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, 2005
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[ ] 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
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2000 Mt. Troy Road, Pittsburgh, Pennsylvania 15212
- -------------------------------------------- ----------
(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 May 10, 2005 there were 559,310 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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RSV BANCORP, INC.
AND SUBSIDIARY
Pittsburgh, Pennsylvania
Index
PART I. Page(s)
- ------- -------
FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated Balance Sheets - as of March 31, 2005
(Unaudited) and September 30, 2004 ...................................3
Consolidated Statements of Income - (Unaudited) for the three
and six months ended March 31, 2005 and 2004..........................4
Consolidated Statements of Cash Flows - (Unaudited) for the six
months ended March 31, 2005 and 2004................................5-6
Notes to (Unaudited) Consolidated Financial Statements...............7-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................13-18
Item 3. Controls and Procedures............................................18
PART II.
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OTHER INFORMATION
Item 1. Legal Proceedings..................................................19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds........19
Item 3. Defaults Upon Senior Securities....................................19
Item 4. Submission of Matters to a Vote of Security Holders................19
Item 5. Other Information..................................................19
Item 6. Exhibits...........................................................19
Signatures..................................................................20
RSV BANCORP, INC
CONSOLIDATED BALANCE SHEETS
March 31, September 30,
2005 2004
(UNAUDITED) (AUDITED)
------------ -------------
ASSETS
Cash and cash equivalents:
Interest bearing $ 1,270,069 $ 4,381,220
Noninterest bearing 468,865 547,782
Interest-bearing time deposits in other banks 1,499,134 998,000
Securities held-to-maturity (fair value of
$4,893,640 and $4,267,008) 3,999,172 4,101,875
Mortgage-backed securities held-to-maturity
(fair value of $1,969,536 and $2,426,694) 1,948,299 2,372,774
Securities available-for-sale, at fair value 14,830,186 13,875,900
Mortgage-backed securities available-for-sale, at fair value 10,008,459 11,029,449
Loans 37,997,327 38,164,674
Allowance for loan loss (209,352) (190,024)
Federal Home Loan Bank stock, at cost 471,000 636,100
Accrued interest receivable 389,490 534,997
Premises and equipment, net 432,833 439,805
Real estate held for investment 62,100 146,532
Prepaid expenses and other assets 568,793 155,496
------------ ------------
TOTAL ASSETS $ 73,736,375 $ 77,194,580
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits $ 59,120,508 $ 59,337,619
Federal Home Loan Bank advances - long term 4,260,785 5,515,260
Advances from borrowers for taxes and insurance 240,754 80,194
Accrued interest payable 101,823 114,960
Other liabilities 277,634 183,870
------------ ------------
Total liabilities 64,001,504 65,231,903
------------ ------------
SHAREHOLDERS' EQUITY:
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 7,204,890 7,167,218
Retained earnings - substantially restricted 6,936,640 6,801,745
Accumulated other comprehensive loss, net of
applicable income taxes of $149,785 and $9,515 (215,545) (13,655)
Treasury stock, at cost (198,190 and 83,766 shares) (3,798,433) (1,527,993)
Unallocated shares held by Employee Stock Ownership
Plan (ESOP) (383,517) (413,016)
Unearned shares held by Restricted Stock Plan (RSP) (84,914) (127,372)
------------ ------------
Total shareholders' equity 9,734,871 11,962,677
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 73,736,375 $ 77,194,580
============ ============
See accompanying notes to unaudited consolidated financial statements.
(3)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
2005 2004 2005 2004
---------- ---------- ---------- ----------
INTEREST AND DIVIDEND INCOME
Loans $ 558,281 $ 610,579 $1,138,175 $1,209,865
Investments 240,351 209,289 465,808 422,988
Mortgaged-backed securities 67,774 108,273 143,890 211,967
Interest-earning demand deposits 19,096 16,704 45,685 37,858
FHLB stock 2,588 2,184 5,088 5,559
---------- ---------- ---------- ----------
888,090 947,029 1,798,646 1,888,237
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 351,917 311,931 716,638 624,651
Advances from Federal Home Loan Bank 43,976 43,720 85,598 90,255
---------- ---------- ---------- ----------
395,893 355,651 802,236 714,906
---------- ---------- ---------- ----------
NET INTEREST INCOME 492,197 591,378 996,410 1,173,331
PROVISION FOR LOAN LOSSES 5,625 4,500 11,250 9,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 486,572 586,878 985,160 1,164,331
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges and other fees 34,149 27,378 61,502 56,118
Income from real estate rental 1,350 3,300 2,700 6,450
Gain on sale of securities 172,151 60,079 224,235 87,373
---------- ---------- ---------- ----------
207,650 90,757 288,437 149,941
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Compensation and benefits 218,712 194,540 429,683 367,315
Occupancy and equipment expense 37,237 33,085 73,997 55,442
Federal deposit insurance premiums 7,912 5,043 18,382 12,836
Real estate held for investment expense 114,678 885 127,165 3,490
Service bureau expense 26,475 22,076 53,844 49,483
Other 116,041 101,181 214,096 187,081
---------- ---------- ---------- ----------
521,055 356,810 917,167 675,647
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 173,167 320,825 356,430 638,625
INCOME TAX EXPENSE 69,184 118,153 133,967 237,447
---------- ---------- ---------- ----------
NET INCOME $ 103,983 $ 202,672 $ 222,463 $ 401,178
========== ========== ========== ==========
EARNINGS PER SHARE - BASIC $ 0.20 $ 0.31 $ 0.43 $ 0.61
EARNINGS PER SHARE - DILUTED $ 0.19 $ 0.30 $ 0.41 $ 0.59
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 514,077 652,896 515,131 655,358
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 546,907 676,884 547,961 679,346
See accompanying notes to unaudited consolidated financial statements.
(4)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
March 31,
2005 2004
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OPERATING ACTIVITIES
Net income $ 222,463 401,178
Adjustments to reconcile net income to
net cash provided by operating activities
Amortization of:
Deferred loan origination fees 2,115 (33,649)
Premiums and discounts on investment securities 72,784 218,251
Provision for loan losses 11,250 9,000
Depreciation and amortization of premises and equipment 27,568 21,620
Write down of real estate held for investment 84,432 --
Net gain on sales of securities available-for-sale (224,235) (87,373)
Compensation expense - ESOP and RSP 109,629 98,729
(Increase) decrease in:
Accrued interest receivable 145,507 3,721
Prepaid expenses (281,028) (178,998)
Increase (decrease) in:
Accrued interest payable (13,137) (57,353)
Other liabilities 91,405 (21,576)
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NET CASH USED IN OPERATING ACTIVITIES (46,245) 373,550
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INVESTING ACTIVITIES
Purchase of interest-bearing deposits in other banks (700,000) --
Proceeds from maturities of interest-bearing deposits
in other banks 199,000 200,000
Proceeds from maturities and calls of
securities held-to-maturity 100,000 195,000
Proceeds from principal repayments of
mortgage-backed securities held-to-maturity 419,301 794,969
Proceeds from sales of securities available-for-sale 883,941 2,496,849
Purchases of securities available-for-sale (7,193,865) (5,371,742)
Proceeds from sales of mortgage-backed securities
available-for-sale -- 4,133,953
Purchases of mortgage-backed securities available-for-sale -- (10,382,870)
Proceeds from maturities and calls of
securities available-for-sale 5,308,973 1,653,842
Proceeds from principal repayments of
mortgage-backed securities available-for-sale 892,690 733,177
Net sales of FHLB stock 165,100 66,600
Purchases of premises and equipment (20,596) (179,756)
Net loan originations and principal repayments on loans 173,310 (800,712)
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES (2,266) (6,460,690)
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(5)
RSV BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED
Six Months Ended
March 31,
2005 2004
----------- -----------
FINANCING ACTIVITIES
Net decrease in FHLB advances (1,254,475) (45,949)
Net increase (decrease) in deposits (217,111) 4,439,844
Dividends paid (85,209) (71,345)
Net increase in advances from borrowers
for taxes and insurance 160,560 180,614
Purchase of treasury stock (2,270,440) (467,970)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (3,666,675) 4,035,194
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,190,068) (2,051,946)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,929,002 3,349,969
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,738,934 $ 1,298,023
=========== ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest on deposits, advances, and other borrowings $ 815,373 $ 772,259
=========== ===========
Income taxes $ 186,360 $ 367,350
=========== ===========
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 March 31, 2005 and 2004
was ($108,362) and $207,719, respectively. Total comprehensive income for the
six months ended March 31, 2005 and 2004 was $20,573 and $427,267, respectively.
(7)
NOTE D - ASSET QUALITY
At March 31, 2005 and September 30, 2004, the Company had total nonperforming
loans (i.e., loans which are contractually past due 90 days or more) of
approximately $2,088,261 and $75,000, respectively. Nonperforming loans were
5.53% of total net loans at March 31, 2005 and 0.21 at September 30, 2004. Total
nonperforming loans as a percentage of total assets at March 31, 2005 was 2.83%
and 0.10% at September 30, 2004.
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
decrease in the total number of weighted average shares outstanding between the
periods is due to the repurchase of 105,674 shares of the Company's common stock
via a modified Dutch auction in October 2004. The computation of basic and
diluted earnings per share is shown in the table below:
Three Months Ended Six Months Ended
March 31, March 31,
2005 2004 2005 2004
---- ---- ---- ----
Basic EPS computation:
Numerator-Net Income $103,983 $202,672 $222,463 $401,178
======== ======== ======== ========
Denominator-Weighted average number
of shares outstanding 514,077 652,896 515,131 655,358
======== ======== ======== ========
Basic EPS $ 0.20 $ 0.31 $ 0.43 $ 0.61
======== ======== ======== ========
Diluted EPS computation:
Numerator-Net Income $103,983 $202,672 $222,463 $401,178
======== ======== ======== ========
Denominator-Weighted average number
of shares outstanding 514,077 652,896 515,131 655,358
Dilutive Stock Options 25,250 12,625 25,250 12,625
Dilutive Unvested RSP 7,580 11,363 7,580 11,363
-------- -------- -------- --------
Weighted average common shares and
common stock equivalents 546,907 676,884 547,961 679,346
======== ======== ======== ========
Diluted EPS $ 0.19 $ 0.30 $ 0.41 $ 0.59
======== ======== ======== ========
(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 March 31,
2005, 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 six month period ended March 31, 2005, compensation from the ESOP of
$29,499 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 March 31, 2005, the ESOP had 19,175 allocated shares and
39,825 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 March 31,
2005. 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 $42,458 for the six
month period ended March 31, 2005.
(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, March 31, 2005 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 8.00 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 8.00 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
MARCH 31,
2005 2004
--------- ---------
Net income, as reported $ 103,983 $ 202,672
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 $ 102,657 $ 201,346
========= =========
Earnings per share:
Basic-as reported $ 0.20 $ 0.31
========= =========
Basic-pro forma $ 0.20 $ 0.31
========= =========
Diluted-as reported $ 0.19 $ 0.30
========= =========
Diluted-pro forma $ 0.19 $ 0.30
========= =========
SIX MONTHS ENDED
MARCH 31,
2005 2004
--------- ---------
Net income, as reported $ 222,463 $ 401,178
Deduct: total stock-based employee compensation expense
determined under fair value based methods for all
awards, net of related tax effects (2,652) (2,652)
--------- ---------
Pro forma net income $ 219,811 $ 398,526
========= =========
Earnings per share:
Basic-as reported $ 0.43 $ 0.61
========= =========
Basic-pro forma $ 0.43 $ 0.61
========= =========
Diluted-as reported $ 0.41 $ 0.59
========= =========
Diluted-pro forma $ 0.41 $ 0.59
========= =========
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)
NOTE I - NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement No. 123(R), "Share-Based Payment." Statement No. 123(R) replaces
Statement No. 123, "Accounting for Stock-Based Compensation," and supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees." Statement No. 123(R)
requires compensation costs related to share-based payment transactions to be
recognized in the financial statements over the period that an employee provides
service in exchange for the award. Public companies are required to adopt the
new standard using a modified prospective method and may elect to restate prior
periods using the modified retrospective method. Under the modified prospective
method, companies are required to record compensation cost for new and modified
awards over the related vesting period of such awards prospectively and record
compensation cost prospectively for the unvested portion, at the date of
adoption, of previously issued and outstanding awards over the remaining vesting
period of such awards. No change to prior periods presented is permitted under
the modified prospective method. Under the modified retrospective method,
companies record compensation costs for prior periods retroactively through
restatement of such periods using the exact pro forma amounts disclosed in the
companies' footnotes. Also, in the period of adoption and after, companies
record compensation cost based on the modified prospective method.
(12)
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 $73.7 million at March 31, 2005, are reflective of
a decrease of $3.5 million or 4.5% as compared to $77.2 million at September 30,
2004. Stockholders' equity decreased by $2.3 million to $9.7 million at March
31, 2005, as compared to $12.0 million at September 30, 2004. The decrease in
total assets was primarily due to a decrease in cash and cash equivalents and
mortgage-backed securities available-for-sale, partially offset by an increase
in interest bearing deposits in other banks and securities available-for-sale.
The decrease in stockholder's equity was primarily due to the repurchase of $2.3
million 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 $1.7 million at March 31, 2005, a decrease of $3.2
million or 65.3% as compared to $4.9 million at September 30, 2004. 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 $1.5 million at March 31, 2005, an increase of $500,000 or 50.0%
as compared to $1.0 million at September 30, 2004.
Investment Securities. Investment securities totaled $18.8 million at March 31,
2005, an increase of $800,000 or 4.4%, as compared to $18.0 million at September
30, 2004. This increase was primarily the result of the purchase of $6.0 million
of Government agency bonds, $1.2 million of corporate bonds and mutual funds,
offset by the proceeds from sales and calls of $6.0 million.
(13)
Mortgage-backed Securities. Mortgage-backed securities totaled $12.0 million at
March 31, 2005, a decrease of $1.4 million or 10.4%, as compared to $13.4
million at September 30, 2004. The decrease was primarily due to principal
payments totaling $1.4 million.
Loans Receivable, net. Net loans receivable at March 31, 2005 totaled $37.8
million, a decrease of $200,000 or 0.5%, as compared to $38.0 million at
September 30, 2004. The decrease was primarily due to net principal repayments.
Deposits. Total deposits, after interest credited, decreased $200,000 or 0.3% to
$59.1 million at March 31, 2005, as compared to $59.3 million at September 30,
2004. The change was due to decreases in savings and NOW accounts, offset by
increases in certificates of deposit.
Federal Home Loan Bank Advances. Federal Home Loan Bank advances totaled $4.3
million at March 31, 2005 compared to $5.5 million at September 30, 2004.
Stockholders' Equity. Stockholders' equity totaled $9.7 million at March 31,
2005, as compared to $12.0 million at September 30, 2004. The decrease of $2.3
million or 19.2% was primarily due to the repurchase of $2.3 million in company
stock and a $202,000 decrease in accumulated other comprehensive income, offset
by increases in net income for the six month period ended March 31, 2005 of
$222,000, and $72,000 from the release of ESOP and RSP shares.
Results of Operations for the Three Months Ended March 31, 2005 and 2004
Net Income. Net income of $104,000 was recorded for the three months ended March
31, 2005, as compared to net income of $203,000 for the three months ended March
31, 2004. The $99,000 or 48.8% decrease in net income for the quarter ended
March 31, 2005 was primarily the result of a decrease in net interest income and
an increase in non-interest expense, partially offset by an increase in
non-interest income. Changes in the components of income and expense are
discussed herein.
Net Interest Income. Net interest income decreased $99,000 or 16.8% for the
three month period ended March 31, 2005, as compared to the three month period
ended March 31, 2004. The average balance of interest-earning assets increased
$1.7 million or 2.4%, whereas the average rate earned thereon decreased 44 basis
points. The average balance of interest-bearing liabilities increased by $4.6
million or 7.5 %, whereas the average rate paid thereon increased 8 basis
points.
The net interest rate spread, which is the difference between the average yield
on interest-earning assets and the average cost of interest-bearing liabilities,
decreased to 2.38% for the three month period ended March 31, 2005 from 2.90%
for the three month period ended March 31, 2004.
Interest Income. Interest income decreased $59,000 or 6.2% to $888,000 for the
three month period ended March 31, 2005, as compared to $947,000 for the three
month period ended March 31, 2004.
Interest on loans receivable decreased $52,000 or 8.6% for the three month
period ended March 31, 2005, as compared to the three month period ended March
31, 2004. This change was the result of a 94 basis point decrease in the average
yield earned on these loans, offset by a $2.1 million increase in the average
balance of loans receivable.
(14)
Interest income on mortgage-backed securities decreased $40,000 or 37.4% for the
three month period ended March 31, 2005, as compared to the three month period
ended March 31, 2004. This change was the result of a $266,000 increase in the
average balance of mortgage-backed securities and a 137 basis point decrease in
the average yield earned thereon.
Interest income on investment securities increased $31,000 or 14.8% for the
three month period ended March 31, 2005, as compared to the three month period
ended March 31, 2004. The increase was the result of a $2.4 million decrease in
the average balance of investment securities and a 126 basis point increase in
the average yield earned thereon.
Interest income on other interest-earning assets increased $2,800 or 14.8% for
the three month period ended March 31, 2005, as compared to the three month
period March 31, 2004. The increase was primarily due to a $1.7 million increase
in the average balance of other interest-earning assets, partially offset by a
36 basis point decrease in the average yield earned thereon.
The average yield on interest-earning assets was 4.82% and 5.26% for the three
month periods ended March 31, 2005 and 2004, respectively.
Interest Expense. Interest expense totaled $396,000 for the three months ended
March 31, 2005, as compared to $356,000 for the three months ended March 31,
2004. The $40,000 or 11.2% increase was primarily due to a $4.6 million increase
in the average balance of interest-bearing liabilities, and an 8 basis point
increase in the average rate paid on interest-bearing liabilities.
Interest expense on deposits totaled $352,000 for the three months ended March
31, 2005, as compared to $312,000 for the three months ended March 31, 2004. The
$40,000 or 12.8% increase was primarily due to a $7.0 million increase in the
average balance of deposits while the average rate thereon was nearly unchanged.
Interest expense on FHLB advances totaled $44,000 for the three months ended
March 31, 2005, unchanged from the three month period ended March 31, 2004.
Provision for Loan Losses. During the three month ended March 31, 2005 and 2004,
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 March 31, 2005, the allowance for loan losses totaled $209,000 or 0.55% and
10.03 % of total loans and total non-performing loans, respectively, as compared
to $190,000 or 0.53% and 177.6%, respectively, at March 31, 2004. Our
non-performing loans (non-accrual loans and accruing loans 90 days or more
overdue) totaled $2,088,000 and $107,000 at March 31, 2005 and March 31, 2004,
respectively, which represented 5.53% and 0.30% of total net loans,
respectively. Our ratio of non-performing loans to total assets was 2.83% and
0.14% at March 31, 2005 and March 31, 2004, respectively. The increase in
non-performing loans at March 31, 2005 is primarily attributable to three
delinquent construction loans, totaling $1,671,000. One loan, totaling $783,000
is scheduled to payoff in the next ninety days and two loans, totaling $888,000,
are scheduled for foreclosure in June 2005. Management believes the company is
adequately collateralized by the properties securing these loans and that the
allowance for loan loss is adequate to absorb any loss incurred on these loans.
(15)
Noninterest Income. During the three months ended March 31, 2005, noninterest
income increased $117,000 or 128.8 %, as compared to the three months ended
March 31, 2004, primarily due to gains on the sale of investments and increases
in service charges and other fees.
Noninterest Expense. Total noninterest expense increased by $164,000 or 46.0%
during the three month period ended March 31, 2005, as compared to the three
month period ended March 31, 2004. The increase was primarily the result of a
$23,000 increase attributable to the ESOP plan and $115,000 attributable to
expenses related to write down and demolition of two buildings owned by the
company. These buildings are adjacent to the bank and were purchased in 2002 and
2003. They have been razed in order to create additional parking and to provide
for possible future expansion of the bank building. The company expects to incur
additional expense of approximately $50,000 during the third quarter in order to
complete the demolition project.
Income Tax Expense. The provision for income tax totaled $69,000 for the three
months ended March 31, 2005, as compared to $118,000 for the three months March
31, 2004. The $49,000 or 41.5% decrease was due to decreased income. The company
estimates its current year tax expense by applying the previous year tax rate to
current year earnings.
Results of Operations for the Six Months Ended March 31, 2005 and 2004
Net Income. Net income of $222,000 was recorded for the six months ended March
31, 2005, as compared to net income of $401,000 for the six months ended March
31, 2004. The $179,000 or 44.6% decrease in net income for the six month period
ended March 31, 2005 was primarily the result of a decrease in net interest
income and an increase in non-interest expense, partially offset by an increase
in non-interest income. Changes in the components of income and expense are
discussed herein.
Net Interest Income. Net interest income decreased $177,000 or 15.1% for the six
month period ended March 31, 2005, as compared to the six month period ended
March 31, 2004. The average balance of interest-earning assets increased $3.1
million or 4.3%, however, the average rate earned thereon decreased 46 basis
points. The average balance of interest-bearing liabilities increased by $5.5
million or 9.2%, while the average rate paid thereon increased 7 basis points.
The net interest rate spread, which is the difference between the average yield
on interest-earning assets and the average cost of interest-bearing liabilities,
decreased to 2.36% for the six month period ended March 31, 2005 from 2.89% for
the six month period ended March 31, 2004.
Interest Income. Interest income decreased approximately $100,000 or 5.3% to
$1.8 million for the six month period ended March 31, 2005, as compared to $1.9
million for the six month period ended March 31, 2004.
Interest on loans receivable decreased $72,000 or 5.9% for the six month period
ended March 31, 2005, as compared to the six month period ended March 31, 2004.
This change was the result of a 76 basis point decrease in the average yield
earned on these loans, offset by a $2.1 million increase in the average balance
of loans receivable.
Interest income on mortgage-backed securities decreased $68,000 or 32.1% for the
six month period ended March 31, 2005, as compared to the six month period ended
March 31, 2004. This change
(16)
was the result of a $777,000 increase in the average balance of mortgage-backed
securities offset by a 129 basis point decrease in the average yield earned
thereon.
Interest income on investment securities increased $43,000 or 10.1% for the six
month period ended March 31, 2005, as compared to the six month period ended
March 31, 2004. The increase was the result of a $1.9 million decrease in the
average balance of investment securities offset by a 95 basis point increase in
the average yield earned thereon.
Interest income on other interest-earning assets increased $7,000 or 16.9% for
the six month period ended March 31, 2005, as compared to the six month period
March 31, 2004. The increase was primarily due to a $2.1 million increase in the
average balance of other interest-earning assets, partially offset by a 37 basis
point decrease in the average yield earned thereon.
The average yield on interest-earning assets was 4.83% and 5.29% for the six
month periods ended March 31, 2005 and 2004, respectively.
Interest Expense. Interest expense totaled $802,000 for the six months ended
March 31, 2005, as compared to $715,000 for the six months ended March 31, 2004.
The $87,000 or 12.2% increase was primarily due to a $5.5 million increase in
the average balance of interest-bearing liabilities and a 7 basis point increase
in the average rate paid on interest-bearing liabilities.
Interest expense on deposits totaled $717,000 for the six months ended March 31,
2005, as compared to $625,000 for the six months ended March 31, 2004. The
$92,000 or 14.7% increase was primarily due to an $8.0 million increase in the
average balance of deposits. The average rate paid on deposits was nearly
unchanged.
Interest expense on FHLB advances decreased $4,000 for the six months ended
March 31, 2005, as compared to the six month ended March 31, 2004. The decrease
was due to a $2.5 million decrease in the average balance, offset by a 92 basis
point increase in the average rate paid on FHLB advances during the six months
ended March 31, 2005.
Provision for Loan Losses. During the six month ended March 31, 2005 and 2004,
the provision for loan losses was $11,250 and $9,000, respectively. 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, 2005, noninterest
income increased $138,000 or 92.4%, as compared to the six months ended March
31, 2004, primarily due to gains on the sale of investments and an increase in
service charges and other fees.
Noninterest Expense. Total noninterest expense increased by $242,000 or 35.7%
during the six month period ended March 31, 2005, as compared to the six month
period ended March 31, 2004. The increase was attributable to a $62,000 increase
in compensation and benefits, including $11,000 attributable to the ESOP plan
and $127,000 attributable to expenses related to write down and demolition of
two buildings owned by the company. Theses buildings are adjacent to the bank
and were purchased in 2002 and 2003. They have been razed in order to create
additional parking and to provide for possible future expansion of the bank
building. The company expects to incur additional expense of approximately
$50,000 during the third quarter in order to complete the demolition project.
(17)
Income Tax Expense. The provision for income tax totaled $134,000 for the six
months ended March 31, 2005, as compared to $237,000 for the six months March
31, 2004. The $103,000 or 43.5% decrease was due to decreased income. The
Company estimates its current year tax expense by applying the previous year tax
rate to current year earnings.
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 March 31, 2005, 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 March 31, 2005, approximately $12.0 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 March 31, 2005, 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
March 31, 2005, 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 to
materially affect, the Company's internal control over financial reporting.
(18)
Part II. OTHER INFORMATION
- -------
Item 1. Legal Proceedings
-----------------
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
-----------------------------------------------------------
The following table provides information on repurchases by the Company of its
common stock in each month for the three months ended March 31, 2005:
-------------------------------------------------------------------------------------------------
Total Number of Maximum Number of
Shares Purchased Shares that may yet
Average as be Purchased
Price Sart of Publicly Under
Total Number of Paid per Announced Plan of the Plans or
Month Shares Purchased Shares Program Programs
-------------------------------------------------------------------------------------------------
January 1 - 31, 2005 - - - 17,569
-------------------------------------------------------------------------------------------------
February 1 - 28, 2005 2,000 $19.06 2,000 15,569
-------------------------------------------------------------------------------------------------
March 1 - 31, 2005 6,750 $18.65 6,750 8,819
-------------------------------------------------------------------------------------------------
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
--------
(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
(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: May 13, 2005 By /s/ Gerard R. Kunic
----------------------------------------
Gerard R. Kunic
President
(Principal Executive Officer)
Date: May 13, 2005 By /s/ Robert B. Kastan
----------------------------------------
Robert B. Kastan
Treasurer/Controller
(Principal Financial/Accounting Officer)
(20)