<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25180
CKF Bancorp, Inc.
----------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 61-1267810
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
340 West Main Street, Danville, Kentucky 40422
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (606) 236-4181
--------------
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 ninety days.
Yes X No
------- -------
As of November 4, 1999, 854,310 shares of the registrant's common stock were
issued and outstanding.
Page 1 of 17 Pages Exhibit Index at Page N/A
---
<PAGE>
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999 (unaudited) and
December 31, 1998........................................... 3
Consolidated Statements of Income for the Three-Month Periods
Ended September 30, 1999 and 1998 (unaudited) and the
Nine-Month Periods Ended September 30, 1999 and 1998
(unaudited) ................................................ 4
Consolidated Statement of Changes in Stockholders' Equity for
the Nine-Month Period Ended September 30, 1999
(unaudited) ................................................ 5
Consolidated Statements of Cash Flows for the Nine-Month
Periods Ended September 30, 1999 and 1998 (unaudited) ...... 6
Notes to Consolidated Financial Statements .......................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ...................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................................. 16
Item 2. Changes in Securities .............................................. 16
Item 3. Defaults Upon Senior Securities .................................... 16
Item 4. Submission of Matters to a Vote of Security Holders ................ 16
Item 5. Other Information .................................................. 16
Item 6. Exhibits and Reports on Form 8-K ................................... 16
SIGNATURES
<PAGE>
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
---------------------
<TABLE>
<CAPTION>
As of As of
September 30, December 31,
1999 1998
--------------- ---------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks $ 577,530 $ 545,711
Interest bearing deposits 2,754,788 3,458,161
Investment securities:
Securities available-for-sale 500,000 634,585
Securities held-to-maturity 2,004,714 2,042,705
Loans receivable, net 63,089,189 57,911,846
Foreclosed real estate 32,923
Accrued interest receivable 478,420 431,153
Office property and equipment, net 846,071 546,203
Other assets 35,245 9,551
--------------- ---------------
Total assets $ 70,318,880 $ 65,579,915
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 52,882,703 $ 48,938,374
Advance from Federal Home Loan Bank 3,597,199 2,119,932
Advance payment by borrowers for taxes and insurance 135,465 39,737
Other liabilities 678,449 615,167
--------------- ---------------
Total liabilities 57,293,816 51,713,210
--------------- ---------------
Stockholders' equity:
Common stock, $.01 par value, 4,000,000 shares authorized;
1,000,000 shares issued 10,000 10,000
Additional paid-in capital 9,580,482 9,555,017
Retained earnings, substantially restricted 7,472,511 7,366,006
Accumulated other comprehensive income 323,539 410,294
Treasury stock, 142,690 and 85,945 shares, respectively, at cost (2,652,084) (1,683,489)
Incentive Plan, 59,600 and 62,500 shares, respectively, at cost (1,172,073) (1,221,853)
Unearned Employee Stock Ownership Plan (ESOP) shares (537,311) (569,270)
--------------- ---------------
Total shareholder's equity 13,025,064 13,866,705
--------------- ---------------
Total liabilities and shareholders' equity $ 70,318,880 $ 65,579,915
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
---------------------
<TABLE>
<CAPTION>
For the Three-Month Periods For the Nine-Month Periods
Ended September 30, Ended September 30,
------------------------------- ------------------------------
1999 1998 1999 1998
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans.................... $ 1,156,065 $ 1,085,466 $ 3,313,726 $ 3,292,118
Interest and dividends on investments 31,441 26,974 96,178 93,157
Other interest income................ 16,747 34,862 72,839 85,701
-------------- ------------- ------------- -------------
Total interest income............. 1,204,253 1,147,302 3,482,743 3,470,976
-------------- ------------- ------------- -------------
Interest expense:.......................
Interest on deposits................. 626,809 610,215 1,863,287 1,774,058
Other interest expense............... 28,900 24,608 42,534 109,168
-------------- ------------- ------------- -------------
Total interest expense............ 655,709 634,823 1,905,821 1,883,226
-------------- ------------- ------------- -------------
Net interest income..................... 548,544 512,479 1,576,922 1,587,750
Provision for loan losses............... 9,000 6,000 27,000 18,000
-------------- ------------- ------------- -------------
Net interest income after
provision for loan losses......... 539,544 506,479 1,549,922 1,569,750
-------------- ------------- ------------- -------------
Non-interest income:
Loan and other service fees.......... 22,319 20,672 63,298 59,056
Gain on sale of investment........... 137,067 137,067
Other, net ......................... 788 973 2,699 2,733
-------------- ------------- ------------- -------------
Total non-interest income......... 23,107 158,712 65,997 198,856
-------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits............ 149,784 137,879 412,051 411,095
Federal insurance premium............ 7,858 7,049 22,073 20,593
State franchise tax.................. 15,513 13,231 44,176 39,692
Occupancy expenses, net.............. 9,756 19,551 35,327 39,193
Data processing expenses............. 16,989 14,304 45,303 43,161
Legal and professional fees.......... 2,383 103,326 30,472 128,719
Loss on real estate owned............ 5,004
Other operating expenses............. 59,130 49,765 193,265 173,847
-------------- ------------- ------------- -------------
Total non-interest expense........ 261,413 345,105 782,667 861,304
-------------- ------------- ------------- -------------
Income before income tax expense........ 301,238 320,086 833,252 907,302
Provision for income taxes.............. 118,545 107,935 283,314 308,175
-------------- ------------- ------------- -------------
Net income ......................... $ 182,693 $ 212,151 $ 549,938 $ 599,127
============== ============= ============= =============
Earnings per common share............... $ .24 $ .27 $ .72 $ .76
============== ============= ============= =============
Earnings per common share
assuming dilution.................... $ .24 $ .26 $ .71 $ .74
============== ============= ============= =============
Weighted average common shares
outstanding during the quarter....... 759,276 784,380 768,340 785,710
============== ============= ============= =============
Weighted average common shares
after dilutive effect outstanding
during the quarter................... 767,155 803,133 776,219 807,750
============== ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for the nine month period ended September 30, 1999
(unaudited)
---------------------
<TABLE>
<CAPTION>
Accumulated
Additional Other Unearned
Common Paid-in Retained Comprehensive Treasury Incentive ESOP
Stock Capital Earnings Income Stock Plan Shares
----------- ----------- ----------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $ 10,000 $9,555,017 $ 7,366,006 $ 410,294 $(1,683,489) $(1,221,853) $ (569,270)
Comprehensive income:
Net income 549,938
Other comprehensive loss,
net of tax unrealized
losses on securities (86,755)
Total comprehensive income
Dividend declared (443,433)
ESOP shares earned 35,965 31,959
Purchase of common stock,
56,745 shares (968,595)
Stock issued upon exercise of
options (10,500) 42,000
Stock issued as compensation 7,780
----------- ----------- ----------- ------------- ----------- ----------- -----------
Balance, September 30, 1999 $ 10,000 $ 9,580,482 $ 7,472,511 $ 323,539 $(2,652,084) $(1,172,073) $ (537,311)
=========== =========== =========== ============= =========== =========== ===========
<CAPTION>
Total
Stockholders'
Equity
-------------
<S> <C>
Balance, December 31, 1998 $ 13,866,705
-------------
Comprehensive income:
Net income 549,938
Other comprehensive loss,
net of tax unrealized
losses on securities (86,755)
-------------
Total comprehensive income 463,183
Dividend declared (443,433)
ESOP shares earned 67,924
Purchase of common stock,
56,745 shares (968,595)
Stock issued upon exercise of
options 31,500
Stock issued as compensation 7,780
-------------
Balance, September 30, 1999 $13,025,064
=============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
---------------------
<TABLE>
<CAPTION>
For the Nine-Month Periods
Ended September 30
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 549,938 $ 599,127
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 27,000 18,000
Loss on real estate owned 5,004
Amortization of loan fees (16,427) (10,153)
ESOP benefit expense 59,033 74,231
Realized gain on sale of investment (137,067)
Provision for depreciation 23,589 20,610
FHLB stock dividend (29,700) (28,400)
Amortization of investment premium 2,069 2,668
Stock issued for compensation 7,780
Change in:
Interest receivable (47,267) (39,052)
Other liabilities and federal income taxes payable 95,717 (5,577)
Prepaid expense (25,694) (18,853)
Interest payable 15,395 (6,765)
------------- -------------
Net cash provided by operating activities 661,433 473,773
------------- -------------
Cash flows from investing activities:
Loan originations and principal payment on loans, net (5,220,840) (501,171)
Purchase of land and office equipment (323,457) (28,733)
Proceeds from sale of real estate owned 33,627
Purchase of held-to-maturity securities (500,000) (500,000)
Matured held-to-maturity securities 500,000 500,000
Proceeds from sale of securities available-for-sale 140,203
Principle repayment on mortgage-backed securities 65,621 122,545
------------- -------------
Net cash (used) by investing activities (5,478,676) (233,529)
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
CKF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(Unaudited)
-------------------
<TABLE>
<CAPTION>
For the Nine-Month Periods
Ended September 30
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW
accounts and savings accounts 1,136,710 1,142,095
Net increase (decrease) in certificates of deposit 2,807,620 3,076,395
Net increase (decrease) in custodial accounts 95,728 98,724
Proceeds from FHLB advances 3,500,000
Payments on FHLB advances (2,022,733) (4,051,766)
Dividends paid (443,433) (411,744)
Purchase of common stock (968,595) (665,076)
Additional principal payment on ESOP loan 8,892 19,211
Proceeds from exercise of stock options 31,500 136,500
------------- -------------
Net cash (used) by financing activities 4,145,689 (655,661)
------------- -------------
Increase (decrease) in cash and cash equivalents (671,554) (415,417)
Cash and cash equivalents, beginning of period 4,003,872 3,273,557
------------- -------------
Cash and cash equivalents, end of period $ 3,332,318 $ 2,858,140
============= =============
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 185,000 $ 327,219
============= =============
Cash paid for interest $ 1,867,831 $ 1,889,991
============= =============
Mortgage loans originated to finance sale
of foreclosed real estate $ 70,625 $ 15,000
============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
7
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
CKF Bancorp, Inc. (the "Company") was formed in August 1994 at the
direction of Central Kentucky Federal Savings Bank (the "Bank") to
become the holding company of the Bank upon the conversion of the Bank
from mutual to stock form (the "Conversion"). Since the Conversion,
the Company's primary assets have been the outstanding capital stock
of the Bank, cash on deposit with the Bank, and a note receivable from
the Company's Employee Stock Ownership Plan ("ESOP"), and its sole
business is that of the Bank. Accordingly, the consolidated financial
statements and discussions herein include both the Company and the
Bank. On December 29, 1994, the Bank converted from mutual to stock
form as a wholly owned subsidiary of the Company. In conjunction with
the Conversion, the Company issued 1,000,000 shares of its common
stock to the public.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) necessary
for fair presentation have been included. The results of operations
and other data for the nine month period ended September 30, 1999 are
not necessarily indicative of results that may be expected for the
entire fiscal year ending December 31, 1999.
2. Regulatory Capital
At September 30, 1999, the Bank's regulatory capital levels exceeded
each of the two regulatory capital requirements. The following table
reconciles the Bank's stockholder equity at September 30, 1999 to its
regulatory capital requirements.
<TABLE>
<CAPTION>
Regulatory Capital
------------------------------
Core Risk-Based
Capital Capital
------------- -------------
(In thousands)
<S> <C> <C>
Stockholder equity $ 12,097 $ 12,097
Net unrealized appreciation on investment
securities available-for-sale (324) (324)
General allowance for loan losses - 152
------------- -------------
Regulatory capital 11,773 11,925
Minimum capital requirement 2,793 3,368
------------- -------------
Excess regulatory capital $ 8,980 $ 8,557
============= =============
Minimum capital requirement as a percentage
of assets 4.0% 8.0%
Regulatory capital in excess of minimum
capital requirements as a percentage
of assets 12.9% 20.3%/1/
</TABLE>
- ----------------------------------
/1/Based on risk weighted assets.
8
<PAGE>
3. Dividends
For the nine months ended September 30, 1999, the Company paid the
regular semi-annual dividends to stockholders of record on January 28,
1999 and July 28, totaling $.27 and $.30 per share, respectively. The
total dividends paid by the Company for the nine month period ended
September 30, 1999 amounted to $443,433.
4. Common Stock
During the nine months ended September 30, 1999, options to acquire
2,400 shares at $13.125 per share were exercised with the Company
receiving total proceeds of $31,500. In addition, the Company
purchased 56,745 shares of treasury stock at a cost of $968,595 during
the nine months ended September 30, 1999.
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
Total assets increased approximately $4.7 million, or 7.2%, from $65.6 million
at December 31, 1998 to $70.3 million at September 30, 1999. The net increase in
assets includes a $5.2 million, or 8.9%, increase in net loans receivable, and a
$373,000, or 37.8%, increase in other assets offset by a $173,000, or 6.5%,
decrease in investment securities and a $672,000 or 16.8% decrease in cash and
interest bearing deposits.
The Company's aggregate investment securities portfolio decreased $173,000, or
6.5% to $2.5 million at September 30, 1999. Securities classified as
available-for-sale and recorded at market value per SFAS No. 115 decreased
$135,000 due solely to the decrease in the market value of such securities.
Securities held-to-maturity decreased $38,000 due to principle repayments offset
by stock dividends and premium amortization.
Under SFAS No. 115, unrealized gains or losses on securities available-for-sale
are recorded net of deferred income tax as a separate component of stockholders'
equity. At September 30, 1999, the Company included net unrealized gains of
approximately $324,000 in stockholders' equity. At December 31, 1998, the
Company included net unrealized gains of approximately $410,000 in stockholders'
equity. Per SFAS No. 115, such gains or losses will not be reflected as a charge
or credit to earnings until the underlying securities are sold, and then only to
the extent of the amount of gain or loss, if any, actually realized at the time
of sale.
Loans receivable increased by $5.2 million, or 8.9%, from $57.9 million at
December 31, 1998 to $63.1 million at September 30, 1999 as management continued
its efforts to be competitive in meeting the loan demand in the Bank's market
area.
Deposits increased by $3.9 million, or 8.1%, to $52.9 million at September 30,
1999. This increase reflects the Company's competitively priced product line
within the local market area.
9
<PAGE>
Results of Operations for the Three Months Ended September 30, 1999 and 1998
Net Income
Net income for the three months ended September 30, 1999 was $183,000 compared
to $212,000 for the corresponding period in 1998, a decrease of $29,000, or
13.9%. The decrease resulted from a decrease in non-interest income of $136,000,
an increase of $3,000 in the provision for loan losses and an increase of
$10,000 in income tax expense offset by a decrease of $84,000 in non-interest
expense and an increase of $36,000 in net interest income.
Interest Income
Interest income totaled 7.2% of average assets for the quarter ended September
30, 1999 compared to 7.5% for the quarter ended September 30, 1998. Interest
income was $1.2 million for the quarter ended September 30, 1999 as compared to
$1.1 million for the same period in 1998. Interest income remained comparable as
the effect of the increase of $5.4 million in the average earning assets was
offset by the impact of the decrease of 26 basis points in the effective rate
earned on interest bearing assets.
Interest Expense
Interest expense totaled $656,000 and $635,000 for the nine months ended
September 30, 1999 and 1998, respectively. Interest expense remained comparable
as the effect of the increase of $5.9 million in the average interest bearing
liabilities was offset by the impact of the decrease of 42 basis points in the
effective rate paid on deposits and FHLB advances.
Provision for Loan Losses
The Bank established a provision for loan losses of $9,000 and $6,000 for the
three month periods ended September 30, 1999 and 1998. Management established
the Bank's existing level of its allowance for loan losses based upon its
analysis of various factors, including the market value of the underlying
collateral, composition of the loan portfolio, the Bank's historical loss
experience, delinquency trends, and prevailing and projected economic conditions
in the Bank's market area.
Non-Interest Income
Non-interest income amounted to $23,000 and $159,000 for the three months ended
September 30, 1999 and 1998, respectively. The decrease was due primarily to a
$137,000 gain resulting from the sale of investments classified as
available-for-sale in the 1998 period.
Non-Interest Expense
Non-interest expense totaled $261,000 and $345,000 for the three months ended
September 30, 1999 and 1998, respectively, a decrease of $84,000, or 24.3%, and
such expense amounted to 1.5% and 2.0% of average assets. The decrease was
primarily due to a decrease of $101,000 in legal and professional fees offset by
a $12,000 increase in compensation and benefits and immaterial increases
totaling $5,000 in various other non-interest expense categories. The decrease
of $101,000 in legal and professional fees were attributed to professional
services provided in connection with the Bank's exploration of strategic capital
employment during the third quarter of 1998. The $12,000 increase in
compensation and benefits was primarily due to a stock compensation bonus
awarded to an employee.
10
<PAGE>
Income Taxes
The provision for income taxes for the three months ended September 30, 1999 and
1998 was $118,000 and $108,000, respectively, which, as a percentage of income
before income taxes was 34% for both periods.
Results of Operations for the Nine Months Ended September 30, 1999 and 1998
Net Income
Net income for the nine months ended September 30, 1999 was $550,000, as
compared to $599,000 for the corresponding period in 1998, a decrease of
$49,000, or 8.2%. The decrease resulted primarily from a decrease of $133,000 in
non-interest income, a decrease of $11,000 in net interest income, and an
increase of $9,000 in the provision for loan losses offset by a $79,000 decrease
in non-interest expense and a $25,000 decrease in income tax expense.
Interest Income
Interest income totaled $3.5 million for the nine months ended September 30,
1999, which was $12,000 more than the comparable period in 1998. The increase in
interest income of $12,000, or .3%, for the nine months ended September 30, 1999
as compared to the same period for 1998 was due primarily to an increase of $4.4
million in the average balance of interest earning assets offset by a decrease
of 48 basis points in the effective rate earned on interest bearing assets.
Interest Expense
Interest expense totaled $1.9 million for the nine months ended September 30,
1999 and 1998. Interest expense remained comparable as the effect of the
increase of $4.4 million in the average interest bearing liabilities was offset
by the impact of the decrease of 38 basis points in the effective rate on
deposits and FHLB advances.
Provision for Loan Losses
The Bank established a provision for loan losses of $27,000 and $18,000 for the
nine month period ended September 30, 1999 and 1998, respectively. Management
considers many factors in determining the necessary level of the allowance for
loan losses, including an analysis of specific loans in the portfolio, estimated
value of the underlying collateral, assessment of general trends in the real
estate market, delinquency trends, prospective economic and regulatory
conditions, inherent loss in the loan portfolio, and the relationship of the
allowance for loan losses to outstanding loans.
Non-Interest Income
Non-interest income amounted to $66,000 and $199,000 for the nine months ended
September 30, 1999 and 1998, respectively. The decrease was due primarily to a
$137,000 gain resulting from the sale of investments classified as
available-for-sale in the 1998 period.
11
<PAGE>
Non-Interest Expense
Non-interest expense totaled $782,000 and $861,000 for the nine months ended
September 30, 1999 and 1998, respectively, a decrease of $79,000, or 9.1%, and
such expense amounted to 1.5% and 1.8% of average assets for the nine months
ended September 30, 1999 and 1998, respectively. The decrease was primarily due
to a decrease of $98,000 in legal and professional fees offset by an increase of
$19,000 in other operating expenses. The decrease of $98,000 in legal and
professional fees were attributed to professional services provided in
connection with the Bank's exploration of strategic capital employment in the
third quarter of 1998. The increase of $19,000 in other operating expenses was
primarily due to increases in ATM related expenses and increases in office
supplies.
Income Taxes
The provision for income taxes for the nine months ended September 30, 1999 and
1998 was $283,000 and $308,000, respectively, and, as a percentage of income
before income taxes was 34% for both periods.
Year 2000 Readiness Disclosure
The Company's operations, like those of most financial institutions, are
substantially dependent upon computer systems for lending and deposit
activities. The Company is addressing the potential problems associated with the
possibility that the computers which control its data processing activities,
facilities, and networks may not be programmed to read four-digit dates, and
upon the arrival of the year 2000, may recognize the two-digit code "00" as the
year 1900 rather than 2000. If uncorrected, this could cause systems to fail to
function or generate erroneous information.
The following information is provided in accordance with the Year 2000
Information and Readiness Disclosure Act of 1998, a special law, which
encourages companies, like CKF Bancorp, Inc., to communicate information about
their Year 2000 readiness plan.
The Bank is heavily dependent upon one major data processing service provider.
Intrieve, Inc. provides customer account records, check clearing, general
ledger, and ATM services to the Bank. The majority of systems provided by
Intrieve, Inc. were certified Y2K ready by the end of 1998. Intrieve, Inc. has
completed migration of all core systems to a new Y2K ready mainframe computer.
Proxy testing was completed in October 1998 and end-to-end testing was completed
in November 1998. However, the Bank replaced its on-line teller system with a
Y2K compliant network in April of 1999. This equipment was tested and certified
in May of 1999. Similarly, the ATM network was upgraded in September of 1998 and
could not be tested in conjunction with other systems at that time. Intrieve
decided to conduct end-to-end testing for ATM systems on a proxy basis, due to
complexity of coordinating with the various regional and national networks. One
machine of each manufacturer and type was selected for testing. The testing was
completed in February 1999, and the test results were verified as compliant.
Data communications to both the ATM and the teller network was switched from a
satellite to a frame relay system on June 21, 1999. Y2K testing for this network
was successfully completed on September 12, 1999 to insure connectivity.
The Company has spent approximately $83,000 for Y2K compliance efforts through
September 30, 1999. It does not expect to spend any significant amounts during
the remainder of 1999. Expenditures to date have been $48,000 for hardware
changes, $30,000 for software upgrades, and an additional $5,000 for labor. All
of these funds will come from budgeted operational and capital expenditure
accounts.
12
<PAGE>
The most critical element of the Bank's Year 2000 preparation is the performance
of Intrieve, Inc. Should Intrieve not meet deadlines or fail to successfully
modify its systems, the Bank would face the prospect of having to revert to
manual posting and processing of customer accounts. Based on the number of
accounts and activity volume, it is possible to continue operations for a
reasonable period of time.
On June 1, 1999, the Bank issued a updated Year 2000 contingency plan. Each core
business was evaluated and prioritized for Year 2000 impact. Those systems
identified as mission critical have a business recovery/contingency plan. The
majority of these systems can be dealt with in a manner that will result in
minimal impact to the customers or financial condition of the Bank. However, if
Intrieve, Inc. should fail to function properly after the century change date, a
significant impact on customers, and operations would occur. Therefore, an
extensive set of plans have been prepared to continue operations as close to
normal as possible. Some of the key contingency items are: maintaining
machine-readable copies of master files, printed and microfiche copies of
records/trial balances, off-site storage of back-up records and computer
hardware redundancy. If mainframe processing is unavailable to the Bank, a plan
for manual posting and processing is in place. With electronic records as of
December 29, 1999, downloaded via diskettes to a stand alone PC at the Bank and
FTP update transfers made on the night of December 31, 1999, processing will
continue through a spreadsheet (Excel) application. It is expected that this
manual process will be adequate to maintain operations during the most likely
worst case scenario.
The foregoing discussion, regarding the timing , effectiveness, implementation,
and cost of the Company's Year 2000 efforts, contains forward-looking
statements, which are based on management's best estimates derived using
assumptions. These forward-looking statements involve inherent risks and
uncertainties, and actual results could differ materially from those
contemplated. Also, please note that the Company will periodically update and
revise this Year 2000 Readiness Disclosure as conditions warrant.
13
<PAGE>
Non-performing Assets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
(amounts in thousands)
<S> <C> <C>
Loans accounted for on a non-accrual basis:/1/
Real Estate:
Residential $ 140 $ 27
Commercial
Consumer 38
------------- -------------
Total $ 140 $ 65
============= =============
Accruing loans which are contractually past due 90 days or more:
Real Estate:
Residential 405 356
Commercial
Consumer
------------- -------------
Total 405 356
============= =============
Total of loans accounted for as non-accrual or as accruing past
due 90 days or more $ 545 $ 421
============= =============
Percentage of total loans .86% .73%
============= =============
Other non-performing assets/2/ $ 33 $ -
============= =============
Restructured loans $ - $ -
============= =============
</TABLE>
/1/Non-accrual status denotes any mortgage loan past due 90 days and whose loan
balance, plus accrued interest exceeds 90% of the estimated loan collateral
value, and any consumer or commercial loan more than 90 days past due. Payments
received on a non-accrual loan are either applied to the outstanding principal
balance or recorded as interest income, or both, depending on assessment of the
collectibility of the loan.
/2/Other non-performing assets represent property acquired by the Bank through
foreclosure or repossession. Such property is carried at the lower of its fair
market value or the principal balance of the related loan.
During the nine months ended September 30, 1999, additional interest income of
$5,500 would have been recorded on loans accounted for on a non-accrual basis if
the loans had been current throughout the year. Interest on such loans actually
included in income during the nine months ended September 30, 1999 totaled
$3,643.
At September 30, 1999, there were no loans identified by management, which were
not reflected in the preceding table, but as to which known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of the borrowers to comply with present loan repayment terms.
Liquidity and Capital Resources
The Bank's principal sources of funds for operations are deposits from its
primary market area, principal and interest payments on loans, and proceeds from
maturing investment securities. The principal uses of funds by the Bank include
the origination of mortgage and consumer loans and the purchase of investment
securities.
14
<PAGE>
The Bank is required by current OTS regulations to maintain specified liquid
assets of at least 4% of its net withdrawable accounts plus short-term
borrowings. Short-term liquid assets (those maturing in one year or less) may
not be less than 1% of the Bank's liquidity base. During the first nine months
of fiscal year 1999, the Bank satisfied all regulatory liquidity requirements,
and management believes that the liquidity levels maintained are adequate to
meet potential deposit outflows, loan demand, and normal operations.
The Bank must satisfy two capital standards, as set by the OTS. These standards
include a ratio of core capital to adjusted total assets of 4.0%, and a
combination of core and "supplementary" capital equal to 8.0% of risk-weighted
assets. The Bank has exceeded all regulatory capital requirements as of
September 30, 1999.
At September 30, 1999, the Bank had outstanding commitments to originate loans
totaling $688,000, excluding $1.1 million in approved but unused home equity
lines of credit. Management believes that the Bank's sources of funds are
sufficient to fund all of its outstanding commitments. Certificates of deposits
which are scheduled to mature in one year or less from September 30, 1999
totaled $25.8 million. Management believes that a significant percentage of such
deposits will remain with the Bank.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds 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) The following Exhibit is filed herewith:
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CKF Bancorp, Inc.
Date: November 4, 1999 /s/ John H. Stigall
-----------------------------------
John H. Stigall, President and Chief Executive Officer
(Duly Authorized Officer)
Date: November 4, 1999 /s/ Ann L. Hooks
-----------------------------------
Ann L. Hooks, Vice President and Treasurer
(Principal Financial and Accounting Officer)
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 578
<INT-BEARING-DEPOSITS> 2,755
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 500
<INVESTMENTS-CARRYING> 2,005
<INVESTMENTS-MARKET> 1,994
<LOANS> 63,241
<ALLOWANCE> 152
<TOTAL-ASSETS> 70,319
<DEPOSITS> 52,883
<SHORT-TERM> 3,500
<LIABILITIES-OTHER> 814
<LONG-TERM> 97
0
0
<COMMON> 10
<OTHER-SE> 13,015
<TOTAL-LIABILITIES-AND-EQUITY> 70,319
<INTEREST-LOAN> 3,314
<INTEREST-INVEST> 96
<INTEREST-OTHER> 73
<INTEREST-TOTAL> 3,483
<INTEREST-DEPOSIT> 1,863
<INTEREST-EXPENSE> 1,906
<INTEREST-INCOME-NET> 1,577
<LOAN-LOSSES> 27
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 783
<INCOME-PRETAX> 833
<INCOME-PRE-EXTRAORDINARY> 833
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 550
<EPS-BASIC> 0.72
<EPS-DILUTED> 0.71
<YIELD-ACTUAL> 3.1
<LOANS-NON> 140
<LOANS-PAST> 405
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 148
<CHARGE-OFFS> 23
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 152
<ALLOWANCE-DOMESTIC> 152
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
