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 June 30, 2004
[ ] 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
RSV 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 Identification
or organization) 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
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.
X Yes No
------ ------
As of August 13, 2004, there were 616,646 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
------ ------
RSV BANCORP, INC.
AND SUBSIDIARY
Pittsburgh, Pennsylvania
Index
PART I. Page(s)
- ------- -------
FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated Balance Sheets - as of June 30, 2004
(Unaudited) and September 30, 2003 .............................................3
Consolidated Statements of Income - (Unaudited) for the three and nine
months ended June 30, 2004 and 2003.............................................4
Consolidated Statements of Cash Flows - (Unaudited) for the nine months
ended June 30, 2004 and 2003..................................................5-6
Notes to (Unaudited) Consolidated Financial Statements.........................7-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................12-17
Item 3. Controls and Procedures..................................................17
PART II.
- --------
OTHER INFORMATION
Item 1. Legal Proceedings........................................................18
Item 2. Changes in Securities and Small Business Issuer Purchases
of Equity Securities.....................................................18
Item 3. Defaults Upon Senior Securities..........................................18
Item 4. Submission of Matters to a Vote of Security Holders......................18
Item 5. Other Information........................................................18
Item 6. Exhibits and Reports on Form 8-K......................................18-19
Signatures............................................................................20
RSV BANCORP, INC
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
2004 2003
(UNAUDITED) (AUDITED)
---------------- ------------------
ASSETS
Cash and cash equivalents:
Interest bearing $ 1,012,039 $ 3,118,784
Noninterest bearing 366,334 231,185
Interest-bearing deposits in other banks 1,197,963 1,397,485
Securities held-to-maturity (estimated fair value of
$4,239,715 and $4,574,916) 4,103,277 4,301,648
Mortgage-backed securities held-to-maturity (estimated
fair value of $2,645,568 and $3,997,025) 2,622,619 3,929,953
Securities available-for-sale, at fair value 15,357,219 14,351,220
Mortgage-backed securities available-for-sale, at fair value 11,624,052 8,063,083
Loans, net 38,278,691 34,886,871
Federal Home Loan Bank stock, at cost 609,700 674,500
Accrued interest receivable 513,915 500,626
Premises and equipment, net 445,249 281,411
Real estate held for investment 154,302 154,302
Other assets 414,650 48,184
---------------- ---------------
TOTAL ASSETS $ 76,700,010 $71,939,252
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 56,722,677 $50,468,363
Federal Home Loan Bank advances 7,465,260 8,378,469
Advances from borrowers for taxes and insurance 391,490 76,998
Accrued interest payable 74,267 122,542
Other liabilities 359,878 296,131
---------------- ---------------
Total liabilities 65,013,572 59,342,503
---------------- ---------------
Commitments and contingencies
Preferred stock, no par value; 2,000,000 authorized;
none outstanding - -
Common stock, par value $.10 per share; 8,000,000
shares authorized; 757,500 shares issued 75,750 75,750
Additional paid-in-capital 7,167,218 7,128,170
Retained earnings - substantially restricted 6,655,213 6,275,671
Accumulated other comprehensive (loss) income, net of
applicable income taxes of $87,641 and $102,203 (126,078) 143,485
Treasury stock, at cost (83,766 and 20,450 shares) (1,509,301) (342,033)
Unallocated shares held by Employee Stock Ownership
Plan (ESOP) (427,764) (472,008)
Unearned shares held by Restricted Stock Plan (RSP) (148,600) (212,286)
---------------- ---------------
Net shareholders' equity 11,686,438 12,596,749
---------------- ---------------
TOTAL $ 76,700,010 $71,939,252
================ ===============
(3)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
2004 2003 2004 2003
------------- ----------- ------------ -----------
INTEREST AND DIVIDEND INCOME
Loans $ 599,527 $ 620,545 $1,809,392 $1,891,274
Investments 258,945 179,233 681,933 510,378
Mortgaged-backed securities 87,429 162,141 299,396 400,214
Interest-earning demand deposits 14,328 27,586 52,186 80,546
FHLB stock 2,589 3,297 8,148 9,797
------------- ----------- ------------ -----------
962,818 992,802 2,851,055 2,892,209
------------- ----------- ------------ -----------
INTEREST EXPENSE
Deposits 332,533 370,579 957,184 1,113,505
Advances from Federal Home Loan Bank 51,655 66,000 141,910 157,744
------------- ----------- ------------ -----------
384,188 436,579 1,099,094 1,271,249
------------- ----------- ------------ -----------
NET INTEREST INCOME 578,630 556,223 1,751,961 1,620,960
PROVISION FOR LOAN LOSSES 4,500 4,500 13,500 13,500
------------- ----------- ------------ -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 574,130 551,723 1,738,461 1,607,460
------------- ----------- ------------ -----------
NONINTEREST INCOME
Service charges and other fees 36,688 52,666 92,806 149,173
Income from real estate rental 3,375 3,150 9,825 8,450
Gain on sale of investments 37,126 - 124,499 34,748
------------- ----------- ------------ -----------
77,189 55,816 227,130 192,371
------------- ----------- ------------ -----------
NONINTEREST EXPENSE
Compensation and benefits 206,484 187,556 573,799 489,658
Occupancy and equipment expense 40,216 28,598 99,148 82,534
Federal deposit insurance premiums 11,317 10,925 24,153 18,867
Service bureau expense 17,621 29,168 67,104 83,671
Other 122,059 107,183 309,140 289,622
------------- ----------- ------------ -----------
397,697 363,430 1,073,344 964,352
------------- ----------- ------------ -----------
INCOME BEFORE INCOME TAX EXPENSE 253,622 244,109 892,247 835,479
INCOME TAX EXPENSE 97,870 87,281 335,317 304,515
------------- ----------- ------------ -----------
NET INCOME $ 155,752 $ 156,828 $ 556,930 $ 530,964
============= =========== ============ ===========
EARNINGS PER SHARE - BASIC $ 0.24 $ 0.23 $ 0.86 $ 0.76
EARNINGS PER SHARE - DILUTED $ 0.23 $ 0.22 $ 0.82 $ 0.75
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 636,632 692,708 649,116 699,683
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 669,457 704,071 681,941 711,046
(4)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
June 30,
2004 2003
--------------- ---------------
OPERATING ACTIVITIES
Net income $ 556,930 $ 530,964
Adjustments to reconcile net income to
net cash provided by operating activities
Amortization of:
Deferred loan origination fees (20,956) (49,566)
Premiums and discounts on investment securities 341,705 45,758
Provision for loan losses 13,500 13,500
Depreciation and amortization of premises and equipment 35,710 33,626
Net gain on sales of securities available-for-sale (124,499) (34,748)
Compensation expense - ESOP and RSP 146,978 93,994
(Increase) decrease in:
Accrued interest receivable (13,289) (142,648)
Prepaid expenses (176,622) (25,043)
Increase (decrease) in:
Accrued interest payable (48,275) 12,378
Other liabilities 63,747 68,938
--------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 774,929 547,153
--------------- ---------------
INVESTING ACTIVITIES
Purchase of interest-bearing deposits in other banks - (100,000)
Proceeds from maturities of interest-bearing deposits
in other banks 200,000 100,000
Proceeds from maturities and calls of
securities held-to-maturity 195,000 1,250,000
Proceeds from principal repayments of
mortgage-backed securities held-to-maturity 1,290,008 1,782,433
Purchases of securities held-to-maturity - (150,000)
Proceeds from sales of securities available-for-sale 4,039,046 292,098
Purchases of securities available-for-sale (7,872,869) (8,411,117)
Proceeds from sales of mortgage-backed securities
available-for-sale 4,133,953 -
Purchases of mortgage-backed securities available-for-sale (11,902,975) (5,753,191)
Proceeds from maturities and calls of
securities available-for-sale 2,673,809 1,692,650
Proceeds from principal repayments of
mortgage-backed securities available-for-sale 3,705,674 825,465
Net sales (purchases) of FHLB stock 64,800 (324,800)
Purchases of premises and equipment (199,548) (38,737)
Net loan originations and principal repayments on loans (3,384,364) 64,122
--------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (7,057,466) (8,771,077)
--------------- ---------------
(5)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED
Nine Months Ended
June 30,
2004 2003
---------------- ----------------
FINANCING ACTIVITIES
Net (decrease) increase in FHLB advances (913,209) 3,841,596
Net increase in deposits 6,254,314 6,915,834
Dividends paid (177,388) (113,625)
Net increase in advances from borrowers
for taxes and insurance 314,492 311,357
Common stock acquired by RSP - (254,656)
Purchase of treasury stock (1,167,268) (127,888)
---------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,310,941 10,572,618
---------------- --------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,971,596) 2,348,694
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,349,969 1,655,160
---------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,378,373 $ 4,003,854
================ ==============
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest on deposits, advances, and other borrowings $ 1,147,369 $ 1,258,870
================ ==============
Income taxes $ 377,350 $ 270,110
================ ==============
(6)
RSV BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated 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 financial
position and 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. The accompanying unaudited consolidated interim financial
statements should be read in conjunction with the September 30, 2003 audited
consolidated financial statements, including the notes thereto.
NOTE B - BUSINESS/PLAN OF CONVERSION
RSV Bancorp, Inc. (the "Company") was incorporated under the laws of the
Commonwealth of Pennsylvania for the purpose of becoming the holding company of
Mt. Troy Bank (the "Bank") in connection with the Bank's conversion from a
federally chartered mutual savings bank to a federally chartered stock savings
bank, pursuant to its Plan of Conversion. The operating results of the Company
depend primarily upon the operating results of the Bank and, to a lesser extent,
income from interest-earning assets such as investment securities. The Bank is a
federally chartered, SAIF-insured stock savings bank. The Bank conducted
business from two offices, RSV Township and the City of Pittsburgh, through
April 2003. In April 2003, the Pittsburgh branch was closed due to the
landlord's decision to close the supermarket in which the branch was located. A
new supermarket branch, in McCandless, Pennsylvania, opened on February 20,
2004. The Bank's principal sources of revenue originate from its portfolio of
residential real estate and commercial mortgage loans as well as income from
investment and mortgage-backed securities. The Bank is subject to regulation and
supervision by the Federal Deposit Insurance Corporation (FDIC) and the Office
of Thrift Supervision (OTS).
On April 5, 2002, the Bank completed its mutual-to-stock conversion (the
"Conversion"). In connection with the Conversion, the Company 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
the Company.
The common stock of the Company began trading on the OTC Bulletin Board on April
8, 2002 under the symbol "RSVB". As of July 27, 2004, as a result of the
Company's name change to RSV Bancorp, Inc. from Reserve Bancorp, the stock
trading symbol was changed from "RSVB" to "RSVI". There was no stock split or
other action affecting the number of authorized or issued and outstanding shares
in connection with the name change.
(7)
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended June 30, 2004 and 2003 was
$207,719 and $267,346 respectively. Total comprehensive income for the nine
months ended June 30, 2004 and 2003 was $427,268 and $644,344, respectively.
NOTE D - ASSET QUALITY
At June 30, 2004 and September 30, 2003, the Company had total nonperforming
loans (i.e., loans which are contractually past due 90 days or more) of
approximately $107,000 and $60,000, respectively. Nonperforming loans were 0.30%
of total net loans at June 30, 2004. Total nonperforming assets as a percent of
total assets at June 30, 2004 was 0.14%.
NOTE E - EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding, less unallocated shares held by the Bank's
Employee Stock Ownership Plan (ESOP) and unvested shares held by the Bank's
Restricted Stock Plan (RSP), during the period. Diluted earnings per share is
calculated by dividing net income by the weighted average number of common
shares outstanding, including the effect of stock options, if dilutive, in
accordance with SFAS 128. Stockholders of the Company ratified the adoption of
the 2003 Stock Option Plan at a meeting of stockholders on April 8, 2003. The
computation of basic and diluted earnings per share is shown in the table below:
Three Months Ended Nine Months Ended
June 30, June 30,
2004 2003 2004 2003
-------- -------- -------- ---------
Basic EPS computation:
Numerator-Net Income $155,752 $156,828 $556,930 $530,964
======== ======== ======== ========
Denominator-Weighted average number
of shares outstanding 636,632 692,708 649,116 699,683
======== ======== ======== ========
Basic EPS $ 0.24 $ 0.23 $ 0.86 $ 0.76
======== ======== ======== ========
Diluted EPS computation:
Numerator-Net Income $155,752 $156,828 $556,930 $530,964
======== ======== ======== ========
Denominator-Weighted average number
of shares outstanding 636,632 692,708 649,116 699,683
Dilutive Stock Options 12,625 - 25,250 -
Dilutive Unvested RSP 11,363 11,363 7,575 11,363
-------- -------- -------- --------
Weighted average common shares and
common stock equivalents 676,884 704,071 681,941 711,046
======== ======== ======== ========
Diluted EPS $ 0.30 $ 0.22 $ 0.82 $ 0.75
======== ======== ======== ========
(8)
As part of the conversion discussed in Note B, an Employee Stock Ownership Plan
(ESOP) was established for all employees who have completed one year of service
and have attained the age of 21. The ESOP borrowed $590,000 from the Company and
used the funds to purchase 59,000 shares of common stock of the Company issued
in the offering. The loan will be repaid principally from the Bank's
discretionary contributions to the ESOP over a period of 10 years. On June 30,
2004, the loan had an outstanding balance of $427,764 and an interest rate of
4.75%. The loan obligation of the ESOP is considered unearned compensation and,
as such, recorded as a reduction of the Company's stockholders' equity. Both the
loan obligation and the unearned compensation are reduced by the amount of the
loan repayments made by the ESOP. Shares purchased with the loan proceeds are
held in a suspense account for allocation among participants as the loan is
repaid. Contributions to the ESOP and shares released from the suspense account
are allocated among participants on the basis of compensation in the year of
allocation. Benefits become fully vested at the end of five years of service
under the terms of the ESOP Plan. Benefits may be payable upon retirement,
death, disability, or separation from service. Since the Bank's annual
contributions are discretionary, benefits payable under the ESOP cannot be
estimated. Compensation expenses are recognized to the extent of the fair value
of shares committed to be released.
For the nine month period ended June 30, 2004, compensation from the ESOP of
$83,292 was expensed. Compensation is recognized at the average fair value of
the ratably released shares during the accounting period as the employees
performed services. At June 30, 2004, the ESOP had 16,225 allocated shares and
42,775 unallocated shares. For the purpose of computing earnings per share, all
ESOP shares committed to be released have been considered outstanding.
NOTE F - RESTRICTED STOCK PLAN (RSP)
The Company maintains a RSP for directors, officers and selected employees. The
objective of this plan is to enable the Company and the Bank to retain their
officers, directors and selected employees who have the experience and ability
necessary to manage these entities. Directors, officers and selected employees
who are selected by members of a Board-appointed committee are eligible to
receive benefits under the RSP. The non-employee directors of the Company and
the Bank serve as trustees for the RSP, and have the responsibility to invest
all funds contributed by the Bank to the Trust created for the RSP.
The Company reserved 30,300 shares, acquired 15,150 shares, and granted a total
of 15,150 shares of common stock, of which 3,787 shares became immediately
vested under the plan with the remaining shares vesting over a three-year period
beginning April 8, 2004. A total of 7,575 shares were vested as of June 30,
2004. The RSP shares purchased initially will be excluded from stockholders'
equity. The Company recognizes compensation expense in the amount of fair value
of the common stock at the grant date, pro rata, over the years during which the
shares are payable and recorded as an addition to the stockholders' equity.
Directors and officers who terminate their association with the Company shall
forfeit the right to any shares that were awarded but not vested.
Net compensation expense attributable to the RSP amounted to $63,686 for the
nine month period ended June 30, 2004.
(9)
NOTE G - STOCK OPTION PLAN
The Company maintains a Stock Option Plan for the directors, officers and
selected employees. An aggregate of 75,750 shares of authorized but unissued
common stock of the Company were reserved for future issuance under this Plan.
The stock options have an expiration term of ten years, subject to certain
extensions and early terminations. The per share exercise price of an incentive
stock option shall at a minimum equal the fair market value of a share of common
stock on the date the option was granted. Proceeds from the exercise of the
stock options are credited to common stock for the aggregate par value and the
excess is credited to paid-in capital.
The following table presents information related to the outstanding options:
Officers' Directors'
Stock Stock Exercise
Options Options Price
------- ------- --------
Outstanding, September 30, 2003 15,150 22,725 $17.00
Granted - - N/A
Exercised - - N/A
Forfeited - - N/A
-------- -------
Outstanding, June 30, 2004 15,150 22,725 $17.00
======== =======
There were 15,150 options outstanding for officers with an exercise price of
$17.00 and a remaining contractual life of 8.75 years. The options vest 1/3 at
the date of the grant and 1/3 annually thereafter. There were also 22,725
options outstanding for directors with an exercise price of $17.00 and a
remaining contractual life of 8.75 years. The options vest 1/3 at the date of
the grant and 1/3 annually thereafter.
NOTE H - STOCK BASED COMPENSATION
The Company accounts for the stock option plan under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under the plan have an
exercise price equal to the market value of the underlying common stock on the
date of the grant. The following table illustrates the effect on net income and
earnings per share if the Company applies the fair value recognition provisions
of FASB Statement No. 123, Accounting for Stock-Based Compensation, to the stock
option plan.
(10)
THREE MONTHS ENDED
JUNE 30,
2004 2003
-------- --------
Net income, as reported $155,752 $156,828
Deduct: total stock-based employee compensation expense
determined under fair value based methods for all
awards, net of related tax effects (1,326) (3,315)
-------- --------
Pro forma net income $154,426 $153,513
======== ========
Earnings per share:
Basic-as reported $0.24 $0.23
===== =====
Basic-pro forma $0.24 $0.22
===== =====
Diluted-as reported $0.23 $0.22
===== =====
Diluted-pro forma $0.23 $0.22
===== =====
NINE MONTHS ENDED
JUNE 30,
2004 2003
-------- --------
Net income, as reported $556,930 $530,964
Deduct: total stock-based employee compensation expense
determined under fair value based methods for all
awards, net of related tax effects (2,652) (3,315)
-------- --------
Pro forma net income $554,278 $527,649
======== ========
Earnings per share:
Basic-as reported $0.86 $0.76
===== =====
Basic-pro forma $0.85 $0.75
===== =====
Diluted-as reported $0.82 $0.75
===== =====
Diluted-pro forma $0.81 $0.74
===== =====
For the purpose of computing the pro forma effects of stock option grants under
the fair value accounting method, the fair value of the stock option grant was
estimated on the date of the grant using the Black Scholes option pricing model.
(11)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the consolidated financial condition and results of
operations of the Company should be read in conjunction with the accompanying
consolidated financial statements.
General
The Company's results of operations are primarily dependent upon net interest
income, which is the difference between the interest income earned on
interest-earning assets, primarily loans, mortgage-backed securities, and
investment securities 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's Discussion and Analysis section of this annual report 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
The Company's total assets of $76.7 million at June 30, 2004, are reflective of
an increase of $4,800,000 or 6.7% as compared to $71.9 million at September 30,
2003. Stockholders' equity decreased by $910,000 to $11.686 million at June 30,
2004, as compared to $12.596 million at September 30, 2003. The increase in
total assets was primarily due to increases in investment securities, net loans,
mortgage backed securities, and premises and equipment, partially offset by a
decrease in cash and cash equivalents. The decrease in stockholders' equity was
primarily due to the repurchase of the Company's common stock. The changes in
the components of assets, liabilities and equity are discussed as follows.
Cash and Cash Equivalents. Cash and cash equivalents, which consist of
interest-bearing and noninterest-bearing deposits with original maturities of
three months or less, totaled $1,378,000 at June 30, 2004, a decrease of
$1,972,000 or 58.9% as compared to $3,350,000 at September 30, 2003. This change
was primarily due to a decrease in interest-bearing deposits maintained at the
Federal Home Loan Bank.
Interest-bearing Deposits in Other Banks. Interest-bearing deposits in other
banks totaled $1.2 million at June 30, 2004, a decrease of $200,000 or 14.3% as
compared to $1.4 million at September 30, 2003.
Investment Securities. Investment securities totaled $19.4 million at June 30,
2004, an increase of $700,000 or 3.7%, as compared to $18.7 million at September
30, 2003. This increase was primarily the result of the purchase of $6.5 million
of Government agency and municipal bonds, $1.2 million of mutual funds, offset
by the proceeds from sales and calls of $6.5 million.
(12)
Mortgage-backed Securities. Mortgage-backed securities totaled $14.2 million at
June 30, 2004, an increase of $2.2 million or 18.3%, as compared to $12.0
million at September 30, 2003. The increase was primarily due to purchases of
$16.2 million, offset by principal payments totaling $4.9 million and sales of
$5.8 million.
Loans Receivable, net. Net loans receivable at June 30, 2004 totaled $38.3
million, an increase of $3,400,000 or 9.7%, as compared to $34.9 million at
September 30, 2003. The increase was primarily due to net principal
originations.
Other Assets. Total other assets at June 30, 2004 totaled $415,000, and increase
of $367,000 or over 7.6 times the September 30, 2003 balance of $48,000. The
increase was primarily due to the change in the deferred income tax asset
associated with the unrealized losses on securities available for sale.
Deposits. Total deposits, after interest credited, increased $4.4 million or
12.3% to $56.7 million at June 30, 2004, as compared to $50.5 million at
September 30, 2003. The change was due to increases in savings, certificates of
deposit, and NOW accounts.
Federal Home Loan Bank Advances. Federal Home Loan Bank advances totaled $7.5
million at June 30, 2004 compared to $8.4 million at September 30, 2003.
Shareholders' Equity. Shareholders' equity totaled $11.7 million at June 30,
2004, as compared to $12.6 at September 30, 2003. The decrease of $900,000 or
7.1% was primarily due to the repurchase of $1.2 million in company stock,
decreases in other comprehensive income of $270,000, and dividends paid of
$177,000, offset by increases in net income for the nine month period ended June
30, 2004 of $557,000 and $147,000 from the release of ESOP and RSP shares.
Results of Operations for the Three Months Ended June 30, 2004 and 2003.
Net Income. Net income of $156,000 was recorded for the three months ended June
30, 2004, as compared to net income of $157,000 for the three months ended June
30, 2003. An increase in net interest income was 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 $22,000 or 4.0% for the three
month period ended June 30, 2004, as compared to the three month period ended
June 30, 2003. The average balance of interest-earning assets increased $4.8
million or 6.9%, whereas the average rate earned thereon decreased 52 basis
points. The average balance of interest-bearing liabilities increased by $5.5
million or 9.5%, whereas the average rate paid thereon decreased 59 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 2.72% for the three month period ended June 30, 2004
from 2.65% for the three month period ended June 30, 2003.
Interest Income. Interest income decreased $30,000 or 3.0% to $963,000 for the
three month period ended June 30, 2004, as compared to $993,000 for the three
month period ended June 30, 2003.
Interest on loans receivable decreased $21,000 or 3.4% for the three month
period ended June 30, 2004, as compared to the three month period ended June 30,
2003. This change was the result of a 61 basis
(13)
point decrease in the average yield, offset by a $1,987,000 increase in the
average balance of loans receivable.
Interest income on mortgage-backed securities decreased $75,000 or 46.1% for the
three month period ended June 30, 2004, as compared to the three month period
ended June 30, 2003. This change was the result of a $934,000 decrease in the
average balance of mortgage-backed securities and a 169 basis point decrease in
the average yield earned thereon.
Interest income on investment securities increased $80,000 or 44.7% for the
three month period ended June 30, 2004, as compared to the three month period
ended June 30, 2003. The increase was the result of a $6.2 million increase in
the average balance of investment securities, offset by a 5 basis point decrease
in the average yield earned thereon.
Interest income on other interest-earning assets decreased $14,000 or 45.2% for
the three month period ended June 30, 2004, as compared to the three month
period June 30, 2003. The decrease was primarily due to a 4 basis point decrease
in the average yield earned thereon, as well as, a $2.4 million decrease in the
average balance of other interest-earning assets.
The average yield on the average balance of interest-earning assets was 5.13%
and 5.66% for the three month periods ended June 30, 2004 and 2003,
respectively.
Interest Expense. Interest expense totaled $384,000 for the three months ended
June 30, 2004, as compared to $437,000 for the three months ended June 30, 2003.
The $53,000 or 12.1% decrease was primarily due to a 59 basis point decrease in
the average rate paid on the total average interest-bearing liabilities,
partially offset by a $5.5 million increase in the average balance of
interest-bearing liabilities.
Interest expense on deposits totaled $333,000 for the three months ended June
30, 2004, as compared to $371,000 for the three months ended June 30, 2003. The
$38,000 or 10.5% decrease was primarily due to a 65 basis point decrease in the
average rate paid thereon, partially offset by a $6.8 million increase in the
average balance of deposits.
Interest expense on FHLB advances decreased $14,000 for the three months ended
June 30, 2004, as compared to the three months ended June 30, 2003. The decrease
was due to a $1.2 million decrease in the average balance and a 26 basis point
decrease in the average rate paid on FHLB advances during the three months ended
June 30, 2004.
Provision for Loan Losses. During the three month ended June 30, 2004 and 2003,
the provision for loan losses was $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 June 30, 2004, the allowance for loan losses totaled $195,000 or 0.51% and
229.9% of total loans and total non-performing loans, respectively, as compared
to $195,000 or 0.56% and 50.9%, respectively, at June 30, 2003. Our
non-performing loans (non-accrual loans and accruing loans 90 days or more
overdue) totaled $85,000 and $383,000 at June 30, 2004 and June 30, 2003,
respectively, which represented 0.53% and 1.09% of total net loans,
respectively. Our ratio of non-performing loans to total assets was 0.11% and
0.53% at June 30, 2004 and June 30, 2003, respectively.
(14)
Noninterest Income. During the three months ended June 30, 2004, noninterest
income increased $21,000 or 38.3%, as compared to the three months ended June
30, 2003, primarily due to gains on the sale of investments, partially offset by
decrease in service charges and other fees.
Noninterest Expense. Total noninterest expense increased by $34,000 or 9.4%
during the three month period ended June 30, 2004, as compared to the three
month period ended June 30, 2003. The increase was attributable to a $19,000
increase in compensation and benefits, including $34,000 attributable to the
ESOP plan and $21,000 attributable to the RSP plan.
Income Tax Expense. The provision for income tax totaled $98,000 for the three
months ended June 30, 2004, as compared to $87,000 for the three months June 30,
2003. The $11,000 or 12.1% increase was due to increased income.
Results of Operations for the Nine Months Ended June 30, 2004 and 2003.
Net Income. Net income of $557,000 was recorded for the nine months ended June
30, 2004, as compared to net income of $531,000 for the nine months ended June
30, 2003. The $26,000 or 4.9% increase in net income for the nine month period
ended June 30, 2004 was primarily the result of increases 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 $131,000 or 8.1% for the nine
month period ended June 30, 2004, as compared to the nine month period ended
June 30, 2003. The average balance of interest-earning assets increased $7.4
million or 11.4%, whereas the average rate earned thereon decreased 68 basis
points. The average balance of interest-bearing liabilities increased by $7.8
million or 14.6%, whereas the average rate paid thereon decreased 78 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 2.83% for the nine month period ended June 30, 2004
from 2.73% for the nine month period ended June 30, 2003.
Interest Income. Interest income decreased $41,000 or 1.42% to $2,851,000 for
the nine month period ended June 30, 2004, as compared to $2,892,000 for the
nine month period ended June 30, 2003.
Interest on loans receivable decreased $82,000 or 4.3% for the nine month period
ended June 30, 2004, as compared to the nine month period ended June 30, 2003.
This change was the result of a 57 basis point decrease in the average yield
earned, offset by a $1,350,000 increase in the average balance of loans
receivable.
Interest income on mortgage-backed securities decreased $100,000 or 25.0% for
the nine month period ended June 30, 2004, as compared to the nine month period
ended June 30, 2003. This change was the result of a 53 basis point decrease in
the average yield earned thereon and a $1.8 million increase in the average
balance of mortgage-backed securities.
Interest income on investment securities increased $172,000 or 33.7% for the
nine month period ended June 30, 2004, as compared to the nine month period
ended June 30, 2003. The increase was the result of a $8.5 million increase in
the average balance of investment securities, offset by a 155 basis point
decrease in the average yield earned thereon.
(15)
Interest income on other interest-earning assets decreased $31,000 or 34.1% for
the nine month period ended June 30, 2004, as compared to the nine month period
June 30, 2003. The decrease was primarily due to a 61 basis point decrease in
the average yield earned thereon, as well as, a $642,000 decrease in the average
balance of other interest-earning assets.
The average yield on the average balance of interest-earning assets was 5.24%
and 5.92% for the nine month periods ended June 30, 2004 and 2003, respectively.
Interest Expense. Interest expense totaled $1,099,000 for the nine months ended
June 30, 2004, as compared to $1,271,000 for the nine months ended June 30,
2003. The $172,000 or 14.6% decrease was primarily due to a 77 basis point
decrease in the average rate paid on the total average interest-bearing
liabilities, partially offset by a $6.3 million increase in the average balance
of interest-bearing liabilities.
Interest expense on deposits totaled $957,000 for the nine months ended June 30,
2004, as compared to $1,114,000 for the nine months ended June 30, 2003. The
$156,000 or 14.0% decrease was primarily due to a 77 basis point decrease in the
average rate paid thereon, partially offset by a $6.4 million increase in the
average balance of deposits.
Interest expense on FHLB advances decreased $16,000 for the nine months ended
June 30, 2004, as compared to the nine month ended June 30, 2003. The decrease
was due to an 87 basis point decrease in the average rate paid on FHLB advances
and a $1.4 million increase in the average balance during the nine months ended
June 30, 2004.
Provision for Loan Losses. During the nine month ended June 30, 2004 and 2003,
the provision for loan losses was $13,500. 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 nine months ended June 30, 2004, noninterest
income increased $35,000 or 18.1%, as compared to the nine months ended June 30,
2003, primarily due to gains on the sale of investments, partially offset by
decrease in service charges and other fees.
Noninterest Expense. Total noninterest expense increased by $109,000 or 11.3%
during the nine month period ended June 30, 2004, as compared to the nine month
period ended June 30, 2003. The increase was attributable to a $84,000 increase
in compensation and benefits, including $71,000 attributable to the ESOP plan
and $64,000 attributable to the RSP plan.
Income Tax Expense. The provision for income tax totaled $335,000 for the nine
months ended June 30, 2004, as compared to $305,000 for the nine months ended
June 30, 2003. The $31,000 or 10.1% increase was due to increased income.
Liquidity and Capital Resources
The Company's primary sources of funds are new deposits, proceeds from principal
and interest payments on loans, and repayments on investment and mortgage-backed
securities. While maturities and scheduled amortization of loans are a
predictable source of funds, deposit flows and mortgage repayments are greatly
influenced by general interest rates, economic conditions and competition. The
Company maintained liquidity levels adequate to fund loan commitments,
investment opportunities, deposit withdrawals and other financial commitments.
At June 30, 2004, the Company had obligations
(16)
to fund outstanding loan commitments of approximately $5.5 million, including
construction loans in process and unused lines of credit, for which adequate
resources were available to fund these loans. At June 30, 2004, approximately
$8.2 million of the Bank's time deposits were scheduled to mature within the
next 12 months. The Bank expects such deposits to be renewed at market rates. In
addition to this source of continuing funding, the Bank has the ability to
obtain advances from the FHLB of Pittsburgh.
At June 30, 2004, management had no knowledge of any trends, events or
uncertainties that will have or are reasonably likely to have material effects
on the liquidity, capital resources or operations of the Company. Further at
June 30, 2004, management was not aware of any current recommendations by the
regulatory authorities, which, if implemented, would have such an effect.
CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on their evaluation
of the Company's disclosure controls and procedures (as defined in RULE
13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")), the
Company's principal executive officer and principal financial officer have
concluded that as of the end of the period covered by this Quarterly Report on
Form 10-QSB such disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
(b) Changes in internal control over financial reporting. During the quarter
under report, there was no change in the Company's internal control over
financial reporting that has materially affected, or is reasonably likely too
materially affect, the Company's internal control over financial reporting.
(17)
OTHER INFORMATION
Part II.
Item 1. Legal Proceedings None
----------------------
Item 2. Change in Securities and Small Business Issuer Purchases of Equity
Securities
------------------------------------------------------------------------
Total Number
of Shares
Purchased as Maximum Number of
Total Part of Publicly Shares that May Yet
Number of Average Announced Be Purchased Under
Shares Price Paid Plans or the Plans or
Period Purchased per Share Programs Programs
- ---------------- --------- --------- ------------- ---------------------
April 1-30, 2004 - $ - - -
May 1 -31, 2004 15,000 $ 18.37 15,000 -
June 1-30, 2004 23,216 $ 18.25 23,216 17,569
----------- ----------- -------------
Total 38,216 $ 18.30 38,216 17,569
=========== =========== =============
On June 14, 2004 the Board of Directors approved a plan to
repurchase up to 5% or 34,535 of the outstanding shares of the
Company in open market purchases. The repurchases were made from in
open-market transactions.
On November 5, 2003 the Board of Directors approved a plan to
repurchase up to 5% or 36,353 of the outstanding shares of the
Company in open market purchases. The repurchases were made from in
open-market transactions. The Company does not intend to make any
further purchases under this plan.
No purchases were made other than through a publicly announced plan.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
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
--------------------------------
(a) Exhibits
31 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(18)
(b) Reports on Form 8-K
During the quarter ended June 30, 2004, the Registrant filed
the following reports on Form 8-K:
o Form 8-K dated April 15, 2004 to report appointment of
a new president (Item 5).
o Form 8-K dated May 26, 2004 to report declaration of
semi-annual cash dividend and name change of Registrant
and subsidiary bank (Items 5 and 7).
o Form 8-K dated June 14, 2004 to report the approval of
a stock repurchase plan (Items 5 and 7).
(19)
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.
RSV BANCORP, INC.
Date: August 13, 2004 By /s/Gerard R. Kunic
------------------
Gerard R. Kunic
President
(Principal Executive Officer)
Date: August 13, 2004 By /s/Robert B. Kastan
-------------------
Robert B. Kastan
Treasurer/Controller
(Principal Financial/Accounting Officer)