10QSB
Form 10QSB
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10 - QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-49696
RESERVE BANCORP, INC.
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(Exact name of Registrant as specified in its Charter)
Pennsylvania 23-3102103
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
2000 Mt. Troy Road, Pittsburgh, Pennsylvania 15212
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 322-6107
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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 90 days.
Yes X No
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As of May 13, 2002, there were 757,500 shares of the Registrant's common stock,
par value $0.10 per share, outstanding. The Registrant has no other classes of
common equity outstanding.
Transitional small business disclosure format:
Yes X No
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RESERVE BANCORP, INC.
AND SUBSIDIARY
Pittsburgh, Pennsylvania
Index
PART I. Page(s)
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FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated Balance Sheets - as of March 31, 2002
(Unaudited) and September 30, 2001, as restated.....................................................3
Consolidated Statements of Income - (Unaudited) for the three and six months
ended March 31, 2002 and 2001.......................................................................4
Consolidated Statements of Cash Flows - (Unaudited)
for the six months ended March 31, 2002 and 2001....................................................5
Notes to (unaudited) consolidated financial statements................................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................................................8
PART II.
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OTHER INFORMATION
Item 1. Legal Proceedings............................................................................12
Item 2. Changes in Securities........................................................................12
Item 3. Defaults Upon Senior Securities..............................................................12
Item 4. Submission of Matters to a Vote of Security Holders..........................................12
Item 5. Other Information............................................................................12
Item 6. Exhibits and Reports on Form 8-K.............................................................12
Signatures................................................................................................13
(2)
MT. TROY SAVINGS BANK, FSB
STATEMENTS OF FINANCIAL CONDITION
March 31, September 30,
2002 2001
(UNAUDITED) (As Restated)
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ASSETS
Cash and cash equivalents
Interest bearing $ 4,854,922 $ 796,703
Non-interest bearing 241,240 263,253
Interest-bearing deposits in other banks 696,520 400,000
Securities held-to-maturity (estimated fair value of
$5,268,790 and $2,177,533) 5,253,738 2,161,455
Mortgage-backed securities held-to-maturity (estimated
fair value of $180,599 and $225,337) 186,523 223,531
Securities available-for-sale, at fair value 1,176,495 1,644,952
Mortgage-backed securities available-for-sale, at fair value 214,269 316,831
Loans, net 35,970,365 37,731,075
Federal Home Loan Bank stock, at cost 312,600 312,600
Accrued interest receivable 284,947 296,496
Premises and equipment, net 283,401 243,760
Prepaid expenses 222,813 44,136
Deferred income taxes 124,828 119,450
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TOTAL ASSETS $49,822,661 $44,554,242
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LIABILITIES AND RETAINED EARNINGS
Deposits $43,833,425 $39,037,658
Advances from borrowers for taxes and insurance 369,500 83,372
Accrued interest payable 141,403 179,177
Other liabilities 90,531 90,127
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TOTAL LIABILITIES 44,434,859 39,390,334
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Commitments and contingencies
Retained earnings 5,381,602 5,150,151
Accumulated other comprehensive income, net of
applicable income taxes of $4,414 and $9,796 6,200 13,757
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TOTAL RETAINED EARNINGS 5,387,802 5,163,908
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TOTAL LIABILITIES AND RETAINED EARNINGS $49,822,661 $44,554,242
=========== ===========
See accompanying notes to the unaudited financial statements
(3)
MT. TROY SAVINGS BANK, FSB
STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
2002 2001 2002 2001
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INTEREST AND DIVIDEND INCOME
Loans $696,265 $659,401 $1,429,924 $1,333,379
Investments 71,384 71,526 126,943 141,370
Mortgaged-backed securities 7,434 11,581 16,783 25,161
Interest-earning demand deposits 19,138 13,344 26,794 30,955
FHLB stock 2,999 4,015 7,999 9,615
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797,220 759,867 1,608,443 1,540,480
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INTEREST EXPENSE
Deposits 393,337 417,115 809,782 836,066
Advances from Federal Home Loan Bank - - - 6,495
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393,337 417,115 809,782 842,561
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NET INTEREST INCOME 403,883 342,752 798,661 697,919
PROVISION FOR LOAN LOSSES 4,500 4,500 9,000 9,000
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 399,383 338,252 789,661 688,919
-------- -------- ---------- ----------
NONINTEREST INCOME
Service charges and other fees 38,202 27,995 74,600 48,548
Income from real estate rental 1,200 1,200 2,400 2,075
Gain on sale of investments - 5,300 - 20,800
-------- -------- ---------- ----------
39,402 34,495 77,000 71,423
-------- -------- ---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 131,617 119,677 250,872 225,267
Occupancy and equipment expense 28,969 30,051 57,025 58,059
Federal insurance premiums 4,764 3,619 11,547 9,129
Service bureau expense 28,300 25,101 54,374 49,515
Other 65,662 65,886 130,124 141,192
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259,312 244,334 503,942 483,162
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INCOME BEFORE INCOME TAX 179,473 128,413 362,719 277,180
INCOME TAX EXPENSE 64,952 48,432 131,268 101,142
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NET INCOME $114,521 $ 79,981 $ 231,451 $ 176,038
======== ======== ========== ==========
See accompanying notes to the unaudited financial statements
(4)
MT. TROY SAVINGS BANK, FSB
STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
March 31,
2002 2001
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OPERATING ACTIVITIES
Net income $231,451 $ 176,038
Adjustments to reconcile change in net income to
net cash provided by operating activities
Amortization of:
Deferred loan origination fees (42,409) (23,327)
Premiums and discounts on investment securities (5,279) (102)
Provision for loan losses 9,000 9,000
Depreciation and amortization of premises and equipment 23,039 25,622
Net gain on sales of securities available-for-sale - (20,800)
(Increase) decrease in:
Accrued interest receivable 11,549 (4,281)
Prepaid expenses (178,677) (51,460)
Increase (decrease) in:
Other liabilities (37,370) (29,998)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 11,304 80,692
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INVESTING ACTIVITIES
Purchases of interest-bearing deposits in other banks (396,520) (200,000)
Proceeds from maturities of interest-bearing deposits
in other banks 100,000 297,000
Proceeds from maturities and calls of
securities held-to-maturity 749,477 -
Proceeds from principal repayments of
mortgage-backed securities held-to-maturity 36,326 29,754
Purchases of securities held-to-maturity (3,836,431) (901,791)
Proceeds from sales of securities available-for-sale - 124,675
Proceeds from maturities and calls of
securities available-for-sale 460,000 250,000
Proceeds from principal repayments of
mortgage-backed securities available-for-sale 98,716 17,488
Purchases of securities available-for-sale - (75,260)
Purchases of premises and equipment (62,680) (12,370)
Net loan originations and principal repayments on loans 1,794,119 434,730
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NET CASH USED IN INVESTING ACTIVITIES (1,056,993) (35,774)
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See accompanying notes to the unaudited financial statements
(5)
MT. TROY SAVINGS BANK, FSB
STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED
Six Months Ended
March 31,
2002 2001
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FINANCING ACTIVITIES
Net decrease in FHLB advances - (1,450,000)
Net increase in deposits 4,795,767 1,561,779
Net increase in advances from borrowers
for taxes and insurance 286,128 217,248
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NET CASH PROVIDED BY FINANCING ACTIVITIES 5,081,895 329,027
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NET INCREASE IN CASH AND CASH EQUIVALENTS 4,036,206 373,945
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,059,956 988,608
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,096,162 1,362,553
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SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest on deposits, advances, and other borrowings $ 847,555 821,268
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Income taxes $ 70,325 148,641
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See accompanying notes to the unaudited financial statements
(6)
MT. TROY SAVINGS BANK, F.S.B.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10 - QSB and, therefore, do not necessarily
include all information that would be included in audited financial statements.
The information furnished reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of the results of operations. All
such adjustments are of a normal recurring nature. The results of operations for
the interim periods are not necessarily indicative of the results to be expected
for the full year or any other interim period.
NOTE B - MUTUAL TO STOCK CONVERSION
On April 5, 2002, the Bank completed its mutual-to-stock conversion (the
"Conversion"). In connection with the Conversion, Reserve Bancorp, Inc., a
Pennsylvania chartered corporation, sold 757,500 shares of its common stock in a
subscription offering at $10.00 per share. Upon completion of these
transactions, the Bank became a wholly-owned subsidiary of Reserve Bancorp, Inc.
and changed its name to Mt. Troy Bank.
The common stock of Reserve Bancorp, Inc. began trading on the OTC Bulletin
Board on April 8, 2002 under the symbol "RSVB."
(7)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Our results of operations are primarily dependent upon our net interest income,
which is the difference between the interest income earned on interest-earning
assets, primarily loans, mortgage-backed securities, and investments, and the
interest expense on interest-bearing liabilities, primarily deposits and
borrowings. Net interest income may be affected significantly by general
economic and competitive conditions and policies of regulatory agencies,
particularly those with respect to market interest rates. The results of
operations are also significantly influenced by the level of noninterest income,
such as loan-related fees and fees on deposit-related services, and the
provision for loan losses.
The Management Discussion and Analysis section of this Form 10-QSB contains
certain forward-looking statements (as defined in the Private Securities
Litigation Reform Act of 1995). These forward-looking statements may involve
risks and uncertainties. Although management believes that the expectations
reflected in such forward-looking statements are reasonable, actual results may
differ from the results in these forward-looking statements. We do not undertake
to update any forward-looking statement, whether written or oral, that may be
made from time to time.
Changes in Financial Condition
Our total assets of $49,823,000 at March 31, 2002, are reflective of an increase
of $5,269,000 or 11.8% as compared to $44,554,000 at September 30, 2001. The
increase in total assets was due to increases in interest bearing cash and
deposits with other financial institutions, securities held-to-maturity and
prepaid expenses, partially offset by decreases in investment securities
available-for-sale, loans receivable, and mortgage backed securities.
The increase in the liabilities was primarily due to increases in savings
deposits and advances from borrowers for taxes and insurance. Changes in the
components of assets, liabilities and equity are discussed herein.
Cash and Cash Equivalents. Cash and cash equivalents, which consist of
interest-bearing and noninterest-bearing deposits, totaled $5,096,000, an
increase of $4,036,000 or 380.8% as compared to $1,060,000 at September 30,
2001. This increase was primarily due to increased interest-bearing deposits
maintained at the Federal Home Loan Bank resulting from the deposit of
subscription funds received in connection with the Bank's mutual-to-stock
conversion during the quarter ended March 31, 2002.
Investment Securities. Investment securities totaled $6,430,000 at March 31,
2002, an increase of $2,624,000 or 68.9%, as compared to $3,806,000 at September
30, 2001. This was primarily a result of purchases of $3.8 million of commercial
paper and municipal securities, offset by the proceeds from maturities, calls
and payments totaling $1.2 million.
Mortgage-backed Securities. Mortgage-backed securities totaled $401,000 at March
31, 2002, a decrease of $139,000 or 25.7%, as compared to $540,000 at September
30, 2001. The decrease was due to principal payments and maturities totaling
$135,000 and a decrease in market value of $4,000.
Loans Receivable, net. Net loans receivable at March 31, 2002 totaled
$35,970,000, a decrease of $1,761,000 or 4.7%, as compared to $37,731,000 at
September 30, 2001. The decrease was primarily due to net principal repayments.
Deposits. Total deposits, after interest credited, increased $4,795,000 or 12.3%
to $43,833,000 at March 31, 2002, as compared to $39,038,000 at September 30,
2001. The increase was primarily due to increases in passbook savings accounts.
(8)
Retained Earnings. Retained earnings totaled $5,388,000 at March 31, 2002, as
compared to $5,164,000 at September 30, 2001. The increase of $224,000 or 4.3%
was due to earnings for the six months ended March 31, 2002 and a decrease in
accumulated other comprehensive income of $7,000.
Results of Operations for the Three Months Ended March 31, 2002 and 2001
Net Income. We recorded income of $115,000 for the three months ended March 31,
2002, as compared to net income of $80,000 for the three months ended March 31,
2001. The $35,000 or 43.8% increase in net income for the three months ended
March 31, 2002 was primarily the result of an increase in net interest income
offset by increases in noninterest expense and provision for income taxes.
Changes in the components of income and expense are discussed herein.
Net Interest Income. Net interest income increased $61,000 or 17.8% for the
three months ended March 31, 2002, as compared to the three month period ended
March 31, 2001. Although the average balance of interest-bearing liabilities
increased by $4.9 million or 13.1%, however, the average rate paid thereon
decreased 75 basis points.
The net interest rate spread, which is the difference between the yield on
average interest-earning assets and the cost of average interest-bearing
liabilities, increased to 3.09% for the three month period ended March 31, 2002
from 2.80% for the three month period ended March 31, 2001. The increase in the
net interest rate spread was primarily the result of increased average balances
of loans receivable, interest earning demand deposits and investment securities,
partially offset by increased average balances on deposits.
Interest Income. Interest income increased $37,000 or 4.9% to $797,000 for the
three month period ended March 31, 2002, as compared to $760,000 for the three
month period ended March 31, 2001.
Interest on loans receivable increased $37,000 or 5.6% for the three months
ended March 31, 2002, as compared to the three month period ended March 31,
2002. This increase was the result of a $1.7 million increase in the average
balance of loans receivable, and a 5 basis point increase in the average yield
earned thereon.
Interest income on mortgage-backed securities decreased $4,000 or 35.8% for the
three months ended March 31, 2002, as compared to the three months ended March
31, 2001. This decrease was the result of $196,000 decrease in the average
balance of mortgage-backed securities and a 27 basis point decrease in the
average yield earned thereon.
Interest income on investment securities decreased $1,000 for the three months
ended March 31, 2002, as compared to the three months ended March 31, 2001.
Interest income on other interest-earning assets increased $5,000 or 27.5% for
the three months ended March 31, 2001, as compared to the three months ended
March 31, 2001. The increase was primarily due to a $2.5 million increase in the
average balance of other interest-earning assets resulting from the deposit of
subscription funds received in connection with the Bank's mutual-to-stock
conversion during the quarter ended March 31, 2002. The increase in the average
balance of other-interest earning assets was offset by a 300 basis point
decrease in the average yield earned thereon.
The average yield on the average balance of interest-earning assets was 6.84%
and 7.30% for the three month periods ended March 31, 2002 and 2001.
Interest Expense. Interest expense totaled $393,000 for the three months ended
March 31, 2002, as compared to $417,000 for the three months ended March 31,
2001. The $24,000 or 5.8% decrease was primarily due to a 75 basis point
decrease in the average rate paid on the total average interest-bearing
liabilities, partially offset by increased average balances.
(9)
Allowance for Loan Losses. During the three month periods ended March 31, 2002
and 2001, we established provisions for loan losses of $4,500. This reflected
management's evaluation of the underlying credit risk of the loan portfolio and
the level of allowance for loan losses.
At March 31, 2002, the allowance for loan losses totaled $172,000 or .48% and
51.96% of total loans and total non-performing loans, respectively, as compared
to $166,000 or .44% and 224.3%, respectively, at September 30, 2001. Our
non-performing loans (non-accrual loans and accruing loans 90 days or more
overdue) totaled $331,000 and $74,000 at March 31, 2002 and September 30, 2001,
respectively, which represented 0.92% and 0.20% of the Company's total loans,
respectively. Our ratio of non-performing loans to total assets was 0.66% and
0.17% at March 31, 2002 and September 30, 2001, respectively.
Noninterest Income. During the three months ended March 31, 2002, noninterest
income increased $5,000 or 14.2%, as compared to the three months ended March
31, 2001.
Noninterest Expense. Total noninterest expense increased by $15,000 or 6.1%
during the three months ended March 31, 2002, as compared to the three months
ended March 31, 2001. The increase was attributable to increases of $12,000 in
compensation and benefits and $3,000 in service bureau expenses.
Income Tax Expense. The provision for income tax totaled $65,000 for the three
months ended March 31, 2002, as compared to $48,000 for the three months ended
March 31, 2001. The $17,000 or 35.4% increase was due to increased income.
Results of Operations for the Six Months Ended March 31, 2002 and 2001
Net Income. We recorded net income of $231,000 for the six months ended March
31, 2002, as compared to net income of $176,000 for the six months ended March
31, 2001. The $55,000 or 31.3% increase in net income for the six months ended
March 31, 2002 was primarily the result of an increase in net interest income,
offset by increases in noninterest expense and provision for income taxes.
Changes in the components of income and expense are discussed herein.
Net Interest Income. Net interest income increased $101,000 or 14.5% for the six
months ended March 31, 2002, as compared to the six month period ended March 31,
2001. Although the average balance of interest-earning assets increased $4.19
million or 9.99%, the average yield earned thereon decreased 75 basis points.
The average balance of interest-bearing liabilities increased by $3.9 million or
10.45%, however, the average rate paid thereon decreased 58 basis points.
The net interest rate spread increased to 3.06% for the six month period ended
March 31, 2002 from 2.86% for the six month period ended March 31, 2001. The
increase in the net interest rate spread was primarily the result of increased
average balances of all interest earning assets, partially offset by increased
average balances on deposits.
Interest Income. Interest income increased $68,000 or 4.4% to $1,608,000 for the
six month period ended March 31, 2002, as compared to $1,540,000 for the six
month period ended March 31, 2001.
Interest on loans receivable increased $97,000 or 7.2% for the six months ended
March 31, 2002, as compared to the six month period ended March 31, 2001. This
increase was the result of a $1.38 million increase in the average balance of
loans receivable, and a 24 basis point increase in the average yield earned
thereon.
Interest income on investment securities decreased $14,000 or 9.93% for the six
months ended March 31, 2002 as compared to the six month period ended March 31,
2001. The decrease was the result of a $1.90 million increase in the average
balance of investment securities offset by a 168 basis point decrease in the
average yield earned thereon.
Interest income on mortgage-backed securities decreased $9,000 or 36.1 % for the
six months ended March 31, 2002, as compared to the six months ended March 31,
2001. This decrease was the result of a $180,000
(10)
decrease in the average balance of mortgage-backed securities and a 89 basis
point decrease in the average yield earned thereon.
Interest income on other interest-earning assets decreased $6,000 or 14.6% for
the six months ended March 31, 2002, as compared to the six months ended March
31, 2001. The decrease was primarily due to a $1.9 million increase in the
average interest-earning deposits at other financial institutions, offset by a
441 basis point decrease in the average yield earned thereon.
The average yield on the average balance of interest-earning assets was 6.97%
and 7.34% for the six month periods ended March 31, 2002 and 2001, respectively.
Interest Expense. Interest expense totaled $810,000 for the six months ended
March 31, 2002, as compared to $843,000 for the six months ended March 31, 2001.
The $33,000 or 3.9% decrease was primarily due to a 58 basis point decrease in
the average rate paid on the total average interest-bearing liabilities,
partially offset by increased average balances of all interest-bearing
liabilities.
Interest expense on deposits totaled $810,000 for the six months ended March 31,
2002, as compared to $836,000 for the six months ended March 31, 2001. The
$26,000 or 30% decrease was primarily due to a 58 basis point decrease in the
average rate paid thereon, partially offset by a $4.6 million increase in the
average balance of deposits.
Interest on FHLB advances decreased $7,000 or 100% for the six months ended
March 31, 2002, as compared to the six months ended March 31, 2001. The decrease
was due to the payoff of the borrowings outstanding.
Provision for Loan Losses. During the six month periods ended March 31, 2002 and
2001, we established provisions for loan losses of $9,000. This reflected
management's evaluation of the underlying credit risk of the loan portfolio and
the level of allowance for loan losses.
Noninterest Income. During the six months ended March 31, 2002, noninterest
income increased $6,000 or 7.8%, as compared to the six months ended March 31,
2001.
Noninterest Expenses. Total noninterest expenses increased by $21,000 or 4.5%
during the six months ended March 31, 2002, as compared to the six months ended
March 31, 2001. The increase was attributable to increases of $26,000 in
compensation and employees benefits, and a $5,000 increase in service bureau
expense, offset by a decrease of $10,000 in various other expenses.
(11)
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
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None
Item 2. Change in Securities
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Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
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Not Applicable
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
None
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 2002.
(12)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RESERVE BANCORP, INC.
Date: May 9, 2002 By /s/Richard A. Sinewe
--------------------
Richard A. Sinewe
(President and Director)
Date: May 9, 2002 By /s/Robert B. Kastan
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Robert B. Kastan
(Treasurer/Controller)