FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(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, 2005
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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 No. 0-50864
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DSA FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 20-1661802
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
118 Walnut Street, Lawrenceburg, Indiana 47025
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(Address of principal executive office)
Registrant's telephone number, including area code: (812) 537-0940
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of November 9, 2005, the latest practicable date, 1,644,242 shares of the
registrant's common stock, $.01 par value, were issued and outstanding.
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INDEX
Page
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PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Quantitative and Qualitative Disclosures
About Market Risk 12
Controls and Procedures 13
PART II - OTHER INFORMATION 14
SIGNATURES 15
2 of 15
DSA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
SEPTEMBER 30, JUNE 30,
ASSETS 2005 2005
(Unaudited)
Cash and due from banks $ 1,426 $ 3,058
Interest-bearing deposits in other financial institutions 1,600 985
-------- --------
Cash and cash equivalents 3,026 4,043
Certificates of deposit in other financial institutions 31 829
Investment securities designated as available for sale - at market 4,509 4,550
Mortgage-backed securities designated as available for sale - at market 690 835
Loans receivable - net 78,128 76,379
Real estate acquired through foreclosure 60 87
Office premises and equipment - at depreciated cost 1,620 1,635
Stock in Federal Home Loan Bank - at cost 1,151 1,150
Accrued interest receivable on loans 335 337
Accrued interest receivable on investments 44 27
Cash surrender value of life insurance 2,765 1,869
Prepaid expenses and other assets 450 543
Prepaid income taxes - 104
Deferred income taxes 159 141
-------- --------
Total assets $ 92,968 $ 92,529
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 67,362 $ 66,891
Borrowings from the Federal Home Loan Bank 7,000 7,000
Advances by borrowers for taxes and insurance 299 208
Accounts payable on mortgage loans serviced for others 64 67
Accrued interest payable 17 16
Other liabilities 1,152 1,114
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Total liabilities 75,894 75,296
Stockholders' equity
Preferred stock - 1,000,000 shares of $0.01 par value authorized; no shares issued - -
Common stock - 5,000,000 shares of $0.01 par value authorized; 1,644,242 shares
issued and outstanding 16 16
Additional paid-in capital 10,284 10,284
Retained earnings, restricted 7,526 7,660
Accumulated comprehensive income, net of related tax effects 28 53
Shares acquired by stock benefit plans (780) (780)
-------- --------
Total stockholders' equity 17,074 17,233
-------- --------
Total liabilities and stockholders' equity $ 92,968 $ 92,529
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DSA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended September 30,
(Unaudited)
(In thousands, except per share data)
2005 2004
Interest income
Loans $1,182 $ 943
Mortgage-backed securities 7 12
Investment securities 38 62
Interest-bearing deposits and other 42 41
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Total interest income 1,269 1,058
Interest expense
Deposits 424 274
Borrowings 82 52
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Total interest expense 506 326
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Net interest income 763 732
Provision for losses on loans 7 6
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Net interest income after provision
for losses on loans 756 726
Other income
Gain on sale of loans 11 27
Loss on sale of investment securities - (2)
Loss on sale of real estate acquired through foreclosure (3) -
Cash surrender value of life insurance 20 20
Other operating 57 50
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Total other income 85 95
General, administrative and other expense
Employee compensation and benefits 325 303
Occupancy and equipment 38 41
Data processing 34 32
Other operating 134 115
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Total general, administrative and other expense 531 491
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Earnings before income taxes 310 330
Income taxes
Current 114 144
Deferred 1 (22)
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Total income taxes 115 122
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NET EARNINGS $ 195 $ 208
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EARNINGS PER SHARE
Basic and diluted $ 0.12 $ 0.13
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DSA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended September 30,
(Unaudited)
(In thousands)
2005 2004
Net earnings $195 $208
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities during the
period, net of taxes (benefits) of $(18) and $67 during (25) 91
the respective periods
Reclassification adjustment for realized losses included
in earnings, net of tax benefits of $1 in fiscal 2004 - 1
---- ----
Comprehensive income $170 $300
==== ====
Accumulated comprehensive income (loss) $ 28 $(34)
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5 of 15
DSA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended September 30,
(Unaudited)
(In thousands)
2005 2004
Cash flows from operating activities:
Net earnings for the period $ 195 $ 208
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Amortization of discounts and premiums on loans,
investments and mortgage-backed securities - net (3) (5)
Amortization of deferred loan origination fees (1) (13)
Amortization of mortgage servicing rights 11 7
Provision for losses on loans 7 6
Depreciation and amortization 22 25
Loss on sale of real estate acquired through foreclosure 3 -
Loss on sale of investment securities
designated as available for sale - 2
Origination of loans for sale in the secondary market (532) (837)
Proceeds from sale of loans in the secondary market 539 960
Gain on sale of loans (7) (19)
Federal Home Loan Bank stock dividends (1) (12)
Increase in cash surrender value of life insurance (20) (20)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans 2 (46)
Accrued interest receivable on investments (17) (37)
Prepaid expenses and other assets 82 162
Accounts payable on mortgage loans serviced for others (3) (7)
Accrued interest payable 1 -
Other liabilities 27 309
Income taxes
Current 115 127
Deferred 1 (22)
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Net cash provided by operating activities 421 788
Cash flows provided by (used in) investing activities:
Purchase of investment securities designated as available for sale - (492)
Proceeds from sale of investment securities designated as available
for sale - 498
Proceeds from maturity and principal repayments of investment securities - 500
Principal repayments on mortgage-backed securities 143 201
Principal repayments on loans 6,181 6,883
Loan disbursements (7,959) (8,554)
Loans purchased - (582)
Purchase of office premises and equipment (7) (4)
(Increase) decrease in certificates of deposit in other financial institutions 800 (582)
Purchase of life insurance (900) -
Redemption of cash surrender value of life insurance 24 -
Proceeds from sale of real estate acquired through foreclosure 51 -
Improvements to real estate acquired through foreclosure (4) (20)
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Net cash used in investing activities (1,671) (2,132)
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Net cash used in operating and investing activities
(balance carried forward) (1,250) (1,344)
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DSA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the three months ended September 30,
(Unaudited)
(In thousands)
2005 2004
Net cash used in operating and investing activities
(balance brought forward) $(1,250) $ (1,344)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposit accounts 471 (10,339)
Advances by borrowers for taxes and insurance 91 49
Proceeds from issuance of common stock - 7,222
Dividends paid on common stock (329) -
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Net cash provided by (used in) financing activities 233 (3,068)
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Net decrease in cash and cash equivalents (1,017) (4,412)
Cash and cash equivalents at beginning of period 4,043 10,564
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Cash and cash equivalents at end of period $ 3,026 $ 6,152
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ - $ 23
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Interest on deposits and borrowings $ 505 $ 334
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Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ (25) $ 91
======= ========
Recognition of mortgage servicing rights in accordance with
SFAS No. 140 $ 4 $ 8
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Transfers from loans to real estate acquired through foreclosure $ 60 $ -
======= ========
Loans originated upon sale of real estate acquired through foreclosure $ 37 $ -
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DSA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2005 and 2004
1. BASIS OF PRESENTATION
The Board of Directors of Dearborn Mutual Holding Company (the "M.H.C.") adopted
a Plan of Conversion (the "Plan") on December 30, 2003. Pursuant to the Plan,
which was completed effective July 28, 2004, the M.H.C. converted from the
mutual holding company form of organization to the fully public form. The
M.H.C., the mutual holding company parent of Dearborn Financial Corporation,
merged into Dearborn Savings Association F.A. ("Dearborn Savings" or the
"Association"), and as a result the M.H.C. no longer exists. Pursuant to the
Plan, Dearborn Financial Corporation, which owned 100% of Dearborn Savings, was
succeeded by a new Delaware corporation named DSA Financial Corporation ("DSA
Financial" or the "Corporation"). As part of the conversion, the M.H.C.'s
ownership interest, as formerly evidenced by 250,000 shares of Dearborn
Financial Corporation common stock, was sold in a subscription and community
offering and to a newly-formed Employee Stock Ownership Plan. Shares of existing
stockholders of Dearborn Financial Corporation were exchanged for shares of DSA
Financial, pursuant to an exchange ratio of 3.3926-to-one. The offering resulted
in proceeds, net of costs related to the offering, of $7.2 million. Following
the completion of the Plan, DSA Financial had 1,644,242 total shares issued.
Following the completion of the conversion, effective July 28, 2004, all of the
capital stock of Dearborn Savings is held by DSA Financial.
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with accounting
principles generally accepted in the United States of America. Accordingly,
these financial statements should be read in conjunction with the financial
statements and notes thereto of the Corporation for the year ended June 30,
2005. However, in the opinion of management, all adjustments (consisting of only
normal recurring accruals) which are necessary for a fair presentation of the
financial statements have been included. The results of operations for the
three-month period ended September 30, 2005, are not necessarily indicative of
the results which may be expected for the entire fiscal year.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Corporation
and the Association. All intercompany transactions and balances have been
eliminated.
3. EARNINGS PER SHARE
Basic earnings per share is computed based upon the weighted-average common
shares outstanding during the period, less unallocated ESOP shares.
Weighted-average common shares deemed outstanding totaled 1,584,112 and
1,576,366 for the three-month periods ended September 30, 2005 and 2004,
respectively. Weighted-average common shares outstanding for the three months
ended September 30, 2004 have been restated for the effects of the Corporation's
reorganization and related stock offering.
The Corporation had no dilutive or potentially dilutive securities at September
30, 2005 and 2004.
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DSA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended September 30, 2005 and 2004
4. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board (the "FASB") issued a
revision to Statement of Financial Accounting Standards ("SFAS") No. 123 which
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services, primarily on accounting
for transactions in which an entity obtains employee services in share-based
transactions. This Statement, SFAS No. 123 (R) "Share-Based Payment", requires a
public entity to measure the cost of employee services received in exchange for
an award of equity instruments based on the grant-date fair value of the award,
with limited exceptions. That cost will be recognized over the period during
which an employee is required to provide services in exchange for the award -
the requisite service period. No compensation cost is recognized for equity
instruments for which employees do not render the requisite service. Employee
share purchase plans will not result in recognition of compensation cost if
certain conditions are met.
Initially, the cost of employee services received in exchange for an award of
liability instruments will be measured based on current fair value; the fair
value of that award will be remeasured subsequently at each reporting date
through the settlement date. Changes in fair value during the requisite service
period will be recognized as compensation cost over that period. The grant-date
fair value of employee share options and similar instruments will be estimated
using option-pricing models adjusted for the unique characteristics of those
instruments (unless observable market prices for the same or similar instruments
are available). If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the
fair value of the modified award over the fair value of the original award
immediately before the modification.
Excess tax benefits, as defined by SFAS 123(R) will be recognized as an addition
to additional paid-in capital. Cash retained as a result of those excess tax
benefits will be presented in the statement of cash flows as financing cash
inflows. The write-off of deferred tax assets relating to unrealized tax
benefits associated with recognized compensation cost will be recognized as
income tax expense unless there are excess tax benefits from previous awards
remaining in additional paid-in capital to which it can be offset.
Compensation cost is required to be recognized in the first annual period that
begins after December 15, 2005, or July 1, 2006 as to the Corporation. The
Corporation currently has no stock option plans or other instruments that are
subject to the provisions of SFAS No. 123(R). However, management has submitted
a stock option plan to stockholders for a vote at the annual meeting in November
2005. If the plan is approved by the stockholders, the Corporation will be
required to expense stock option grants under the plan pursuant to SFAS No.
123(R).
9 of 15
DSA FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This document contains certain "forward-looking statements" which may be
identified by the use of words such as "believe," "expect," "anticipate,"
"should," "planned," "estimated" and "potential." Examples of forward-looking
statements include, but are not limited to, estimates with respect to our
financial condition, results of operations and business that are subject to
various factors which could cause actual results to differ materially from these
estimates and most other statements that are not historical in nature. These
factors include, but are not limited to, general and local economic conditions,
changes in interest rates, deposit flows, demand for mortgage and other loans,
real estate values, and competition; changes in accounting principles, policies,
or guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting our
operations, pricing products and services.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM JUNE 30, 2005 TO SEPTEMBER 30,
2005
ASSETS. Total assets increased $439,000, or 0.5%, to $93.0 million at September
30, 2005, from June 30, 2005. The increase in assets resulted from a $1.7
million increase in loans, net to $78.1 million at September 30, 2005 from $76.4
million at June 30, 2005, partially offset by a $1.0 million decrease in cash
and cash equivalents, to $3.0 million at September 30, 2005 from $4.0 million at
June 30, 2005 and a $798,000 decrease in certificates of deposit in other
financial institutions, to $31,000 at September 30, 2005 from $829,000 at June
30, 2005. The decrease in certificates of deposit and interest-bearing deposits
resulted from our funding loan originations with proceeds from maturities of
$798,000 and cash invested in overnight funds. The increase in loans reflected
increases in one- to four-family, construction and nonresidential real estate
and land loans. We have opted to retain a majority of our recently originated
fixed-rate one- to four-family residential real estate loans in our portfolio
due to our strong capital position. In addition, we maintain construction loans,
nonresidential real estate and land loans in our portfolio because they are
originated at favorable rates of interest compared to one-to four-family
residential real estate loans and assist us in managing interest rate risk.
LIABILITIES. Total liabilities increased $598,000, or 0.8%, to $75.9 million at
September 30, 2005 from $75.3 million at June 30, 2005. The increase in
liabilities primarily reflects a $471,000, or 0.7%, increase in deposits, to
$67.4 million at September 30, 2005 from $66.9 million at June 30, 2005. The
increase in deposits resulted primarily from an increase of $2.0 million in
certificates of deposit, as customers took advantage of higher rates on time
deposits, partially offset by decreases in passbook and demand accounts.
STOCKHOLDERS' EQUITY. Stockholders' equity decreased $159,000 to $17.1 million
at September 30, 2005, reflecting a $25,000 increase in unrealized losses on
securities available for sale coupled with dividends paid of $329,000, partially
offset by net earnings of $195,000.
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30,
2005 AND 2004
GENERAL. Net earnings decreased $13,000, or 6.3%, to $195,000 for the three
months ended September 30, 2005, from $208,000 for the three months ended
September 30, 2004. The decrease resulted primarily from a decrease in gain on
sale of loans of $16,000 and a $40,000 increase in general, administrative and
other expense, partially offset by a $31,000 increase in net interest income.
During the three months ended September 30, 2005 and 2004, all significant
elements of income or expense arose from our continuing operations.
10 of 15
DSA FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30,
2005 AND 2004 (continued)
INTEREST INCOME. Interest income was $1.3 million for the three months ended
September 30, 2005, an increase of $211,000, or 19.9%, over $1.1 million for the
three months ended September 30, 2004. Material changes occurred in interest
income on loans and to a lesser extent in interest income on investment
securities.
Interest income on loans increased $239,000, or 25.3%, to $1.2 million for the
three months ended September 30, 2005 from $943,000 for the three months ended
September 30, 2004. The increase was due primarily to a $16.2 million, or 26.7%,
increase in the average balance of loans outstanding, partially offset by a
decrease of seven basis points in the average yield, to 6.15% for the three
months ended September 30, 2005, from 6.22% for the three months ended September
30, 2004.
Interest income on investment securities decreased by $24,000, or 38.7%, due
primarily to a $2.8 million, or 38.7%, decrease in the average outstanding
balance.
INTEREST EXPENSE. Interest expense increased $180,000, or 55.2%, to $506,000 for
the three months ended September 30, 2005 from $326,000 for the three months
ended September 30, 2004. The increase in interest expense resulted from a
$150,000 increase in interest expense on deposits and a $30,000 increase in
interest expense on borrowed money.
Interest expense on deposits increased $150,000, or 54.7%, to $424,000 for the
three months ended September 30, 2005 from $274,000 for the three months ended
September 30, 2004. The increase was due to an increase in the average rate paid
on deposits to 2.42% for the three months ended September 30, 2005 from 1.69%
for the same period in 2004, and an increase in the average balance of deposits
outstanding of $5.4 million, or 8.3%. The single most contributing factor were
the changes in certificates of deposit. The average balance increased $9.3
million, or 29.0%, and the average rate paid increased 80 basis points, to 3.24%
for the three months ended September 30, 2005 from 2.44% for the three months
ended September 30, 2004. The average balance of passbook accounts decreased by
$4.2 million, or 20.5%, while the average cost of passbook accounts increased by
57 basis points to 1.77% for the period.
Interest expense on borrowings increased $30,000, or 57.7%, to $82,000 for the
three months ended September 30, 2005 from $52,000 for the three months ended
September 30, 2004. The increase was due to an increase in the average rate paid
on borrowings to 4.68% for the three months ended September 30, 2005 from 4.15%
for the same period in 2004, and an increase in the average balance of
borrowings outstanding of $2.0 million, or 39.7%.
NET INTEREST INCOME. The foregoing changes in our interest income and our
interest expense resulted in a $31,000, or 4.2%, increase in net interest
income, to $763,000 for the three months ended September 30, 2005, from $732,000
for the three months ended September 30, 2004. Our interest rate spread
decreased to 3.25% in the 2005 quarter from 3.57% in the 2004 quarter and our
net interest margin decreased to 3.53% during the 2005 quarter from 3.76% during
the 2004 quarter, while average net interest-earning assets increased to $9.3
million for the three months ended September 30, 2005 from $8.1 million for the
three months ended September 30, 2004.
PROVISION FOR LOSSES ON LOANS. We establish provisions for losses on loans,
which are charged to operations, at a level necessary to absorb known and
inherent losses that are both probable and reasonably estimable at the date of
the financial statements. Management made provisions of $7,000 and $6,000 for
the three months ended September 30, 2005 and 2004, respectively. We used the
same methodology and generally similar assumptions in assessing the allowance
for both periods. The allowance for loan losses was $360,000, or 0.43%, of gross
loans outstanding at September 30, 2005, as compared with $362,000, or 0.45%, of
gross loans outstanding at June 30, 2005. The level of the allowance is based on
estimates, and ultimate losses may vary from the estimates.
11 of 15
DSA FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30,
2005 AND 2004 (continued)
PROVISION FOR LOSSES ON LOANS (CONTINUED). Determining the amount of the
allowance for loan losses necessarily involves a high degree of judgment.
Management reviews the level of the allowance on a quarterly basis, at a
minimum, and establishes the provision for losses on loans based on the
composition of the loan portfolio, delinquency levels, loss experience, economic
conditions, and other factors related to the collectibility of the loan
portfolio. Nonperforming loans totaled $296,000, or 0.38% of total loans at
September 30, 2005, compared to $77,000, or 0.10% of total loans at June 30,
2005. The provision for the three months ended September 30, 2005 was predicated
primarily upon growth in the overall loan portfolio.
Although we believe that we use the best information available to establish the
allowance for loan losses, future additions to the allowance may be necessary
based on estimates that are susceptible to change as a result of changes in
economic conditions and other factors. In addition, the Office of Thrift
Supervision, as an integral part of its examination process, periodically
reviews our allowance for loan losses. The Office of Thrift Supervision may
require us to recognize adjustments to the allowance based on its judgment
regarding the adequacy of our allowance for loan losses at the time of its
examination.
OTHER INCOME. Other income decreased $10,000, or 10.5%, to $85,000 for the three
months ended September 30, 2005 from $95,000 for the three months ended
September 30, 2004. A decrease of $16,000 in gain on sale of loans, to $11,000
for the three months ended September 30, 2005, from $27,000 for the three months
ended September 30, 2004, was partially offset by a $7,000 increase in other
operating income for the three-month period ended September 30, 2005. We sold
$532,000 of loans during the three months ended September 30, 2005 compared to
$941,000 of such sales during the three months ended September 30, 2004,
resulting from our retaining one- to four-family residential loans in our
portfolio during the current period, as discussed above.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and other
expense increased $40,000, or 8.1%, to $531,000 for the three months ended
September 30, 2005 from $491,000 for the three months ended September 30, 2004.
The increase resulted, in part, due to a $22,000, or 7.3%, increase in employee
compensation and benefits expense, to $325,000 for the three months ended
September 30, 2005 from $303,000 for the three months ended September 30, 2004.
This increase resulted primarily from an increase in health insurance premiums
and a $9,000 increase in expense related to the ESOP plan. In addition, other
operating expense increased $19,000, or 16.5%, to $134,000 for the three-month
period ended September 30, 2005 from $115,000 for the three-month period ended
September 30, 2004. The increase resulted from an increase in ATM charges,
increased advertising expenditures, legal fees, and costs associated with
becoming a publicly traded company.
INCOME TAXES. The provision for income taxes was $115,000 for the three months
ended September 30, 2005 and $122,000 for the three months ended September 30,
2004, reflecting effective tax rates of 37.1% and 37.0%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation has entered into a contract with a builder providing for the
construction of a new headquarters for DSA Financial Corporation. The building
will be constructed on land previously acquired in Lawrenceburg, Indiana at the
intersection of U.S. Route 50 and Indiana Route 48. Management currently expects
to occupy approximately seventy percent of the building and lease the remainder.
The space occupied by the Corporation will include full service banking
facilities, as well as administrative offices. Construction is expected to begin
in December 2005 and conclude by July 2006. Management has estimated costs of
construction, equipment and furnishings to amount to $1.9 million.
There were no other material changes to the Corporation's liquidity and capital
resources since that disclosed in the Corporation's Form 10-KSB as of June 30,
2005.
12 of 15
DSA FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
ITEM 3 CONTROLS AND PROCEDURES
The Corporation's Chief Executive Officer and Chief Financial Officer evaluated
the disclosure controls and procedures (as defined under Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of
the period covered by this quarterly report. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
Corporation's disclosure controls and procedures are effective.
There were no changes in the Corporation's internal controls over financial
reporting that have materially affected, or were reasonably likely to materially
affect, these controls subsequent to the date of their evaluation by the
Corporation's Chief Executive Officer and Chief Financial Officer.
13 of 15
DSA FINANCIAL CORPORATION
PART II
ITEM 1. LEGAL PROCEEDINGS
Not applicable
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
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
EX-31.1 Certification of Chief Executive Officer pursuant to
Rule 13(a) or 15(d)
EX-31.2 Certification of Chief Financial Officer pursuant to
Rule 13(a) or 15(d)
EX-32.1 Section 1350 Certification of the Chief Executive Officer
EX-32.2 Section 1350 Certification of the Chief Financial Officer
14 of 15
DSA FINANCIAL CORPORATION
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 10, 2005 By: /s/ Edward L. Fischer
--------------------------- -------------------------------------
Edward L. Fischer
President and Chief Executive Officer
Date: November 10, 2005 By: /s/ Steven R. Doll
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Steven R. Doll
Chief Financial Officer
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