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, 2003
OR
|_| 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 001-16763
Allied First Bancorp, Inc.
(Exact name of small business issuer as specified in its charter)
Maryland 36-4482786
(State or other jurisdiction of (I.R.S. Employer identification
incorporation or organization) or number)
387 Shuman Boulevard, Suite 290 E, Naperville, IL 60563
(Address of principal executive offices) (Zip Code)
(630) 778-7700
(Registrant's telephone number)
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.
Yes |X| No |_|
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
Indicate the number of Shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of November 13, 2003, there were 558,350 shares of the Registrant's common
stock issued and outstanding.
Allied First Bancorp, Inc.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Condensed Financial Statements
Consolidated Balance Sheets at September 30, 2003 and
June 30, 2003 3
Consolidated Statements of Income and Comprehensive Income
for the three months ended September 30, 2003 and 2002 4
Consolidated Statements of Cash Flows for the three months
ended September 30, 2003 and 2002 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Controls and Procedures 14
PART II. OTHER INFORMATION
Items 1-6 15
Signature Page 16
10-QSB Certifications 17
2
PART I: FINANCIAL INFORMATION, Item 1.
Allied First Bancorp, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
At At
ASSETS: September 30, June 30,
2003 2003
---- ----
Cash and cash equivalents ......................................................... $ 3,374,744 $ 3,035,791
Securities available for sale ..................................................... 9,567,617 3,805,606
Time deposits with other financial institutions ................................... 2,342,696 3,137,257
Loans held for sale ............................................................... -- 734,151
Loans, net of allowance for loan losses of $640,984 at
September 30, 2003 and $592,373 at June 30, 2003 ............................ 111,284,892 87,250,293
Federal Home Loan Bank stock, at cost ............................................. 1,666,400 1,640,100
Accrued interest receivable ....................................................... 408,492 315,421
Premises and equipment-net ........................................................ 119,921 66,050
Servicing agent receivable ........................................................ 692,998 1,105,087
Other assets ...................................................................... 181,717 471,755
------------- -------------
Total Assets .......................................................... $ 129,639,477 $ 101,561,511
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Non-interest-bearing demand deposits .............................................. $ 8,381,646 $ 8,385,779
Interest-bearing demand deposits .................................................. 4,512,141 4,337,974
Savings, Now and Money Market deposits ............................................ 57,020,077 59,678,230
Other time deposits ............................................................... 18,397,402 18,841,382
------------- -------------
Total deposits .......................................................... 88,311,266 91,243,365
Borrowed funds .................................................................... 31,000,000 --
Other liabilities ................................................................. 427,246 501,753
------------- -------------
Total liabilities ....................................................... 119,738,512 91,745,118
------------- -------------
Shareholders' Equity:
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued ......... -- --
Common stock, $.01 par value, 8,000,000 shares authorized,
608,350 shares issued and 558,350 outstanding at September 30, 2003 and
June 30, 2003 ............................................................ 6,084 6,084
Additional paid-in capital ........................................................ 5,271,948 5,271,948
Retained earnings ................................................................. 5,239,352 5,162,001
Accumulated other comprehensive income, net of tax ................................ 46,081 38,860
Treasury stock, at cost 50,000 shares ............................................. (662,500) (662,500)
------------- -------------
Total shareholders' equity ........................................... 9,900,965 9,816,393
------------- -------------
Total Liabilities and Shareholders' Equity ................... $ 129,639,477 $ 101,561,511
============= =============
The accompanying notes are an integral part of these consolidated financial
statements
3
PART I: FINANCIAL INFORMATION, Item 1
Allied First Bancorp, Inc.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
September 30,
2003 2002
---- ----
Interest income:
Loans receivable ............................................ $1,231,411 $1,181,724
Interest earning deposits with other financial
institutions ................................................ 55,279 71,943
Taxable securities .......................................... 70,705 108,125
---------- ----------
Total interest income .................................. 1,357,395 1,361,792
Interest expense:
Deposits .................................................... 401,165 550,477
Borrowed funds .............................................. 60,772 1,540
---------- ----------
Total interest expense ................................. 461,937 552,017
Net interest income: .......................................................... 895,458 809,775
Provision for loan losses ..................................................... 121,000 60,000
---------- ----------
Net interest income after
provision for loan losses ..................................................... 774,458 749,775
Non-interest income:
Credit and debit card transaction ........................... 129,459 137,978
Account fees ................................................ 40,350 31,289
Gain on sale of securities,net .............................. 4,910 --
First mortgage loan fees .................................... 23,310 23,176
Other ....................................................... 6,037 8,620
---------- ----------
Total non-interest income .............................. 204,066 201,063
Non-interest expense:
Salaries and employee benefits .............................. 333,192 286,885
Office operations and equipment ............................. 107,716 103,626
Occupancy expense ........................................... 25,818 20,692
Data processing ............................................. 63,486 62,355
Credit and debit card processing ............................ 119,385 137,176
Travel and conference ....................................... 17,403 12,082
Professional services ....................................... 108,934 94,197
Marketing and promotion ..................................... 38,664 106,005
Other expenses .............................................. 36,753 20,203
---------- ----------
Total non-interest expense ............................. 851,351 843,221
Income before income taxes: ................................................... 127,173 107,617
Income tax expense .......................................... 49,822 42,132
---------- ----------
Net income: ................................................................... $ 77,351 $ 65,485
========== ==========
Other comprehensive income .................................................... 7,221 49,971
---------- ----------
Total comprehensive income .................................................... $ 84,572 $ 115,456
========== ==========
Earning per common shares:
Basic ....................................................... $ 0.14 $ 0.11
Diluted ..................................................... $ 0.14 $ 0.11
The accompanying notes are an integral part of these consolidated financial
statements
4
PART I: Financial Information, Item 1
Allied First Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
2003 2002
---- ----
Cash flows from operating activities
Net Income ............................................................ $ 77,351 $ 65,485
Adjustment to reconcile net income to net cash from
operating activities
Depreciation .................................................. 11,469 11,241
Amortization of premiums on securities ........................ 28,424 17,141
Net gain on sale of securities ................................ (4,910) --
Provision for loan losses ..................................... 121,000 60,000
FHLB stock dividend ........................................... (26,300) (19,100)
Net changes in
Accrued interest receivable .............................. (93,071) (7,204)
Servicing agent receivable ............................... 412,089 --
Other assets ............................................. 286,880 3,486
Other liabilities ........................................ (74,507) 150,823
------------ ------------
Net cash from operating activities .................. 738,425 281,872
Cash flows from investing activities
Purchase of available for sale securities ............................. (7,221,039) (3,068,153)
Sale of available for sale securities ................................. 357,863 --
Principal collected on mortgage backed securities ..................... 1,088,030 750,219
Net expenditures of premises and equipment ............................ (65,340) (4,606)
Purchase of loans from other institutions ............................. (35,328,795) --
Net changes in:
Loans ......................................................... 11,907,347 (193,933)
Time deposits with other financial institutions ............... 794,561 792,985
------------ ------------
Net cash from investing activities .................. (28,467,373) (1,723,488)
Cash flows from financing activities
Net change in deposits ........................................ (2,932,099) 4,130,289
Proceeds from borrowed funds .................................. 31,000,000 --
------------ ------------
Net cash from financing activities .................. 28,067,901 4,130,289
Increase (decrease) in cash and cash equivalents ................................. 338,953 2,688,673
Cash and cash equivalents at beginning of period ................................. 3,035,791 7,363,100
------------ ------------
Cash and cash equivalents at end of period ....................................... $ 3,374,744 $ 10,051,773
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
5
Allied First Bancorp, Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The accompanying consolidated condensed financial statements include the
accounts of Allied First Bancorp, Inc. and its wholly owned subsidiary, Allied
First Bank, sb. All significant inter-company transactions and balances are
eliminated in consolidation. The accompanying unaudited consolidated condensed
financial statements have been prepared in accordance with accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Regulation SB. Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
In the opinion of management, the consolidated condensed financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to represent fairly the financial condition of the
Company as of September 30, 2003 and June 30, 2003 and the results of its
operations, for the three months ended September 30, 2003 and 2002. Financial
statement reclassifications have been made for the prior period to conform to
classifications used as of and for the period ended September 30, 2003.
Operating results for the three months ended September 30, 2003 are not
necessarily indicative of the results that may be expected for the fiscal year
ending June 30, 2004. Allied First Bancorp, Inc.'s 2003 annual report on Form
10-KSB should be read in conjunction with these statements.
(2) Use of Estimates
The preparation of consolidated financial statements, in conformity with
accounting principles generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the
reported amounts of income and expenses during the reporting period. Actual
results could differ from current estimates. Estimates that are more susceptible
to change in the near term include the allowance for loan losses and the fair
values of financial instruments.
(3) Earnings Per Common Share
Basic earnings per common share is computed by dividing net income by the
weighted average number of shares of common stock outstanding. For the
three-month period ended September 30, 2003, the weighted average number of
common shares used in the computation of basic earning per share was 558,350.
The weighted average number of common shares for the same period in 2002 was
608,350. There are no potential dilutive common shares.
6
(4) Premises and Equipment
The company is obligated under a five year operating lease for office space that
contains a termination option effective as of April 30, 2007. The lease was
effective as of September 16, 2003 with terms to begin occupancy in November
2003. The expiration of the lease is April 30, 2009. It contains a period of
free rent in the 2004 fiscal year, and escalation clauses providing for
increases in rental expense based primarily on increases in real estate taxes
and operating costs. Rent expense was $26,000 for the three month period ending
September 30, 2003 under the terms of the expired lease.
The future minimum commitments under the full lease term at September 30, 2003
for all operating leases are as follows:
Year Ending June 30, Amount
2004 $ 7,564
2005 117,464
2006 120,988
2007 124,618
2008 128,357
Thereafter 109,625
--------
Total $608,616
========
(5) Federal Home Loan Bank Advances
At September 30, 2003, advances from the Federal Home Loan Bank were as follows.
Open line advance, variable rate and term $16,000,000
Maturity July 2004, fixed rate of 1.34% 5,000,000
Maturity July 2005, fixed rate of 1.70% 5,000,000
Maturity July 2006, fixed rate of 2.12% 5,000,000
-----------
Total $31,000,000
===========
Each advance is payable at its maturity date, with a prepayment penalty.
All advances including open line advances were collateralized by $9,052,000 in
mortgaged backed securities and $51,831,000 of first mortgage loans under a
blanket lien arrangement at September 30, 2003.
7
Part I, Item 2
Allied First Bancorp, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Allied First Bancorp, Inc.'s results of operations are primarily dependent
on Allied First Bank's net interest margin, which is the difference between
interest income on interest-earning assets and interest expense on
interest-bearing liabilities. Allied First Bank's net income is also affected by
the level of its non-interest income and non-interest expenses, such as employee
compensation and benefits, occupancy expenses and other expenses.
FORWARD-LOOKING STATEMENTS
When used in this filing and in future filings by Allied First Bancorp,
Inc. and Allied First Bank, sb with the U.S. Securities and Exchange Commission,
in Allied First Bancorp, Inc. and Allied First Bank press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be,"
"will allow," "intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.
Such statements are subject to risks and uncertainties, including but not
limited to changes in economic conditions in our market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for
loans in our market area and competition, all or some of which could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected.
Allied First Bancorp, Inc. wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made, and advises readers that various factors, including regional and national
economic conditions, substantial changes in levels of market interest rates,
credit and other risks of lending and investment activities and competitive and
regulatory factors, could affect our financial performance and could cause
Allied First Bancorp, Inc.'s actual results for future periods to differ
materially from those anticipated or projected.
These risks and uncertainties should be considered in evaluating
forward-looking statements and you should not rely on these statements.
CRITICAL ACCOUNTING POLICIES
Certain of the Company's accounting policies are important to the portrayal
of the Company's financial condition, since they require management to make
difficult, complex or subjective judgments, some of which may relate to matters
that are inherently uncertain. Estimates associated with these policies are
susceptible to material changes as a result of changes in facts and
circumstances. Some of the facts and circumstances which could affect these
judgments include changes in interest rates, in the performance of the economy
or in the financial condition of borrowers. Management believes that its
critical accounting policies include
8
determining the allowance for loan losses and determining the fair value of
securities and other financial instruments.
COMPARISON OF THREE-MONTH PERIODS
ENDED SEPTEMBER 30, 2003 AND 2002
FINANCIAL CONDITION
The Company's total assets increased $28.0 million during the three months
ended September 30, 2003, to $129.6 million from $101.6 million at June 30,
2003. The increase was due to increases in net loans of $24.0 million and an
increase of $5.8 million in available for sale securities.
The Company's total liabilities increased $28.0 million from $91.7 million
at June 30, 2003, to $119.7 million at September 30, 2003. The increase was due
primarily to $31.0 million in borrowed funds and was offset by a decrease in
deposits of $2.9 million from $91.2 million at June 30, 2003 to $88.3 million at
September 30, 2003.
Stockholders' equity increased by $85,000 from $9.8 million at June 30,
2003 to $9.9 million at September 30, 2003. The increase is primarily from year
to date net income of $77,000, and increased unrealized appreciation of
available for sale securities of $8,000
RESULTS OF OPERATION
Net income for the three-month period ended September 30, 2003 was $77,000
compared to net income of $65,000 for the equivalent period in 2002. The
increase in net income for the three-month period ended September 30, 2003
compared to the same three month period in 2002 was due primarily to a higher
net interest income.
NET INTEREST INCOME
The net interest income for the three-month period ended September 30,
2003, was $895,000 compared to $810,000 for the same period in 2002. This is a
10.49% increase over the same period in 2002. The net interest margins were
3.25% and 3.77% for the three-month periods ended September 30, 2003 and 2002.
The reason net interest income rose in the three-month period ended September
30, 2003 compared to the same period in 2002 was due to a lower percentage cost
on interest bearing liabilities. The three-month period ended September 30, 2003
had a declining interest rate margin due to a 142 basis point drop in the
average rate for interest earning assets; this is partially offset by the 125
basis points drop in average rate for interest bearing liabilities.
Total average loans increased $28.5 million for the three-month period over
one-year ago. The increase in average loans in 2003 over 2002 average loans is
due to the purchase of $35.3 million in first mortgage loans. Total average
interest earning balances decreased $3.3 million for the three-month over
one-year ago. The yields on total average earning assets were 4.93%and 6.35% for
the three-month period ended September 30, 2003, and 2002.
9
Total average interest bearing liabilities increased $25.7 million for the
three-month periods ended September 30, 2003 over the comparative period in
2002. Interest bearing liabilities increased primarily due to the increase in
average debt outstanding of $13.8 million. During the first quarter of the 2004
fiscal year, Allied First Bancorp began utilizing Federal Home Loan Bank of
Chicago loan advances to purchase first mortgage products in an effort to
utilize more of its capital. The terms of the advances were one, two, and three
years with $5.0 million due in each year and having fixed interest rates of
1.34%, 1.70%, and 2.12% respectively. The company also has $16.0 million
outstanding on an open line of credit with a variable rate of interest with the
Federal Home Loan Bank of Chicago.
INTEREST INCOME
Interest income for the three months ended September 30, 2003 was
$1,357,000 compared to $1,362,000 for the same period in 2002. The decrease for
the three-month period was primarily due to a decline in yields on earning
assets. Allied First Bancorp was able to partially offset the loss in income
from the decline in yields by purchasing first mortgage loans.
INTEREST EXPENSE
Interest expense for the three months ended September 30, 2003 was $462,000
compared to $552,000 for the same period in 2002. The decrease was primarily due
to lower rates paid on interest-bearing liabilities of 1.95% for the three-month
period ending September 30, 2003, and 3.20% for the same three-month period in
2002. This represents a 125 basis point decrease in the rates paid over the same
period in the prior year.
10
The following tables set forth consolidated information regarding average
balances and annualized average rates.
Allied First Bancorp, Inc.
Three Months ending September 30 Three Months ending September 30
2003 2002
---------------------------------------- ---------------------------------------
Average Average Average Average
INTEREST EARNING ASSETS Balance Interest Rate Balance Interest Rate
-------- -------- -------- -------- -------- --------
Loans $ 95,100 $ 1,231 5.18% $ 66,575 $ 1,182 7.10%
Available for sale securities 7,037 71 4.04% 8,156 108 5.30%
Federal Home Loan Bank stock 1,649 26 6.31% 1,551 20 5.16%
Interest earning balances 6,310 29 1.84% 9,563 52 2.18%
-------- -------- -------- -------- -------- --------
Total interest-earning assets 110,096 1,357 4.93% 85,845 1,362 6.35%
-------- -------- -------- -------- -------- --------
NON-INTEREST EARNING ASSETS
Premises and equipment 80 67
Allowance for loan losses (585) (661)
Other non-earning assets 2,015 636
-------- --------
Total assets $111,606 $ 85,887
======== ========
INTEREST BEARING LIABILITIES
Interest checking $ 4,628 $ 17 1.47% $ 1,197 $ 10 3.34%
Savings 14,334 18 0.50% 11,519 31 1.08%
Money market 43,047 168 1.56% 36,935 262 2.84%
Time deposits 18,824 198 4.21% 18,860 247 5.24%
Borrowed funds 13,791 61 1.77% 405 2 1.98%
-------- -------- -------- -------- -------- --------
94,624 462 1.95% 68,916 552 3.20%
-------- -------- -------- -------- -------- --------
NON-INTEREST BEARING LIABILITIES AND EQUITY
Checking 6,875 6,606
Other liabilities 454 326
Equity 9,653 10,039
-------- --------
Total liabilities and equity $111,606 $ 85,887
======== ========
Net Interest/Spread $ 895 2.98% $ 810 3.15%
======================= =======================
Margin 3.25% 3.77%
======== ========
(1) Total Loans less deferred net loan fees
11
PROVISION FOR LOAN LOSSES
The provision for loan losses was $121,000 for the three-month period ended
September 30, 2003 and $60,000 for the same period in 2002. The reason for the
increase is due to the increase in the loan portfolio balances and in net
charge-offs for the three-month period ended September 30, 2003 over the same
period in 2002, as well as current probable losses in the loan portfolio.
Changes in the provision for loan losses are attributed to management's analysis
of the adequacy of the allowance for loan losses to address probable losses. Net
charge-offs of $72,000 have been recorded for the three-month period ended
September 30, 2003, compared to $59,000 of net charge-offs for the same period
in 2002. The allowance for loan losses was $641,000 or 0.58% of net loans as of
September 30, 2003, compared to $592,000 or 0.68% of net loans at June 30, 2003.
The reason for the decline in percentage of allowance for loan loss to net loans
was primarily due to loan portfolio shifting to a greater percentage of real
estate secured loans and a smaller percentage of unsecured loans. The portfolio
continued to shift to more real estate loans with the purchase of $35.3 million
in first mortgage loans during the first quarter of the fiscal 2004 year. Allied
First Bancorp, Inc. holds a small percentage in secured commercial loans, which
was $2.9 million or 2.61% of net loans at September 30, 2003. At September 30,
2003 first mortgage and home equity loans comprise nearly 70% of the loan
portfolio compared to 62% at June 30, 2003.
We establish provisions for loan losses, which are charged to operations,
at a level management believes is appropriate to absorb probable credit losses
in the loan portfolio. In evaluating the level of the allowance for loan losses,
management considers historical loss experience, the nature and volume of the
loan portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral, peer group information, and
prevailing economic conditions. This evaluation is inherently subjective as it
requires estimates that are susceptible to significant revisions as more
information becomes available or as future events change.
Approximately 93% of our customer base consists of American Airlines pilots
and their family members. Although this customer base had historically
relatively stable employment and sources of income, the terrorist attacks on the
United States in September 2001, the war in Iraq, and the current economic
environment have adversely affected the airline industry. As a result of these
factors, the stability of the employment and income of the American Airline
pilots has been adversely affected and could negatively affect the ability of
our customers to repay their loans, although the effect on our loan
delinquencies and loan losses cannot be identified with reasonable certainty at
this time. As a result of these factors, we may have higher loan delinquencies
and defaults in future periods. At September 30, 2003, our delinquent loans past
due 60 days or more remained at 0.02% of our loan portfolio.
NON-INTEREST INCOME
Non-interest income remained relatively stable over all periods presented.
Non-interest income for the three-months period ended September 30, 2003 was
$204,000 and $201,000 for the same period in 2002. Account fees for the
three-month period ended September 30, 2003 were $40,000 compared to $31,000 for
the same three-month period in 2002 for a 29.03% increase. This increase was
primarily due to the overdraft privilege program.
12
NON-INTEREST EXPENSE
Non-interest expense for the three-month period ended September 30, 2003
was $851,000, an increase of $8,000, or 0.95%, compared to $843,000 for the same
period in 2002. Salary and employee benefits was $333,000 for the three-month
period ended September 30, 2003 an increase of $46,000 or 16.03%, from $287,000
for the same period in 2002. The increase in salaries and employee benefits is
due to normal merit raises, additional staff, increased pension and benefit
costs. Occupancy expense was $26,000 for the quarter ended September 30, 2003 up
$5,000 or 23.81% from $21,000 for same three-month period in 2002. The reason
for the increase was a change in rent effective January 1, 2003. Credit and
debit card processing expense was $119,000 for the quarter ended September 30,
2003 a decrease of $18,000 or 13.14% from $137,000 for the same period in 2002.
The decrease was due to lower processing expenses on credit cards. The travel
and conference expense was $17,000, an increase of $5,000 from $12,000 for the
same three-month period in 2002. The reason for the increase is additional
conference attendance. Professional services were $109,000 for the three-month
period ended September 30, 2003 up $15,000 or 15.96% from $94,000 for the same
three-month period in 2002. The reason for the increase is additional legal and
audit service expenses. Marketing and promotion was $39,000 for the three-month
period ended September 30, 2003, a decrease of $67,000 or 63.21%, from $106,000
for the same period in 2002. The decrease in marketing and promotion expense is
a result of decreased promotional activities in the first quarter of the 2004
fiscal year. Other expenses for the quarter ended September 30, 2003 were
$37,000 an increase of $17,000, from the $20,000 for the three months ended
September 30, 2002. This increase is primarily related to an increase in
regulatory fees.
INCOME TAXES
The provision for income taxes was $50,000 for the three-month period ended
September 30, 2003 compared to $42,000 for the same period in 2002. The
effective tax rate for the three months ended September 30, 2003 and September
30, 2002 was 39.18% and 39.15%.
REGULATORY CAPITAL REQUIREMENTS
Pursuant to federal law, Allied First Bank must meet three separate minimum
capital ratio requirements. As of September 30, 2003, Allied First Bank had core
capital, Tier I risk-based and total risk-based ratios of 8.6%, 11.0% and 11.8%
compared to well-capitalized requirements of 5.00%, 6.00% and 10.00%. At June
30, 2003, Allied First Bank had core capital, Tier I risk-based and total
risk-based ratios of 9.5%, 12.1% and 12.9%, respectively.
LIQUIDITY
Liquidity management refers to the ability to generate sufficient cash to
fund current loan demand, meet deposit withdrawals, and pay operating expenses.
Allied First Bancorp, Inc. relies on various funding sources in order to meet
these demands. Primary sources of funds include interest-earning balances with
other financial institutions, money market mutual funds, proceeds from principal
and interest payments on loans as well as the ability to borrow against first
mortgages, and marketable securities. At September 30, 2003, Allied First Bank
had $3.4 million in cash and cash equivalents that could be used for its funding
needs. Cash and cash equivalents increased by $339,000 compared to the period
ending June 30, 2003 and securities available for sale increased by $5.8
million, time deposits with other institutions decreased $800,000.
As of September 30, 2003, management is not aware of any current
recommendations by regulatory authorities, which, if they were to be
implemented, would have or are reasonably likely to have a material adverse
effect on the Allied First Bancorp, Inc.'s liquidity, capital resources or
operations.
13
Item 3
Allied First Bancorp, Inc.
CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report an evaluation
was carried out under the supervision and with the participation of Allied First
Bancorp Inc.'s management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of disclosure controls and procedures
(as defined in Rule 13a-14(c)/15d-14(c)) under the Securities Exchange Act of
1934). Based on their evaluation, Allied First Bancorp Inc.'s Chief Executive
Officer and Chief Financial Officer have concluded that Allied First Bancorp,
Inc's disclosure controls and procedures are to the best of their knowledge,
effective to ensure that the information required to be disclosed by Allied
First Bancorp Inc. in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. Subsequent to the date of
their evaluation, there were no significant changes in Allied First Bancorp
Inc.'s internal controls or in other factors that could significantly affect
these controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
14
Part II - Other Information
Item 1 - Legal Proceedings - Not Applicable.
Item 2 - Changes in Securities and Use of Proceeds - Not Applicable.
Item 3 - Defaults upon Senior Securities - Not Applicable.
Item 4 - Submission of Matters to a vote of Security Holders
On October 23, 2003, the shareholders held their annual meeting to consider and
act upon the election of Mr. Frank K. Voris and Mr. Brien J. Nagle to serve as
directors for terms of three years and the ratification of the appointment of
Crowe Chizek and Company LLC as auditors for the Company for the fiscal year
ending June 30, 2004. Both of the foregoing items were approved by the
shareholders at the meeting by the following vote totals based upon 558,350
shares outstanding and entitled to vote at the meeting.
I. Election of Directors- 451,738 shares voted, as follows:
Frank K. Voris: 449,738 votes for; 1700 votes WITHHELD.
Brien J. Nagle: 450,738 votes for; 700 votes WITHHELD.
II. Ratification of the appointment of Crowe Chizek and Company LLC as
auditors for the company for the fiscal year ending June 30, 2004 -
451,438 shares voted, as follows:
451,438 votes for; 0 votes withheld
Item 5 - Other Information - Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 31.1 Rule 13a-14(a)/15d/14(a) Certification of Chief
Executive Officer
Exhibit 31.2 Rule 13a-14(a)/15d/14(a) Certification of Chief
Financial Officer
Exhibit 32.1 Chief Executive Officer's Section 906
Certification under the Sarbanes-Oxley Act of
2002
Exhibit 32.2 Chief Financial Officer's Section 906
Certification Under the Sarbanes-Oxley Act of
2002
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirement 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.
Allied First Bancorp, Inc.
Registrant
Date: November,13 2003 /s/ Kenneth L. Bertrand
----------------------------------
Kenneth L. Bertrand
President and Chief Executive Officer
Date: November 13, 2003 /s/ Brian K. Weiss
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Brian K. Weiss
Chief Financial Officer
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