<PAGE>
<PAGE>
U.S. 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 December 31, 1997
Commission File Number: 333-20489
Rocky Ford Financial, Inc.
- ----------------------------------------------------------------
(Exact Name of Small business Issuer as Specified in Its Charter)
Delaware 84-1413346
- ------------------------------- -----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
801 Swink Avenue, Rocky Ford, Colorado 81067
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(Address of Principal Executive Offices)
719-254-7642
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(Issuer's Telephone Number, Including Area Code)
Check whether the issuer's: (1) 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:
Shares of common stock outstanding as of December 31, 1997
423,200
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ROCKY FORD FINANCIAL, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statement of Condition at
December 31, 1997 and September 30, 1996 3
Statements of Consolidated Income for the
Three Ended December 31, 1997 and 1996 4
Statements of Consolidated Cash Flows for the
Three Months Ended December 31, 1997 and 1996 5
Notes to Financial Statements 6 - 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 9
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 10
Item 2: Changes in Securities 10
Item 3: Defaults Upon Senior Securities 10
Item 4: Submission of Matters to a Vote
of Security Holders 10
Item 5: Other Information 10
Item 6: Exhibits and Reports on Form 8-K 10
Signature 10
2
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<PAGE>
ROCKY FORD FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, September 30
1997 1997
---------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents
Interest - bearing $ 2,900,000 $ 2,900,000
Non-interest bearing 470,793 305,382
Certificates of deposit 1,802,277 1,999,312
Securities available for sale
Equity securities (amortized cost
of $11,327) 485,856 409,218
Securities held to maturity
Mortgage-backed securities (estimated
market value of $2,348,000 and
$2,629,000) 2,238,988 2,421,308
U.S. agencies (estimated market value
of $754,000 and $743,000) 749,024 748,965
Loans receivable - net 13,451,728 13,529,566
Federal Home Loan Bank stock, at cost 330,100 323,500
Retirement trust assets 251,687 251,687
Accrued interest receivable 131,087 146,769
Premises and equipment 78,262 83,270
Prepaids 16,898 45,910
----------- -----------
TOTAL ASSETS $22,906,700 $23,164,887
=========== ===========
LIABILITIES AND EQUITY
Deposits $15,728,150 $16,139,404
Advances from borrowers for taxes and
insurance 45,562 35,562
Accounts payable and accrued expenses 348,897 372,700
Current income taxes payable 4,132 -
Deferred income taxes 197,756 169,400
----------- -----------
TOTAL LIABILITIES 16,324,497 16,717,066
----------- -----------
Commitments and contingencies
Preferred stock - $.01 par value;
authorized 1,000,000 shares; no
shares issued or outstanding - -
Common stock-$.01 par value;
authorized 3,000,000 shares;
issued and outstanding 423,200
shares 4,232 4,232
Paid-in capital 3,834,179 3,830,582
Retained earnings - substantially
restricted 2,749,570 2,700,923
Net unrealized gain on securities
available for sale, net of tax of
$175,600 and $145,640 298,926 250,644
Note receivable from ESOP Trust in
connection with 27,084 of uncommitted
and unallocated shares as of December
31, 1997 (304,704) (338,560)
----------- -----------
TOTAL EQUITY 6,582,203 6,447,821
----------- -----------
TOTAL LIABILITIES AND EQUITY $22,906,700 $23,164,887
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
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<PAGE>
ROCKY FORD FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------------
1997 1996
---------- -----------
<S> <C> <C>
INTEREST INCOME
Loans receivable $293,092 $277,176
Securities available for sale 6,645 5,953
Securiites held to maturity 57,674 60,256
Other interest-bearing assets 70,876 54,305
-------- --------
TOTAL INTEREST INCOME 428,287 397,690
INTEREST ON DEPOSITS 198,975 206,896
-------- --------
NET INTEREST INCOME 229,312 190,794
(PROVISION FOR) RECOVERY OF LOAN LOSSES - -
-------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 229,312 190,794
-------- --------
NON-INTEREST INCOME 1,826 8,403
Other charges -------- --------
NON-INTEREST EXPENSE
GENERAL AND ADMINISTRATIVE
Compensation and benefits 71,696 60,566
Occupancy and equipment 8,315 7,790
Computer services 8,291 8,023
SAIF deposit insurance 4,467 11,553
Other 62,721 29,377
-------- --------
TOTAL NON-INTEREST EXPENSE 155,490 117,309
-------- --------
INCOME BEFORE TAXES 75,648 81,888
INCOME TAX (EXPENSE) BENEFIT (27,000) (25,300)
-------- --------
NET INCOME $ 48,648 $ 56,588
======== ========
BASIC EARNINGS PER COMMON SHARE: $ 0.12
========
DILUTED EARNINGS PER SHARE $ 0.11
========
</TABLE>
See Notes to Consolidated Financial Statements.
4<PAGE>
<PAGE>
ROCKY FORD FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------------
1997 1996
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 48,648 $ 56,588
----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of:
Deferred loan origination fees (1,740) (4,418)
Discounts on investments (60) -
Stock dividend received from FHLB (6,600) (4,900)
ESOP market value expense 3,597 -
Depreciation 5,008 4,980
Change in assets and liabilities
Accrued interest receivable 15,682 (2,312)
Prepaids 29,012 (57,967)
Accounts payable and accrued expenses 10,053 (213,545)
Current income taxes 4,132 -
Deferred income taxes - 64,100
----------- -----------
TOTAL ADJUSTMENTS 59,084 (214,062)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 107,732 (157,474)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in certificates of deposit 197,035 100,000
Loan originations and principal payments
on loans 79,578 (304,898)
Principal payments on mortgage-backed
securities 182,320 21,352
Capital purchases - (4,630)
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 458,933 (188,176)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (411,254) 190,625
Net change in mortgage escrow funds 10,000 11,971
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (401,254) 202,596
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 165,411 (143,054)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,205,382 2,221,416
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,370,793 $ 2,078,362
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
Cash paid for:
Taxes $ - $ -
Interest 206,588 205,330
</TABLE>
See Notes to Consolidated Financial Statements.
5<PAGE>
<PAGE>
ROCKY FORD FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1997
Note 1. Nature of Business
Rocky Ford Financial, Inc. (the "Company") was incorporated under
the laws of the State of Delaware for the purpose of becoming
the holding company of Rocky Ford Federal Savings and Loan
Association (the "Association") in connection with the
Association's conversion from a federally chartered mutual
savings and loan association to a federally chartered stock
savings and loan association, pursuant to its Plan of
Conversion. The Company was organized in January 1997 to
acquire all of the common stock of Rocky Ford Federal Savings
and Loan Association upon its conversion to stock form. The
subscription and community offering of the Company's shares was
completed on May 21, 1997.
Note 2. Basis of Presentation
The accompanying unaudited consolidated financial
statements,(except for the statement of financial condition at
September 30, 1997, which is audited) have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-QSB of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management all adjustments necessary for a fair
presentation of the financial position and results of operations
for the periods presented have been included. The financial
statements of the Company are presented on a consolidated basis
with those of Rocky Ford Federal Saving and Loan Association.
The account balances include only the accounts and operations of
Rocky Ford Federal Savings and Loan Association prior to May 21,
1997. The results of operations for the three months ended
December 31, 1997 are not necessarily indicative of the results
of operations that may be expected for the year ended September
30, 1998. The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
The accounting policies followed are as set forth in Note 1. of
the Notes to Financial Statements in the 1997 Rocky Ford Federal
Savings and Loan Association financial statements
Note 3. Regulatory Capital Requirements
At December 31, 1997, the Association met each of the three
current minimum regulatory capital requirements. The following
table summarizes the Association's regulatory capital position
at December 31, 1997:
Tangible Capital:
Actual $4,642,000 22.14%
Required 315,000 1.50
Excess $4,327,000 20.64%
Core Capital:
Actual $4,642,000 22.14%
Required 629,000 3.00
Excess $4,013,000 19.14%
Risk-Based Capital:
Actual $4,702,000 55.98%
Required 672,000 8.00
Excess $4,030,000 47.98%
6<PAGE>
<PAGE>
ROCKY FORD FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1997
Note 3. Regulatory Capital Requirements (Continued)
Tangible and core capital levels are shown as a percentage of
total adjusted assets; risk-based capital levels are shown as
a percentage of risk-weighted assets.
Note 4. Mutual to Stock Conversion
On January 14, 1997, The Board of Directors of the
Association adopted a Plan of Conversion (the Plan) under
which the Association would convert from a federally charted
mutual savings and loan association to a federally chartered
stock savings and loan association and become a wholly-owned
subsidiary of the Company formed in connection with the
Conversion. The Plan was approved by the Office of Thrift
Supervision (OTS) and included the filing of a registration
statement with Securities and Exchange Commission. The Plan
was approved by the members of the Association at a special
meeting held May 6, 1997. In accordance with the Plan, the
Company issued common stock which was sold in the Conversion.
The closing of the offering occurred on May 21, 1997 and
resulted in a stock offering of $4,232,000 (including
$331,560 in shares subscribed by the ESOP). The Company
transferred fifty percent of the net proceeds for the
purchase of all of the capital stock of the Association.
The costs of issuing the common stock were deferred and was
deducted from the proceeds of the stock sale and amounted to
$410,186.
For the purpose of granting eligible members of the
Association a priority in the event of future liquidation,
the Association, at the time of conversion, established a
liquidation account equal to its regulatory capital as of the
date of the latest balance sheet used in the final conversion
offering circular. In the event (and only in such event) of
future liquidation of the converted Association, an eligible
savings account holder who continues to maintain a savings
account shall be entitled to receive a distribution from the
liquidation account, in the proportionate amount of the then-
current adjusted balance of the savings deposits then held,
before any distributions may be made with respect to capital
stock.
The Association may not declare or pay a cash dividend on its
common stock if its net worth would thereby be reduced below
either the aggregate amount then required for the liquidation
account or the minimum regulatory capital requirements
imposed by federal regulations.
The ESOP stock purchases were financed by issuing a note to
the Company for the entire purchase.
Note 5. Earnings Per Share
The Company adopted Financial Accounting Standards Board
Statement No. 128 relating to earnings per share, effective
for the quarter ended December 31, 1997. The statement
requires dual presentations of basic and diluted earnings per
share on the face of the income statement and requires a
reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the
diluted EPS computation. Basic EPS excludes dilution and is
computed by dividing income available to common stockholders
by the weighted -average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution
that could occur if securities to issue common stock were
exercised or converted into common stock or resulted in the
issuance of common stock that then shares in the earnings of
the entity.
7
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ROCKY FORD FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND
SEPTEMBER 30, 1997
The Company's total assets decreased by $258 thousand or 1.11%
from $23.2 million at September 30, 1997 to $22.9 million at
December 31, 1997. The decrease is attributed to the reduction
of loans receivable and investments, with the cash received used
to cover the decrease in deposit accounts of $411,000.
The Company's net loan portfolio decreased by approximately $78
thousand during the three months ended December 31, 1997. Net
loans totaled $13.5 million at December 31, 1997 and September
30, 1997.
The allowance for loan losses totaled $60,000 at December 31,
1997 and September 30, 1997. As of those dates the Company did
not have any non-performing loans in its portfolio. There were
no loans charged off or recoveries of previous loan losses
during the three months ended December 31, 1997. The
determination of the allowance for loan losses is based on
management's analysis, performed on a quarterly basis, of
various factors, including the market value of the underlying
collateral, growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding
loans, historical loss experience, delinquency trends and
prevailing economic conditions. Although management believes
its allowance for loan losses is adequate, there can be no
assurance that additional allowances will not be required or
that losses on loans will not be incurred. The Company has had
minimal losses on loans in prior years. At December 31, 1997,
the ratio of the allowance for loan losses to net loans was
.45%. as compared to .44% at September 30, 1997.
At December 31, 1997, the Company's investment portfolio
included mortgage-backed and related securities classified as
"held to maturity" carried at amortized cost of $3.0 million and
an estimated fair value of $3.1 million, and equity securities
classified as "available for sale" with an estimated fair value
of $486 thousand. The balance of the Company's investment
portfolio at December 31, 1997 consists of interest bearing
deposits with various financial institutions totaling $4.7
million.
At December 31, 1997 deposits decreased to $15.7 million from
$16.1 million at September 30, 1997 or a net decrease of 2.54%.
Management is continually evaluating the investment alternatives
available to the Company's customers, and adjusts the pricing on
its savings products to maintain its existing deposits.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996
Net Income. The Company's net income for the three months ended
December 31, 1997 was $48,648 compared to net income of $56,588
for the three months ended December 31, 1996. The decrease in
net earnings for the three months ended December 31, 1997
resulted primarily from the recognition of employee benefit
plans adopted and professional services incurred as a result of
the added reporting requirements, less the effects of net
interest income.
Net Interest Income. Net interest income for the three months
ended December 31, 1997 was $229,000 compared to $191,000 for
the three months ended December 31, 1996. The increase in net
interest income for the three months ended December 31, 1997 was
due to an increase in the interest earning assets received from
the conversion and a reduction in deposits.
Interest Income. Interest income increased by $30,000 from
$398,000 to $428,000 or by 7.54%, during 1997 compared to 1996.
This increase resulted in part from an overall increase of
interest-earning assets by $1,942,000 from $20,016,000 to
$21,958,000 or by 9.70% from 1996 to 1997. The Company
experienced a decrease in the average yield on the interest-
earning assets from 7.95% in 1996 to 7.77% in 1997
8
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ROCKY FORD FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest Expense. Interest expense decreased $8,000 to $199,000
for the three months ended December 30, 1997 from $207,000 for
the three months ended December 31, 1996. The comparable
expense for the periods was caused by the increase of the
average rate paid from 4.75% in 1996 to 4.87% in 1997 with a
corresponding decrease in deposits from $16,139,000 in 1996 to
$15,728,000 in 1997.
Provision for Loan Losses. The allowance for loan losses is
established through a provision for loan losses based on
management's evaluation of the risk inherent in its loan
portfolio and the general economy. Such evaluation considers
numerous factors including, general economic conditions, loan
portfolio composition, prior loss experience, the estimated fair
value of the underlying collateral and other factors that
warrant recognition in providing for an adequate loan loss
allowance.
The Company determined a provision for loan loss was not
required for the three months ended December 31, 1997 and 1996.
Non-Interest Expense. The increase in the non-interest expense
section of the consolidated statement of income is attributed to
expense recognized in accordance with benefit plans adopted by
the board, and professional expenses incurred in the quarter due
to additional reporting requirements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds consists of deposits,
repayment of loans and mortgage-backed securities, maturities of
investments and interest-bearing deposits, and funds provided
form operations. While scheduled repayments of loans and
mortgage-backed securities and maturities of investment
securities are predicable sources of funds, deposit flows and
loan prepayments are greatly influenced by the general level of
interest rates, economic conditions and competition. The
Company uses its liquidity resources principally to fund
existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to
invest in other interest-earning assets, to maintain liquidity,
and to meet operating expenses. Management believes that
proceeds from the stock sale, loan repayments and other sources
of funds will be adequate to meet the Company's liquidity needs
for the immediate future.
The Company is required to maintain minimum levels of liquid
assets as defined by OTS regulations. This requirement, which
may be varied at the direction of the OTS depending upon
economic conditions and deposit flows, is based upon a
percentage of deposits and short-term borrowings. The required
minimum ratio was 5% until November 24, 1997 when it was changed
to 4%. The Company has historically maintained a level of
liquid assets in excess of regulatory requirements. The
Company's liquidity ratios at December 31, 1997 and 1996 were
20% and 21%, respectively.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have
been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position
and results of operations in terms of historical dollars without
considering changes in the relative purchasing power of money
over time because of inflation. Unlike most industrial
companies, virtually all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates
have a more significant impact on the Company's performance than
the effects of general levels of inflation. Interest rates do
not necessarily move in same direction or in the same magnitude
as the prices of goods and services.
9
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ROCKY FORD FINANCIAL, INC.
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None.
ITEM 2: Changes in Securities
None.
ITEM 3: Defaults Upon Senior Securities
Not Applicable
ITEM 4: Submission of Matters to a Vote of Security Holders.
Not Applicable
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
None
SIGNATURE
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.
Rocky Ford Financial, Inc.
Registrant
Date February 6, 1998 /s/ Keith E Waggoner
----------------------------
Keith E. Waggoner, President
and Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 470,793
<INT-BEARING-DEPOSITS> 4,702,277
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 485,856
<INVESTMENTS-CARRYING> 2,988,012
<INVESTMENTS-MARKET> 3,102,000
<LOANS> 13,451,728
<ALLOWANCE> 60,000
<TOTAL-ASSETS> 22,906,700
<DEPOSITS> 15,728,150
<SHORT-TERM> 0
<LIABILITIES-OTHER> 596,347
<LONG-TERM> 0
<COMMON> 4,232
0
0
<OTHER-SE> 6,577,971
<TOTAL-LIABILITIES-AND-EQUITY> 22,906,700
<INTEREST-LOAN> 293,092
<INTEREST-INVEST> 64,319
<INTEREST-OTHER> 70,876
<INTEREST-TOTAL> 428,287
<INTEREST-DEPOSIT> 198,975
<INTEREST-EXPENSE> 198,975
<INTEREST-INCOME-NET> 229,312
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 155,490
<INCOME-PRETAX> 75,648
<INCOME-PRE-EXTRAORDINARY> 75,648
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,648
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.11
<YIELD-ACTUAL> 7.70
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 60,000
<ALLOWANCE-DOMESTIC> 60,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
