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 December 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ----------------------
Commission File Number 0-49696
RSV BANCORP, INC.
-----------------
(Exact name of Registrant as specified in its Charter)
Pennsylvania 23-3102103
------------ ----------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Number)
2000 Mt. Troy Road, Pittsburgh, Pennsylvania 15212
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrantss.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 February 2, 2005, there were 568,060 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 December 31, 2004
(Unaudited) and September 30, 2004 .....................................3
Consolidated Statements of Income - (Unaudited) for the three
months ended December 31, 2004 and 2003.................................4
Consolidated Statements of Cash Flows - (Unaudited) for the three
months ended December 31, 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.....................................12-15
Item 3. Controls and Procedures..........................................15
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings................................................16
Item 2. Changes in Securities............................................16
Item 3. Defaults Upon Senior Securities..................................16
Item 4. Submission of Matters to a Vote of Security Holders..............16
Item 5. Other Information................................................16
Item 6. Exhibits.........................................................16
Signatures....................................................................17
RSV BANCORP, INC
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2004 2004
------------ ------------
(UNAUDITED) (AUDITED)
ASSETS
Cash and cash equivalents:
Interest bearing $ 4,813,801 $ 4,381,220
Noninterest bearing 409,327 547,782
Interest-bearing deposits in other banks 1,099,134 998,000
Securities held-to-maturity (estimated fair value of
$4,231,459 and $4,267,008) 4,100,532 4,101,875
Mortgage-backed securities held-to-maturity (estimated
fair value of $2,187,099 and $2,426,694) 2,140,723 2,372,774
Securities available-for-sale, at fair value 13,261,456 13,875,900
Mortgage-backed securities available-for-sale, at fair value 10,597,535 11,029,449
Loans, net 38,350,817 37,974,650
Federal Home Loan Bank stock, at cost 559,000 636,100
Accrued interest receivable 467,945 534,997
Premises and equipment, net 442,974 439,805
Real estate held for investment 145,422 146,532
Prepaid expenses and other assets 314,273 155,496
------------ ------------
TOTAL ASSETS $ 76,702,939 $ 77,194,580
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 60,678,077 $ 59,337,619
Federal Home Loan Bank advances 5,515,260 5,515,260
Advances from borrowers for taxes and insurance 234,663 80,194
Accrued interest payable 121,711 114,960
Other liabilities 219,650 183,870
------------ ------------
Total liabilities 66,769,361 65,231,903
------------ ------------
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 7,167,218
Retained earnings - substantially restricted 6,832,659 6,801,745
Accumulated other comprehensive income (loss), net of
applicable income taxes of ($2,224) and ($9,515) (3,201) (13,655)
Treasury stock, at cost (189,440 and 83,766 shares) (3,634,438) (1,527,993)
Unallocated shares held by Employee Stock Ownership
Plan (ESOP) (398,267) (413,016)
Unearned shares held by Restricted Stock Plan (RSP) (106,143) (127,372)
------------ ------------
Net shareholders' equity 9,933,578 11,962,677
------------ ------------
TOTAL $ 76,702,939 $ 77,194,580
============ ============
See accompanying notes to unaudited consolidated financial statements.
(3)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
December 31,
2004 2003
-------- --------
INTEREST AND DIVIDEND INCOME
Loans $579,893 $599,286
Investments 225,457 213,699
Mortgaged-backed securities 76,117 103,694
Interest-earning demand deposits 26,589 21,154
FHLB stock 2,500 3,375
-------- --------
910,556 941,208
-------- --------
INTEREST EXPENSE
Deposits 364,720 312,720
Advances from Federal Home Loan Bank 41,622 46,535
-------- --------
406,342 359,255
-------- --------
NET INTEREST INCOME 504,214 581,953
PROVISION FOR LOAN LOSSES 5,625 4,500
-------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 498,589 577,453
-------- --------
NONINTEREST INCOME
Service charges and other fees 27,353 28,740
Income from real estate rental 1,350 3,150
Gain on sale of investments 52,083 27,294
-------- --------
80,786 59,184
-------- --------
NONINTEREST EXPENSE
Compensation and benefits 210,971 172,775
Occupancy and equipment expense 37,869 24,962
Federal deposit insurance premiums 10,470 7,793
Service bureau expense 27,369 27,407
Other 109,432 85,900
-------- --------
396,111 318,837
-------- --------
INCOME BEFORE INCOME TAX EXPENSE 183,264 317,800
INCOME TAX EXPENSE 64,783 119,294
-------- --------
NET INCOME $118,481 $198,506
======== ========
EARNINGS PER SHARE - BASIC $ 0.23 $ 0.30
EARNINGS PER SHARE - DILUTED $ 0.22 $ 0.29
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 513,431 657,821
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 546,261 681,809
DIVIDENDS PER SHARE $ 0.15 $ 0.10
See accompanying notes to unaudited consolidated financial statements.
(4)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
December 31,
2004 2003
----------- -----------
OPERATING ACTIVITIES
Net income $ 118,481 198,506
Adjustments to reconcile net income to
net cash provided by operating activities
Amortization of:
Deferred loan origination fees 15,931 22,354
Premiums and discounts on investment securities 42,828 166,731
Provision for loan losses 5,625 4,500
Depreciation and amortization of premises and equipment 14,818 9,802
Net gain on sales of securities available-for-sale (53,517) (27,294)
Compensation expense - ESOP and RSP 35,979 50,180
(Increase) decrease in:
Accrued interest receivable 67,052 (39,719)
Prepaid expenses (57,925) (10,826)
Increase (decrease) in:
Accrued interest payable 6,751 (32,899)
Other liabilities 35,780 (39,954)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 231,803 301,381
----------- -----------
INVESTING ACTIVITIES
Purchase of interest-bearing deposits in other banks (200,000) -
Proceeds from maturities of interest-bearing deposits
in other banks 99,000 100,000
Proceeds from principal repayments of
mortgage-backed securities held-to-maturity 229,232 554,617
Purchases of securities held-to-maturity - -
Proceeds from sales of securities available-for-sale 296,728 -
Purchases of securities available-for-sale (1,764,259) (3,070,000)
Proceeds from sales of mortgage-backed securities
available-for-sale - 4,125,482
Purchases of mortgage-backed securities available-for-sale - (3,079,024)
Proceeds from maturities and calls of
securities available-for-sale 2,062,551 1,140,943
Proceeds from principal repayments of
mortgage-backed securities available-for-sale 375,657 372,980
Net sales of FHLB stock 77,100 90,300
Purchases of premises and equipment (16,877) (22,474)
Net loan originations and principal repayments on loans (397,723) (627,995)
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 761,409 (415,171)
----------- -----------
(5)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED
Three Months Ended
December 31,
2004 2003
----------- -----------
FINANCING ACTIVITIES
Net decrease in FHLB advances - (900,589)
Net increase in deposits 1,340,458 1,135,291
Dividends paid (85,209) (71,345)
Net increase in advances from borrowers
for taxes and insurance 154,469 168,590
Purchase of treasury stock & related expenses (2,108,804) (467,970)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (699,086) (136,023)
----------- -----------
NET (INCREASE) DECREASE IN CASH AND CASH EQUIVALENTS 294,126 (251,413)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,929,002 3,349,969
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,223,128 $ 3,098,556
=========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest on deposits, advances, and other borrowings $ 406,342 $ 319,536
=========== ===========
Income taxes $ 63,939 $ 132,775
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
(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, 2004 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. Mt. Troy Bank
is a federally chartered, SAIF-insured stock savings bank. The Bank conducted
business from two offices, Reserve 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." On July 1, 2004, the Company's trading symbol
changed to "RSVI."
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended December 31, 2004 and 2003
was $128,935 and $219,549, respectively.
(7)
NOTE D - ASSET QUALITY
At December 31, 2004 and September 30, 2004, the Company had total nonperforming
loans (i.e., loans which are contractually past due 90 days or more) of
approximately $1,033,000 and $75,000, respectively. Nonperforming loans were
2.69% of total net loans at December 31, 2004. Total nonperforming assets as a
percentage of total assets at December 31, 2004 was 1.35%.
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
December 31,
2004 2003
-------- --------
Basic EPS computation:
Numerator-Net Income $118,481 $198,506
======== ========
Denominator-Weighted average number
of shares outstanding 513,431 657,821
======== ========
Basic EPS $ 0.23 $ 0.30
======== ========
Diluted EPS computation:
Numerator-Net Income $118,481 $198,506
======== ========
Denominator-Weighted average number
of shares outstanding 513,431 657,821
Dilutive Stock Options 25,250 12,625
Dilutive Unvested RSP 7,580 11,363
======== --------
Weighted average common shares and
common stock equivalents 546,261 681,809
======== ========
Diluted EPS $ 0.22 $ 0.29
======== ========
(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 December
31, 2004, the loan had an outstanding balance of $413,000 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 three month period ended December 31, 2004, compensation from the ESOP
of $14,750 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 December 31, 2004, the ESOP had 17,700 allocated shares
and 41,300 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 its
corporate 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 7,570 shares were vested as of December 31,
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, which were awarded but not vested.
Net compensation expense attributable to the RSP amounted to $21,229 for the
three month period ended December 31, 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, 2004 15,150 22,725 $17.00
Granted - - N/A
Exercised - - N/A
Forfeited - - N/A
------ ------
Outstanding, December 31, 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 8.3 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 8.3 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
DECEMBER 31,
2004 2003
--------- ---------
Net income, as reported $ 118,481 $ 198,506
Deduct: total stock-based employee compensation expense
determined under fair value based methods for all
awards, net of related tax effects (1,326) (1,326)
--------- ---------
Pro forma net income $ 118,481 $ 198,506
========= =========
Earnings per share:
Basic-as reported $ 0.23 $ 0.30
========= =========
Basic-pro forma $ 0.00 $ 0.00
========= =========
Diluted-as reported $ 0.21 $ 0.29
========= =========
Diluted-pro forma $ 0.00 $ 0.00
========= =========
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.
NOTE I - RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS 123R, Share-Based Payment, which replaces
SFAS 123, Accounting for Stock-Based Compensation, and supercedes APB Opinion
25, Accounting for Stock Issued to Employees. SFAS 123R requires that the cost
of share-based payment transactions (including those with employees and
nonemployees) be recognized in the financial statements. SFAS 123R applies to
all share-based payment transactions in which an entity acquires goods or
services by issuing (or offering to issue) its shares, share options, or other
equity instruments (except for those held by an ESOP) or by incurring
liabilities (1) in amounts based (even in part) on the price of the entity's
shares or other equity instruments, or (2) that require (or may require)
settlement by the issuance of an entity's shares or other equity instruments.
Public entities that file as small business issuers, such as the Company, are
not required to apply SFAS 123R until the beginning of the first interim or
annual reporting period that begins after December 15, 2005. The Company does
not plan to implement the provisions of SFAS 123R before March 31, 2006.
(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 December 31, 2004, are reflective
of a decrease of $492,000 or 0.64% as compared to $77.2 million at September 30,
2004. Stockholders' equity decreased by $2.1 million to $9.9 million at December
31, 2004 as compared to $12.0 million at September 30, 2004. The decrease in
total assets was primarily due to a decrease in investment securities partially
offset by increases in cash and cash equivalents, interest bearing deposits in
other banks, mortgage backed securities, and net loans. The decrease in
stockholder's equity was primarily due to the repurchase of the Company's common
stock via a Modified Dutch Auction. 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 $5.2 million at December 31, 2004, an increase of
$294,000 or 6.0% as compared to $4.9 million at September 30, 2004. This change
was primarily due to an increase in interest-bearing deposits maintained at the
Federal Home Loan Bank.
Interest-bearing Deposits in Other Banks. Interest-bearing deposits in other
banks totaled $1.1 million at December 31, 2004, an increase of $101,000 or
10.1% as compared to $998,000 at September 30, 2004.
Investment Securities. Investment securities totaled $17.4 million at December
31, 2004, a decrease of $616,000 or 3.3%, as compared to $18.0 million at
September 30, 2004. This decrease was primarily the result of $2.0 million in
maturities, $300,000 in sales, offset by $1.8 million in purchases.
(12)
Mortgage-backed Securities. Mortgage-backed securities totaled $12.7 million at
December 31, 2004, a decrease of $664,000 or 5.2%, as compared to $13.4 million
at September 30, 2004.
Loans Receivable, net. Net loans receivable at December 31, 2004 totaled $38.4
million, an increase of $376,000 or 1.1%, as compared to $38.0 million at
September 30, 2004. The increase was primarily due to net principal
originations.
Deposits. Total deposits, after interest credited, increased $1.4 million or
2.4% to $60.7 million at December 31, 2004, as compared to $59.3 million at
September 30, 2004. 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 $5.5
million at December 31, 2004, unchanged from September 30, 2004.
Stockholders' Equity. Stockholders' equity totaled $9.9 million at December 30,
2004, as compared to $12.0 million at September 30, 2004. The decrease of $2.1
million or 17.5% was primarily due to the repurchase of 105,674 shares in common
stock acquired via a Modified Dutch Auction transaction. The cost to acquire the
stock totaled $2,008,000 including related expenses of $98,000. The decrease in
stockholders' equity was also the result of dividends paid of $85,000, offset by
increases in net income for the three month period ended December 31, 2004 of
$118,000, other comprehensive income of $10,000 and $36,000 from the release of
ESOP and RSP shares.
Results of Operations for the Three Months Ended December 31, 2004 and 2003
Net Income. Net income of $118,000 was recorded for the three months ended
December 31, 2004, as compared to net income of $199,000 for the three months
ended December 31, 2003. The $81,000 or 40.3% decrease in net income for the
quarter ended December 31, 2004 was primarily the result of a decrease in net
interest income along with increases in non-interest expense. Changes in the
components of income and expense are discussed herein.
Net Interest Income. Net interest income decreased $78,000 or 13.4% for the
three month period ended December 31, 2004, as compared to the three month
period ended December 31, 2003. The average balance of interest-earning assets
increased $4.8 million or 6.7%, whereas the average rate earned thereon
decreased 35 basis points. The average balance of interest-bearing liabilities
increased by $6.8 million or 11.6%, whereas the average rate paid thereon
increased 4 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, decreased 39 basis points to 2.50% for the three month period ended
December 31, 2004 from 2.89% for the three month period ended December 31, 2003.
Interest Income. Interest income decreased $31,000 or 3.3% to $911,000 for the
three month period ended December 31, 2004, as compared to $941,000 for the
three month period ended December 31, 2003.
Interest on loans receivable decreased $19,000 or 3.2% for the three month
period ended December 31, 2004, as compared to the three month period ended
December 31, 2003. This change was the result of a 61 basis point decrease in
the average yield earned on loans receivable, offset by a $2.2 million increase
in the average balance thereof.
(13)
Interest income on mortgage-backed securities decreased $28,000 or 26.6% for the
three month period ended December 31, 2004, as compared to the three month
period ended December 31, 2003. This change was the result of a 137 basis point
decrease in the average yield, offset by a $2.0 million increase in the average
balance of mortgage-backed securities.
Interest income on investment securities increased $12,000 or 5.5% for the three
month period ended December 31, 2004, as compared to the three month period
ended December 31, 2003. The increase was the result of a 69 basis point
increase in average yield which was partially offset by a $1.7 million decrease
in the average balance of investment securities.
Interest income on other interest-earning assets increased $4,600 or 18.6% for
the three month period ended December 31, 2004, as compared to the three month
period December 31, 2003. The increase was primarily due to a 120 basis point
increase in the average yield earned thereon along with a $2.4 million increase
in the average balance of other interest-earning assets.
The average yield on the average balance of interest-earning assets was 4.98%
and 5.33% for the three month periods ended December 31, 2004 and 2003,
respectively.
Interest Expense. Interest expense totaled $406,000 for the three months ended
December 31, 2004, as compared to $359,000 for the three months ended December
31, 2003. The $47,087 or 13.1% increase was primarily due to a $6.8 million
increase in the average balance of interest-bearing liabilities and a 4 basis
point increase in the average rate paid on the total average interest-bearing
liabilities.
Interest expense on deposits totaled $365,000 for the three months ended
December 31, 2004, as compared to $313,000 for the three months ended December
31, 2003. The $52,000 or 16.6% increase was primarily due to a $9.2 million
increase in the average balance of deposits partially offset by a 10 basis point
decrease in the average rate paid thereon.
Interest expense on FHLB advances decreased $4,913 for the three months ended
December 31, 2004, as compared to the three months ended December 31, 2003. The
decrease was due to a $2.4 million decrease in the average balance partially
offset by a 71 basis point increase in the average rate paid on FHLB advances
during the three months ended December 31, 2004.
Provision for Loan Losses. During the three month ended December 31, 2004 and
2003, the provision for loan losses was $5,625 and $4,500 respectively. This
reflected management's evaluation of the underlying credit risk of the loan
portfolio and the level of allowance for loan losses.
At December 31, 2004, the allowance for loan losses totaled $205,000 or .53% and
19.81% of total loans and total non-performing loans, respectively, as compared
to $197,000 or .56% and 182.94%, respectively, at December 31, 2003. Our
non-performing loans (non-accrual loans and accruing loans 90 days or more
overdue) totaled $1,033,000 and $108,000 at December 31, 2004 and December 31,
2003, respectively, which represented 2.69% and .30% of total net loans,
respectively. Our ratio of non-performing loans to total assets was 1.35% and
..15% at December 31, 2004 and December 31, 2003, respectively.
Noninterest Income. During the three months ended December 31, 2004, noninterest
income increased $22,000 or 36.5%, as compared to the three months ended
December 31, 2003, primarily
(14)
due to gains on the sale of investments, partially offset by decreases in
service charges and rental income.
Noninterest Expense. Total noninterest expense increased by $77,000 or 24.2%
during the three month period ended December 31, 2004, as compared to the three
month period ended December 31, 2003. The increase was primarily attributable to
a $38,000 increase in compensation and benefits, including $15,000 attributable
to the ESOP plan and $21,000 attributable to the RSP plan, a $13,000 increase in
occupancy and equipment expense, and a $10,000 increase attributable to real
estate owned expense.
Income Tax Expense. The provision for income tax totaled $65,000 for the three
months ended December 31, 2004, as compared to $119,000 for the three months
December 31, 2003. The decrease was due to reduced 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 December 31, 2004, the Company had obligations to fund outstanding loan
commitments of approximately $4.5 million, including construction loans in
process and unused lines of credit, for which adequate resources were available
to fund these loans. At December 31, 2004, approximately $11.0 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 December 31, 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
December 31, 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.
(15)
OTHER INFORMATION
Part II.
Item 1. Legal Proceedings
-----------------
None
Item 2. Change in Securities
--------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held its Annual Meeting of Stockholders for the year ended
September 30, 2004 on January 25, 2005. At the meeting, stockholders
reelected Brian S. Allen as director for a four-year term, and ratified the
appointment of Parente Randolph, LLC (formally Stokes & Hinds, LLC) as the
Company's independent auditor for the fiscal year ending September 30,
2005.
Item 5. Other Information
-----------------
None
Item 6. Exhibits
--------
(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
(16)
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: February 18, 2005 By /s/Gerard R. Kunic
----------------------------------------
Gerard R. Kunic
President
(Principal Executive Officer)
Date: February 18, 2005 By /s/Robert B. Kastan
----------------------------------------
Robert B. Kastan
Treasurer/Controller
(Principal Financial/Accounting Officer)
(17)