U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-22587
SFB BANCORP, INC.
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Tennessee 62-1683732
---------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
632 East Elk Avenue, Elizabethton, Tennessee 37643
---------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 543-1000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
---------- --------
As of November 1, 2000, there were 590,595 shares of the Registrant's common
stock, par value $0.10 per share, outstanding. The Registrant has no other
classes of common equity outstanding.
Transitional small business disclosure format:
Yes X No
---------- --------
<PAGE>
SFB BANCORP, INC.
AND SUBSIDIARY
Elizabethton, Tennessee
Index
<TABLE>
<CAPTION>
PART I. Page(s)
------- -------
<S> <C>
FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets-(Unaudited) as of December 31, 1999 and September 30, 2000..................................3
Consolidated Statements of Income - (Unaudited) for the three and nine month
periods ended September 30, 1999 and 2000...............................................................................4
Consolidated Statements of Stockholders' Equity - (Unaudited)...........................................................5
Consolidated Statements of Cash Flows - (Unaudited) for the nine months
ended September 30, 1999 and 2000.....................................................................................6
Notes to (Unaudited) Consolidated Financial Statements................................................................7-8
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................................................9-13
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................................14
Item 2. Changes in Securities.........................................................................................14
Item 3. Defaults Upon Senior Securities...............................................................................14
Item 4. Submission of Matters to a Vote of Security Holders...........................................................14
Item 5. Other Information.............................................................................................14
Item 6. Exhibits and Reports on Form 8-K..............................................................................14
Signatures.............................................................................................................15
</TABLE>
2
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
--------------------- --------------------
<S> <C> <C>
Assets
------
Cash on hand $ 1,424 $ 469
Interest earning deposits 738 896
Investment securities:
Held to maturity (market value of $911
in 1999 and $835 in 2000) 1,017 899
Available for sale (amortized cost of $2,124
in 1999 and $2,125 in 2000) 2,091 2,105
Loans receivable, net 43,789 46,002
Mortgage-backed securities:
Available for sale (amortized cost of $2,225 in
1999 and $1,818 in 2000) 2,183 1,744
Premises and equipment, net 1,011 969
Federal Home Loan Bank stock 487 514
Accrued interest receivable 280 324
Prepaid expenses and other assets 109 56
--------------- ---------------
Total assets $ 53,129 $ 53,978
=============== ===============
Liabilities and Stockholders' Equity
------------------------------------
Deposits $ 40,435 $ 41,913
Federal Home Loan Bank advances 500 -
Advance payments by borrowers for taxes and insurance 220 578
Accrued expenses and other liabilities 157 207
Income taxes payable:
Current - 39
Deferred 101 93
---------------- ----------------
Total liabilities 41,413 42,830
--------------- ---------------
Preferred stock ($.10 par value, 1,000,000 shares authorized;
None outstanding) - -
Common stock ($.10 par value, 4,000,000 shares authorized;
767,000 shares issued; 679,417 and 590,595 outstanding at
December 31, 1999 and September 30, 2000, respectively) 77 77
Paid-in capital 7,382 7,389
Retained earnings, substantially restricted 6,165 6,487
Treasury stock at cost (87,583 and 176,405 shares at December 31,
1999 and September 30, 2000, respectively) (1,208) (2,221)
Accumulated other comprehensive income (45) (56)
Unearned compensation:
Employee stock ownership plan (419) (365)
Restricted stock plan (236) (163)
--------------- ----------------
Total stockholders' equity 11,716 11,148
--------------- ----------------
Total liabilities and stockholders' equity $ 53,129 $ 53,978
=============== ================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
For Three Months Ended For Nine Months Ended
September 30, September 30,
------------------ ------------------
1999 2000 1999 2000
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 842 $ 946 $ 2,485 $ 2,726
Mortgage-backed securities 34 27 115 83
Investments 51 49 160 148
Interest earning deposits 23 8 99 20
------- ------- ------- -------
Total interest income 950 1,030 2,859 2,977
------- ------- ------- -------
Interest expense:
Deposits 442 529 1,360 1,473
FHLB Advances - 4 - 19
------- ------- ------- -------
Total interest expense 442 533 1,360 1,492
------- ------- ------- -------
Net interest income 508 497 1,499 1,485
Provision for loan losses 9 9 27 27
------- ------- ------- -------
Net interest income after provision
for loan losses 499 488 1,472 1,458
Non-interest income:
Loan fees and service charges 45 42 130 136
Other 3 7 8 13
------- ------- ------- -------
Total non-interest income 48 49 138 149
------- ------- ------- -------
Non-interest expenses:
Compensation 166 183 463 519
Employee benefits 32 31 95 95
Net occupancy expense 28 29 72 94
Deposit insurance premiums 6 2 18 6
Data processing 28 31 74 91
Other 64 69 208 203
------- ------- ------- -------
Total non-interest expenses 324 345 930 1,008
------- ------- ------- -------
Income before income taxes 223 192 680 599
Income tax expense 85 71 257 221
------- ------- ------- -------
Net income 138 121 423 378
Other comprehensive (loss) income (8) 10 (16) (11)
------- ------- ------- -------
Comprehensive income $ 130 $ 131 $ 407 $ 367
======= ======= ======= =======
Earnings per share
Basic $ .21 $ .22 $ .66 $ .65
Diluted $ .21 $ .22 $ .66 $ .65
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
(Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
Accumulated
Other Unearned Compensation
Common Paid-In Retained Treasury Comprehensive ---------------------
Stock Capital Income Stock Income for ESOP for RSP Total
----- ------- ------ ----- ------ -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 77 7,368 5,732 (1,034) (24) (491) (358) 11,270
Comprehensive income:
Net income - - 559 - - - - 559
Unrealized losses on
securities available for sale,
net of income tax expense - - - - (21) - - (21)
Cash dividends declared ($.20 share) - - (126) - - - - (126)
Treasury stock purchased (14,733 shares) - - - (174) - - - (174)
Compensation earned - 14 - - - 72 122 208
---- ------ ------ ------ --------- ----- ------- ---------
Balance at December 31, 1999 77 7,382 6,165 (1,208) (45) (419) (236) 11,716
Comprehensive income:
Net income - - 378 - - - - 378
Unrealized losses on securities
available for sale,
net of income tax expense - - - - (11) - - (11)
Cash dividends declared ($.10 share) (56) (56)
Treasury stock purchased (88,822 shares) - - - (1,013) - - - (1,013)
Compensation earned - 7 - - - 54 73 134
---- ------ ------ ------ --------- ----- ------- ---------
Balance at September 30, 2000 $ 77 $7,389 $6,487 $(2,221) $ (56) $ (365) $ (163) $ 11,148
===== ====== ====== ======= =========== ====== ======= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1999 2000
---- ----
<S> <C> <C>
Operating activities:
Net income $ 423 $ 378
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 53 69
Provision for loan losses 27 27
Increase (decrease) in reserve for uncollected interest (1) (1)
Deferred income taxes (benefit) - -
Net increase (decrease) in deferred loan fees (54) (15)
Accretion of discounts on investment securities, net (18) (19)
Amortization of premiums on mortgage-backed securities 7 7
Amortization of unearned compensation 155 134
FHLB stock dividends (25) (27)
(Increase) decrease in other assets (39) 53
(Increase) decrease in accrued interest receivable (6) (43)
Increase (decrease) in accrued expenses and other liabilities 23 50
Increase (decrease) in current income taxes - 39
------- -------
Net cash provided by operating activities 545 652
------- -------
Investing activities:
Purchase of investment securities held to maturity - -
Maturities of investment securities held to maturity 130 136
Purchase of investment securities available for sale (1,299) -
Maturities of investment securities available for sale 1,500 -
Principal payments on mortgage-backed securities
available for sale 1,080 400
Net decrease in loans (1,953) (2,225)
Purchase of premises and equipment (225) (27)
------- -------
Net cash used by investing activities (767) (1,716)
------- -------
Financing activities:
Net (decrease) in deposits (92) 1,478
Repayment of FHLB Advances - (500)
Increase in advance payments by borrowers for taxes
and insurance 371 358
Treasury stock purchased (174) (1,013)
Payment of cash dividend (64) (56)
------- -------
Net cash provided by financing activities 41 267
------- -------
Decrease in cash and cash equivalents (181) (797)
Cash and cash equivalents at beginning of period 2,839 2,162
------- -------
Cash and cash equivalents at end of period $ 2,658 $ 1,365
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,348 $ 1,486
Income taxes 289 130
======= =======
Noncash transactions:
Unrealized gains (losses) on securities and mortgage-backed
securities available for sale, net of deferred taxes (16) (11)
Loan charge off's 2 7
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements
-------------------------------- ------------------------------------------
SFB BANCORP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(Tabular amounts in thousands)
1. Basis of Preparation
--------------------
The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-QSB and therefore, do not
include all disclosures necessary for a complete presentation of the
consolidated balance sheets, consolidated statements of income,
consolidated statements of stockholders' equity, and consolidated
statements of cash flows in conformity with generally accepted accounting
principles. However, all adjustments which are, in the opinion of
management, necessary for the fair presentation of the interim financial
statements have been included. All such adjustments are of a normal
recurring nature. The statements of income for the three and nine month
periods ending September 30, 2000 are not necessarily indicative of the
results which may be expected for the entire year or any other interim
period.
It is suggested that these consolidated financial statements be read in
conjunction with the audited consolidated financial statements and notes
thereto for the Company for the year ended December 31, 1999 which are
included in the Form 10-KSB by reference (file no. 0-22587).
2. Earnings Per Share
------------------
Basic earnings per common share ("EPS") for all periods presented is
computed by dividing net income by the weighted average number of common
share outstanding. Diluted earnings per common share is computed by
dividing net income available to common stockholders by the weighted
average number of common shares outstanding and dilutive potential common
shares, which include stock options. Dilutive potential common shares are
calculated using the treasury stock method. Options to purchase 73,630
shares of the Company's common stock were outstanding during the three and
nine months period ended September 30, 2000, but were not included in the
computation of diluted EPS because their effect would be anti-dilutive.
7
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements
-------------------------------- ------------------------------------------
<TABLE>
<CAPTION>
Three months ended,
-------------------------------------------------------
September 30, 1999 September 30, 2000
--------------------------- ---------------------------
Income Shares Income Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $138 $121
BASIC EPS
Income available to common stockholders $138 643 $121 556
Per share amount $.21 $.22
Effect of Dilutive Securities $.00 $.00
DILUTIVE EPS
Income available to common stockholders $138 643 $121 556
Per share amount $.21 $.22
</TABLE>
<TABLE>
<CAPTION>
Nine months ended,
-------------------------------------------------------
September 30, 1999 September 30, 2000
--------------------------- ---------------------------
Income Shares Income Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $423 $378
BASIC EPS
Income available to common stockholders $423 644 $378 582
Per share amount $.66 $.65
Effect of Dilutive Securities $.00 $.00
DILUTIVE EPS
Income available to common stockholders $423 644 $378 582
Per share amount $.66 $.65
</TABLE>
3. Asset Quality
-------------
The following table provides information regarding the Bank's nonperforming
loans (i.e., loans which are contractually past due 90 days or more) at
December 31, 1999 and September 30, 2000, respectively. As of the dates
indicated, the Bank had no loans categorized as troubled debt restructuring
within the meaning of SFAS 15.
December 31, September 30,
1999 2000
---- ----
(Dollars in Thousands)
Nonaccrual loans $ 217 $ 239
Repossessed real estate - -
----- -----
Total nonperforming assets $ 217 $ 239
===== =====
Nonperforming loans to net loans 0.50% 0.52%
Nonperforming assets to total assets 0.41% 0.45%
8
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Private Securities Litigation Reform Act of 1995 contains safe harbor
provisions regarding forward-looking statements. When used in this discussion,
the words "believes", "anticipates", "contemplates", "expects", and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in interest rates, risk associated with the effect of opening a new
branch, the ability to control costs and expenses, and general economic
conditions. The Company undertakes no obligation to publicly release the results
of any revisions to those forward looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
The following discussion and analysis is intended to assist in understanding the
financial condition and the results of operations of the Company. References to
the "Company" include SFB Bancorp, Inc. and/or the Bank as appropriate.
Comparison of Results of Operations for the Three and Nine Months Ending
September 30, 1999 and 2000
Net Income. Net income for the three months ending September 30, 2000, decreased
$17,000, or 12.3%, from $138,000 in 1999, to $121,000 in 2000. Net income
decreased $45,000, or 10.6%, to $378,000 for the nine months ending September
30, 2000, from $423,000 in 1999. The decrease for the three and nine month
periods ended September 30, 2000, compared to 1999, was principally due to a
decrease in net interest income, combined with an increase in non-interest
expenses, offset by lower income tax expense. Dilutive income per share
increased $.01, from $.21 for the three month ended September 30, 1999, to $.22
for the three months ended September 30, 2000. Dilutive income per share
decreased $.01, from $.66 for the nine months ended September 30, 1999, to $.65
for the nine months ended September 30, 2000.
Net Interest Income. Net interest income decreased $11,000, from approximately
$508,000 for the three months ending September 30, 1999, to $497,000 for the
three months ending September 30, 2000. Net interest income decreased $14,000 to
approximately $1.5 million for the nine months ending September 30, 2000. The
decrease in net interest income for the three month period in 2000, primarily
reflects a 39 basis point decrease in the interest rate spread from 3.23% for
the three months ending September 30, 1999, to 2.84% in 2000, offset by a
increase in average interest-earning assets over average interest-bearing
liabilities of approximately $567,000 for the three months ending September 30,
2000, as compared to the same period in 1999. The net interest margin decreased
24 basis points to 3.84% for the three months ending September 30, 2000, from
4.08% for the three months ending September 30, 1999. The overall decrease in
net interest
9
<PAGE>
income for the nine months ending September 30, 2000, primarily reflects a 14
basis point decrease in the interest rate spread from 3.06% for the nine months
ending September 30, 1999, to 2.92% in 2000. The net interest margin decreased 7
basis points to 3.88% for the nine months ending September 30, 2000, from 3.95%
for the nine months ending September 30, 1999.
Interest Income. Interest income increased $80,000, from approximately $950,000
for the three months ending September 30, 1999, to $1.03 million for the three
months ending September 30, 2000. The increase was attributable to a increase in
average interest-earning assets of approximately $2.0 million from $49.7 million
at September 30, 1999, to $51.7 million at September 30, 2000, combined with a
increase in the average yield on interest-earning assets of 32 basis points,
from 7.65% for the three months ending September 30, 1999, to 7.97% for the same
period in 2000. Interest income increased $118,000, from approximately $2.86
million for the nine months ending September 30, 2000, to approximately $3.0
million for the nine months ending September 30, 2000. The increase was
attributable to a increase in average interest-earning assets of approximately
$481,000, from $50.5 million at September 30, 1999, to $51.0 million at
September 30, 2000, combined with a increase in the average yield on
interest-earning assets of 24 basis points, from 7.54% for the nine months
ending September 30, 1999, to 7.78% for the same period in 2000.
Interest on loans increased $104,000 for the three months ending September 30,
2000, as compared to the same period in 1999, and $241,000 for the nine months
ending September 30, 2000, as compared to the same period in 1999. The increase
for the three months ending September 30, 2000, compared to 1999, primarily
reflects a $3.8 million increase in average loans outstanding, and a increase in
the average yield on average loans outstanding of 24 basis points, from 8.01%
for the three months ending September 30, 1999, to 8.25% for the same period in
2000. The increase for the nine months ending September 30, 2000, compared to
1999, primarily reflects a $4.2 million increase in average loans outstanding,
offset by a decrease in the average yield on average loans outstanding of 3
basis points, from 8.09% for the nine months ending September 30, 1999, to 8.06%
for the same period in 2000.
Interest on investment securities decreased $2,000 for the three months ending
September 30, 2000, as compared to the same period in 1999, and decreased
$12,000 for the nine months ending September 30, 2000, as compared to the same
period in 1999. The decrease in interest on investments for the three months
ending September 30, 2000, primarily reflects an decrease of approximately
$142,000 in the average investment balance for 2000, compared to 1999, offset by
a increase in the average yield on investments of 2 basis points, from 5.26% in
1999, to 5.28% in 2000. The decrease in interest on investments for the nine
months ending September 30, 2000, primarily reflects an decrease of
approximately $354,000 in the average investment balance for 2000, compared to
1999. The nine month average yield on investments was 5.28% in 1999 and 2000.
Interest on interest-earning deposits decreased $15,000 for the three months
ending September 30, 2000, as compared to the same period in 1999, and decreased
$79,000 for the nine months ending September 30, 2000, as compared to the same
period in 1999.
10
<PAGE>
These decreases in interest on interest-earning deposits for three and nine
months ending September 30, 2000, compared to 1999, primarily reflects a
decrease of approximately $923,000 and $2.4 million, respectively, in the
average balance of interest-earning deposits.
Interest on mortgage-backed securities decreased $7,000 for the three months
ending September 30, 2000, as compared to the same period in 1999, and $32,000
for the nine months ending September 30, 2000, as compared to the same period in
1999, as the portfolio continued to pay down principal and those funds were
invested in other earning assets.
The decrease in average interest-earning deposits for both the three and nine
month periods in 2000, compared to 1999, along with the principal payments from
mortgage-backed securities were used to fund loan demand, deposit withdrawals
and stock repurchases.
Interest Expense. Interest expense increased $91,000, from $442,000 for the
three months ending September 30, 1999, to $533,000 for the three months ending
September 30, 2000. Interest expense increased $132,000, from approximately $1.4
million for the nine months ending September 30, 1999, to $1.5 million for the
nine months ending September 30, 2000. The increase for the three months ending
September 30, 2000, was primarily the result of a 71 basis point increase in the
average cost of funds, combined with an approximate $1.5 million increase in the
average balance of interest-bearing liabilities for the three months ending
September 30, 2000, compared to 1999. The increase for the nine months ending
September 30, 2000, was primarily the result of a 38 basis point increase in the
average cost of funds, combined with an approximate $458,000 increase in the
average balance of interest-bearing liabilities for the nine months ending
September 30, 2000, compared to 1999. Interest rates of certificate of deposits
increased during the three and nine month periods in 2000, compared to 1999.
These increases were primarily due to the continued increase in short term
interest rates which forced the Company to reprice its certificate of deposits
at a much higher rate. Until the interest rate environment stabilizes and
returns to a normal pattern, management does not foresee any relief in repricing
customer deposits at a higher cost of funds.
Provision for Loan Losses. The provision for loan losses was $9,000 three month
periods ending September 30, 1999 and 2000, respectively. The provision for loan
losses was $27,000 for the nine months periods ending September 30, 1999 and
2000, respectively. The Company's management routinely performs an analysis to
quantify the inherent risk of loss in its portfolio. At September 30, 2000, the
ratio of the allowance for loan loss was at a level deemed adequate by
management to provide for losses in the loan portfolio. The ratio of allowance
for loan loss to non-performing loans at September 30, 2000, was 156%, and
nonperforming assets represented 0.45% of total consolidated assets.
Nonperforming assets were $239,000 at September 30, 2000, compared to $349,000
at September 30, 1999. Management is not aware of any trends or events inherent
to its loan portfolio that have not been provided for in its loan loss
allowance. There, however, can be no assurance that future losses will not
exceed estimated amounts or that additional provisions for loan losses will not
be required in future periods.
Non-Interest Income. Non-interest income continues to be an additional source of
income for the Company. The income is produced by fees on new loan production
and service fees on other
11
<PAGE>
products and services. Total non-interest income amounted to $49,000 and
$149,000 for the three and nine months ending September 30, 2000, respectively,
and $48,000 and $138,000 for the three and nine months ending September 30,
1999, respectively.
Non-Interest Expense. Non-interest expense increased $21,000, from $324,000 for
the three months ending September 30, 1999, to $345,000 for 2000. The increase
was primarily the result of a combined $25,000 increase in compensation, data
processing and other expenses, offset by a $4,000 reduction in deposit insurance
premiums incurred during the period. Non-interest expense increased $78,000,
from approximately $930,000 for the nine months ending September 30, 1999, to
$1.0 million for 2000. The increase was primarily the result of increased
compensation expense of $56,000, a combined $39,000 increase in net occupancy
and data processing expenses, offset by a $17,000 reduction in deposit insurance
premiums and other expenses incurred during the period. The increase in
compensation expense for the nine months ended September 30, 2000, was primarily
attributable normal compensation increases, combined with the addition of extra
personnel associated with the new branch office in Mountain City, Tennessee. The
decrease in other non-interest expense for nine months ending September 30,
2000, compared to 1999, was mainly attributable to management's attempt to
control general operating expenses and those expenses associated with being a
public company. The increase in net occupancy expense for both the three and
nine months ending September 30, 2000, compared to 1999, was mainly attributable
to expenses associated with the Bank's additional branch office in Mountain
City, Tennessee. The increase in data processing expense for both the three and
nine months ending September 30, 2000, compared to 1999, was mainly attributable
to expenses associated with increased transaction volumes, data communications
expenses, and the new teller operating system. The decrease in deposit insurance
premiums for both the three and nine months ending September 30, 2000, compared
to 1999, was attributable to reduced insurance assessment rates beginning
January 1, 2000.
Income Taxes. Income tax expense for the three months ending September 30, 2000,
was $71,000, compared to $85,000 for the same period in 1999. Income tax expense
for the nine months ending September 30, 2000, was $221,000, compared to
$257,000 for the same period in 1999. The decrease for the three and nine month
periods ending September 30, 2000, compared to 1999, was principally due to
lower pre-tax income. The effective tax rate for both the three and nine months
in 1999 and 2000, was approximately 37%.
Liquidity and Capital Resources. The Company's primary sources of funds are new
deposits, proceeds from principal and interest payments on loans, and repayments
on mortgage-backed securities. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and mortgage prepayments
are greatly influenced by general interest rates, economic conditions and
competition. The Company's primary investing activity is loan originations. The
Company maintains liquidity levels adequate to fund loan commitments, investment
opportunities, deposit withdrawals and other financial commitments. Obligations
to fund outstanding loan commitments at September 30, 2000 were approximately
$814,000.
12
<PAGE>
At September 30, 2000, management had no knowledge of any trends, events or
uncertainties that will have or are reasonably likely to have material effects
on the liquidity, capital resources or operations of the Company. Furthermore,
at September 30, 2000, management was not aware of any current recommendations
by the regulatory authorities which, if implemented, would have such an effect.
The Bank exceeded all of its capital requirements at September 30, 2000. The
Bank had the following capital ratios at September 30, 2000:
<TABLE>
<CAPTION>
For Capital Categorized as
Actual Adequacy Purposes "Well Capitalized"(1)
------------------------ ----------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 2000:
Total Capital
(to risk weighted assets) $ 10,182 30.5% $ 2,671 8.0% $ 3,339 10.0%
Tier I Capital
(to risk weighted assets) $ 9,825 29.4% $ 1,336 4.0% $ 2,004 6.0%
Tier I Capital
(to total assets) $ 9,825 18.5% $ 1,591 3.0% $ 2,625 5.0%
Tangible Capital
(to total assets) $ 9,825 18.5% $ 795 1.50% $ 2,625 5.0%
</TABLE>
(1) As categorized under the Prompt Corrective Action Provisions.
13
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Company and its subsidiaries may be a party to
various legal proceedings incident to its or their business. At
September 30, 2000, there were no legal proceedings to which the
Company or any subsidiary was a party, or to which of any of their
property was subject, which were expected by management to result in a
material loss.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) 3(i) Charter of SFB Bancorp, Inc.*
3(ii) Bylaws of SFB Bancorp, Inc. *
4 Specimen Stock Certificate *
10 Employment Agreement with Peter W. Hampton *
10.1 SFB Bancorp, Inc. 1998 Stock Option Plan * *
10.2 Security Federal Bank Restricted Stock Plan * *
27 Financial Data Schedule ( Electronic filing only)
* Incorporated by reference to the Registration Statement on Form
SB-2, File No. 333-23505.
** Incorporated by reference to the proxy statement for the annual
meeting of stockholders on June 1, 1998, and filed with the SEC
on April 17, 1998 (File No. 0-22587).
(b) Reports on Form 8-K
None.
14
<PAGE>
SIGNATURES
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.
SFB Bancorp, Inc.
Date: November 13, 2000 By /s/ Peter W. Hampton
---------------------------------------
Peter W. Hampton
(President and Chief Executive Officer)
Date: November 13, 2000 By /s/ Bobby Hyatt
---------------------------------------
Bobby Hyatt
(Finance Officer)
