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 June 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 (I.R.S. Employer Identification Number)
incorporation or organization)
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 July 28, 2000, there were 597,595 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 June 30, 2000.......................................3
Consolidated Statements of Income - (Unaudited) for the three and six month
periods ended June 30, 1999 and 2000....................................................................................4
Consolidated Statements of Stockholders' Equity - (Unaudited)...........................................................5
Consolidated Statements of Cash Flows - (Unaudited) for the six months
ended June 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..............................................................................15
Signatures.............................................................................................................16
</TABLE>
2
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31, June 30,
Assets 1999 2000
------ --------------------- --------------------
<S> <C> <C>
Cash on hand $ 1,424 $ 598
Interest earning deposits 738 362
Investment securities:
Held to maturity (market value of $911
in 1999 and $889 in 2000) 1,017 960
Available for sale (amortized cost of $2,124
in 1999 and $2,125 in 2000) 2,091 2,096
Loans receivable, net 43,789 45,443
Mortgage-backed securities:
Available for sale (amortized cost of $2,225 in
1999 and $1,894 in 2000) 2,183 1,813
Premises and equipment, net 1,011 985
Federal Home Loan Bank stock 487 504
Accrued interest receivable 280 308
Prepaid expenses and other assets 109 84
--------------- ---------------
<S> <C> <C>
Total assets $ 53,129 $ 53,153
=============== ================
Liabilities and Stockholders' Equity
------------------------------------
Deposits $ 40,435 $ 40,663
Federal Home Loan Bank advances 500 600
Advance payments by borrowers for taxes and insurance 220 474
Accrued expenses and other liabilities 157 175
Income taxes payable:
Current - 47
Deferred 101 87
--------------- ---------------
Total liabilities 41,413 42,046
--------------- ---------------
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 602,995 outstanding at 77 77
December 31, 1999 and June 30, 2000, respectively)
Paid-in capital 7,382 7,386
Retained earnings, substantially restricted 6,165 6,366
Treasury stock at cost (87,583 and 164,005 shares at December 31,
1999 and June 30, 2000, respectively) (1,208) (2,085)
Accumulated other comprehensive income (45) (66)
Unearned compensation:
Employee stock ownership plan (419) (383)
Restricted stock plan (236) (188)
--------------- ----------------
Total stockholders' equity 11,716 11,107
--------------- ----------------
Total liabilities and stockholders' equity $ 53,129 $ 53,153
================ =================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
For Three For Six
Months Ended Months Ended
June 30, June 30,
--------------- ---------------
1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 823 $ 899 $1,643 $1,780
Mortgage-backed securities 38 25 81 56
Investments 54 50 109 99
Interest earning deposits 39 8 76 12
------ ------ ------ ------
Total interest income 954 982 1,909 1,947
------ ------ ------ ------
Interest expense:
Deposits 452 488 918 944
FHLB Advances - 8 - 15
------ ------ ------ ------
Total interest expense 452 496 918 959
------ ------ ------ ------
Net interest income 502 486 991 988
Provision for loan losses 9 9 18 18
------ ------ ------ ------
Net interest income after provision
for loan losses 493 477 973 970
Non-interest income:
Loan fees and service charges 43 43 85 94
Other 2 3 5 6
------ ------ ------ ------
Total non-interest income 45 46 90 100
------ ------ ------ ------
Non-interest expenses:
Compensation 157 157 297 336
Employee benefits 31 29 63 64
Net occupancy expense 21 33 44 65
Deposit insurance premiums 6 2 12 4
Data processing 21 28 46 60
Other 73 66 144 134
------ ------ ------ ------
Total non-interest expenses 309 315 606 663
------ ------ ------ ------
Income before income taxes 229 208 457 407
Income tax expense 86 77 172 150
------ ------ ------ ------
Net income $ 143 $ 131 $ 285 $ 257
====== ====== ====== ======
Earnings per share
Basic $ .22 $ .23 $ .44 $ .43
Diluted $ .22 $ .23 $ .44 $ .43
</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 ($.20 share) - - (126) - - - - (126)
Treasury stock purchased
(14,733 shares) - - - (174) - - - (174)
Compensation earned - 14 - - - 72 122 208
------- ------ ------- ------- --------- --------- --------- -------
Balance at December 31, 1999 77 7,382 6,165 (1,208) (45) (419) (236) 11,716
Comprehensive income:
Net income - - 257 - - - - 257
Unrealized losses on securities
available for sale,
net of income tax expense - - - - (21) - - (21)
Cash dividends declared ($.10 share) (56) (56)
Treasury stock purchased
(76,422 shares) - - - (877) - - - (877)
Compensation earned - 4 - - - 36 48 88
------- ------ ------- ------- --------- --------- --------- -------
Balance at June 30, 2000 $ 77 $7,386 $ 6,366 $(2,085) $ (66) $ (383) $ (188) $11,107
======= ====== ======= ======= ========= ========= ========= =======
</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>
Six Months Ended
June 30,
-------------------
1999 2000
------- -------
<S> <C> <C>
Operating activities:
Net income $ 285 $ 257
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 33 47
Provision for loan losses 18 18
Decrease in reserve for uncollected interest (1) -
Net increase (decrease) in deferred loan fees (35) 4
Accretion of discounts on investment securities, net (13) (13)
Amortization of premiums on mortgage-backed securities 5 5
Amortization of unearned compensation 101 88
FHLB stock dividends (16) (17)
(Increase) decrease in other assets (61) 25
(Increase) decrease in accrued interest receivable 2 (28)
Increase in accrued expenses and other liabilities - 18
Increase in current income taxes - 47
------- -------
Net cash provided by operating activities 318 451
------- -------
Investing activities:
Purchase of investment securities held to maturity - -
Maturities of investment securities held to maturity 66 69
Purchase of investment securities available for sale (1,298) -
Maturities of investment securities available for sale 1,500 -
Principal payments on mortgage-backed securities
available for sale 775 326
Net increase in loans (316) (1,676)
Purchase of premises and equipment (123) (21)
------- -------
Net cash provided (used) by investing activities 604 (1,302)
------- -------
Financing activities:
Net increase (decrease) in deposits (291) 228
Increase in advance payments by borrowers for taxes
and insurance 256 254
Federal Home Loan Bank Advances - 100
Treasury stock purchased (54) (877)
Payment of cash dividend (64) (56)
------- -------
Net cash used by financing activities (153) (351)
------- -------
Increase (decrease) in cash and cash equivalents 769 (1,202)
Cash and cash equivalents at beginning of period 2,839 2,162
------- -------
Cash and cash equivalents at end of period $ 3,608 $ 960
======= =======
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 916 $ 954
Income taxes 206 29
======= =======
Noncash transactions:
Unrealized gains (losses) on securities and mortgage-backed
securities available for sale, net of deferred taxes $ (8) $ (21)
</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)
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 six month
periods ending June 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
six months ending June 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,
-------------------------------------------------------
June 30, 1999 June 30, 2000
--------------------------- ---------------------------
Income Shares Income Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $143 $131
BASIC EPS
Income available to common stockholders $143 645 $131 578
Per share amount $.22 $.23
Effect of Dilutive Securities $.00 $.00
DILUTIVE EPS
Income available to common stockholders $143 645 $131 578
Per share amount $.22 $.23
</TABLE>
<TABLE>
<CAPTION>
Six months ended,
-------------------------------------------------------
June 30, 1999 June 30, 2000
--------------------------- ---------------------------
Income Shares Income Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $285 $257
BASIC EPS
Income available to common stockholders $285 645 $257 594
Per share amount $.44 $.43
Effect of Dilutive Securities $.00 $.00
DILUTIVE EPS
Income available to common stockholders $285 645 $257 594
Per share amount $.44 $.43
</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 June 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, June 30,
1999 2000
---- ----
(Dollars in Thousands)
Nonaccrual loans $ 217 $ 276
Repossessed real estate - -
---- ----
Total nonperforming assets $ 217 $ 276
==== ====
Nonperforming loans to net loans 0.50% 0.61%
Nonperforming assets to total assets 0.41% 0.52%
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 Six Months Ending June 30,
1999 and 2000
Net Income. Net income for the three months ending June 30, 2000, decreased
$12,000, or 8.4%, from $143,000 in 1999, to $131,000 in 2000. Net income
decreased $28,000, or 9.8%, to $257,000 for the six months ending June 30, 2000,
from $285,000 in 1999. The decrease for the three month period ended June 30,
2000, compared to 1999, was principally due to a decrease in net interest
income, offset by lower income tax expense. The decrease for the six months
ending June 30, 2000, compared to 1999, was primarily the result of an increase
in non-interest expenses, offset by lower income tax expense. Dilutive income
per share increased $.01, from $.22 for the three month ended June 30, 1999, to
$.23 for the three months ended June 30, 2000. Dilutive income per share
decreased $.01, from $.44 for the six months ended June 30, 1999, to $.43 for
the six months ended June 30, 2000.
Net Interest Income. Net interest income decreased $16,000, from $502,000 for
the three months ending June 30, 1999, to $486,000 for the three months ending
June 30, 2000. Net interest income decreased $3,000, from $991,000 for the six
months ending June 30, 1999, to $988,000 for the six months ending June 30,
2000. The decrease in net interest income for the three month period in 2000,
primarily reflects a net decrease in average interest-earning assets over
average interest-bearing liabilities of approximately $347,000, as compared to
the same period in 1999. Furthermore, the interest rate spread decreased 19
basis points to 2.87% for the three months ending June 30, 2000, compared to
1999, while the net interest margin decreased 14 basis points to 3.81%. The
overall decrease in net interest income for the six months ending June 30, 2000,
9
<PAGE>
primarily reflects a 7 basis point decrease in net interest spread, offset by a
net increase in average interest-earning assets over average interest-bearing
liabilities of approximately $218,000, as compared to the same period in 1999.
The net interest margin increased to 3.90% for the six months ending June 30,
2000, compared to 1999.
Interest Income. Interest income increased $28,000, from $954,000 for the three
months ending June 30, 1999, to $982,000 for the three months ending June 30,
2000. The increase was attributable to a increase in average interest-earning
assets of approximately $149,000, from $50.9 million at June 30, 1999, to $51.0
million at June 30, 2000, and a increase in the average yield on
interest-earning assets of 20 basis points, from 7.50% for the three months
ending June 30, 1999, to 7.70% for the same period in 2000. Interest income
increased $38,000, or 2.0%, to approximately $1.9 million for the six months
ending June 30, 2000, as compared to the same period in 1999. The increase was
primarily attributable to a increase in the average yield on interest-earning
assets of 20 basis points, from 7.49% for the six months ending June 30, 1999,
to 7.69% for the same period in 2000, offset by a decrease in average
interest-earning assets of approximately $290,000, from $50.9 million at June
30, 1999, to $50.7 million at June 30, 2000.
Interest on loans increased $76,000 for the three months ending June 30, 2000,
as compared to the same period in 1999, and $137,000 for the six months ending
June 30, 2000, as compared to the same period in 1999. The increase in interest
on loans for the three months ending June 30, 2000, primarily reflects an
increase of approximately $4.6 million in the average loans outstanding balance
for 2000, compared to 1999, offset by a 14 basis point decrease in the average
yield on loans from 8.11% in 1999, to 7.97% in 2000. The increase in interest on
loans for the six months ending June 30, 2000, primarily reflects an increase of
approximately $4.3 million in the average loans outstanding balance for 2000,
compared to 1999, offset by a 17 basis point decrease in the average yield on
loans from 8.13% in 1999, to 7.96% in 2000.
Interest on investment securities decreased $4,000 for the three months ending
June 30, 2000, as compared to the same period in 1999, and $10,000 for the six
months ending June 30, 2000, as compared to the same period in 1999. The
decrease in interest on investments for the three months ending June 30, 2000,
primarily reflects a decrease of approximately $330,000 in the average
investment balance for 2000, compared to 1999, and a 14 basis point decrease in
the average yield on investments from 5.42% in 1999, to 5.28% in 2000. The
decrease in interest on investments for the six months ending June 30, 2000,
primarily reflects a decrease of approximately $461,000 in the average
investment balance for 2000, compared to 1999. The average yield on investments
was 5.28% in 2000, compared 5.29% in 1999.
Interest on interest-earning deposits decreased $31,000 for the three months
ending June 30, 2000, as compared to the same period in 1999, and $64,000 for
the six months ending June 30, 2000, as compared to the same period in 1999. The
decrease in interest on interest-earning deposits for the three months ending
June 30, 2000, primarily reflects a decrease in the average balance of
interest-earning deposits of $3.1 million for 2000, compared to 1999. The
decrease in interest on interest-earning deposits for the six months ending June
30, 2000, primarily reflects a decrease in the average balance of
interest-earning deposits of $3.1 million for 2000, compared to 1999.
10
<PAGE>
Interest on mortgage-backed securities decreased $13,000 for the three months
ending June 30, 2000, as compared to the same period in 1999, and $25,000 for
the six months ending June 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 $3.1 million decrease in average interest-earning deposits for both the
three and six 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 $44,000 from $452,000 for the three
months ending June 30, 1999, to $496,000 for the three months ending June 30,
2000. Interest expense increased $41,000 from $918,000 for the six months ending
June 30, 1999, to $959,000 for the six months ending June 30, 2000. The increase
for the three months ending June 30, 2000, was primarily the result of a 39
basis point increase in the average cost of funds and an increase in the average
interest-bearing liabilities of approximately $496,000, compared to 1999. The
increase for the six months ending June 30, 2000, was primarily the result of a
26 basis point increase in the average cost of funds, offset by an approximate
$508,000 decrease in the average balance of interest-bearing liabilities for the
six months ending June 30, 2000, compared to 1999.
Provision for Loan Losses. The provision for loan losses was $9,000 three month
period ending June 30, 1999 and 2000, respectively. The provision for loan
losses was $18,000 for the six month period ending June 30, 1999 and 2000,
respectively. The Company's management routinely performs an analysis to
quantify the inherent risk of loss in its portfolio. At June 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 June 30, 2000, was 134%, and nonperforming assets
represented 0.52% of total consolidated assets. Nonperforming assets were
$276,000 at June 30, 2000, compared to $385,000 at June 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. However, there 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 products and services. Total non-interest income
amounted to $46,000 and $100,000 for the three and six months ending June 30,
2000, respectively, and $45,000 and $90,000 for the three and six months ending
June 30, 1999, respectively.
Non-Interest Expense. Non-interest expense increased $6,000, from $309,000 for
the three months ending June 30, 1999, to $315,000 for 2000. The increase was
primarily the result of a combined $19,000 increase in net occupancy and data
processing expenses, offset by a $11,000 reduction in deposit insurance premiums
and other expenses incurred during the period. Non-interest expense increased
$57,000, from $606,000 for the six months ending June 30, 1999, to $663,000 for
2000. The increase was primarily the result of increased compensation expense of
$39,000, a combined $35,000 increase in net occupancy and data processing
expenses, offset by a
11
<PAGE>
$18,000 reduction in deposit insurance premiums and other expenses incurred
during the period. The increase in compensation expense for the six months ended
June 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 both the three and six months ending June 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 six months ending June 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 was for both the three and six months ending June 30, 2000, compared
to 1999, mainly was attributable to expenses associated with increased
transaction volumes, data communications expenses, and the teller operating
system. The decrease in deposit insurance premiums for both the three and six
months ending June 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 June 30, 2000, was
$77,000, compared to $86,000 for the same period in 1999. Income tax expense for
the six months ending June 30, 2000, was $150,000, compared to $172,000 for the
same period in 1999. The decrease for the three and six month periods was
principally the result of lower pre-tax income. The effective tax rate for both
the three and six 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 June 30, 2000 were approximately
$430,000.
At June 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 June 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 June 30, 2000. The Bank had
the following capital ratios at June 30, 2000:
12
<PAGE>
<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 June 30, 2000:
Total Capital
(To risk weighted assets) $ 10,037 30.4% $ 2,641 8.0% $ 3,301 10.0%
Tier I Capital
(To risk weighted assets) $ 9,667 29.3% $ 1,320 4.0% $ 1,981 6.0%
Tier I Capital
(To total assets) $ 9,667 18.5% $ 990 3.0% $ 1,650 5.0%
Tangible Capital
(To total assets) $ 9,667 18.5% $ 495 1.50% $ 1,650 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
June 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
---------------------------------------------------
The Annual Meeting of Stockholders of the Company ("Meeting") was held
on May 3, 2000. The results of the vote on the matters presented at
the Meeting were as follows:
1. The following individuals were elected as directors, each for a
three-year term:
Vote For Vote Withheld
-------- -------------
Peter W. Hampton, Jr. 516,858 9,500
Donald W. Tetrick 516,858 9,500
2. Ratification of the appointment of Crisp Hughes Evans LLP as the
Company's independent audit firm was approved by stockholders by
the following vote
For 525,358; Against -0-; Abstain 1,000
Item 5. Other Information
-----------------
None
14
<PAGE>
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.
<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.
Date: August 3, 2000 By: /s/Peter W. Hampton
------------------------------------
Peter W. Hampton
(President and Chief Executive Officer)
Date: August 3, 2000 By: /s/Bobby Hyatt
---------------------------------------
Bobby Hyatt
(Principal Accounting Officer)
16
