UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-20956
HFB FINANCIAL CORPORATION
A Tennessee Corporation I.R.S. Employer
Identification
No. 61-1228266
Address Telephone Number
------- ----------------
1602 Cumberland Avenue (606) 248-1095
Middlesboro, Kentucky 40965
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the
preceding twelve 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 __.
The number of shares of the registrant's $1 par value common stock outstanding
at May 14, 2002 was 1,296,311.
There are a total of 14 pages filed in this document.
HFB FINANCIAL CORPORATION
I N D E X
---------
PAGE NO
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statement of Stockholders' Equity 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 8-12
PART II - OTHER INFORMATION 13
SIGNATURES 14
2
HFB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
2002 2001
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 7,626,967 $ 13,887,788
Trading securities -- 1,049,327
Investment securities, available for sale 71,316,491 57,109,780
Loans 150,496,168 137,581,692
Allowance for loan losses (854,757) (718,267)
------------- -------------
Net loans 149,641,411 136,863,425
Premises and equipment 4,472,653 4,642,655
Federal Home Loan Bank stock 1,604,300 1,527,400
Interest Receivable 1,621,181 1,790,607
Other assets 3,727,746 533,607
------------- -------------
Total assets $ 240,010,749 $ 217,404,589
============= =============
LIABILITIES
Deposits
Interest bearing $ 193,664,020 $ 177,316,986
Non-interest bearing 2,732,308 4,631,492
------------- -------------
Totals 196,396,328 181,948,478
Long term debt 19,892,259 12,452,796
Interest payable 1,317,021 962,143
Other liabilities 1,587,777 1,572,344
------------- -------------
Total liabilities 219,193,385 196,935,761
------------- -------------
STOCKHOLDERS' EQUITY
Issued and outstanding - 1,584,513 and 1,579,582 shares 1,584,513 1,579,582
Additional paid-in-capital 8,749,714 8,729,990
Less: Common stock acquired by Rabbi trusts for deferred
compensation plans (488,102) (488,102)
Treasury stock, at cost, 288,202 and 282,728 shares (2,561,998) (2,484,267)
Retained earnings 13,553,149 12,839,997
Accumulated other comprehensive gain/(loss) (19,912) 291,628
------------- -------------
Total stockholders' equity 20,817,364 20,468,828
------------- -------------
Total liabilities and stockholders' equity $ 240,010,749 $ 217,404,589
============= =============
See notes to consolidated financial statements.
3
HFB FINANCIAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Income
(Unaudited)
THREE-MONTHS ENDED NINE-MONTHS ENDED
MARCH 31, MARCH 31,
2002 2001 2002 2001
INTEREST INCOME
Loans receivable $ 2,932,744 $ 2,971,662 $ 8,817,311 $ 8,752,650
Investment securities 909,413 890,081 2,603,349 2,871,137
Other dividend income 37,546 34,744 121,882 105,266
Deposits with financial institutions 14,347 41,923 140,365 81,536
------------ ------------ ------------ ------------
Total interest income 3,894,050 3,938,410 11,682,907 11,810,589
------------ ------------ ------------ ------------
INTEREST EXPENSE
Deposits 1,722,564 2,230,252 5,841,013 6,608,024
Short term borrowings -- -- -- --
Long term debt 226,490 168,885 568,916 518,036
------------ ------------ ------------ ------------
Total interest expense 1,949,054 2,399,137 6,409,929 7,126,060
------------ ------------ ------------ ------------
NET INTEREST INCOME 1,944,996 1,539,273 5,272,978 4,684,529
Provision for loan losses 76,808 30,000 161,808 74,980
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,868,188 1,509,273 5,111,170 4,609,549
------------ ------------ ------------ ------------
OTHER INCOME
Service charges for deposit accounts 175,636 156,431 537,622 430,238
Other customer fees 33,495 26,548 90,570 59,846
Net gain (loss) on trading securities -- 22,656 27,484 154,818
Net realized gain (loss) on sales of
available for sale securities -- -- -- (670)
Other income 73,612 3,212 115,789 18,748
------------ ------------ ------------ ------------
Total other income 282,743 208,847 771,465 662,980
------------ ------------ ------------ ------------
OTHER EXPENSES
Salaries and employee benefits 652,898 576,377 1,917,023 1,625,320
Net occupancy expenses 95,100 78,455 284,818 247,985
Equipment expenses 132,534 104,768 377,908 295,275
Data processing fees 59,927 60,747 177,325 195,406
Deposit insurance expense 8,487 8,520 25,127 25,938
Legal and professional fees 128,699 53,124 278,232 169,178
Advertising 60,000 65,544 180,514 164,072
State franchise and deposit taxes 58,450 40,885 146,626 129,202
Other expenses 248,583 237,953 690,524 731,470
------------ ------------ ------------ ------------
Total other expenses 1,444,678 1,226,373 4,078,097 3,583,846
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX 706,253 491,747 1,804,538 1,688,683
Income tax expense 228,736 165,645 584,626 578,279
------------ ------------ ------------ ------------
NET INCOME $ 477,517 $ 326,102 $ 1,219,912 $ 1,110,404
============ ============ ============ ============
BASIC EARNINGS PER SHARE $ 0.37 $ 0.25 $ 0.94 $ 0.86
DILUTED EARNINGS PER SHARE $ 0.37 $ 0.25 $ 0.94 $ 0.85
See notes to condensed consolidated financial statements.
4
HFB FINANCIAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE-MONTHS ENDED MARCH 31, 2002
ACCUMULATED
ADDITIONAL COMPRE- OTHER TOTAL
COMMON PAID-IN RABBI TREASURY HENSIVE RETAINED COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL TRUSTS STOCK INCOME EARNINGS INCOME (LOSS) EQUITY
-------------------------------------------------------------------------------------------------------
Balances, June 30, 2001 $1,579,582 $8,729,990 ($488,102) ($2,484,267) $12,839,997 $291,628 $20,468,828
Net income $1,219,912 1,219,912 1,219,912
Other comprehensive
income, net of tax
Unrealized loss on
securities (311,540) (311,540) (311,540)
------------
Comprehensive income $908,372
============
Cash dividend declared
($.39 per share) (506,760) (506,760)
--------------
Stock issued upon exercise
of stock options 4,931 19,724 24,655
Purchase of treasury
stock (5,474 shares) (77,731) (77,731)
------------------------------------------------ ------------------------------------------
March 31, 2002 (UNAUDITED) $1,584,513 $8,749,714 ($488,102) ($2,561,998) $13,553,149 ($19,912) $20,817,364
================================================ ==========================================
See notes to condensed consolidated financial statements.
5
HFB FINANCIAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
NINE-MONTHS ENDED
MARCH 31,
2002 2001
Operating Activities
Net cash provided by operating activities $ 481,839 $ 2,485,672
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available for sale (59,476,462) (5,719,570)
Proceeds from maturities of securities available for sale 35,432,303 7,387,287
Proceeds from sales of securities available for sale 9,128,907 3,649,998
Proceeds from maturities of securities held to maturity -- 3,547,264
Net change in loans (12,996,678) (8,686,804)
Purchases of premises and equipment (158,207) (983,967)
------------ ------------
Net cash used by investing activities (28,070,137) (805,792)
------------ ------------
FINANCING ACTIVITIES
Net change in
Non interest-bearing, interest-bearing and
savings deposits (1,899,184) 137,835
Certificates of deposit 16,347,034 4,659,581
Short term borrowings -- (400,000)
Proceeds of long term debt 7,500,000
Repayment of long term debt (60,537) (55,870)
Cash dividends (506,760) (493,240)
Proceeds from exercise of options on common stock 24,655 26,500
Purchase of treasury stock (77,731) (45,901)
------------ ------------
Net cash provided by financing activities 21,327,477 3,828,905
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (6,260,821) 5,508,785
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,887,788 3,171,389
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,626,967 $ 8,680,174
============ ============
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 6,055,051 $ 6,340,283
Income tax paid 582,869 496,826
See notes to condensed consolidated financial statements.
6
HFB FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial information for the
three and nine-month periods ended March 31, 2002 and 2001 includes the
results of operations of HFB Financial Corporation (the "Company") and
its wholly owned subsidiary Home Federal Bank Corporation ("Home
Federal" or the "Bank"). The accompanying unaudited financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial
statements and with the instructions to Form 10-QSB. Certain
information and note disclosures normally included in the company's
annual financial statements prepared in accordance with generally
accepted accounting principles have condensed or omitted. It is
suggested that these statements and notes be read in conjunction with
the financial statements and notes thereto included in the Company's
annual report for the year ended June 30, 2001 on Form 10-KSB filed
with the Securities and Exchange Commission.
In the opinion of management, the financial information reflects all
adjustments (consisting only of normal recurring adjustments), which
are necessary for a fair presentation of the results of operations for
such periods but should not be considered as indicative of results for
a full year.
The condensed consolidated balance sheet of the Company as of June 30,
2001 has been derived from the audited consolidated balance sheet of
the Company as of that date.
2. NON-PERFORMING LOANS AND PROBLEM ASSETS
The following sets forth the activity in the Company's allowance for
loan losses for the nine-months ended March 31, 2002 and 2001:
(Dollars in thousands)
2002 2001
---- ----
Balance July 1 $718 $645
Charge offs (25) (22)
Recoveries - 1
Provision for loan losses 162 75
--- --
Balance March 31 $855 $699
============ ============
Information on impaired loans is summarized below
AT MARCH 31 2002
----
Impaired loans with an allowance $2,203
Allowance for impaired loans (included in the Company's
allowance for loan losses) $263
7
NINE-MONTHS ENDED MARCH 31 2002
----
Average balance of impaired loans $1,920
Interest income recognized on impaired loans $0
Cash-basis interest received $0
3. RECLASSIFICATIONS
Reclassifications of certain amounts in the March 31, 2001 consolidated
statement have been made to conform to the March 31, 2002 presentation.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Quarterly Report on Form 10-QSB are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes",
"anticipates", "expects", "estimates" or words of similar import. Similarly,
statements that describe the Company's future plans, objectives or goals are
also forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties, which are described in, close proximity to such
statements and which could cause actual results to differ materially from those
anticipated as of the date of this report. Shareholders, potential investors and
other readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no obligation
to publicly update such forward-looking statements to reflect subsequent events
or circumstances.
GENERAL:
HFB Financial Corporation, a Tennessee Corporation, was formed in September 1992
at the direction of Home Federal Bank, Federal Savings Bank for the purpose of
becoming a holding company for the Bank as part of its conversion from mutual to
stock form. The Company's primary operation is its investment in the common
stock of the Bank.
The Bank is principally engaged in the business of accepting deposits from the
general public and originating permanent loans, which are secured by one-to-four
family residential properties located in its market area. The Bank also
originates consumer loans and commercial real estate loans, and maintains a
substantial investment portfolio of mortgage-backed and other investment
securities. During the quarter ended December 31, 2001, the Bank converted from
a federal thrift charter to a state chartered commercial bank as a means for
management to focus more on commercial lending and other activities permissible
for commercial banks.
The operations of Home Federal, and savings institutions generally, are
significantly influenced by general economic conditions and the monetary and
fiscal policies of government regulatory agencies. Deposit flows and costs of
funds are influenced by interest rates on competing investments and prevailing
market rates of interest. Lending activities are affected by the demand for
financing real estate and other types of loans, which in turn are influenced by
the interest rates at which such financing may be offered and other factors
related to loan demand and the availability of funds.
FINANCIAL CONDITION
The Corporation's assets increased by 10.4% to $240.0 million at March 31, 2002
compared to $217.4 million at June 30, 2001. The majority of this increase is
reflected in increases in loans and investments. These increases were financed
primarily by increases in deposits and long-term borrowings and decreases in
cash and due from banks and trading account securities.
8
Cash and due from banks decreased $6.3 million to $7.6 million at March 31, 2002
compared to $13.9 million at June 30, 2001. This decrease provided a portion of
the funding used for increases in the loan and investment portfolios.
In the past, the Company has maintained a portfolio of trading account
securities, which was comprised of common stock of other financial institutions.
The portfolio was totally liquidated during the quarter ended December 31, 2001
compared to $1.049 million at June 30, 2001.
Investment securities, available for sale, increased $14.2 million to $71.3
million at March 31, 2002 from $57.1 million at June 30, 2001 primarily as the
result of funding available from an increase in deposits, the liquidation of
trading account securities and a decrease in cash and due from banks. During the
quarter ended March 31, 2002, Management executed a leverage strategy, borrowing
$7.5 million with maturities ranging from 2 to 4 years to purchase investment
securities with similar maturities.
Loans, net, increased by $12.7 million to $149.6 million at March 31, 2002 from
$136.9 million at June 30, 2001 as the result of continued mortgage loan demand
and an increase in participation loans. The Company continues to maintain a high
percentage of its loan portfolio in adjustable-rate residential mortgages.
At March 31, 2002, the allowance for loan losses was $854,000 or .57% of loans
receivable compared to $718,000 or .52 of loans receivable at June 30, 2001.
Other assets increased $3.2 million to $3.7 million at March 31, 2002 from .5
million at June 30, 2001, primarily due to the payment of $2.7 million in
premium for bank owned life insurance on key employees of the Bank. The Bank
recognizes the periodic increase in the cash surrender value of these policies,
net of costs, as income.
Total deposits increased by $14.5 million to $196.4 million at March 31, 2002
from $181.9 million at June 30, 2001. During the nine-months ended March 31,
2002, certificates of deposit increased $11.5 million and NOW accounts and
savings deposits increased $3.0 million. Competition for deposits in the local
market has eased considerably over the last several quarters due to increased
liquidity in the Banks' market area.
The Bank's regulatory liquidity ratio was 30.3% at March 31, 2002 as compared to
36.2% at June 30, 2001. At March 31, 2002 the Bank met all the regulatory
capital requirements to be considered "well capitalized" under bank regulations.
Tangible, core and risk-based capital ratios were 8.2%, 8.2% and 15.4%
respectively at March 31, 2002 as compared to 8.7%, 8.7% and 15.7% respectively,
at June 30, 2001.
RESULTS OF OPERATIONS FOR THE THREE-MONTHS ENDED MARCH 31, 2002 AND 2001
Net income increased by $152,000 to $478,000 for the three-month period ended
March 31, 2002 from $326,000 for the three-month period ended March 31, 2001.
The primary reasons for the increase were a $406,000 increase in net interest
income and a $74,000 increase in other income offset by a $218,000 increase in
other expense, a $47,000 increase in the provision for loan losses and a $63,000
increase in income tax expense.
Interest income decreased by $44,000 for the three-month period ended March 31,
2002 as compared to the three-month period ended March 31, 2001, primarily a
result of a lower weighted-average yield on earning assets. The lower average
yields were the result of sharp declines in interest rates over the past 12
months.
Interest on loans decreased by $39,000 to $2.933 million for the three-month
period ended March 31, 2002 as compared to $2.972 million for the three-month
period ended March 31, 2001. This decrease is mainly attributable to a lower
weighted-average yield on loans during the quarter ended March 31, 2002.
Interest on investment securities and other dividend income increased by $22,000
to $947,000 for the three-month period ended March 31, 2002 from $925,000
million for the three-month period ended March 31, 2001. This increase is
primarily the result of a higher average balance of investments during the three
months ended March 31,
9
2002. The weighted average yield on investments during the same period was lower
than that of the three months ended March 31, 2001.
Interest on deposits with other financial institutions decreased by $28,000 to
$14,000 for the three-month period ended March 31, 2002 from $42,000 for the
three-month period ended March 31, 2001 primarily due to a lower level of
interest-bearing deposits with financial institutions as well as lower yields.
Interest expense on deposits decreased by $507,000 to $1.723 million for the
three-month period ended March 31, 2002 from $2.230 million for the three-month
period ended March 31, 2001 as a result of a significant drop in rates paid on
deposit accounts.
Interest expense on long-term debt increased by $57,000 to $226,000 for the
three-month period ended March 31, 2002 from $169,000 for the three-month period
ended March 31, 2001, primarily due to a higher level of long-term debt
outstanding during the three months ended March 31, 2002.
The provision for loan losses increased $47,000 for the three-month period ended
March 31, 2002 as compared to the same period in 2001. The provision was the
result of management's evaluation of the adequacy of the allowance for loan
losses including consideration of recoveries of loans previously charged off,
the perceived risk exposure among loan types, actual loss experience,
delinquency rates, and current economic conditions. The Bank's allowance for
loan losses as a percent of total loans at March 31, 2002 was 0.57%.
Non-interest income increased by $74,000 to $283,000 for the three-month period
ended March 31, 2002 as compared to $209,000 for the same period in 2001. The
increase was primarily attributable to an increase of $20,000 in service charges
on deposits, an increase of $6,000 in other customer fees and an increase of
$71,000 in other income offset by a net decrease of $23,000 in gains on trading
account securities and realized gains and losses on available for sale
securities. The $70,000 increase in other income was primarily due to an
increase of $39,000 in the increase in cash surrender value of bank owned life
insurance, net of costs, a $12,000 increase in rental income and a $17,000
increase in gains on the sale of real estate.
Non-interest expense increased by $218,000 to $1.444 million for the three-month
period ended March 31, 2002 as compared to $1.226 million for the same period in
2001.
Compensation and benefits increased by $77,000 to $653,000 for the three-month
period ended March 31, 2002 as compared to $576,000 for the three-months ended
March 31, 2001 primarily as the result of a $7,000 increase in salaries, wages
and commissions and an increase of $59,000 in the cost of funding the Banks
retirement plan.
Occupancy expense increased by $17,000 to $95,000 for the three-months ended
March 31, 2002 compared to $78,000 for the same period in 2001. This was
primarily due to an increase of $11,000 in depreciation expense attributable to
the addition of fixed assets over the past 12 months.
Equipment expense increased by $28,000 to $133,000 for the three-months ended
March 31, 2002 from $105,000 for the three months-ended March 31, 2001 primarily
due to an increase in depreciation expense of $15,000 and an increase of $14,000
in maintenance and repairs.
Legal and professional fees increased by $76,000 to $129,000 for the three-month
period ended March 31, 2002 from $53,000 for the three-month period ended March
31, 2001 primarily due to a higher level of consulting fees and legal services
utilized in the three-months ended March 31, 2002 and closing costs paid by the
Bank on customers home equity lines of credit
Advertising expense decreased by $6,000 to $60,000 for the quarter ended March
31, 2002 compared to $66,000 for the quarter ended March 31, 2001 primarily due
to a lower level of advertising activity in the current period.
State deposit and franchise taxes increased by $17,000 to $58,000 for the
quarter ended March 31, 2002 compared to $41,000 for the quarter ended March 31,
2001 due to a higher level of deposits in the current period.
10
Other expenses increased by $11,000 to $249,000 for the three-month period ended
March 31, 2002 from $238,000 for the three-month period ended March 31, 2001,
primarily due to increases in telephone, postage, intangible amortization and
other miscellaneous expenses.
Income tax expense increased by $63,000 to $229,000 for the three-month period
ended March 31, 2002 compared to $166,000 for the three-months ended March 31,
2001 due a higher level of taxable income.
RESULTS OF OPERATIONS FOR THE NINE-MONTHS ENDED MARCH 31, 2002 AND 2001
Net income increased by $110,000 to $1.220 million for the nine-month period
ended March 31, 2002 from $1.110 million for the nine-month period ended March
31, 2001. The primary reasons for the increase were a $588,000 increase in net
interest income and a $108,000 increase in non-interest income offset by a
$87,000 increase in provision for loan losses, a $494,000 increase in
non-interest expense and a $7,000 increase in income tax expense.
Net interest income increased by $588,000 for the nine-month period ended March
31, 2002 as compared to the nine-month period ended March 31, 2001, primarily as
the result of a higher volumes in the period ended March 31, 2002.
Interest on loans increased by $64,000 to $8.817 million for the nine-month
period ended March 31, 2002 as compared to $8.753 million for the nine-month
period ended March 31, 2001. This increase is mainly attributable to higher
volume.
Interest on investment securities and other dividend income decreased by
$251,000 to $2.725 million for the nine-month period ended March 31, 2002 from
$2.976 million for the nine-month period ended March 31, 2001. This decrease is
primarily the result of lower reinvestment rates on maturing securities.
Interest on deposits with other financial institutions increased by $59,000 to
$140,000 for the nine-months ended March 31, 2002 compared to $81,000 for the
nine-months ended March 31, 2001 primarily due to a higher average balance
during the period ended March 31, 2002.
Interest expense on deposits decreased by $767,000 to $5.841 for the nine-month
period ended March 31, 2002 from $6.608 million for the nine-month period ended
March 31, 2001 as a result of a significantly lower cost of funds.
Interest expense on long term debt increased by $51,000 to $569,000 for the
nine-month period ended March 31, 2002 from $518,000 for the nine-month period
ended March 31, 2001 primarily due to a higher level of long-term debt during
the nine-months ended March 31, 2002.
The provision for loan losses increased by $87,000 to $162,000 for the
nine-month period ended March 31, 2002 as compared to $75,000 the same period in
2001. The provision was the result of management's evaluation of the adequacy of
the allowance for loan losses including consideration of recoveries of loans
previously charged off, the perceived risk exposure among loan types, actual
loss experience, delinquency rates, and current economic conditions. The Bank's
allowance for loan losses as a percent of total loans, net at March 31, 2002 was
0.57%.
The Bank's non-interest income increased by $108,000 to $771,000 for the
nine-month period ended March 31, 2002 as compared to $663,000 for the same
period in 2001. The increase was mainly attributable to a decrease in gains on
trading account securities and net gains on the sale of investment securities,
available for sale of $128,000 offset by a $108,000 increase in service charges
for deposit accounts, an increase of $31,000 in other customer fees and an
increase of $97,000 in other income. The $97,000 increase in other income was
primarily due to an increase of $39,000 in the increase in cash surrender value
of bank owned life insurance, net of costs, a $28,000 increase in rental income
and a $30,000 increase in gains on the sale of real estate.
Non-interest expense increased by $494,000 to $4.078 million for the nine-month
period ended March 31, 2002 as compared to $3.584 million for the same period in
2001. Compensation and benefits increased by $292,000 to $1.917 million for the
nine-month period ended March 31, 2002 as compared to $1.625 million for the
same period
11
in 2001. This increase is primarily attributable to annual wage increases and an
increase in the cost of funding the Banks retirement plan.
Occupancy expense increased by $37,000 to $285,000 for the nine-month period
ended March 31, 2002 compared to $248,000 for the same period in 2001. This
increase was primarily due to a $27,000 increase in depreciation expense.
Equipment expense increased by $83,000 to $378,000 for the nine-month period
ended March 31, 2002 compared to $295,000 for the same period in 2001. This
increase was mainly the result of higher deprecation associated with the
purchase of new furniture and equipment over the past year.
Data processing fees decreased by $18,000 to $177,000 for the nine-month period
ended March 31, 2002 from $195,000 for the nine-month period ended March 31,
2001 as the result a more favorable contract negotiated with the Banks data
processor.
Legal and professional fees increased by $109,000 to $278,000 for the nine-month
period ended March 31, 2002 from $169,000 for the nine-month period ended March
31, 2001 primarily due to a increase in consulting fees and closing costs paid
by the Bank on customers home equity lines of credit.
Advertising expense increased by $17,000 to $181,000 for the nine-month period
ended March 31, 2002 compared to $164,000 for the nine-month period ended March
31, 2001 due to a higher level of advertising.
State deposit and franchise taxes increased by $18,000 to $147,000 for the
nine-month period ended March 31, 2002 compared to $129,000 for the nine-month
period ended March 31, 2001 due to a higher level of deposits.
Other expenses decreased by $40,000 to $691,000 for the nine-month period ended
March 31, 2002 from $731,000 for the nine-month period ended March 31, 2001
primarily as the result of decreases in telephone, postage, REO, intangible
amortization and other miscellaneous expenses.
Income tax expense decreased by $7,000 to $585,000 for the nine-month period
ended March 31, 2002 compared to $578,000 for the nine-months ended March 31,
2001 due to a lower level of taxable income.
12
HFB FINANCIAL CORPORATION
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
No matters were submitted to a vote of Security Holders during
the quarter ended March 31, 2002.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Reports on Form 8-K
The Company filed a Form 8-K on March 6, 2002, announcing it's
determination to change it's fiscal year end from June 30 to
December 31, effective July 1, 2002.
13
HFB FINANCIAL CORPORATION
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned, thereunto duly authorized.
HFB FINANCIAL CORPORATION
By: /s/ David B. Cook
-----------------------------
David B. Cook
President and
Chief Executive Officer
By: /s/ Stanley Alexander, Jr.
----------------------------
Stanley Alexander, Jr.
Chief Financial Officer
Dated: May 14, 2002
14