
Page 1 of 15 Pages Exhibit Index at Page N/A
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CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2001 (unaudited) and
December 31, 2000...............................................................................3
Consolidated Statements of Income for the Three-Month periods
Ended September 30, 2001 and 2000 (unaudited) and the
Nine-Month Periods
Ended September 30, 2001 and 2000 (unaudited)...................................................4
Consolidated Statement of Changes in Stockholders' Equity for the
Nine-Month Periods Ended September 30, 2001 and 2000 (unaudited) ...............................5
Consolidated Statements of Cash Flows for the Nine-Month Periods Ended
September 30, 2001 and 2000 (unaudited).........................................................6
Notes to Consolidated Financial Statements.........................................................7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................15
Item 2. Changes in Securities.............................................................................15
Item 3. Defaults Upon Senior Securities...................................................................15
Item 4. Submission of Matters to a Vote of Security Holders...............................................15
Item 5. Other Information.................................................................................15
Item 6. Exhibits and Reports on Form 8-K..................................................................15
SIGNATURES
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of As of
September 30, December 31,
2001 2000
--------------- ---------------
(Unaudited)
ASSETS
Cash and due from banks $ 2,138,492 $ 415,198
Interest-bearing deposits 6,444,377 2,851,509
Investment securities:
Securities available-for-sale 2,123,680 536,480
Securities held-to-maturity 3,240,905 1,710,916
Loans receivable, net 123,834,998 70,444,968
Accrued interest receivable 1,084,772 595,773
Office property and equipment, net 2,077,025 1,447,550
Goodwill 1,143,916
Other assets 150,640 113,446
--------------- ---------------
Total assets $ 142,238,805 $ 78,115,840
=============== ===============
Liabilities and Stockholders' Equity
Deposits $ 114,280,320 $ 54,470,412
Advances from Federal Home Loan Bank 13,981,784 10,556,625
Advance payment by borrowers for taxes and insurance 207,222 26,209
Other liabilities 1,209,805 735,728
--------------- ---------------
Total liabilities 129,679,131 65,788,974
--------------- ---------------
Commitments and contingencies
Preferred stock, 500,000 shares, authorized and unissued
Common stock, $.01 parvalue, 4,000,000 shares authorized;
641,784 and 648,106, issued and outstanding at September 30,
2001 and December 31, 2000, respectively 10,000 10,000
Additional paid-in capital 9,596,570 9,578,665
Retained earnings, substantially restricted 8,438,364 8,091,071
Accumulated other comprehensive income 318,493 348,909
Treasury stock, 261,085 and 249,085 shares, respectively, at cost (4,301,010) (4,136,260)
Incentive Plan Trust, 54,100 shares, at cost (1,072,433) (1,093,433)
Unearned Employee Stock Ownership Plan (ESOP) stock (430,310) (472,086)
--------------- ---------------
Total stockholders' equity 12,559,674 12,326,866
--------------- ---------------
Total liabilities and stockholders' equity $ 142,238,805 $ 78,115,840
=============== ===============
See accompanying notes to consolidated financial statements.
3
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three-Month Periods For the Nine-Month Periods
Ended September 30, Ended September 30,
------------------------------- ------------------------------
2001 2000 2001 2000
-------------- ------------- ------------- -------------
Interest income:
Interest on loans.................... $ 2,328,235 $ 1,327,159 $ 5,668,556 $ 3,821,545
Interest and dividends on investments 67,250 27,975 143,489 90,531
Other interest income................ 40,820 23,958 116,144 65,569
-------------- ------------- ------------- -------------
Total interest income............. 2,436,305 1,379,092 5,928,189 3,977,645
-------------- ------------- ------------- -------------
Interest expense:.......................
Interest on deposits................. 1,350,399 711,345 3,297,761 2,022,424
Other interest expense............... 214,681 111,810 369,274 270,089
-------------- ------------- ------------- -------------
Total interest expense............ 1,565,080 823,155 3,667,035 2,292,513
-------------- ------------- ------------- -------------
Net interest income..................... 871,225 555,937 2,261,154 1,685,132
Provision for loan losses............... 15,000 9,000 35,000 27,000
-------------- ------------- ------------- -------------
Net interest income after
provision for loan losses......... 856,225 546,937 2,226,154 1,658,132
-------------- ------------- ------------- -------------
Non-interest income:
Loan and other service fees.......... 41,483 24,266 116,890 63,161
Gain on sale of real estate owned, net 22,841 38,385
Other, net ......................... 18,876 4,344 30,137 5,966
-------------- ------------- ------------- -------------
Total non-interest income......... 83,200 28,610 185,412 69,127
-------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits............ 245,649 159,272 608,682 447,993
Federal insurance premium............ 3,898 4,783 12,102 13,095
State franchise tax.................. 15,767 14,922 50,042 44,767
Occupancy expenses, net.............. 48,436 25,981 114,067 55,242
Data processing expenses............. 36,563 22,140 105,359 54,928
Legal and professional fees.......... 3,969 1,379 20,082 14,289
Other operating expenses............. 136,135 74,850 313,589 202,597
-------------- ------------- ------------- -------------
Total non-interest expense........ 490,417 303,057 1,223,923 832,911
-------------- ------------- ------------- -------------
Income before income tax expense........ 449,008 272,490 1,187,643 894,348
Provision for income taxes.............. 162,311 92,646 413,447 304,078
-------------- ------------- ------------- -------------
Net income ......................... $ 286,697 $ 179,844 $ 774,196 $ 590,270
============== ============= ============= =============
Earnings per common share............... $ .45 $ .27 $ 1.21 $ .88
============== ============= ============= =============
Earnings per common share
assuming dilution.................... $ .44 $ .27 $ 1.20 $ .88
============== ============= ============= =============
Weighted average common shares
outstanding during the quarter....... 641,351 658,520 639,023 670,225
============== ============= ------------- =============
Weighted average common shares
after dilutive effect outstanding
during the quarter................... 649,750 661,032 647,422 672,737
============== ============= ------------- =============
See accompanying notes to consolidated financial statements.
4
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for the nine-month periods ended September 30, 2001 and 2000
(unaudited)
Accumulated
Additional Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income
----------- -------------- ------------- --------------
Balance, December 31, 1999 $ 10,000 $ 9,585,429 $ 7,733,718 $ 243,322
Comprehensive income:
Net income 590,270
Other comprehensive income, net of tax
unrealized gains on securities 36,947
Total comprehensive income
Dividend declared (421,489)
ESOP shares earned 14,685
Purchase of common stock, 51,024 shares
Shares issued upon exercise of options
----------- ---------------- --------------- --------------
Balance, September 30, 2000 $ 10,000 $ 9,600,114 $ 7,902,499 $ 280,269
=========== ================ =============== ==============
Balance, December 31, 2000 $ 10,000 $ 9,578,665 $ 8,091,071 $ 348,909
Comprehensive income:
Net income 774,196
Other comprehensive loss, net of tax,
net unrealized loss on securities (30,416)
Total comprehensive income
Dividend declared (426,903)
ESOP shares earned 17,905
Purchase of common stock
Issue of common stock
----------- -------------- ------------- --------------
Balance, September 30, 2001 $ 10,000 $ 9,596,570 $ 8,438,364 $ 318,493
=========== ============== ============= ==============
Unearned Total
Treasury Incentive ESOP Stockholders'
Stock Plan Shares Equity
------------- ----------- ------------- -------------
Balance, December 31, 1999 $ (3,265,804) $(1,172,073) $ (524,206) $ 12,610,386
-------------
Comprehensive income:
Net income 590,270
Other comprehensive income, net of tax
unrealized gains on securities 36,947
-------------
Total comprehensive income 627,217
Dividend declared (421,489)
ESOP shares earned 39,090 53,775
Purchase of common stock, 51,024 shares (718,138) (718,138)
Shares issued upon exercise of options 52,500 52,500
-------------- ------------ ------------ ------------
Balance, September 30, 2000 $ (3,983,942) $(1,119,573) $ ( 485,116) $ 12,204,251
============== ============ ============ ============
Balance, December 31, 2000 $ (4,136,260) $(1,093,433) $ (472,086) $ 12,326,866
------------
Comprehensive income:
Net income 774,196
Other comprehensive loss, net of tax,
net unrealized loss on securities (30,416)
------------
Total comprehensive income 743,780
Dividend declared (426,903)
ESOP shares earned 41,776 59,681
Purchase of common stock (164,750) (164,750)
Issue of common stock 21,000 21,000
------------- ----------- ------------- ------------
Balance, September 30, 2001 $ (4,301,010) $(1,072,433) $ (430,310) $ 12,559,674
============== ========== ============= ============
The accompanying notes are an integral part
of the consolidated financial statements.
5
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine-Month Periods
Ended September 30
2001 2000
-------------- -------------
Cash flows from operating activities:
Net income $ 774,196 $ 590,270
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 35,000 27,000
Amortization of loan fees (3,542) (10,704)
ESOP benefit expense 59,681 53,775
Provision for depreciation 78,068 41,424
FHLB stock dividend (55,500) (32,900)
Amortization of premiums and discounts, net 67,541 520
Non-cash compensation under stock based benefit plan 21,000
Change in:
Interest receivable (155,663) (112,784)
Other liabilities and federal income taxes payable (266,561) (3,936)
Prepaid expense 45,279 (23,681)
Interest payable 14,072 10,698
------------- -------------
Net cash provided by operating activities 613,571 539,682
------------- -------------
Cash flows from investing activities:
Loan originations and principal payment on loans, net (4,934,682) (3,811,756)
Payments for land and construction of Branch bank building (483,772)
Purchase of office equipment (5,288) (175,511)
Cash consideration in the First Lancaster acquisition, net (10,795,858)
Maturity of securities, held-to-maturity 500,000 250,000
Purchase of securities, held-to-maturity (992,468)
Principle repayment on mortgage-backed securities 81,848 42,939
Investment in service corporation (76,320)
------------- -------------
Net cash provided (used) by investing activities (16,222,768) (4,178,100)
------------- -------------
Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW accounts
and savings accounts 5,068,420 (1,145,543)
Net increase (decrease) in certificates of deposit 22,915,738 1,175,734
Net increase (decrease) in custodial accounts 147,409 129,641
Proceeds from FHLB advances 12,000,000 3,000,000
Payments on FHLB advances (18,614,555) (24,339)
Dividends paid (426,903) (421,489)
Purchase of common stock (164,750) (718,138)
Proceeds from the exercise of stock options 52,500
------------- -------------
Net cash provided by financing activities 20,925,359 2,048,366
------------- -------------
Increase (decrease) in cash and cash equivalents 5,316,162 (1,590,052)
Cash and cash equivalents, beginning of period 3,266,707 4,323,816
------------- -------------
Cash and cash equivalents, end of period $ 8,582,869 $ 2,733,764
============= =============
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 195,000 $ 353,045
============= =============
Cash paid for interest $ 3,947,133 $ 2,281,815
============= =============
Real estate owned sales financed by loans $ 925,000
=============
6
NOTES TO UNAUDITED 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-Q 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 nine-month period ended September
30, 2001 are not necessarily indicative of results that may be expected for the
entire fiscal year ending December 31, 2001.
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):
September 30, 2001
-------------------------------------------------------
To be Well
For Capital Capitalized Under
Adequacy Purposes Prompt Corrective
Action Provisions
-------------- ---------------- ------------------
Actual Required Required
-------------- ---------------- ------------------
Amount % Amount % Amount %
-------------- ---------------- ------------------
Core capital $9,528 6.8% $5,633 4.0% $8,449 6.0%
Tangible capital $9,528 6.8% $5,633 4.0% N/A N/A
Total Risk based capital $9,980 10.5% $7,636 8.0% $9,545 10.0%
Leverage $9,528 6.8% N/A N/A $7,041 5.0%
3. Dividends
A cash dividend of $0.32 per share was paid on February 10, 2001 to
stockholders of record as of January 29, 2001. On August 10, 2001, a cash
dividend of $0.35 per share was paid to stockholders of record at July 27,
2001. The total dividends paid by the Company for the nine months ended
September 30, 2001 amounted to $426,903.
7
4. Common Stock
The Company purchased 12,000 shares of treasury stock at a cost of $164,750
during the nine months ended September 30, 2001. In addition, the Company
granted 1,500 shares of common stock as employee compensation during this same
period at a cost of $21,000. The stock was issued from shares held in the
Incentive Plan Trust. On August 18, 2001, the Board of Directors awarded
additional stock options for 5,000 shares with an exercise price of $16.67 per
share. These options will be vested at 20% per year beginning on August 18,
2001.
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. 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 $1,172,013 was
allocated to goodwill and is being amortized over 15 years using the
straight-line method.
The following unaudited pro forma condensed consolidated financial information
reflects the results of operations of the Company for the year ended December
31, 2000 and for the nine months ended September 30, 2001 as if the transaction
had occurred at the beginning of each period presented. These pro forma results
are not necessarily indicative of what the Company's results of operations
would have been had the acquisition actually taken place at the beginning of
each period presented.
Pro Forma
---------------------------------------------------
Year Ended Nine months Ended
December 31, 2000 September 30, 2001
------------------------- ------------------------
(Dollars in Thousands)
Net interest income $3,768 $2,706
========================= ========================
Net income $886 $797
========================= ========================
Diluted net income per share $1.34 $1.23
========================= ========================
8
6. New Accounting Pronouncements
In June of 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 September 30, 2001 and requires all business combinations after
this date to be accounted for using the purchase method of accounting.
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 will be required to cease amortizing goodwill
acquired in business combinations prior to July 1, 2001. Subsequent to January
1, 2002 and at a minimum on an annual basis, the Company must test the goodwill
recorded for impairment. If it is determined that the goodwill has been
impaired, then the carrying value of goodwill must be reduced for the
impairment. The Company does not anticipate the effect of implementing these
statements to be material to its financial position or results of operations.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Total assets increased approximately $64.1 million, from $78.1 million at
December 31, 2000 to $142.2 million at September 30, 2001. The increase in the
assets of the Company was primarily due to the Company's acquisition of First
Lancaster Bancshares, Inc. on May 31, 2001. The assets acquired in this
transaction totaled $55 million, which included loans of $48 million.
Liabilities assumed in the transaction totaled approximately $42 million,
including deposits of $32 million and FHLB borrowings of $10 million. The
goodwill recorded as a result of this transaction totaled $1.2 million. Since
December 31, 2000, net loans have increased $53.4 million, while cash,
interest-bearing deposits, and investments have increased a total of $8.4
million.
The Company's aggregate investment portfolio increased $3.1 million from
December 31, 2000 to $5.4 million at September 30, 2001. Approximately $2.7
million was due to investments acquired in the First Lancaster acquisition. The
remaining increase was due to the purchase of government agency-backed bonds
totaling approximately $1.0 million, net of a bond in the amount of $500,000,
which matured.
Loans increased $53.4 million from December 31, 2000 to $123.8 million at
September 30, 2001 with approximately $48 million of the increase due to the
First Lancaster acquisition. In addition, real estate owned acquired in the
Lancaster acquisition totaling $855,000 was sold at a net gain of $23,000.
Deposits increased $59.9 million from December 31, 2000 to $114.3 million at
September 30, 2001 with approximately $32.0 million of the increase due to the
First Lancaster acquisition. In addition to the First Lancaster acquisition,
deposits have increased an additional $27.9 million. This increase is due to the
9
Company's competitively priced product line within the local market area, plus
the reaction of customers to the increased risks in alternative investments, as
evidenced by the decline in equity market indexes during this period.
Advances from the Federal Home Loan Bank increased a net $3.4 million from
December 31, 2000 to $14.0 million at September 30, 2001, with approximately
$10.0 million being assumed in the First Lancaster transaction.
Results of Operations for the Three Months Ended September 30, 2001 and 2000
Net Income
Net income for the three months ended September 30, 2001 was $287,000, compared
to $180,000 for the corresponding period in 2000, an increase of $107,000, or
59.4%. The increase resulted from increases in net interest income of $315,000
and non-interest income of $55,000, offset in part by an increase of $187,000 in
non-interest expense, a $6,000 increase in the provision for loan losses, and an
increase of $70,000 in federal income tax expense.
Interest Income
Interest income increased by $1.1 million, or 76.7%, to $2.4 million for the
quarter ended September 30, 2001, compared to $1.4 million for the quarter ended
September 30, 2000. The increase in interest income resulted primarily from the
growth in the Company's loan and investment portfolio as a result of the First
Lancaster acquisition. Interest income totaled 7.2% of average interest-earning
assets for the quarter ended September 30, 2001, compared to 7.8% for the
comparable quarter in year 2000. The average balance of interest-earning assets
totaled $134.7 million for the quarter ended September 30, 2001, compared to
$70.2 million in the comparable quarter in 2000.
Interest Expense
Interest expense totaled $1.6 million and $823,000 for the three months ended
September 30, 2001 and 2000, respectively. The increase in interest expense of
$742,000, or 90.1%, was due primarily to the increase in the average balance of
interest-bearing liabilities in the quarter ended September 30, 2001, compared
to the same period in 2000. The average balance of interest-bearing liabilities
was $127.6 million for the quarter ended September 30, 2001, compared to $58.8
million for the same period in year 2000. The average rate paid on the
interest-bearing deposits for the quarter ended September 30, 2001 was 4.9%,
compared to 5.6% in the same period in year 2000.
Provision for Loan Losses
The Bank recorded a provision for loan losses of $15,000 and $9,000 for the
quarters ended September 30, 2001 and 2000, respectively. Management established
the Bank'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 Bank's historical loss
experience, delinquency trends and prevailing and projected economic conditions
in the Bank's market area. The Company's allowance for loan losses as a
percentage of total loans outstanding, net of unearned loan origination fees,
totaled .36% at September 30, 2001, compared to .26% at December 31, 2000.
10
Non-Interest Income
Non-interest income amounted to $83,000 and $29,000 for the three months ended
September 30, 2001 and 2000, respectively. Non-interest income included
primarily fees charged in connection with loans and service charges on deposit
accounts of $42,000 and $24,000 for the three months ended September 30, 2001
and 2000, respectively. In addition, the Company realized a net gain of $23,000
on the sale of real estate owned for the quarter ended September 30, 2001.
Non-interest Expense
Non-interest expense totaled $490,000 and $303,000 for the three months ended
September 30, 2001 and 2000, respectively. Non-interest expense increased
$187,000, or 61.8%, for the quarter ended September 30, 2001, compared to the
same period in year 2000. The increase of $187,000 was due primarily to an
increase of $86,000 in compensation and benefits, a $22,000 increase in net
occupancy expenses, a $14,000 increase in data processing expenses, and an
increase of $61,000 in other operating expenses. The increases were due to the
increased costs in these categories from the First Lancaster acquisition.
Income Taxes
The provision for income taxes for the three months ended September 30, 2001 and
2000 was $162,000 and $92,000, respectively, which as a percentage of income
before income taxes was 36.1% and 34%, respectively.
Results of Operations for the Nine months Ended September 30, 2001 and 2000
Net Income
Net income for the nine months ended September 30, 2001 was $774,000, as
compared to $590,000 for the corresponding period in 2000, an increase of
$184,000, or 31.1%. The increase resulted primarily from an increase of $576,000
in net interest income, an increase of $116,000 in non-interest income, offset
by a $391,000 increase in non-interest expense, an $8,000 increase in the
provision for loan losses, and a $109,000 increase in income tax expense.
Interest Income
Interest income totaled $5.9 million for the nine months ended September 30,
2001, which was $1.9 million more than the comparable period in 2000. The
increase in interest income of $1.9 million, or 49%, for the nine months ended
September 30, 2001 as compared to the same period for 2000 was due primarily to
an increase of $31.4 million in the average balance of interest earning assets
for the nine-month period ended September 30, 2001 compared to the same period
in year 2000. The average balance of interest earning assets for the nine-months
ended September 30, 2001 was $100.9 million, compared to $69.5 million for the
same period in 2000, which was primarily due to the loan and investment assets
acquired from First Lancaster Bancshares, Inc.
11
Interest Expense
Interest expense totaled $3.7 million for the nine months periods ended
September 30, 2001, which was $1.4 million more than the comparable period in
2000. The increase in interest expense of $1.4 million, or 60.0%, was due
primarily to the increase in the average balance of interest bearing liabilities
in the nine-month period ended September 30, 2001, compared to the same period
in 2000. The average balance of interest bearing liabilities was $92.5 million
for the nine-month period ended September 30, 2001, compared to $57.8 million
for the same period in year 2000.
Provision for Loan Losses
The Bank recorded a provision for loan losses of $35,000 and $27,000 for the
nine-month periods ended September 30, 2001 and 2000, respectively. Management
considers many factors in determining the necessary level of the allowance for
loan losses, including an analysis of specific loans in the portfolio, estimated
value of the underlying collateral, assessment of general trends in the real
estate market, delinquency trends, prospective economic and regulatory
conditions, inherent loss in the loan portfolio, and the relationship of the
allowance for loan losses to outstanding loans.
Non-Interest Income
Non-interest income amounted to $185,000 and $69,000 for the nine months ended
September 30, 2001 and 2000, respectively. Noninterest income included primarily
fees charged in connection with loans and service charges on deposit accounts of
$117,000 for the nine months ended September 30, 2000 and $63,000 for the same
period in 2000. In addition, the Company realized a net gain on the sale of real
estate owned for the nine-month period ended September 30, 2001 totaling
$38,000.
Non-Interest Expense
Non-interest expense totaled $1.2 million and $833,000 for the nine months ended
September 30, 2001 and 2000, respectively, an increase of $391,000, or 47%. The
increase of $391,000 was due primarily to a $161,000 increase in compensation
and benefits, a $59,000 increase in occupancy expenses, a $50,000 increase in
data processing expenses, a $111,000 increase in other operating expenses, and a
$6,000 increase in legal and other professional fees. The increases were due to
the increased costs in these categories, related to the First Lancaster
acquisition.
Income Taxes
The provision for income taxes for the nine months ended September 30, 2001 and
2000 was $413,000 and $304,000, respectively, and, as a percentage of income
before income taxes was 34% for both nine-month periods ended September 30, 2001
and 2000.
12
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.
September 30, December 31,
2001 2000
------------- -------------
(amounts in thousands)
Loans accounted for on a non-accrual basis:/1/
Real Estate:
Residential $ 273 $ 194
Commercial
Consumer 24 28
------------- -------------
Total $ 297 $ 222
============= =============
Accruing loans which are contractually past due 90 days or more:
Real Estate:
Residential 1,726 348
Commercial 180
Consumer 67
------------- -------------
Total 1,973 348
============= =============
Total of loans accounted for as non-accrual or as accruing past
due 90 days or more $ 2,270 $ 570
============= =============
Percentage of total loans 1.83% .81%
============= =============
Other non-performing assets/2/ $ $ -
============= =============
Restructured loans $ - $ -
============= =============
/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 recorded initially at
its fair value less selling expenses, and subsequently at the lower of the
established carrying value or fair value less cost to sell.
During the nine months ended September 30, 2001, additional interest income of
$12,982 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 nine months ended September 30, 2001
totaled $9,452.
At September 30, 2001, 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.
13
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 of mortgage 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, at September 30, 2001, was classified as "Well Capitalized"
under current regulatory capital requirements.
At September 30, 2001, the Bank had outstanding commitments to originate loans
totaling $6.0 million, excluding $3.2 million in approved but unused home equity
lines of credit. In addition, the Bank at September 30, 2001 had unused
commercial lines of credit outstanding in the amount of $360,000 plus standby
letters of credit totaling $32,000. Management believes that the Bank's sources
of funds are sufficient to fund all of its outstanding commitments. Certificates
of deposits which are scheduled to mature in one year or less from September 30,
2001 totaled $53.4 million. Management believes that a significant percentage of
such deposits will remain with the Bank.
14
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
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K None
15
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: November 12, 2001 /s/ John H. Stigall
-----------------------------------------------
John H. Stigall, President and Chief Executive Officer
(Duly Authorized Officer)
Date: November 12, 2001 /s/ Ann L. Hooks
----------------------------------------------
Ann L. Hooks, Vice President and Treasurer
(Principal Financial and Accounting Officer)
16