Attached files
file | filename |
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EX-32.0 - Delanco Bancorp, Inc | v166005_ex32-0.htm |
EX-31.1 - Delanco Bancorp, Inc | v166005_ex31-1.htm |
EX-31.2 - Delanco Bancorp, Inc | v166005_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended September 30, 2009
OR
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
For the
transition period from ______________ to _____________
Commission
file number: 0-52517
DELANCO BANCORP,
INC.
(Exact
name of small business issuer as specified in its charter)
United States
(State
or other jurisdiction of incorporation
or
organization)
|
36-4519533
(I.R.S.
Employer Identification No.)
|
615 Burlington Avenue,
Delanco, New Jersey 08075
(Address
of principal executive offices)
(856)
461-0611
(Issuer’s
telephone number)
Not
Applicable
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
¨
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate website, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).
Yes ¨ No
¨
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“accelerated filer,” “large accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
(Do not
check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
No x
As of
November 13, 2009 there were 1,634,725 shares of the registrant’s common stock
outstanding.
DELANCO
BANCORP, INC.
FORM
10-Q
Index
Page No.
|
|||
PART
I. FINANCIAL INFORMATION
|
|||
Item
1.
|
Financial
Statements
|
||
Consolidated
Statements of Financial Condition at
September
30, 2009 (Unaudited) and March 31, 2009
|
1
|
||
Consolidated
Statements of Operations for the three and six months
ended
September 30, 2009 and 2008 (Unaudited)
|
2
|
||
Consolidated
Statements of Stockholders’ Equity for the six months
ended
September 30, 2009 (Unaudited)
|
3
|
||
Consolidated
Statements of Cash Flows for the six months ended
September
30, 2009 and 2008 (Unaudited)
|
4
|
||
Notes
to Unaudited Consolidated Financial Statements
|
6
|
||
Item 2. |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
11
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
17
|
|
Item
4.
|
Controls
and Procedures
|
17
|
|
PART
II. OTHER INFORMATION
|
|||
Item
1.
|
Legal
Proceedings
|
18
|
|
Item 1A.
|
Risk
Factors
|
18
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
18
|
|
Item
3.
|
Defaults
upon Senior Securities
|
18
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
18
|
|
Item
5.
|
Other
Information
|
18
|
|
Item
6.
|
Exhibits
|
18
|
|
Signatures
|
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
DELANCO
BANCORP, INC. AND SUBSIDIARY
Consolidated
Statements of Financial Condition
September 30,
2009
|
March 31,
2009
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Cash
and cash equivalents
|
||||||||
Cash
and amounts due from banks
|
$ | 821,774 | $ | 476,087 | ||||
Interest-bearing
deposits
|
2,796,394 | 1,240,868 | ||||||
Total
cash and cash equivalents
|
3,618,168 | 1,716,955 | ||||||
Investment
securities:
|
||||||||
Securities
held-to-maturity (fair value of $15,187,625 (unaudited) and $14,730,626 at
September 30,2009 and March 31, 2009, respectively)
|
14,664,949 | 14,282,255 | ||||||
Securities
available-for-sale
|
254,141 | 222,719 | ||||||
Total
investment securities
|
14,919,090 | 14,504,974 | ||||||
Loans,
net of allowance for loan losses of $1,355,915 at September 30, 2009
(unaudited), $1,546,601 at March 31, 2009
|
108,794,933 | 103,624,343 | ||||||
Accrued
interest receivable
|
510,028 | 499,981 | ||||||
Premises
and equipment, net
|
7,884,978 | 8,024,232 | ||||||
Real
Estate Owned
|
487,968 |
|
||||||
Investment
required by law-stock in Federal Home Loan Bank, at cost
|
251,700 | 345,900 | ||||||
Deferred
income taxes
|
723,715 | 561,000 | ||||||
Bank
owned life insurance
|
136,004 | 130,042 | ||||||
Prepaid
and refundable income taxes
|
552,361 | 561,971 | ||||||
Other
assets
|
309,505 | 498,966 | ||||||
Total
assets
|
$ | 138,188,450 | $ | 130,468,364 | ||||
LIABILITIES
|
||||||||
Deposits
|
||||||||
Non-interest
bearing deposits
|
2,209,738 | 2,518,934 | ||||||
Interest
bearing deposits
|
122,696,840 | 111,464,281 | ||||||
Total
deposits
|
124,906,578 | 113,983,215 | ||||||
Federal
Home Loan Bank Advances
|
1,000,000 | 3,750,000 | ||||||
Accrued
interest payable
|
66,213 | 211,962 | ||||||
Advance
payments by borrowers for taxes and insurance
|
423,066 | 359,738 | ||||||
Other
liabilities
|
536,753 | 642,032 | ||||||
Total
liabilities
|
126,932,610 | 118,946,947 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Preferred
stock, $.01 par value, 3,000,000 shares authorized; no shares
issued
|
|
|
||||||
Common
stock, $.01 par value, 7,000,000 shares authorized; 1,634,725 shares
issued and outstanding
|
$ | 16,347 | $ | 16,347 | ||||
Additional
paid-in capital
|
6,652,235 | 6,652,235 | ||||||
Retained
earnings, substantially restricted
|
5,188,830 | 5,499,813 | ||||||
Unearned
common stock held by employee stock ownership plan
|
(576,729 | ) | (576,729 | ) | ||||
Accumulated
other comprehensive (Loss)
|
(24,843 | ) | (70,249 | ) | ||||
Total
stockholder’s equity
|
11,255,840 | 11,521,417 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 138,188,450 | $ | 130,468,364 |
See
Notes to the Unaudited Consolidated Financial Statements.
1
DELANCO
BANCORP, INC. AND SUBSIDIARY
Consolidated
Statements of Income
(Unaudited)
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
INTEREST
INCOME
|
||||||||||||||||
Loans
|
$ | 1,518,517 | $ | 1,606,237 | $ | 3,115,336 | $ | 3,155,653 | ||||||||
Investment
securities
|
177,901 | 197,285 | 345,614 | 394,487 | ||||||||||||
Total
interest income
|
1,696,418 | 1,803,522 | 3,460,950 | 3,550,140 | ||||||||||||
INTEREST
EXPENSE
|
||||||||||||||||
Interest-bearing
checking accounts
|
27,345 | 14,519 | 53,365 | 27,519 | ||||||||||||
Passbook
and money market accounts
|
132,140 | 173,026 | 269,835 | 351,279 | ||||||||||||
Certificates
of deposits
|
512,812 | 706,279 | 1,039,200 | 1,458,725 | ||||||||||||
Federal
Home Loan Bank Advances
|
5,580 |
─
|
15,236 |
─
|
||||||||||||
Total
interest expense
|
677,877 | 893,824 | 1,377,636 | 1,837,523 | ||||||||||||
Net
interest income
|
1,018,541 | 909,698 | 2,083,314 | 1,712,617 | ||||||||||||
Provision
for loan losses
|
705,000 | 442,000 | 805,000 | 442,000 | ||||||||||||
Net
interest income after provision for loan losses
|
313,541 | 467,698 | 1,278,314 | 1,270,617 | ||||||||||||
NON-INTEREST
INCOME
|
||||||||||||||||
Income
from bank-owned life insurance
|
|
─
|
5,962 | 5,630 | ||||||||||||
Service
charges
|
33,886 | 48,449 | 69,731 | 73,786 | ||||||||||||
Rental
income
|
|
─
|
|
5,875 | ||||||||||||
Other
|
14,157 | 15,306 | 19,183 | 32,169 | ||||||||||||
Total
non-interest income
|
48,043 | 63,755 | 94,876 | 117,460 | ||||||||||||
NON-INTEREST
EXPENSE
|
||||||||||||||||
Salaries
and employee benefits
|
464,073 | 480,908 | 944,776 | 962,567 | ||||||||||||
Advertising
|
10,778 | 13,840 | 20,709 | 28,967 | ||||||||||||
Office
supplies, telephone and postage
|
41,530 | 39,060 | 68,783 | 75,874 | ||||||||||||
Net
occupancy expense
|
172,441 | 171,868 | 341,692 | 334,838 | ||||||||||||
Federal
insurance premiums
|
90,013 | 33,773 | 147,708 | 51,323 | ||||||||||||
Data
processing expenses
|
25,285 | 31,698 | 70,687 | 65,196 | ||||||||||||
ATM
expenses
|
7,327 | 16,796 | 11,109 | 33,955 | ||||||||||||
Bank
charges and fees
|
26,497 | 17,662 | 57,006 | 33,019 | ||||||||||||
Insurance
and surety bond premiums
|
17,101 | 13,152 | 33,306 | 27,377 | ||||||||||||
Dues
and subscriptions
|
5,066 | 11,493 | 19,124 | 24,097 | ||||||||||||
Professional
fees
|
58,386 | 90,057 | 106,210 | 201,454 | ||||||||||||
On-line
banking expense
|
|
26,289 |
|
53,548 | ||||||||||||
Other
|
9,877 | 37,721 | 56,050 | 69,487 | ||||||||||||
Total
non-interest expense
|
928,374 | 984,317 | 1,877,160 | 1,961,702 | ||||||||||||
INCOME
(LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
|
(566,790 | ) | (452,864 | ) | (503,970 | ) | (573,625 | ) | ||||||||
Income
taxes (benefits)
|
(210,152 | ) | (166,797 | ) | (192,987 | ) | (201,029 | ) | ||||||||
NET
INCOME (LOSS)
|
$ | (356,638 | ) | $ | (286,067 | ) | $ | (310,983 | ) | $ | (372,596 | ) | ||||
INCOME
(LOSS) PER COMMON SHARE
|
$ | (0.23 | ) | $ | (0.18 | ) | $ | (0.20 | ) | $ | (0.24 | ) |
See
Notes to the Unaudited Consolidated Financial Statements.
2
DELANCO
BANCORP, INC. AND SUBSIDIARY
Consolidated
Statements of Stockholders’ Equity
(Unaudited)
Common Stock
|
Additional
Paid-in
|
Retained
|
Unearned
Employee Stock
Ownership
|
Accumulated
Other-Comprehensive
|
Total
Stockholders’
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Plan
|
Income (Loss)
|
Equity
|
||||||||||||||||||||||
Balance
at March 31, 2009
|
1,634,725 | $ | 16,347 | $ | 6,652,235 | $ | 5,499,813 | $ | (576,729 | ) | $ | (70,249 | ) | $ | 11,521,417 | |||||||||||||
Net
income
|
(310,983 | ) | (310,983 | ) | ||||||||||||||||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||||||||||||||
Change
in unrealized gain on securities available-for-sale, net of deferred
income taxes of $12,490
|
45,406 | 45,406 | ||||||||||||||||||||||||||
Total
comprehensive income
|
(310,983 | ) | 45,406 | (265,577 | ) | |||||||||||||||||||||||
Balance
at September 30, 2009
|
1,634,725 | $ | 16,347 | $ | 6,652,235 | $ | 5,188,830 | $ | (576,729 | ) | $ | (24,843 | ) | $ | 11,255,840 |
See
Notes to the Unaudited Consolidated Financial Statements.
3
DELANCO
BANCORP, INC. AND SUBSIDIARY
Consolidated
Statements of Cash Flows
(Unaudited)
Six Months Ended
September 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flow from operating activities
|
||||||||
Net
Income (Loss)
|
$ | (310,983 | ) | $ | (372,596 | ) | ||
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
||||||||
Deferred
income taxes
|
(148,535 | ) | (18,449 | ) | ||||
Depreciation
|
170,037 | 157,884 | ||||||
Discount
accretion net of premium amortization
|
(3,331 | ) | 39,343 | |||||
Provision
for loan losses
|
805,000 | 442,000 | ||||||
Income
from bank owned life insurance
|
(5,962 | ) | (5,630 | ) | ||||
Changes
in operating assets and liabilities
|
||||||||
(Increase) decrease
in:
|
||||||||
Accrued
interest receivable
|
(10,047 | ) | (85,531 | ) | ||||
Other
assets
|
189,461 | (29,324 | ) | |||||
Prepaid
and refundable income taxes
|
9,610 | (145,986 | ) | |||||
Increase
(decrease) in:
|
||||||||
Accrued
interest payable
|
(145,749 | ) | (170,163 | ) | ||||
Other
liabilities
|
(105,279 | ) | 68,402 | |||||
Net
cash provided by (used in) operating activities
|
$ | 444,222 | $ | (120,050 | ) | |||
Cash
flows from investing activities
|
||||||||
Purchases
of securities available-for-sale
|
(195 | ) | (865 | ) | ||||
Purchases
of securities held-to-maturity
|
(3,500,000 | ) | (6,681,320 | ) | ||||
Proceeds
from maturities and principal repayments of securities
held-to-maturity
|
3,120,636 | 3,786,724 | ||||||
(Purchase),
sale of investment required by law – stock in Federal Home Loan
Bank
|
94,200 | (38,000 | ) | |||||
Net
increase in loans
|
(6,463,558 | ) | (3,548,205 | ) | ||||
Purchases
of premises and equipment
|
(30,783 | ) | (87,572 | ) | ||||
Net
cash (used in) investing activities
|
$ | ( 6,779,700 | ) | $ | (6,569,238 | ) | ||
Cash
flows from financing activities
|
||||||||
Net
increase (decrease) in deposits
|
10,923,362 | (1,581,033 | ) | |||||
Net
increase in advance payments by borrowers for taxes and
insurance
|
63,329 | 44,182 | ||||||
Increase
(decrease) in Federal Home Loan Bank Advances
|
(2,750,000 | ) |
|
|||||
Distribution
of ESOP shares
|
|
22,588 | ||||||
Net
cash provided by (used in) financing activities
|
$ | 8,236,691 | $ | (1,514,263 | ) |
(continued)
4
Six Months Ended
September 30,
|
||||||||
2009
|
2008
|
|||||||
Net
decrease in cash and cash equivalents
|
$ | 1,901,213 | $ | (8,203,551 | ) | |||
Cash
and cash equivalents, beginning of the period
|
1,716,955 | 12,679,133 | ||||||
Cash
and cash equivalents, end of period
|
$ | 3,618,168 | $ | 4,475,582 | ||||
Supplemental
Disclosures:
|
||||||||
Cash
paid during the period for interest
|
$ | 1,523,385 | $ | 2,007,686 | ||||
Cash
paid during the period for income taxes
|
$ | 520 | $ | 1,150 | ||||
Loans
transferred to foreclosed real estate during the period
|
$ | 487,968 | $ | – | ||||
Proceeds
from sales of foreclosed real estate financed through
loans
|
$
|
$ | – | |||||
Net
change in unrealized gain on securities available-for-sale net of
tax
|
$ | 31,019 | $ | 15,727 |
See
Notes to the Unaudited Consolidated Financial Statements.
5
DELANCO
BANCORP, INC. AND SUBSIDIARY
Notes
to the Unaudited Consolidated Financial Statements
September
30, 2009
(1) Basis
of Presentation
The accompanying unaudited consolidated
financial statements have been prepared in accordance with instructions for Form
10-Q and, therefore, do not include all disclosures necessary for a complete
presentation of the financial statements in conformity with accounting
principles generally accepted in the United States of
America. However, all adjustments that are, in the opinion of
management, necessary for the fair presentation of the interim financial
statements have been included. Such adjustments were of a normal
recurring nature. The results of operations for the three and six
month periods ended September 30, 2009 are not necessarily indicative of
the results that may be expected for the entire year or any other interim
period. For additional information, refer to the consolidated
financial statements and footnotes thereto of Delanco Bancorp, Inc. (the
“Company”) included in the Company’s annual report on Form 10-K for the year
ended March 31, 2009. In connection with the preparation of the
accompanying financial statements, the Company has evaluated events and
transactions through November 12, 2009, which is the date the financial
statements were available to be issued.
(2) Use
of Estimates
In
preparing financial statements in conformity with U.S. generally accepted
accounting principles requires Management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in the near
term relate to the determination of the allowance for losses on loans and the
evaluation of deferred taxes.
(3)
Earnings Per Share
Basic earnings per share (“EPS”) are
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflect
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the
entity.
The
difference between the common shares issued and the common shares outstanding
for the purposes of calculating basic EPS is a result of the unallocated ESOP
shares.
6
The
calculated basic and dilutive EPS are as follows:
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Numerator
|
$ | (356,638 | ) | $ | (286,067 | ) | $ | (310,983 | ) | $ | (372,596 | ) | ||||
Denominators:
|
||||||||||||||||
Basic
shares outstanding
|
1,577,052 | 1,573,848 | 1,577,052 | 1,573,848 | ||||||||||||
Effect
of dilutive securities
|
|
|
|
|
||||||||||||
Dilutive
shares outstanding
|
1,577,052 | 1,573,848 | 1,577,052 | 1,573,848 | ||||||||||||
Earnings
per share:
|
||||||||||||||||
Basic
|
$ | (0.23 | ) | $ | (0.18 | ) | $ | (0.20 | ) | $ | (0.24 | ) | ||||
Dilutive
|
$ | (0.23 | ) | $ | (0.18 | ) | $ | (0.20 | ) | $ | (0.24 | ) |
(4) Supervisory
Agreement
On December 17, 2007, Delanco Federal
Savings Bank entered into a Supervisory Agreement with the OTS. The
entry into the Supervisory Agreement was based on the Bank’s 2007 report of
examination in which the OTS concluded that grounds existed for the initiation
of administrative proceedings against the Bank. Without admitting or
denying that such grounds existed, the Bank determined to enter into the
Supervisory Agreement to cooperate with the OTS and as evidence of the Bank’s
intent to comply with all applicable laws and regulations and engage in safe and
sound practices.
Pursuant to the terms of Supervisory
Agreement, the Bank agreed as follows:
•
|
To
refrain from making, investing in, purchasing or otherwise modifying any
commercialloan without the prior written non-objection of the
OTS.
|
|
•
|
By
December 31, 2007, to review each commercial loan file with an outstanding
principal balance that equals or exceeds $250,000, and by February 29,
2008 for all other commercial loans, to determine whether all required
documentation has been obtained. All missing or incomplete
documentation must be obtained by January 31, 2008 for all commercial
loans with an outstanding principal balance that equals or exceeds
$250,000 and by February 29, 2008 for all other commercial
loans.
|
|
•
|
By
January 31, 2008, to implement a credit administration process utilizing
an electronic system and checklists to facilitate ongoing reviews of the
financial condition of borrowers and
guarantors.
|
|
•
|
To
evaluate, on a semiannually basis, the effectiveness of the Bank’s credit
administration function.
|
|
•
|
To
engage an independent, third-party service provider to conduct an internal
loan review of the Bank’s lending operations on a quarterly
basis. As part of the internal loan review program, the Bank
must develop and implement a risk rating system for all
loans. On a quarterly basis, the Board’s Audit Committee must
provide the Board with, and the Board must review and evaluate, a written
report documenting the findings and recommendations relating to the
internal loan reviews.
|
|
•
|
By
December 31, 2007, to adopt and implement a written program which
satisfies certain OTS regulations and interagency guidelines regarding the
identification and classification of problem assets. The
program must (i) provide for and require the maintenance of an adequate
allowance for loan and lease losses; (ii) ensure the prompt charge-off of
loans when proper; and (iii) require the timely and accurate reporting of
criticized assets, the allowance for loan and lease losses and charge-offs
in the Bank’s Thrift Financial Reports
(TFRs).
|
7
•
|
To
prepare TFRs accurately and in accordance with applicable
instructions.
|
|
•
|
To
ensure that at the end of each quarter, the Bank’s assets have not
increased by an amount greater than 2.5% of the Bank’s total assets at the
end of the prior quarter.
|
|
•
|
To
notify and receive the non-objection of the OTS before adding or replacing
any Board member, employing any person as a senior executive officer or
entering into or revising any contractual arrangement with any director or
senior executive officer.
|
The Bank has received relief from two
portions of the Supervisory Agreement from the OTS:
|
•
|
The
Bank may refinance, extend or otherwise modify an existing commercial loan
so long as no new or additional funds are advanced, without the need for
the Regional director’s prior written non
objection.
|
|
•
|
The
OTS also modified the sections regarding the internal loan review,
eliminating the requirement that the Audit Committee engage an independent
third party. It also reduced the scope of the reviews required on a
quarterly basis.
|
The remainder of the Supervisory
Agreement will remain in effect until terminated, modified or suspended in
writing by the OTS. The failure to comply with the Supervisory
Agreement could result in the initiation of formal enforcement action by the
OTS, including the imposition of civil monetary penalties.
(5) Recent Accounting
Pronouncements
Below is a discussion of recent
accounting pronouncements. Recent pronouncements not discussed below
were deemed to not be applicable to the Company.
ASC
Topic 820-10-65, Determining Fair Value When the Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly
In April 2009, the FASB
issued guidance on identifying circumstances that indicate a
transaction is not orderly and guidance on estimating fair value when
the volume and level of activity for the asset or liability have significantly
decreased. This guidance emphasizes that fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date under current
market conditions. This guidance was adopted by the Company, for the
interim period beginning April 1, 2009, and did not have a material effect on
the Company’s financial position or results of operations.
ASC
Topic 320-10-65, Recognition and Presentation of Other Than Temporary
Impairments
In April 2009, the FASB
issued guidance regarding the recognition and presentation
of other than temporary impairments on debt and equity securities in the
financial statements. This guidance modifies the presentation of OTTI
losses and expands existing disclosure requirements about OTTI. This
guidance was adopted by the Company for the interim period beginning April 1,
2009 and did not have a material effect on the Company’s financial position or
results of operations.
8
ASC
Topic 825-10-50, Interim Disclosures about Fair Value of
Instruments
In April 2009 the FASB issued guidance
which requires publicly traded companies to disclose the fair value of financial
instruments within the scope of FAS 107 in interim financial
statements. This guidance was adopted by the Company for the interim
period beginning April 1, 2009.
ASC
Topic 855, Subsequent Events
In May 2009 the FASB issued additional
guidance on the evaluation of subsequent events and requires the disclosure of
the date through which subsequent events have been evaluated. This
guidance was adopted by the Company for the interim period June 30,
2009.
FASB
Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles
In June 2009 the FASB issued FASB
Statement No. 168 “The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles, a replacement of FASB Statement No.
162”. (SFAS No. 168). SFAS No. 168 established the FASB
Accounting Standards Codification. The Codification will become the
exclusive authoritative reference for nongovernmental U.S. GAAP for
use in financial statements issued for interim and annual periods ending after
September 15, 2009, except for SEC rules and interpretive releases, which are
also authoritative GAAP for SEC registrants. The contents of the
Codification will carry the same level of authority, eliminating the four-level
GAAP hierarchy previously set forth in Statement 162, which has been superseded
by Statement 168. All authoritative GAAP issued by the FASB after
this Statement will be referred to as Accounting Standards
Updates. Accounting Standards Updates will not be considered
authoritative in their own right, rather they will only serve to update the
Codification, provide background information about the guidance and provide
basis for conclusions on changes in the Codification. The
Codification retains existing GAAP without changing it except in one instance
related to software revenue recognition, which does not impact the
Company. SFAS No. 168 is effective for the Company for the interim
period ending September 30, 2009 and effective for the Form 10-Q for the period
ending September 30, 2009, all references to authoritative literature are
required to cite the Codification as opposed to legacy accounting
pronouncements.
(6) Fair
Value of Financial Instruments
On April 1, 2009 the Bank adopted ASC
Topic 820-10, “Fair Value Measurements and Disclosures”. ASC Topic 820-10
defines fair value, establishes a framework for measuring fair value in U.S.
generally accepted accounting principles, and expands disclosure requirements
for fair value measurements. ASC Topic 820 does not require any new
fair value measurements. The adoption of ASC Topic 820-10 did not
have a material impact on the consolidated financial statements.
In conjunction with the adoption
of ASC Topic 820, the Bank also adopted the guidance of ASC
Paragraphs 820-10-50-8A, 55-23A and 55-23B on April 1, 2008. This
guidance defers its effective date of AS Topic 820 for all non-financial assets
and non-financial liabilities, except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis, to fiscal years
beginning after November 15, 2008, or April 1, 2009 for the
Company.
ASC Topic 820 establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value into three broad levels, as described below:
· Level
1
|
Level
1 inputs are unadjusted quoted prices in active markets for identical
assets or liabilities.
|
9
· Level
2
|
Level
2 inputs are inputs other than quoted prices included in Level 1 that are
observable, either directly or indirectly. Level 2 inputs
include quoted prices for similar assets, quoted prices in markets that
are not considered to be active, and observable inputs other than quoted
prices such as interest rates.
|
· Level
3
|
Level
3 inputs are unobservable inputs.
|
A financial instrument’s level within
the fair value hierarchy is based upon the lowest level of any input significant
to the fair value measurement.
10
As
required by ASC Topic 825-10-65, the estimated fair value of financial
instruments at September 30, 2009 and March 31, 2009 was as
follows:
September 30, 2009
|
March 31, 2009
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
Amount
|
Value
|
Amount
|
Value
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Financial
Assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 3,618 | $ | 3,618 | $ | 1,717 | $ | 1,717 | ||||||||
Investment
securities
|
14,919 | 15,442 | 14,527 | 14,953 | ||||||||||||
Loans
– net
|
108,795 | 112,059 | 103,624 | 107,728 | ||||||||||||
FHLB
stock
|
252 | 252 | 346 | 346 | ||||||||||||
Accrued
interest receivable
|
510 | 510 | 500 | 500 | ||||||||||||
Total
financial assets
|
128,094 | 131,881 | 120,714 | 125,244 | ||||||||||||
Financial
Liabilities:
|
||||||||||||||||
Deposits
|
124,900 | 125,095 | 113,983 | 116,283 | ||||||||||||
Advances
from FHLB
|
1,000 | 1,000 | 3,750 | 3,750 | ||||||||||||
Advance
payments by borrowers for taxes and insurance
|
423 | 423 | 360 | 360 | ||||||||||||
Accrued
interest payable
|
66 | 66 | 212 | 212 | ||||||||||||
Total
financial liabilities
|
126,389 | 126,584 | 118,305 | 120,605 |
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Management’s discussion and analysis of
the financial condition and results of operations at and for the six months
ended September 30, 2009 and 2008 is intended to assist in understanding our
financial condition and results of operations. The information
contained in this section should be read in conjunction with the Unaudited
Financial Statements and the notes thereto, appearing in Part I, Item 1 of this
report.
Forward-Looking
Statements
This quarterly report contains
forward-looking statements that are based on assumptions and may describe our
future plans, strategies and expectations. These forward-looking
statements are generally identified by use of the words “believe,” “expect,”
“intend,” “anticipate,” “estimate,” “project” or similar
expressions.
Our
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse
effect on our operations include, but are not limited to, changes in interest
rates, national and regional economic conditions, legislative and regulatory
changes, monetary and fiscal policies of the U.S. government, including policies
of the U.S. Treasury and the Federal Reserve Board, the quality and composition
of our loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in our market area, changes in real
estate market values in our area, and changes in relevant accounting principles
and guidelines.
11
These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such
statements. Except as required by applicable law or regulation, we do
not undertake, and specifically disclaim any obligation, to release publicly the
result of any revisions that may be made to any forward-looking statements to
reflect events or circumstances after the date of the statements or to reflect
the occurrence of anticipated or unanticipated events.
General
Delanco Bancorp, Inc. is the holding
company for Delanco Federal Savings Bank. Delanco Federal Savings
Bank operates from two offices in Burlington County, New
Jersey. Delanco Federal Savings Bank is engaged primarily in the
business of attracting deposits from the general public and using such funds to
originate a variety of consumer and business loans.
Balance
Sheet Analysis
Overview. Total assets at
September 30, 2009 were $138.2 million, an increase of $7.7 million, or 5.9%,
from total assets of $130.5 million at March 31, 2009. The change in
the asset composition reflected an increase in net loans and cash and cash
equivalents.
Loans. At
September 30, 2009, total loans, net, were $108.8 million, or 78.7% of total
assets. The increase was primarily attributed to single family
residential loans.
Table
1: Loan Portfolio Analysis
September
30,
|
March
31,
|
||||||||||||||||
2009
|
2009
|
||||||||||||||||
(Dollars
in thousands)
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||
Real
estate loans:
|
|||||||||||||||||
Residential
|
$ | 78,837 | 71.5 | % | $ | 70,806 | 67.2 | % | |||||||||
Commercial
and multi-family
|
24,812 | 22.5 | 26,054 | 24.7 | |||||||||||||
Construction
|
1,814 | 1.7 | 1,796 | 1.7 | |||||||||||||
Total
real estate loans
|
105,463 | 95.7 | 98,656 | 93.6 | |||||||||||||
Commercial
loans
|
3,031 | 2.7 | 4,618 | 4.4 | |||||||||||||
Consumer
loans
|
1,741 | 1.6 | 2,134 | 2.0 | |||||||||||||
Total
loans
|
110,235 | 100 | % | 105,408 | 100.0 | % | |||||||||||
Loans
in process
|
|
(139 | ) | ||||||||||||||
Net
deferred loan fees
|
(84 | ) | (98 | ) | |||||||||||||
Allowance
for losses
|
(1,356 | ) | (1,547 | ) | |||||||||||||
Loans,
net
|
$ | 108,795 | $ | 103,624 |
Nonperforming
Loans. Total
nonperforming loans at September 30, 2009 increased $940,000 primarily due to
delinquencies in commercial and multi-family real estate loans and to a lesser
degree, commercial loans. Management automatically places all loans greater than
90 days past due on non-accrual status. During the quarter, the Bank accepted
deeds in lieu of foreclosure on two properties that were placed into real estate
owned.
12
Table 2: Nonperforming Assets
|
||||||||
September 30,
|
March 31,
|
|||||||
(Dollars
in thousands)
|
2009
|
2009
|
||||||
Nonaccrual
loans
|
$ | 9,363 | $ | 8,298 | ||||
Accruing
loans past due 90 days or more
|
|
128 | ||||||
Total
of nonaccrual and 90 days or more past due loans
|
9,363 | 8,426 | ||||||
Real
estate owned
|
488 |
|
||||||
Other
nonperforming assets
|
117 | 295 | ||||||
Total
nonperforming assets
|
9,968 | 8,721 | ||||||
Troubled
debt restructurings
|
588 | 303 | ||||||
Troubled
debt restructurings and total nonperforming assets
|
$ | 10,556 | $ | 9,024 | ||||
Total
nonperforming loans to total loans
|
8.49 | % | 8.00 | % | ||||
Total
nonperforming loans to total assets
|
6.78 | 6.46 | ||||||
Total
nonperforming assets and troubled debt restructurings to total
assets
|
7.64 | 6.92 |
Securities. The
investment securities portfolio was $14.9 million, or 10.8 % of total assets, at
September 30, 2009. At that date, 69.6% of the investment portfolio
was invested in mortgage-backed securities, while the remainder was invested
primarily in U.S.
Government agency and other debt securities. The portfolio increase was due to
purchases of U.S Government agency bonds.
Table
3: Investment Securities
|
||||||||||||||||
September
30,
|
March
31,
|
|||||||||||||||
2009
|
2009
|
|||||||||||||||
(Dollars
in thousands)
|
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
||||||||||||
Securities
available for sale:
|
||||||||||||||||
Mutual
funds
|
$ | 245 | $ | 254 | $ | 245 | $ | 223 | ||||||||
Total
available for sale
|
245 | 254 | 245 | 223 | ||||||||||||
Securities
held to maturity:
|
||||||||||||||||
U.S.
Government and agency securities
|
4,292 | 4,319 | 2,500 | 2,508 | ||||||||||||
Mortgage-backed
securities
|
10,373 | 10,869 | 11,782 | 12,223 | ||||||||||||
Total
held to maturity
|
14,665 | 15,188 | 14,282 | 14,731 | ||||||||||||
Total
|
$ | 14,910 | $ | 15,442 | $ | 14,527 | $ | 14,954 |
Deposits. Our
deposit base is comprised of demand deposits, money market and passbook accounts
and time deposits. We consider demand deposits and money market and
passbook accounts to be core deposits. We do not have any brokered
deposits. At September 30, 2009, core deposits were 44.3% of total
deposits. Deposits increased $10.9 million, or 9.6%, for the six
months ended September 30, 2009. Certificates of deposit increased $7.4 million
and demand deposits increased $3.5 million.
Table
4: Deposits
|
||||||||||||||||
September
30,
|
March
31,
|
|||||||||||||||
2009
|
2009
|
|||||||||||||||
(Dollars
in thousands)
|
Amount
|
Percent
|
Amount
|
Percent
|
||||||||||||
Noninterest-bearing
demand deposits
|
$ | 2,210 | 1.8 | % | $ | 2,519 | 2.2 | % | ||||||||
Interest-bearing
demand deposits
|
13,553 | 10.9 | 10,036 | 8.8 | ||||||||||||
Savings
and money market accounts
|
39,517 | 31.6 | 39,241 | 34.4 | ||||||||||||
Certificates
of deposit
|
69,627 | 55.7 | 62,187 | 54.6 | ||||||||||||
Total
|
$ | 124,907 | 100.0 | % | $ | 113,983 | 100.0 | % |
Borrowings. In
recent periods, we have occasionally used short-term FHLB advances as an
additional source of liquidity. At September 30, 2009, we had $1.0
million of short-term advances outstanding. During the six month
period, the Bank repaid $2.8 million in maturing borrowings.
13
Results
of Operations for the Six Months Ended September 30, 2009 and 2008
Financial
Highlights. Net loss for the six months ended September 30, 2009 was
$311,000 compared to a net loss of $373,000 from the prior year ended. Net loss
decreased for the six months ended September 30, 2009 from the prior year period
due to improvements in the net interest margin as reflected by the increase in
net interest income and a reduction in noninterest expenses, partially offset by
an increase in the amount of provision for loan losses.
Table
5: Summary Income Statements
|
||||||||||||||||
Six
months ended September 30, (Dollars in thousands)
|
2009
|
2008
|
2009 v. 2008
|
%
Change
|
||||||||||||
Net
interest income
|
$ | 2,083 | $ | 1,713 | 370 | 21.6 | % | |||||||||
Provision
for loan losses
|
805 | 442 | 363 | 82.1 | ||||||||||||
Noninterest
income
|
95 | 117 | (22 | ) | (18.8 | ) | ||||||||||
Noninterest
expenses
|
1,877 | 1,962 | (85 | ) | (4.3 | ) | ||||||||||
Net
income
|
(311 | ) | (373 | ) | 62 | 16.6 | ||||||||||
Return
on average equity (annualized)
|
(5.36 | )% | (5.89 | )% | ||||||||||||
Return
on average assets (annualized)
|
(0.46 | )% | (0.58 | )% |
Net Interest
Income. Net interest income increased $370,000 to $2,083,000
for the six months ended September 30, 2009 from $1,713,000 for the six months
ended September 30, 2008 driven by lower interest expense due to the decreased
interest rates. The 46 basis point increase in the net interest
margin to 3.34% reflected the Bank’s ability to maintain the amount of interest
income recognized while significantly decreasing its cost of
funds. Interest income remained steady due to an increase in
outstanding loans that offset the effect of an increased amount of
non-performing loans. The decrease in the cost of funds was
driven by lower market interest rates as well as the Bank’s determination to not
pay above market rates on deposits.
Average loans in the six months ended
September 30, 2009 increased $7.2 million, or 7.3%,
compared with the same period in 2008, driven by growth in residential
mortgages. Average investment securities in the six months ended
September 30, 2009 decreased $10,000, or 0.10%, compared to the same period in
2008. The reduction in the investment portfolio reflected payments on
mortgage backed securities. Reduction of interest rates on loans and investments
decreased the average yield on earning assets to 5.55% for the six months ended
September 30, 2009, compared with 5.97% for the same period in
2008.
Average interest-bearing deposits in
the six months ended September 30, 2009 increased $ 8.1 million, or 7.4%,
compared with the same period in 2008 due to increases in interest bearing
demand deposits and time deposits. Average time deposits increased as
we promoted select deposit maturities. Decreases in market interest
rates caused the average cost of deposits to drop to 2.28%, compared with 3.34%
for the same period in 2008.
14
Table 6: Analysis of Net
Interest Income
Six months ended September 30, (Dollars in thousands)
|
2009
|
2008
|
2009 v. 2008 |
% Change
|
||||||||||||
Components
of net interest income
|
||||||||||||||||
Loans
|
$ | 3,115 | $ | 3,156 | $ | (41 | ) | (1.3 | )% | |||||||
Investment
securities
|
346 | 394 | (48 | ) | (12.2 | ) | ||||||||||
Total
interest income
|
3,461 | 3,550 | (89 | ) | (2.5 | ) | ||||||||||
Deposits
|
1,363 | 1,837 | (474 | ) | (25.8 | ) | ||||||||||
Borrowings
|
15 |
─
|
15 |
|
||||||||||||
Total
interest expense
|
1,378 | 1,837 | (459 | ) | (25.0 | ) | ||||||||||
Net
interest income
|
2,083 | 1,713 | 370 | 21.6 | ||||||||||||
Average
yields and rates paid
|
||||||||||||||||
Interest-earning
assets
|
5.55 | % | 5.97 | % | (42 |
) bp
|
||||||||||
Interest-bearing
liabilities
|
2.28 | 3.34 | (106 | ) | ||||||||||||
Interest
rate spread
|
3.27 | 2.63 | 64 | |||||||||||||
Net
interest margin
|
3.34 | 2.88 | 46 | |||||||||||||
Average
balances
|
||||||||||||||||
Loans
|
$ | 106,310 | $ | 99,089 | $ | 7,221 | 7.3 | % | ||||||||
Investment
securities
|
14,285 | 14,295 | (10 | ) | (0.1 | ) | ||||||||||
Other
earning assets
|
4,207 | 5,645 | (1,438 | ) | (25.5 | ) | ||||||||||
Interest-bearing
deposits
|
118,285 | 110,155 | 8,130 | 7.4 | ||||||||||||
Borrowings
|
1,776 |
─
|
1,776 |
|
Provision
for Loan Losses. The allowance for loan losses is a valuation
allowance for probable losses inherent in the loan portfolio. We
evaluate the need to establish allowances against losses on loans on a quarterly
basis. When additional allowances are necessary, a provision for loan
losses is charged to earnings. Provisions for loan losses were
$805,000 in the six months ended September 30, 2009 compared to $442,000 in the
six months ended September 30, 2008. We had $997,000 in charge-offs
in the six months ended September 30, 2009, compared to $392,500 in charge-offs
in the same prior year period.
Table
7: Analysis of Loan Loss Experience
|
||||||||
Six
months ended September 30, (Dollars in thousands)
|
2009
|
2008
|
||||||
Allowance
at beginning of period
|
$ | 1,547 | $ | 1,353 | ||||
Provision
for loan losses
|
805 | 442 | ||||||
Total
charge-offs
|
(997 | ) | (393 | ) | ||||
Recoveries
|
1 | 2 | ||||||
Net
charge-offs
|
(996 | ) | (391 | ) | ||||
Allowance
at end of period
|
$ | 1,356 | $ | 1,404 | ||||
Allowance
to nonperforming loans
|
14.5 | % | 40.0 | % | ||||
Allowance
to total loans outstanding at the end of the period
|
1.2 | 1.4 | ||||||
Net
charge-offs (recoveries) to average loans outstanding during the
period
|
0.94 | 0.40 |
Non-Interest
Income. Noninterest income decreased in the six months ended
September 30, 2009 compared to the same period in the prior year primarily as a
result of no rental income from the Cinnaminson office building and a reduction
in miscellaneous other income.
15
Table 8: Noninterest Income Summary
|
||||||||||||||||
Six months ended September 30, (Dollars in thousands)
|
2009
|
2008
|
$ Change
|
% Change
|
||||||||||||
Income
from bank-owned life insurance
|
$ | 6 | $ | 5 | $ | 1 | 20.0 | % | ||||||||
Service
charges
|
70 | 74 | (4 | ) | (5.4 | ) | ||||||||||
Rental
income
|
|
6 | (6 | ) |
|
|||||||||||
Other
|
19 | 32 | (13 | ) | (40.6 | ) | ||||||||||
Total
|
$ | 95 | $ | 117 | $ | (22 | ) | (18.8 | ) |
Non-Interest
Expenses. Noninterest expenses declined in the six months
ended September 30, 2009 over the same period in the prior year due to reduced
professional fees and lower overall data processing costs. The on-line banking
expense is now included in the data processing expense. The combined expense
decreased $48,000 from the prior period, and overall data processing costs
decreased $71,000. The reductions were offset by the $97,000 increase in the
Federal Deposit Insurance premiums. The
increased premiums include a special assessment charged to all FDIC insured
financial institutions. Our charge amount was $62,117.50.
Table 9: Noninterest Expense Summary
|
||||||||||||||||
Six months ended September 30, (Dollars in thousands)
|
2009
|
2008
|
$ Change
|
% Change
|
||||||||||||
Salaries
and employee benefits
|
$ | 944 | $ | 963 | $ | (19 | ) | (2.0 | )% | |||||||
Advertising
|
21 | 29 | (8 | ) | (27.6 | ) | ||||||||||
Office
supplies, telephone and postage
|
69 | 76 | (7 | ) | (9.2 | ) | ||||||||||
Net
occupancy expense
|
342 | 335 | 7 | 2.1 | ||||||||||||
Federal
insurance premiums
|
148 | 51 | 97 | 190.2 | ||||||||||||
Data
processing expenses
|
71 | 65 | 6 | 9.2 | ||||||||||||
ATM
expenses
|
11 | 34 | (23 | ) | (67.6 | ) | ||||||||||
Bank
charges and fees
|
57 | 33 | 24 | 72.7 | ||||||||||||
Insurance
and surety bond premiums
|
33 | 27 | 6 | 22.2 | ||||||||||||
Dues
and subscriptions
|
19 | 24 | (5 | ) | (20.8 | ) | ||||||||||
Professional
fees
|
106 | 201 | (95 | ) | (47.3 | ) | ||||||||||
On-line
banking expenses
|
|
54 | (54 | ) | (100.0 | ) | ||||||||||
Other
|
56 | 70 | (14 | ) | (20.0 | ) | ||||||||||
Total
|
$ | 1,877 | $ | 1,962 | (95 | ) | (4.8 | ) |
Liquidity
and Capital Management
Liquidity
Management. Liquidity is the ability to meet current and
future financial obligations of a short-term nature. Our primary sources of
funds consist of deposit inflows, loan repayments, maturities of and payments on
investment securities and borrowings from the Federal Home Loan Bank of New
York. While maturities and scheduled amortization of loans and
securities are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
We regularly adjust our investments in
liquid assets based upon our assessment of (1) expected loan demand,
(2) expected deposit flows, (3) yields available on interest-earning
deposits and securities and (4) the objectives of our asset/liability management
policy.
Our most liquid assets are cash and
cash equivalents. The levels of these assets depend on our operating,
financing, lending and investing activities during any given
period. At September 30, 2009, cash and cash equivalents totaled $3.6
million. In addition, at September 30, 2009, we had arrangements to
borrow up to $8.5 million from the Federal Home Loan Bank of New
York. On September 30, 2009, we had $1 million in advances
outstanding. During the quarter the Bank did not have any maturing
borrowings.
16
At September 30, 2009, substantially
all of our investment securities were classified as held to
maturity. We have classified our investments in this manner, rather
than as available for sale, because they were purchased primarily to provide a
source of income and not to provide liquidity. We anticipate
that a portion of future investments will be classified as available for sale in
order to give us greater flexibility in the management of our investment
portfolio.
A significant use of our liquidity is
the funding of loan originations. At September 30, 2009, we had $0.8
million in loan commitments outstanding. In addition, we had $6.4
million in unused lines of credit. Historically, many of the lines of
credit expire without being fully drawn; therefore, the total commitment amounts
do not necessarily represent future cash requirements. Another
significant use of our liquidity is the funding of deposit
withdrawals. Certificates of deposit due within one year of September
30, 2009 totaled $45.8 million, or 65.7% of certificates of
deposit. The large percentage of certificates of deposit that mature
within one year reflects customers’ hesitancy to invest their funds for long
periods in the recent low interest rate environment. If these
maturing deposits do not remain with us, we will be required to seek other
sources of funds, including other certificates of deposit and
borrowings. Depending on market conditions, we may be required to pay
higher rates on such deposits or other borrowings than we currently pay on the
certificates of deposit due on or before September 30, 2010. We
believe, however, based on past experience, that a significant portion of our
certificates of deposit will remain with us. We have the ability to
attract and retain deposits by adjusting the interest rates
offered.
Capital
Management. We are subject to various regulatory capital
requirements administered by the Office of Thrift Supervision, including a
risk-based capital measure. The risk-based capital guidelines include
both a definition of capital and a framework for calculating risk-weighted
assets by assigning balance sheet assets and off-balance sheet items to broad
risk categories. At September 30, 2009, we exceeded all of our
regulatory capital requirements. We are considered “well capitalized”
under regulatory guidelines.
Off-Balance
Sheet Arrangements
In the
normal course of operations, we engage in a variety of financial transactions
that, in accordance with generally accepted accounting principles, are not
recorded in our financial statements. These transactions involve, to
varying degrees, elements of credit, interest rate and liquidity
risk. Such transactions are used primarily to manage customers’
requests for funding and take the form of loan commitments and lines of credit.
We currently have no plans to engage in hedging activities in the
future.
For the
six months ended September 30, 2009, we did not engage in any off-balance sheet
transactions reasonably likely to have a material effect on our financial
condition, results of operations or cash flows.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Not applicable as the Company is a
smaller reporting company.
Item
4. Controls and Procedures
The
Company’s management, including the Company’s principal executive officer and
principal financial officer, have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Based upon their evaluation, the principal executive officer
and principal financial officer concluded that, as of the end of the period
covered by this report, the Company’s disclosure controls and procedures were
effective for the purpose of ensuring that the information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms and (2) is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required
disclosure. There have been no changes in the Company’s internal
control over financial reporting identified in connection with the evaluation
required by Rule 13(a)-15(e) that occurred during the Company’s last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
17
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings
Delanco
Bancorp is not involved in any pending legal proceedings. Delanco
Federal Savings Bank is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of
business. Such routine legal proceedings, in the aggregate, are
believed by management to be immaterial to its financial condition and results
of operations.
Item
1A. Risk Factors
There are no material changes from the
risk factors set forth under Part I, Item 1A. “Risk Factors” in the
Company’s Annual Report on Form 10-K for the year ended March 31, 2009,
which could materially and adversely affect the Company’s business, financial
condition or future results. The risks described in the Company’s Annual Report
on Form 10-K are not the only risks that the Company faces. Additional risks and
uncertainties not currently known to the Company or that the Company currently
deems to be immaterial also may materially adversely affect the Company’s
business, financial condition and/or operating results.
Item
2. Unregistered Sales of Equity 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
The
Annual Meeting of Stockholders of the Company was held on August 17,
2009. The results of the vote on the matters presented at the meeting
are as follows:
1. The
following individuals were elected as directors, each for a three-year
term:
Votes for
|
Votes Withheld
|
||
Thomas
J. Coleman, III
|
1,302,704
|
158,483
|
|
Donald
R. Neff
|
1,312,346
|
148,841
|
|
2.
|
The
appointment of Connolly, Grady & Cha, P.C. as auditors for the Company
for the fiscal year ending March 31, 2010 was ratified by stockholders by
the following vote:
|
For:
|
1,419,742
|
Against:
|
40,385
|
Abstain:
|
1,060
|
18
Item
5. Other Information
None.
Item
6. Exhibits
|
3.1
|
Charter
of Delanco Bancorp, Inc. (1)
|
|
3.2
|
Bylaws
of Delanco Bancorp, Inc. (1)
|
|
4.0
|
Stock
Certificate of Delanco Bancorp, Inc.
(1)
|
|
10.1
|
Supervisory
Agreement, dated December 17, 2007, by and between Delanco Federal
Savings Bank and the Office of Thrift Supervision
(2)
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
|
|
32.0
|
Section
1350 Certification
|
|
(1)
|
Incorporated
by reference into this document from the Exhibits filed with the
Securities and Exchange Commission on the Registration Statement on Form
SB-2, and any amendments thereto, Registration No.
333-139339.
|
(2)
|
Incorporated
by reference from Exhibit 99.1 of the Form 8-K filed with the
Securities andExchange Commission on December 20,
2007.
|
19
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
DELANCO
BANCORP, INC.
|
||
Dated:
November 13, 2009
|
By:
|
/s/ James E. Igo
|
James
E. Igo
|
||
President
and Chief Executive Officer
|
||
Dated:
November 13, 2009
|
By:
|
/s/ Eva Modi
|
Eva
Modi
|
||
Chief
Financial Officer
|
20