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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, 1999
Commission file number 0-22441
Rocky Ford Financial, Inc.
------------------------------------------------------------
(Exact Name of Small business Issuer as Specified in Its
Charter)
Delaware 84-1413346
- ------------------------------- -----------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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, 1999
361,269
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ROCKY FORD FINANCIAL, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statement of Condition
at December 31, 1999 and September 30, 1999 3
Statements of Consolidated Income for
the Three Months Ended December 31, 1999
and 1998 4
Statements of Consolidated Cash Flows
for the Three Months Ended December 31,
1999 and 1998 5
Notes to Financial Statements 6 - 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 10
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 11
Item 2: Changes in Securities 11
Item 3: Defaults Upon Senior Securities 11
Item 4: Submission of Matters to a Vote of
Security Holders 11
Item 5: Other Information 11
Item 6: Exhibits and Reports on Form 8-K 11
Signature 11
2
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ROCKY FORD FINANCIAL, INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
----------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents
Interest - bearing $ 4,200,000 $ 4,100,000
Non-interest bearing 318,907 574,771
Certificates of deposit 2,099,000 2,099,000
Securities available for sale at
fair value
Equity securities (cost of $11,327) 544,419 601,536
Securities held to maturity at cost
Mortgage-backed securities (estimated
fair value of $1,606,000 and
$1,702,000) 1,601,691 1,667,376
U.S. agencies (estimated fair value
of $248,800 and $253,000) 249,492 249,434
Loans receivable - net 13,154,937 13,446,497
Federal Home Loan Bank stock, at cost 169,500 166,400
Retirement trust assets 340,105 305,673
Accrued interest receivable 144,758 133,799
Premises and equipment 82,651 89,732
Prepaids 5,820 43,172
----------- -----------
TOTAL ASSETS $22,911,280 $23,477,390
=========== ===========
LIABILITIES AND EQUITY
Deposits $15,890,838 $16,214,512
Advances from borrowers for taxes and
insurance 37,843 26,680
Accounts payable and accrued expenses 432,743 396,415
Deferred income taxes 155,200 180,100
----------- -----------
TOTAL LIABILITIES 16,516,624 16,817,707
----------- -----------
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 3,849,680 3,849,305
Retained earnings - substantially
restricted 2,910,499 2,860,454
Net unrealized gain on securities
available for sale, net of tax of
$197,300 and $218,400 335,821 371,805
Note receivable from ESOP Trust (236,992) (236,992)
Treasury stock, at cost - 43,397
and 18,250 shares (468,584) (189,121)
----------- -----------
TOTAL EQUITY 6,394,656 6,659,683
----------- -----------
TOTAL LIABILITIES AND EQUITY $22,911,280 $23,477,390
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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ROCKY FORD FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
-------- -------
<S> <C> <C>
INTEREST INCOME
Loans receivable $277,901 $307,537
Securities available for sale 4,881 3,198
Securities held to maturity 36,809 53,270
Other interest-bearing assets 91,153 85,033
-------- --------
TOTAL INTEREST INCOME 410,744 449,038
INTEREST ON DEPOSITS 191,495 194,721
-------- --------
NET INTEREST INCOME 219,249 254,317
(PROVISION FOR) RECOVERY OF LOAN
LOSSES -- --
-------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 219,249 254,317
-------- --------
NON-INTEREST INCOME
Other charges 2,603 4,100
-------- --------
NON-INTEREST EXPENSE
GENERAL AND ADMINISTRATIVE
Compensation and benefits 73,273 72,505
Occupancy and equipment 7,675 6,783
Computer services 12,569 14,284
SAIF deposit insurance 4,273 4,100
Other 51,616 58,226
-------- --------
TOTAL NON-INTEREST EXPENSE 149,406 155,898
-------- --------
INCOME BEFORE TAXES 72,446 102,519
INCOME TAX (EXPENSE) BENEFIT (22,401) (39,419)
-------- --------
NET INCOME $ 50,045 $ 63,100
======== ========
BASIC AND DILUTED EARNINGS PER COMMON SHARE: $ 0.13 $ 0.16
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 380,225 395,886
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
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ROCKY FORD FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 50,045 $ 63,100
----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of:
Deferred loan origination fees (2,312) (5,241)
Discounts on investments (58) (59)
Stock dividend received from FHLB (3,100) (3,100)
ESOP market value expense 375 779
Depreciation 7,081 3,488
Change in assets and liabilities
Accrued interest receivable (10,959) (18,857)
Prepaids 37,352 5,744
Accounts payable and accrued expenses 36,328 26,762
Current income taxes -- 51,816
Deferred income taxes (3,767) (11,781)
----------- -----------
TOTAL ADJUSTMENTS 60,940 49,551
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 110,985 112,651
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment to retirement trust (34,432) --
Loan originations and principal payments
on loans 293,872 134,224
Principal payments on mortgage-backed
securities 65,685 195,696
Federal Home Loan Bank stock redeemed -- 54,900
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 325,125 384,820
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CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (323,674) 195,937
Treasury stock purchases (279,463) (152,821)
Net change in mortgage escrow funds 11,163 8,747
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (591,974) 51,863
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (155,864) 549,334
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,674,771 3,370,793
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,518,907 $ 3,920,127
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Cash paid for:
Taxes $ 745 $ --
Interest 193,963 198,863
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
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ROCKY FORD FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1999
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.
Note 2. Basis of Presentation
The accompanying unaudited consolidated financial
statements,(except for the statement of financial condition at
September 30, 1999, 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 results of operations for the three months ended December 31,
1999 are not necessarily indicative of the results of operations
that may be expected for the year ended September 30, 2000. 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 1999 financial
statements
Note 3. Regulatory Capital Requirements
At December 31, 1999, 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, 1999:
<TABLE>
<CAPTION>
Tangible Capital:
<S> <C> <C>
Actual $4,886,000 22.81%
Required 321,000 1.50
Excess $4,565,000 21.31%
Core Capital:
Actual $4,886,000 22.81%
Required 857,000 4.00
Excess $4,029,000 18.81%
Risk-Based Capital:
Actual $5,186,000 58.78%
Required 706,000 8.00
Excess $4,480,000 50.78%
</TABLE>
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.
6
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ROCKY FORD FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1999
Note 4. Earnings Per Share
The Company adopted Financial Accounting Standards Board
Statement No. 128 relating to earnings per share. 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 or other contracts 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, 1999 AND
SEPTEMBER 30, 1999
The Company's total assets decreased by $566,000
or 2.41% from $23.5 million at September 30, 1999 to $22.9
million at December 31, 1999. The decrease is attributed to a
decrease in non-interest bearing cash of $256,000 and the
decrease in loans of $292,000.
The Company's net loan portfolio decreased by approximately
$292,000 during the three months ended December 31, 1999. Net
loans totaled $13.2 million at December 31, 1999 and $13.4
million at September 30, 1999. For the three months ended
December 31, 1998, the Association closed loans in the amount of
$626,000 and received payments in the amount of $918,000. As of
December 31, 1999, the Association had outstanding loan
commitments of $539,000.
The allowance for loan losses totaled $60,000 at December 31,
1999. As of that date the Company had $113,100 of
non-performing, single family loans in its portfolio with a
aggregated loan to value of 58%, based on last appraisals.
There were no loans charged off or recoveries of previous loan
losses during the three months ended December 31, 1999. 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, 1999,
the ratio of the allowance for loan losses to net loans was
.46%. as compared to .45% at September 30, 1999.
At December 31, 1999, the Company's investment portfolio
included mortgage-backed and related securities classified as
"held to maturity" carried at amortized cost of $1.9 million and
an estimated fair value of $1.9 million, and equity securities
classified as "available for sale" with an estimated fair value
of $544,000. The balance of the Company's investment portfolio
at December 31, 1999 consists of interest bearing deposits with
various financial institutions totaling $6.3 million.
At December 31, 1999 deposits decreased to $15.9 million from
$16.2 million at September 30, 1999 or a net decrease of 2.00%.
The demand accounts increased by $100,000 and the certificate of
deposit accounts decreased by $424,000 for the three months
ended December 31,1999. 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.
During the period ending December 31, 1999, the Company
purchased 25,147 shares of common stock, at a cost of $279,463,
and reported the purchase as treasury stock.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999 AND 1998
Net Income. The Company's net income for the three months ended
December 31, 1999 was $50.045 compared to net income of $63,100
for the three months ended December 31, 1998. The decrease in
net income for the three months ended December 31, 1999 resulted
from the decrease in interest income, primarily on loans.
Net Interest Income. Net interest income for the three months
ended December 31, 1999 was $219,000 compared to $254,000 for
the three months ended December 31, 1998. The decrease in net
interest income for the three months ended December 31, 1999 was
due to an decrease in the interest earning assets.
Interest Income. Interest income decreased by $38,000 from
$449,000 to $411,000 or by 8.46%, during 1999 compared to 1998.
This decrease resulted in part from an overall decrease of
interest-earning assets by $311,000 from $22.3 million to $22.0
million or by 1.39% from 1998 to 1999. The Company experienced
a decrease in the average yield on the interest-earning assets
from 7.94% in 1998 to 7.34% in 1999.
8
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ROCKY FORD FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest Expense. Interest expense decreased $4,000 to $191,000
for the three months ended December 31, 1999 from $195,000 for
the three months ended December 31, 1998. The comparable
expense for the periods was caused by the decrease of the
average rate paid from 4.94% in 1998 to 4.78% in 1999 with a
corresponding increase in average deposits from $15.8 million as
of December 31,1998 to $16.0 million as of December 31, 1999.
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, 1999 and
1998.
Non-Interest Expense. The non-interest expense section of the
consolidated statement of income decreased by $7,000 for the
three months ended December 31, 1999 when compared to the three
months ended December 31,1998. The decrease is attributed to a
reduction of professional fees.
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 is 4%. The Company has historically maintained a
level of liquid assets in excess of regulatory requirements.
The Company's liquidity ratio at December 31, 1999 was 41%.
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.
YEAR 2000 COMPLIANCE
The Company has an ongoing program of evaluating the effect of
the Year 2000 on its information processing systems and business
operations. The Company's core data processing is performed by
an outside vendor. As of January 2000, and through February 1,
2000 the system was functioning with no noted errors.
9
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ROCKY FORD FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR 2000 COMPLIANCE (Continued)
It is not possible to be certain that all aspects of the Year
2000 issue affecting the Company, including those related to the
efforts of customers, other financial institutions, or other
third parties will all be fully resolved. Although the Company
and its subsidiary had not experienced any problems as of
February 1, 2000, systems failures and errors could still happen
with other date changes through out the year.
10
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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
Exhibit 27 Financial Data Schedules
No Form 8-K was filed for the quarter
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 1, 2000 /s/ Keith E. Waggoner
-------------------------
Keith E. Waggoner, President
11
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 318,907
<INT-BEARING-DEPOSITS> 6,299,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 544,419
<INVESTMENTS-CARRYING> 1,851,183
<INVESTMENTS-MARKET> 1,854,800
<LOANS> 13,154,937
<ALLOWANCE> 60,000
<TOTAL-ASSETS> 22,911,280
<DEPOSITS> 15,890,838
<SHORT-TERM> 0
<LIABILITIES-OTHER> 625,786
<LONG-TERM> 0
<COMMON> 4,232
0
0
<OTHER-SE> 6,390,424
<TOTAL-LIABILITIES-AND-EQUITY> 22,911,280
<INTEREST-LOAN> 277,901
<INTEREST-INVEST> 41,690
<INTEREST-OTHER> 91,153
<INTEREST-TOTAL> 410,744
<INTEREST-DEPOSIT> 191,495
<INTEREST-EXPENSE> 191,495
<INTEREST-INCOME-NET> 219,249
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 149,406
<INCOME-PRETAX> 72,446
<INCOME-PRE-EXTRAORDINARY> 72,446
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,045
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
<YIELD-ACTUAL> 7.34
<LOANS-NON> 113,100
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 60,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 60,000
<ALLOWANCE-DOMESTIC> 60,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
