SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25180
CKF Bancorp, Inc.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 61-1267810
- ------------------------------ --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
340 West Main Street, Danville, Kentucky 40422
- ---------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (606) 236-4181
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
----- -----
As of August 5, 1999, 881,375 shares of the registrant's common stock were
issued and outstanding.
Page 1 of 16 Pages Exhibit Index at Page N/A
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CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999 (unaudited) and
December 31, 1998.........................................................3
Consolidated Statements of Income for the Three-Month Periods
Ended June 30, 1999 and 1998 (unaudited) and the Six-Month
Periods Ended June 30, 1999 and 1998 (unaudited)..........................4
Consolidated Statement of Changes in Stockholders' Equity for the
Six Month Period Ended June 30, 1999 (unaudited)..........................5
Consolidated Statements of Cash Flows for the Six-Month Periods Ended
June 30, 1999 and 1998 (unaudited)........................................6
Notes to Consolidated Financial Statements...................................7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...........................................................15
Item 2. Changes in Securities.......................................................15
Item 3. Defaults Upon Senior Securities.............................................15
Item 4. Submission of Matters to a Vote of Security Holders.........................15
Item 5. Other Information...........................................................15
Item 6. Exhibits and Reports on Form 8-K............................................15
SIGNATURES
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
-----------------------
As of As of
June 30, December 31,
1999 1998
--------------- ---------------
ASSETS (Unaudited)
Cash and due from banks $ 330,529 $ 545,711
Interest bearing deposits 2,063,411 3,458,161
Investment securities:
Securities available-for-sale 577,500 634,585
Securities held-to-maturity 2,012,505 2,042,705
Loans receivable, net 61,159,637 57,911,846
Accrued interest receivable 426,818 431,153
Office property and equipment, net 852,090 546,203
Other assets 53,872 9,551
--------------- ---------------
Total assets $ 67,476,362 $ 65,579,915
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 51,601,524 $ 48,938,374
Advance from Federal Home Loan Bank 1,604,906 2,119,932
Advance payment by borrowers for taxes and insurance 99,651 39,737
Other liabilities 684,642 615,167
--------------- ---------------
Total liabilities 53,990,723 51,713,210
--------------- ---------------
Stockholders' equity:
Common stock, $.01 par value, 4,000,000 shares authorized;
1,000,000 shares issued 10,000 10,000
Additional paid-in capital 9,573,109 9,555,017
Retained earnings, substantially restricted 7,518,901 7,366,006
Accumulated other comprehensive income 374,689 410,294
Treasury stock, 118,625 and 85,945 shares, respectively, at cost (2,260,791) (1,683,489)
Incentive Plan, 60,100 and 62,500 shares, respectively, at cost (1,179,853) (1,221,853)
Unearned Employee Stock Ownership Plan (ESOP) shares (550,416) (569,270)
--------------- ---------------
Total shareholder's equity 13,485,639 13,866,705
--------------- ---------------
Total liabilities and shareholders' equity $ 67,476,362 $ 65,579,915
=============== ===============
See accompanying notes to consolidated financial statements.
3
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
-----------------------
For the Three-Month Periods For the Six-Month Periods
Ended June 30, Ended June 30,
------------------------------- ------------------------------
1999 1998 1999 1998
-------------- ------------- ------------- -------------
Interest income:
Interest on loans.................... $ 1,099,839 $ 1,093,666 $ 2,157,661 $ 2,206,652
Interest and dividends on investments 32,600 31,956 64,737 66,183
Other interest income................ 26,948 28,466 56,092 50,839
-------------- ------------- ------------- -------------
Total interest income.............. 1,159,387 1,154,088 2,278,490 2,323,674
-------------- ------------- ------------- -------------
Interest expense:.......................
Interest on deposits................. 626,454 595,988 1,236,478 1,163,843
Other interest expense............... 10,090 36,074 13,634 84,560
-------------- ------------- ------------- -------------
Total interest expense............. 636,544 632,062 1,250,112 1,248,403
-------------- ------------- ------------- -------------
Net interest income..................... 522,843 522,026 1,028,378 1,075,271
Provision for loan losses............... 9,000 6,000 18,000 12,000
-------------- ------------- ------------- -------------
Net interest income after
provision for loan losses.......... 513,843 516,026 1,010,378 1,063,271
-------------- ------------- ------------- -------------
Non-interest income:
Loan and other service fees.......... 20,604 20,045 40,979 38,384
Other, net........................... 932 1,220 1,911 1,760
-------------- ------------- ------------- -------------
Total non-interest income.......... 21,536 21,265 42,890 40,144
-------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits............ 125,138 132,002 262,267 273,216
Federal insurance premium............ 7,227 6,827 14,215 13,544
State franchise tax.................. 15,514 20,645 28,663 26,461
Occupancy expenses, net.............. 13,612 6,411 25,571 19,642
Data processing expenses............. 13,680 19,449 28,314 28,857
Legal and other professional fees.... 15,634 11,761 28,089 25,393
Loss on real estate owned............ 5,004 5,004
Other operating expenses............. 74,119 68,374 134,135 124,082
-------------- ------------- ------------- -------------
Total non-interest expense......... 264,924 270,473 521,254 516,199
-------------- ------------- ------------- -------------
Income before income tax expense........ 270,455 266,818 532,014 587,216
Provision for income taxes.............. 75,832 91,613 164,769 200,240
-------------- ------------- ------------- -------------
Net income.............................. $ 194,623 $ 175,205 $ 367,245 $ 386,976
============== ============= ============= =============
Earnings per common share............... $ .25 $ .22 $ .47 $ .49
============== ============= ============= =============
Earnings per common share
-assuming dilution................... $ .25 $ .22 $ .46 $ .48
============== ============= ============= =============
Weighted average common shares
outstanding during the quarter....... $ 769,342 $ 781,774 $ 777,404 $ 787,041
============== ============= ============= =============
Weighted average common shares after
dilutive effect outstanding during
the quarter.......................... $ 781,654 $ 806,086 $ 790,786 $ 812,368
============== ============= ============= =============
4
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for the six month period ended June 30, 1999
(unaudited)
------------------------------
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Income Stock
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 $ 10,000 $ 9,555,017 $ 7,366,006 $ 410,294 $ (1,683,489)
Comprehensive income:
Net income 367,245
Other comprehensive loss, net of tax
unrealized losses on securities (35,605)
Total comprehensive income
Dividend declared (214,350)
ESOP shares earned 28,592
Purchase of common stock, 32,680 shares (577,302)
Shares issued upon exercise of options (10,500)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1999 $ 10,000 $ 9,573,109 $ 7,518,901 $ 374,689 $ (2,260,791)
============ ============ ============ ============ ============
Unearned Total
Incentive ESOP Stockholders'
Plan Shares Equity
------------- ------------ ------------
Balance, December 31, 1998 $ (1,221,853) $ (569,270) $ 13,866,705
------------
Comprehensive income:
Net income 367,245
Other comprehensive loss, net of tax
unrealized losses on securities (35,605)
------------
Total comprehensive income 331,640
Dividend declared (214,350)
ESOP shares earned 18,854 47,446
Purchase of common stock, 32,680 shares (577,302)
Shares issued upon exercise of options 42,000 31,500
------------ ------------ ------------
Balance, June 30, 1999 $ (1,179,853) $ (550,416) $ 13,485,639
============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
5
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
-------------------------------------
For the Six-Month Periods
Ended June 30
------------------------------
1999 1998
------------- -------------
Cash flows from operating activities:
Net income $ 367,245 $ 386,976
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 18,000 12,000
Loss on real estate owned 5,004
Amortization of loan fees (11,796) (7,539)
ESOP benefit expense 38,554 51,005
Provision for depreciation 15,726 13,740
FHLB stock dividend (19,300) (18,700)
Amortization of investment premium 1,695 1,645
Change in:
Interest receivable 4,335 5,952
Other liabilities 82,612 47,271
Prepaid expense (44,321) (31,279)
Interest payable 8,343 (2,207)
------------- -------------
Net cash provided by operating activities 461,093 463,868
------------- -------------
Cash flows from investing activities:
Loan originations and principal payment on loans, net (3,253,995) (233,169)
Purchase of land and office equipment (321,613) (28,733)
Proceeds from sale of real estate owned 33,627
Matured held-to-maturity securities 500,000 500,000
Purchase of held-to-maturity securities (500,000)
Principle repayment on mortgage-backed securities 47,805 73,033
------------- -------------
Net cash provided (used) by investing activities (3,527,803) 344,758
------------- -------------
Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW accounts
and savings accounts 1,082,309 1,059,638
Net increase (decrease) in certificates of deposit 1,580,841 1,977,373
Net increase (decrease) in custodial accounts 59,914 57,973
Proceeds from FHLB advances 1,500,000
Payments on FHLB advances (2,015,026) (3,042,601)
Dividends paid (214,350) (201,024)
Purchase of common stock (577,302) (665,076)
Additional principal payment on ESOP loan 8,892 19,211
Proceeds from exercise of stock option 31,500 136,500
------------- -------------
Net cash provided by financing activities 1,456,778 (658,006)
------------- -------------
Increase (decrease) in cash and cash equivalents (1,609,932) 150,620
Cash and cash equivalents, beginning of period 4,003,872 3,273,557
------------- -------------
Cash and cash equivalents, end of period $ 2,393,940 $ 3,424,177
============= =============
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 75,000 $ 187,219
============= =============
Cash paid for interest $ 1,241,769 $ 1,250,610
============= =============
Mortgage loans originated to finance sale of foreclosed real estate $ 70,625 $ 15,000
============= =============
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
CKF Bancorp, Inc. (the "Company") was formed in August 1994 at the
direction of Central Kentucky Federal Savings Bank (the "Bank") to become
the holding company of the Bank upon the conversion of the Bank from mutual
to stock form (the "Conversion"). Since the Conversion, the Company's
primary assets have been the outstanding capital stock of the Bank, cash on
deposit with the Bank, and a note receivable from the Company's Employee
Stock Ownership Plan ("ESOP"), and its sole business is that of the Bank.
Accordingly, the consolidated financial statements and discussions herein
include both the Company and the Bank. On December 29, 1994, the Bank
converted from mutual to stock form as a wholly owned subsidiary of the
Company. In conjunction with the Conversion, the Company issued 1,000,000
shares of its common stock to the public.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) necessary for fair
presentation have been included. The results of operations and other data
for the six month period ended June 30, 1999 are not necessarily indicative
of results that may be expected for the entire fiscal year ending December
31, 1999.
2. Regulatory Capital
At June 30, 1999, the Bank's regulatory capital levels exceeded each of the
two regulatory capital requirements. The following table reconciles the
Bank's stockholder equity at June 30, 1999 to its regulatory capital
requirements.
Regulatory Capital
------------------------------
Core Risk-Based
Capital Capital
------------- -------------
(In thousands)
Stockholder equity $ 11,941 $ 11,941
Net unrealized appreciation on investment
securities available-for-sale (375) (375)
General allowance for loan losses - 143
------------- -------------
Regulatory capital 11,566 11,709
Minimum capital requirement 2,699 3,238
------------- -------------
Excess regulatory capital $ 8,867 $ 8,471
============= =============
Minimum capital requirement as a percentage of assets 4.0% 8.0%
Regulatory capital in excess of minimum capital
requirements as a percentage of assets 13.3% 20.9%/1/
- --------------------------------------
/1/ Based on risk weighted assets.
7
3. Dividends
A cash dividend of $0.27 per share was paid on February 10, 1999 to
stockholders of record as of January 28, 1999. The total dividends
paid by the Company for the six month period ended June 30, 1999
amounted to $214,350.
4. Common Stock
During the six months ended June 30, 1999, options to acquire 2,400
shares at $13.125 per share were exercised with the Company receiving
total proceeds of $31,500. In addition, the Company purchased 32,680
shares of treasury stock at a cost of $577,302 during the six months
ended June 30, 1999.
8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Total assets increased approximately $1.9 million, or 2.9%, from $65.6 million
at December 31, 1998 to $67.5 million at June 30, 1999. The net increase in
assets includes a $3.2 million, or 5.6%, increase in net loans receivable, and a
$346,000, or 35.0%, increase in other assets offset by a $87,000, or 3.3%,
decrease in investment securities, and a $1.6 million decrease in cash and
interest bearing deposits .
The Company's aggregate investment securities portfolio decreased $87,000, or
3.3% to $2.6 million at June 30, 1999. Securities classified as
available-for-sale and recorded at market value per SFAS No. 115 decreased
$57,000 due solely to the decrease in the market value of such securities.
Securities held-to-maturity decreased $30,000 due to principle repayments offset
by stock dividends and premium amortization.
Under SFAS No. 115, unrealized gains or losses on securities available-for-sale
are recorded net of deferred income tax as a separate component of stockholders'
equity. At June 30, 1999, the Company included net unrealized gains of
approximately $375,000 in stockholders' equity. At December 31, 1998, the
Company included net unrealized gains of approximately $410,000 in stockholders'
equity. Per SFAS No. 115, such gains or losses will not be reflected as a charge
or credit to earnings until the underlying securities are sold, and then only to
the extent of the amount of gain or loss, if any, actually realized at the time
of sale.
Loans receivable increased by $3.2 million, or 5.6%, from $57.9 million at
December 31, 1998 to $61.1 million at June 30, 1999 as management continued its
efforts to be competitive in meeting the loan demand in the Bank's market area.
Deposits increased by $2.7 million, or 5.4%, to $51.6 million at June 30, 1999.
This increase reflects the Company's competitively priced product line within
the local market area.
Results of Operations for the Three Months Ended June 30, 1999 and 1998
Net Income
Net income for the three months ended June 30, 1999 was $195,000 compared to
$175,000 for the corresponding period in 1998, an increase of $20,000, or 11.1%.
The increase resulted primarily from a decrease in non-interest expense of
$5,000 and a decrease of $15,000 in income tax expense.
Interest Income
Interest income totaled 6.9% of average assets for the quarter ended June 30,
1999 compared to 7.5% for the quarter ended June 30, 1998. Interest income was
$1.2 million for both quarters ended June 30, 1999 and 1998. Interest income
remained comparable as the effect of the increase of $5.5 million in the average
earning assets was offset by the impact of the decrease of 58 basis points in
the effective rate earned on interest bearing assets.
9
Interest Expense
Interest expense totaled $637,000 and $632,000 for the six months ended June 30,
1999 and 1998, respectively. Interest expense remained comparable as the effect
of the increase of $5.2 million in the average interest bearing liabilities was
offset by the impact of the decrease of 47 basis points in the effective rate
paid on deposits and FHLB advances.
Provision for Loan Losses
The Bank established a provision for loan losses of $9,000 and $6,000 for the
three month periods ended June 30, 1999 and 1998. Management established the
Bank's existing level of its allowance for loan losses based upon its analysis
of various factors, including the market value of the underlying collateral,
composition of the loan portfolio, the Bank's historical loss experience,
delinquency trends, and prevailing and projected economic conditions in the
Bank's market area.
Non-Interest Income
Non-interest income amounted to $21,000 for both the three months periods ended
June 30, 1999 and 1998. Non-interest income included primarily fees charged in
connection with loans and service charges on deposit accounts of $21,000 and
$20,000 for the three months ended June 30, 1999 and 1998, respectively.
Non-Interest Expense
Non-interest expense totaled $265,000 and $270,000 for the three months ended
June 30, 1999 and 1998, respectively, a decrease of $5,000, or 2.1%, and such
expense amounted to 1.6% and 1.7% of average assets. The decrease was due to a
$6,000 decrease in compensation and benefits, a $6,000 decrease in data
processing expenses, a $5,000 decrease in state franchise taxes and a $5,000
decrease in the loss on real estate owned offset by a $7,000 increase in
occupancy expenses, a $4,000 increase in legal and other professional fees plus
a $6,000 increase in other operating expenses.
Income Taxes
The provision for income taxes for the three months ended June 30, 1999 and 1998
was $76,000 and $91,000, respectively, which, as a percentage of income before
income taxes was 28% and 34% for the three month quarters ended June 30, 1999
and 1998, respectively.
Results of Operations for the Six Months Ended June 30, 1999 and 1998
Net Income
Net income for the six months ended June 30, 1999 was $367,000, as compared to
$387,000 for the corresponding period in 1998, a decrease of $20,000, or 5.1%.
The decrease resulted primarily from a decrease of $47,000 in net interest
income, an increase of $6,000 in the provision for loan losses, and an increase
of $5,000 in non-interest expense offset by a decrease of $35,000 in income tax
expense, and an increase of $3,000 in non-interest income.
10
Interest Income
Interest income totaled $2.3 million for the six months ended June 30, 1999,
which was $45,000 less than the comparable period in 1998. The decrease in
interest income of $45,000, or 1.9%, for the six months ended June 30, 1999 as
compared to the same period for 1998 was due primarily to a decrease of 59 basis
points in the effective rate earned on interest bearing assets offset by an
increase of $3.9 million in the average balance of interest earning assets.
Interest Expense
Interest expense totaled $1.2 million for the six months periods ended June 30,
1999 and 1998. Interest expense remained comparable as the effect of the
increase of $3.6 million in the average interest bearing liabilities was offset
by the impact of the decrease of 36 basis points in the effective rate paid on
deposits and FHLB advances.
Provision for Loan Losses
The Bank established a provision for loan losses of $18,000 and $12,000 for the
six month period ended June 30, 1999 and 1998, respectively. Management
considers many factors in determining the necessary level of the allowance for
loan losses, including an analysis of specific loans in the portfolio, estimated
value of the underlying collateral, assessment of general trends in the real
estate market, delinquency trends, prospective economic and regulatory
conditions, inherent loss in the loan portfolio, and the relationship of the
allowance for loan losses to outstanding loans.
Non-Interest Income
Non-interest income amounted to $43,000 and $40,000 for the six months ended
June 30, 1999 and 1998, respectively. Noninterest income included primarily fees
charged in connection with loans and service charges on deposit accounts of
$41,000 and $38,000 for the six months ended June 30, 1999 and 1998,
respectively.
Non-Interest Expense
Non-interest expense totaled $521,000 and $516,000 for the six months ended June
30, 1999 and 1998, respectively, an increase of $5,000 or 1.0%, and such expense
amounted to 1.6% of average assets for both periods. The increase was primarily
due to an increase of $10,000 in other operating expenses, an increase of $6,000
in occupancy expenses, an increase of $3,000 in legal and other professional
fees plus a $2,000 increase in state franchise taxes offset by a decrease of
$11,000 in compensation and benefits and a decrease of $5,000 in the loss on
real estate owned.
Income Taxes
The provision for income taxes for the six months ended June 30, 1999 and 1998
was $135,000 and $200,000, respectively, and, as a percentage of income before
income taxes was 31% and 34% for the six months ended June 30, 1999 and 1998,
respectively.
Year 2000 Readiness Disclosure
The Company's operations, like those of most financial institutions, are
substantially dependent upon computer systems for lending and deposit
activities. The Company is addressing the potential problems associated with the
possibility that the computers which control its data processing activities,
facilities, and
11
networks may not be programmed to read four-digit dates, and upon the arrival of
the year 2000, may recognize the two-digit code "00" as the year 1900 rather
than 2000. If uncorrected, this could cause systems to fail to function or
generate erroneous information.
The following information is provided in accordance with the Year 2000
Information and Readiness Disclosure Act of 1998, a special law, which
encourages companies, like CKF Bancorp, Inc., to communicate information about
their Year 2000 readiness plan.
The Bank is heavily dependent upon one major data processing service provider.
Intrieve, Inc. provides customer account records, check clearing, general
ledger, and ATM services to the Bank. The majority of systems provided by
Intrieve, Inc. were certified Y2K ready by the end of 1998. Intrieve, Inc. has
completed migration of all core systems to a new Y2K ready mainframe computer.
Proxy testing was completed in October 1998 and end-to-end testing was completed
in November 1998. However, the Bank replaced its on-line teller system with a
Y2K compliant network in April of 1999. This equipment was tested and certified
in May of 1999. Similarly, the ATM network was upgraded in September of 1998 and
could not be tested in conjunction with other systems at that time. Intrieve
decided to conduct end-to-end testing for ATM systems on a proxy basis, due to
complexity of coordinating with the various regional and national networks. One
machine of each manufacturer and type was selected for testing. The testing was
completed in February 1999, and the test results were verified as compliant.
Data communications to both the ATM and the teller network was switched from a
satellite to a frame relay system on June 21, 1999. Y2K testing for this network
will be on September 12, 1999 to insure connectivity.
The Company has spent approximately $83,000 for Y2K compliance efforts through
June 30, 1999. It does not expect to spend any significant amounts during the
remainder of 1999. Expenditures to date have been $48,000 for hardware changes,
$30,000 for software upgrades, and an additional $5,000 for labor. All of these
funds will come from budgeted operational and capital expenditure accounts.
The most critical element of the Bank's Year 2000 preparation is the performance
of Intrieve, Inc. Should Intrieve not meet deadlines or fail to successfully
modify its systems, the Bank would face the prospect of having to revert to
manual posting and processing of customer accounts. Based on the number of
accounts and activity volume, it is possible to continue operations for a
reasonable period of time.
On June 1, 1999, the Bank issued a updated Year 2000 contingency plan. Each core
business was evaluated and prioritized for Year 2000 impact. Those systems
identified as mission critical have a business recovery/contingency plan. The
majority of these systems can be dealt with in a manner that will result in
minimal impact to the customers or financial condition of the Bank. However, if
Intrieve, Inc. should fail to function properly after the century change date, a
significant impact on customers, and operations would occur. Therefore, an
extensive set of plans have been prepared to continue operations as close to
normal as possible. Some of the key contingency items are: maintaining
machine-readable copies of master files, printed and microfiche copies of
records/trial balances, off-site storage of back-up records and computer
hardware redundancy. If mainframe processing is unavailable to the Bank, a plan
for manual posting and processing is in place. With electronic records as of
December 29, 1999, downloaded via diskettes to a stand alone PC at the Bank,
processing will continue through a spreadsheet (Excel) application. It is
expected that this manual process will be adequate to maintain operations during
the most likely worst case scenario.
The foregoing discussion, regarding the timing , effectiveness, implementation,
and cost of the Company's Year 2000 efforts, contains forward-looking
statements, which are based on management's best estimates derived using
assumptions. These forward-looking statements involve inherent risks and
uncertainties, and actual results could differ materially from those
contemplated. Also, please note that the Company will periodically update and
revise this Year 2000 Readiness Disclosure as conditions warrant.
12
Non-performing Assets
June 30, December 31,
1999 1998
------------- -------------
(amounts in thousands)
Loans accounted for on a non-accrual basis:/1/
Real Estate:
Residential $ 126 $ 27
Commercial
Consumer 7 38
------------- -------------
Total $ 133 $ 65
============= =============
Accruing loans which are contractually past due 90 days or more:
Real Estate:
Residential 252 356
Commercial
Consumer 56
------------- -------------
Total 308 356
============= =============
Total of loans accounted for as non-accrual or as accruing past
due 90 days or more $ 441 $ 421
============= =============
Percentage of total loans .72 .73
============= =============
Other non-performing assets/2/ $ - $ -
============= =============
Restructured loans $ - $ -
============= =============
/1/ Non-accrual status denotes any mortgage loan past due 90 days and whose loan
balance, plus accrued interest exceeds 90% of the estimated loan collateral
value, and any consumer or commercial loan more than 90 days past due. Payments
received on a non-accrual loan are either applied to the outstanding principal
balance or recorded as interest income, or both, depending on assessment of the
collectibility of the loan.
/2/Other non-performing assets represent property acquired by the Bank through
foreclosure or repossession. Such property is carried at the lower of its fair
market value or the principal balance of the related loan.
During the six months ended June 30, 1999, additional interest income of $6,400
would have been recorded on loans accounted for on a non-accrual basis if the
loans had been current throughout the year. Interest on such loans actually
included in income during the six months ended June 30, 1999 totaled $1,717.
At June 30, 1999, there were no loans identified by management, which were not
reflected in the preceding table, but as to which known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of the borrowers to comply with present loan repayment terms.
Liquidity and Capital Resources
The Bank's principal sources of funds for operations are deposits from its
primary market area, principal and interest payments on loans, and proceeds from
maturing investment securities. The principal uses of funds by the Bank include
the origination of mortgage and consumer loans and the purchase of investment
securities.
13
The Bank is required by current OTS regulations to maintain specified liquid
assets of at least 4% of its net withdrawable accounts plus short-term
borrowings. Short-term liquid assets (those maturing in one year or less) may
not be less than 1% of the Bank's liquidity base. During the first six months of
fiscal year 1999, the Bank satisfied all regulatory liquidity requirements, and
management believes that the liquidity levels maintained are adequate to meet
potential deposit outflows, loan demand, and normal operations.
The Bank must satisfy two capital standards, as set by the OTS. These standards
include a ratio of core capital to adjusted total assets of 4.0%, and a
combination of core and "supplementary" capital equal to 8.0% of risk-weighted
assets. The Bank exceeded all regulatory capital requirements as of June 30,
1999.
At June 30, 1999, the Bank had outstanding commitments to originate loans
totaling $319,000, excluding $954,000 in approved but unused home equity lines
of credit. Management believes that the Bank's sources of funds are sufficient
to fund all of its outstanding commitments. Certificates of deposits which are
scheduled to mature in one year or less from June 30, 1999 totaled $25.9
million. Management believes that a significant percentage of such deposits will
remain with the Bank.
14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on April 20,
1999, 760,733 shares of CKF Bancorp, Inc. common stock were
represented at the Annual Meeting in person or by proxy.
Stockholders voted in favor of the election of three nominees for
director. The voting results for each nominee were as follows:
Votes in Votes
Nominee Favor of Election Withheld
-------------------- ----------------------- ----------------------
Jack L. Bosley, Jr. 758,233 2,500
Yvonne Y. Morley 758,233 2,500
J. T. Goggans 758,233 2,500
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibit is filed herewith:
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended June
30, 1999.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CKF Bancorp, Inc.
Date: August 5, 1999 /s/ John H. Stigall
--------------------------------------------
John H. Stigall, President and Chief
Executive Officer
(Duly Authorized Officer)
Date: August 5, 1999 /s/ Ann L. Hooks
--------------------------------------------
Ann L. Hooks, Vice President and Treasurer
(Principal Financial and Accounting Officer)
16