1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 0-23935
---------
COLUMBIA FINANCIAL OF KENTUCKY, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 61-1319175
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
2497 Dixie Highway
Ft. Mitchell, Kentucky 41017-3085
- ------------------------------- --------------
(Zip Code)
(Address of principal executive
office)
Registrant's telephone number, including area code: (859) 331-2419
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of February 12, 2001, the latest
practicable date, 2,625,950 common shares of the registrant, no par value, were
issued and outstanding.
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INDEX
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COLUMBIA FINANCIAL OF KENTUCKY, INC.
PAGE
----
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Quantitative and Qualitative Disclosures About Market Risk 11
PART II - OTHER INFORMATION 12
SIGNATURES 14
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COLUMBIA FINANCIAL OF KENTUCKY, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DEC. 31 SEPT. 30
2000 2000
--------------- ----------------
(In Thousands, Except Share Data)
ASSETS
Cash and due from Banks $ 582 $ 605
Interest Bearing Deposits in Other Banks 3,893 4,385
--------- ---------
Total Cash and Cash Equivalents 4,475 4,990
Investment Securities
Held to Maturity, At Cost (Market Value of
$14,746 and $14,512 at December 31, and
and September 30, 2000, Respectively) 14,838 14,842
Mortgage-Backed Securities, At Cost (Market Value of
$15,798 and $16,360 at December 31, and
and September 30, 2000, Respectively) 16,023 16,637
Loans Receivable, Net 71,171 70,682
Interest Receivable 744 836
Premises and Equipment, Net 1,480 1,500
Federal Home Loan Bank Stock, At Cost 1,588 1,559
Federal Income Tax - Refund Receivable -- 409
Deferred Federal Income Tax Asset 48 --
Other Assets 82 59
--------- ---------
Total Assets $ 110,449 $ 111,514
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits $ 76,646 $ 75,462
Short-Term Borrowings 4,000 6,000
Advances from Borrowers for Taxes
and Insurance 151 405
Accrued Federal Income Tax Liability 52 --
Deferred Federal Income Tax Liability 160 250
Other Liabilities 320 286
--------- ---------
Total Liabilities 81,329 82,403
--------- ---------
Shareholders' Equity
Preferred Stock (1,000,000 Shares, No Par Value,
Authorized, No Shares Issued or Outstanding) -- --
Common Stock (6,000,000 Shares, No Par Value,
Authorized, 2,650,950 Issued and Outstanding) -- --
Additional Paid in Capital 18,832 18,266
Retained Earnings - Substantially Restricted 13,194 13,817
Treasury Stock, 20,500 Shares at Cost (489) (489)
Unearned ESOP Shares (1,294) (1,360)
Shares Acquired by RRP Trust (1,123) (1,123)
--------- ---------
Total Shareholders' Equity 29,120 29,111
--------- ---------
Total Liabilities and Shareholders' Equity $ 110,449 $ 111,514
========= =========
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COLUMBIA FINANCIAL OF KENTUCKY, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DEC. 31,
------------------------------
2000 1999
-------------- -------------
(In Thousands Except Share Data)
INTEREST INCOME
Loans $1,444 $1,450
Mortgage-Backed Securities 266 302
Investments 252 267
Interest-Bearing Deposits 52 28
------ ------
Total Interest Income 2,014 2,047
------ ------
INTEREST EXPENSE
Deposits 940 860
FHLB Advances 82 39
------ ------
Total Interest Expense 1,022 899
------ ------
NET INTEREST INCOME 992 1,148
PROVISION FOR LOSSES ON LOANS -- --
------ ------
Net Interest Income After Provision for
Losses on Loans 992 1,148
------ ------
NON-INTEREST INCOME 23 48
------ ------
NON-INTEREST EXPENSE
Salaries and Employee Benefits 553 596
Occupancy Expense of Premises 65 74
Federal Deposit Insurance Premiums 4 13
Data Processing Services 33 28
Advertising 18 21
Other 147 180
------ ------
Total Non-Interest Expense 820 912
------ ------
Income Before Federal Income Tax
Expense 195 284
FEDERAL INCOME TAX EXPENSE 66 96
------ ------
NET INCOME $ 129 $ 188
====== ======
EARNINGS PER SHARE
Basic $ 0.05 $ 0.08
====== ======
Diluted $ 0.05 $ 0.08
====== ======
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COLUMBIA FINANCIAL OF KENTUCKY, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------
2000 1999
------------ ------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 129 $ 188
Reconciliation of Net Income with
Cash Flows from Operations
Depreciation 27 27
Shares Released to ESOP 66 109
FHLB Stock Dividends (29) (26)
Deferred Federal Income Tax 368 (44)
Changes In
Interest Receivable 92 84
Other Assets (23) (15)
Federal Income Tax Receivable / Liability (45) 160
Other Liabilities 34 61
------- -------
Net Cash Provided by Operating Activities 619 544
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment Securities
Matured 4 1,006
Mortgage-Backed Securities
Principal Collected 614 797
Loan Originations and Repayments, Net (489) (1,067)
Purchases of Property and Equipment (7) (21)
------- -------
Net Cash Provided by Investing Activities 122 715
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
FHLB Advances (2,000) 3,000
Advances from Borrowers for
Taxes and Insurance (254) (229)
Change in Deposits 1,184 (2,794)
Dividends Paid (186) (186)
Shares Acquired by RRP -- (95)
------- -------
NET CASH (USED) BY FINANCING ACTIVITIES (1,256) (304)
------- -------
CHANGE IN CASH AND CASH EQUIVALENTS (515) 955
BEGINNING BALANCE, CASH AND CASH EQUIVALENTS 4,990 3,441
------- -------
ENDING BALANCE, CASH AND CASH EQUIVALENTS $ 4,475 $ 4,396
======= =======
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COLUMBIA FINANCIAL OF KENTUCKY, INC.
For the three-month periods ended
December 31, 2000 and 1999
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited financial statements were prepared in
accordance with instructions for Form 10-Q, and, therefore, do not include
information or footnotes necessary for complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. Accordingly, these financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto of Columbia Financial of Kentucky, Inc. ("CFKY" or the "Company") for
the year ended September 30, 2000. However, in the opinion of management, all
adjustments (consisting of only normal recurring accruals) which are necessary
for fair presentation of the consolidated financial statements have been
included. The results of operations for the three-month periods ended December
31, 2000 and 1999 are not necessarily indicative of the results that may be
expected for an entire fiscal year.
The accompanying consolidated financial statements include the accounts
of CFKY and Columbia Federal Savings Bank ("Columbia Federal" or the "Savings
Bank"). All significant intercompany items have been eliminated.
2. COMPREHENSIVE INCOME
--------------------
Comprehensive income includes net income and other non-owner changes in
equity. The Company had no other comprehensive income for the quarters ended
December 31, 2000 and 1999.
3. IMPACT OF RECENT ACCOUNTING STANDARDS
-------------------------------------
On November 12, 1999, the Gramm-Leach-Bliley Act (the "GLB Act") was
enacted into law. The GLB Act makes sweeping changes in the financial services
in which various types of financial institutions may engage. The Glass-Steagall
Act, which had generally prevented banks from affiliating with securities and
insurance firms, was repealed. A new "financial holding company," which owns
only well capitalized and well managed depository institutions, will be
permitted to engage in a variety of financial activities, including insurance
and securities underwriting and agency activities.
The GLB Act permits unitary savings and loan holding companies in
existence on May 4, 1999, including the Company, to continue to engage in all
activities in which they were permitted to engage prior to the enactment of the
Act. Such activities are essentially unlimited, provided that the thrift
subsidiary remains a qualified thrift lender. Any thrift holding company formed
after May 4, 1999, will be subject to the same restrictions as a multiple thrift
holding company. In addition, a unitary thrift holding company in existence on
May 4, 1999, may be sold only to a financial holding company engaged in
activities permissible for multiple savings and loan holding companies.
The GLB Act did not have a material effect on the activities in which the
Company and the Savings Bank currently engage, except to the extent that
competition with other types of financial institutions may increase as they
engage in activities not permitted prior to enactment of the GLB Act.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COLUMBIA FINANCIAL OF KENTUCKY, INC.
4. PENDING LEGISLATIVE CHANGES
---------------------------
None.
5. EARNINGS PER SHARE
------------------
Basic earnings per share is computed based upon the weighted average
shares outstanding during the period, less shares in the ESOP that are
unallocated and not committed to be released. Weighted average common shares
outstanding, which give effect to 169,333 unallocated ESOP shares, totaled
2,456,617 shares for the three-month period ended December 31, 2000. Diluted
earnings per share is computed using basic common shares outstanding because
options on 252,600 shares were not considered due to their anti-dilutive
effects.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COLUMBIA FINANCIAL OF KENTUCKY, INC.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information contained herein, this Form 10-Q
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, Columbia Federal's operations and actual results could
differ significantly from those discussed in the forward-looking statements.
Some of the factors that could cause or contribute to such differences are
discussed herein but also include changes in the economy and interest rates in
the nation and Columbia Federal's market area generally.
Some of the forward-looking statements included herein are the statements
regarding management's determination of the amount of allowance for losses on
loans, the adequacy of collateral on nonperforming loans, legislative changes,
interest rate risk, and the effect of certain accounting pronouncements. See
Exhibit 99 "Safe Harbor Under the Private Securities Litigation Reform Act of
1995," attached hereto and incorporated herein by reference.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 2000 TO
- --------------------------------------------------------------------
DECEMBER 31, 2000
- -----------------
GENERAL. CFKY's assets totaled $110.4 million at December 31, 2000, a
decrease of $1.1 million, or 1.0%, from $111.5 million at September 30, 2000.
Cash and cash equivalents decreased $515,000, investments and mortgage-backed
securities decreased $618,000 and loans receivable increased $489,000. Deposits
increased $1.2 million. Short-term borrowings decreased $2.0 million and
advances from borrowers for taxes and insurance decreased $254,000.
LIQUID ASSETS AND INVESTMENTS. Liquid assets (cash and cash equivalents)
totaled $4.5 million at December 31, 2000, a decrease of $515,000, from the
total at September 30, 2000.
LOANS RECEIVABLE. Net loans receivable equaled $71.2 million at December
31, 2000, compared to $70.7 million at September 30, 2000, a .7% increase,
attributable to loans being originated more rapidly than loans were being
repaid.
ALLOWANCE FOR LOSSES ON LOANS. Columbia Federal's allowance for loan
losses totaled $300,000 at December 31, 2000 and September 30, 2000. The
allowance represented .42% of net loans at December 31, 2000 and September 30,
2000. As of September 30, 2000, there was $117,000 in nonperforming loans, which
was .17% of net loans at that date. As of December 31, 2000, there was $85,000
in nonperforming loans, which was .12 % of net loans at that date.
It is management's policy to maintain an allowance for estimated losses
based on the perceived risk of loss in the loan portfolio. In assessing risk,
management considers historical loss experience, the volume and type of lending
conducted by the Bank, industry standards, past due loans, general economic
conditions and other factors related to the collectibility of the loan
portfolio.
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The following table sets forth the composition of the Bank's portfolio by
type of loan at the dates indicated.
December 31, 2000 September 30, 2000
----------------- ------------------
Amount Percent Amount Percent
------ ------- ------ -------
REAL ESTATE LOANS
One-to-four Family Residential $62,677 85.17% $60,994 82.97%
Multi-family and Non-residential 4,147 5.63 3,805 -
Land and Construction:
Nonresidential Real Estate 2,864 3.89 3,763 5.18
Construction Loans 3,883 5.28 4,762 6.48
------- ------ ------- ------
Total Real Estate Loans 73,571 99.97 73,324 99.75
------ ----- ------ ------
CONSUMER LOANS
Loans on Deposit 23 .03 187 .25
------ ----- ------ ------
Total Loans 73,594 100.00% 73,511 100.00%
====== ====== ====== ======
LESS
Loans in Process 1,417 1,818
Deferred Loan Fees 706 711
Allowance for Loan Losses 300 300
------ -----
Loans Receivable, Net $71,171 $70,682
====== ======
The following is the change in the allowance for loan losses for the
periods indicated.
Three Months Ended Year Ended
December 31, 2000 September 30, 2000
------------------ ------------------
ALLOWANCE FOR LOAN LOSSES
Balance at Beginning of Period $300 $300
Net (Charge-Offs) Recoveries - -
Provision for Loan Losses - -
---- ----
Balance at End of Period $300 $300
==== ====
Although management believes that its allowance for loan losses at
December 31, 2000, was adequate based upon the available facts and
circumstances, there can be no assurances that additions to such allowance will
not be necessary in future periods, which could adversely affect CFKY's results
of operations.
DEPOSITS. Total deposits increased by $1.2 million, to $76.6 million, at
December 31, 2000, from September 30, 2000. At December 31, 2000, certificates
of deposit that will mature within one year accounted for 31.6% of Columbia
Federal's deposit liabilities.
SHORT-TERM BORROWINGS: Advances from the FHLB were $4.0 million at
December 31, 2000, compared to $6.0 million at September 30, 2000. The increase
in deposits was used to reduce FHLB advances.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Savings Bank's liquidity, represented by cash and cash equivalents,
is a product of its operating, investing and financing activities. The Savings
Bank's primary sources of funds are deposits, borrowings, amortization,
prepayments and maturities of outstanding loans, sales of loans, maturities of
investment securities and other short-term investments and funds provided from
operations. While scheduled loan amortization and maturing investment securities
and short-term investments are relatively predictable sources of funds, deposit
flows and loan prepayments are greatly influenced by general interest rates,
economic conditions and competition. The Savings Bank manages the pricing of its
deposits to maintain a steady deposit balance. In addition, the Savings Bank
invests excess funds in overnight deposits and other short-term interest-earning
assets which provide liquidity to meet lending requirements. The Savings Bank
has generally been able to generate enough
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cash through the retail deposit market, its traditional funding source, to
offset the cash utilized in investing activities. As an additional source of
funds, the Savings Bank may borrow from the FHLB of Cincinnati. At December 31,
2000, the Savings Bank had $4 million in outstanding advances from the FHLB of
Cincinnati.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as overnight deposits. On a longer-term basis, the Savings Bank maintains a
strategy of investing in various lending products. The Savings Bank uses its
sources of funds primarily to meet its ongoing commitments, to pay maturing
savings certificates and savings withdrawals and fund loan commitments. At
December 31, 2000, the total approved loan commitments outstanding, excluding
construction loans, amounted to $212,000. At the same date, the unadvanced
portion of construction loans approximated $2.6 million. The Savings Bank did
not have any investment securities scheduled to mature within one year.
Mortgage-backed securities scheduled to mature in one year or less at December
31, 2000 totaled $16,000. On the liability side, certificates of deposit
scheduled to mature in one year or less at December 31, 2000 totaled $25.4
million.
The Savings Bank is required by the OTS to maintain average daily
balances of liquid assets (as defined) in an amount equal to 4% of net
withdrawable deposits and borrowings payable in one year or less to assure its
ability to meet demand for withdrawals and repayment of short-term borrowings.
The liquidity requirements may vary from time to time at the direction of the
OTS depending upon economic conditions and deposit flows. The Savings Bank
generally maintains a liquidity ratio of at least 8% of its net withdrawable
deposits and borrowings payable in one year or less. The Savings Bank's
liquidity for December 31, 2000 was approximately $18.7 million, or 22.64%.
Federally insured savings institutions are required to satisfy three
different OTS capital requirements. Under these standards, savings institutions
must maintain "tangible" capital equal to at least 1.5% of adjusted total
assets, "core" capital generally equal to at least 4% of adjusted total assets
and "total" capital (a combination of core and "supplementary" capital) equal to
at least 8% of "risk-weighted" assets. For purposes of the regulation, core
capital is defined as common stockholders' equity (including retained earnings),
noncumulative perpetual preferred stock and related surplus, minority interests
in the equity accounts of fully consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits and qualifying supervisory
goodwill. Core capital is generally reduced by the amount of a savings
institution's intangible assets. Tangible capital is core capital less all
intangible assets, with a limited exception for purchased mortgage-servicing
rights. Risk-based capital is defined as core capital plus certain additional
items of capital, which in the case of the Savings Bank, includes a general
valuation allowance for losses on loans of $300,000 at December 31, 2000.
Under the "prompt corrective action" regulations of OTS, a savings bank
that has not received the highest possible examination rating may become subject
to corrective action if its core capital is less than 4% of its adjusted total
assets.
The Savings Bank substantially exceeded each of the above-described
regulatory capital requirements at December 31, 2000.
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED
- -----------------------------------------------------------------
DECEMBER 31, 2000 AND 1999
- --------------------------
GENERAL. CFKY recorded earnings of $129,000 for the quarter ended
December 31, 2000, a decrease of $59,000 and 31% from the same period in 1999.
The decrease was a result of a decrease in net interest income of $156,000 and a
decrease of non-interest income of $25,000, partially offset by a decrease in
non-interest expense of $92,000 and a decrease in federal income tax expense of
$30,000.
INTEREST INCOME. Interest income decreased $33,000 for the three months
ended December 31, 2000 compared to the three months ended December 31, 1999.
This was primarily a result of a decrease of $3.1 million in average balances in
interest-earning assets.
INTEREST EXPENSE. Interest expense increased $123,000 for the three
months ended December 31, 2000 compared to the three months ended December 31,
1999. This increase was the result of an increase in the cost of funds of 72
basis points to 5.06% at December 31, 2000.
Columbia Federal's net interest rate spread was 2.46% for the three
months ended December 31, 2000, compared to 3.08% for the three months ended
December 31, 1999.
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NON-INTEREST INCOME AND NON-INTEREST EXPENSE. Non-interest income was
$23,000 for the three months ended December 31, 2000, compared to $48,000 for
the same period in 1999, primarily due to a decrease in fee income. Non-interest
expense decreased $92,000, or 10%, to $820,000. The primary reason for this
decrease was a reduction in salaries and employee benefits from $596,000 for the
three months ended December 31, 1999, to $553,000 for the three months ended
December 31, 2000 as a result of reduced costs associated with CFKY's ESOP and
RRP.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's December 31, 2000 analysis of the impact of changes in interest
rates on net interest income over the next 12 months indicates no significant
changes in its exposure to interest rate changes since the Company filed its
Annual Report on Form 10 K with the Securities and Exchange Commission for the
year ended September 30, 2000.
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PART II
COLUMBIA FINANCIAL OF KENTUCKY, INC.
ITEM 1. LEGAL PROCEEDINGS
-----------------
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
CFKY held its 2000 Annual Meeting of Shareholders on Thursday, January
25, 2001. The following information sets forth the matters considered
at such annual meeting and the voting with respect to such matters.
Broker
1. Election of Three Directors For Withheld Non-votes
--- -------- ---------
a. Daniel T. Mistler 2,084,274 72,706 -0-
b. Fred A. Tobergate, Sr. 2,084,074 72,906 -0-
c. Geraldine Zembrodt 2,082,974 74,006 -0-
2. Ratification of Auditors
Broker
For Against Abstain Non-votes
--- ------- ------- ---------
2,096,292 19,063 41,625 - 0 -
ITEM 5. OTHER INFORMATION
-----------------
Not Applicable
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Exhibit 3.1 - Articles of Incorporation of Columbia Financial of
Kentucky, Inc.
Incorporated by reference to Registration Statement on Form
8-A of the Registrant filed with the SEC on March 20, 1998,
Exhibit 2(a) and 2(b).
Exhibit 3.2 - Code of Regulations of Columbia Financial of Kentucky,
Inc.
Incorporated by reference to Registration Statement on Form
8-A of the Registrant filed with the SEC on March 20, 1998,
Exhibit 2(c).
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Safe Harbor Under the Private Securities Litigation
Reform Act of 1995
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SIGNATURES
COLUMBIA FINANCIAL OF KENTUCKY, INC.
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.
Date: February 13, 2001 By: /S/ Robert V. Lynch
---------------------- ------------------------------------
Robert V. Lynch, President and
Chief Executive Officer
Date: February 13, 2001 By: /S/ Abijah Adams
---------------------- ------------------------------------
Abijah Adams, Controller
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