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United States Securities and Exchange Commission
Washington, D. C. 20549
FORM 10 - QSB
(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, 1999
[ ] Transition Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from ________ to _________
Commission File Number: 0-28032
PATAPSCO BANCORP, INC.
(Exact Name of Small Business Issuer as Specified
in its Charter)
MARYLAND 52-1951797
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1301 Merritt Boulevard, Dundalk, Maryland 21222-2194
-----------------------------------------------------
(Address of Principal Executive Offices)
(410) 285-1010
Registrant's Telephone Number, Including Area Code
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act 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 The issuer has not been subject to such
--- --- filing requirements for the past 90 days.
As of October 25, 1999, the issuer had 338,695 shares of
Common Stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
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CONTENTS
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Statements of Financial Condition at
September 30, 1999 and June 30, 1999 3
Consolidated Statements of Income for the
Three-Month Periods Ended September
30, 1999 and 1998 4
Consolidated Statements of Comprehensive
Income for the Three-Month Periods
Ended September 30, 1999 and 1998 5
Consolidated Statements of Cash Flows
for the Three-Month Periods Ended
September 30, 1999 and 1998 6
Notes to Financial Statements 7
Item 2. Management's discussion and analysis
or plan of operations 8
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security-Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
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PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
Assets 1999 1999
------ --------------- --------------
<S> <C> <C>
Cash:
On hand and due from banks $ 1,983,651 $ 1,601,598
Interest bearing deposits in other banks 1,597,868 2,170,254
Federal funds sold 1,595,529 5,580,098
Investment securities, at fair value 208,353 213,761
Mortgage-Backed Securities, at fair value 4,770,280 4,879,359
Loans receivable, net 80,770,405 77,777,163
Investment in securities required by law, at cost 800,850 800,850
Property and equipment, net 1,048,291 1,052,618
Deferred income taxes 421,448 441,000
Accrued interest, prepaid expenses and other assets 841,257 811,660
----------- -----------
Total assets $94,037,933 $95,328,361
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Savings deposits:
Interest bearing deposits $65,700,687 $66,792,156
Non interest bearing deposits 3,237,580 2,879,263
Borrowings 13,900,000 13,900,000
Accrued expenses and other liabilities 1,940,638 2,539,082
----------- -----------
Total liabilities 84,778,905 86,110,501
Stockholders' equity:
Common stock $0.01 par value: authorized 4,000,000
shares: issued and outstanding 341,900 and
344,426 shares, respectively 3,419 3,445
Additional paid-in capital 1,812,621 1,888,962
Contra equity - Employee stock ownership plan (325,100) (325,100)
Contra equity - Management recognition plan (257,095) (257,095)
Retained income, substantially restricted 8,162,775 8,017,059
Unrealized net holding losses on available-for-sale
portfolios, net of taxes (137,592) (109,411)
----------- -----------
Total stockholders' equity 9,259,028 9,217,860
----------- -----------
Total liabilities and stockholders'
equity $94,037,933 $95,328,361
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
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PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
SEPTEMBER 30
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Interest income:
Loans receivable $1,713,703 $1,618,287
Mortgage-backed securities 84,717 -
Investment securities - 86,821
Federal funds sold and other
investments 92,512 84,302
---------- ----------
Total interest income 1,890,932 1,789,410
---------- ----------
Interest expense:
Savings deposits 653,727 700,054
Borrowings 202,323 148,127
---------- ----------
Total interest expense 856,050 848,181
---------- ----------
Net interest income 1,034,882 941,229
Provision for losses on loans 80,000 60,000
---------- ----------
Net interest income after
provision for losses on
loans 954,882 881,229
Noninterest income:
Fees and service charges 62,159 55,540
Net gain (loss) on sales of securities - -
Other 4,534 2,719
---------- ----------
Total noninterest income 66,693 58,259
---------- ----------
Noninterest expenses:
Compensation and employee benefits 436,793 438,181
Insurance premiums 16,224 17,801
Professional fees 35,644 30,060
Equipment expense 41,025 28,886
Net occupancy costs 21,100 24,210
Advertising 6,703 11,644
Data processing 45,040 30,780
Other 95,809 107,304
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Total noninterest expense 698,339 688,866
---------- ----------
Income before provision for
income taxes 323,236 250,622
Provision for income taxes 125,646 92,759
---------- ----------
Net Income $ 197,590 $ 157,863
========== ==========
Basic earnings per share $ 0.62 $ 0.48
========== ==========
Diluted earnings per share 0.58 0.46
</TABLE>
See accompanying notes to financial statements.
4
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PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
SEPTEMBER 30
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Net income $ 197,590 $157,863
Other comprehensive income, net of tax:
Unrealized net holding (losses)/gains on
available-for-sale portfolios (137,592) (19,202)
---------- --------
Comprehensive income $ 59,700 $138,661
========== ========
</TABLE>
See accompanying notes to financial statements.
5
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PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
SEPTEMBER 30
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 197,590 $ 157,863
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 34,181 29,427
Provision for losses on loans 80,000 60,000
Non-cash compensation under stock-based
benefit plans 55,287 -
Amortization of premiums and discounts, net 1,417 509
Deferred loan origination fees, net of costs (4,965) (20,646)
Change in deferred income taxes 34,106 (10,957)
(Increase) Decrease in Income Taxes payable 133,909
(Increase) in accrued interest on investments,
prepaid expenses and other assets 62,697 (28,422)
Decrease in accrued expenses and other liabilities (1,136,305) (1,019,440)
----------- -----------
Net cash used in operating activities (542,083) (831,666)
----------- -----------
Cash flows from investing activities:
Loan principal disbursements, net of repayments (3,054,194) (2,128,986)
Purchase of loans - (730,000)
Purchase of property and equipment (29,854) (15,162)
Principal repayment on mortgage-backed securities
available-for-sale 68,036 -
Principal repayment on investment securities
available-for-sale - -
----------- -----------
Net cash used in investing activities (3,016,012) (2,874,148)
Cash flows from financing activities:
Net decrease in deposits (733,152) (1,722,831)
Stock repurchase (108,251) -
Purchase of common stock for stock-based benefit plans - (36,166)
Dividends paid (39,774) (36,255)
Increase in Checks written in excess of bank balance 264,360 -
(Decrease) increase in borrowings - (800,000)
----------- -----------
Net cash (used in) provided by financing
activities (616,817) (2,595,252)
----------- -----------
Net (decrease) increase in cash and cash equivalents $(4,174,912) $(6,301,066)
Cash and cash equivalents at beginning of period 9,351,960 8,538,420
----------- -----------
Cash and cash equivalents end of period $ 5,177,048 $ 2,237,354
=========== ===========
Supplemental information:
Interest paid on deposits and borrowed funds 856,050 847,125
Income taxes paid 0 166,500
=========== ===========
</TABLE>
See accompanying notes to financial statements.
6
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PATAPSCO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: Principles of Consolidation
The consolidated financial statements include the accounts of
Patapsco Bancorp, Inc. ("the Company") and its wholly-owned
subsidiary, The Patapsco Bank ("the Bank"). All intercompany
accounts and transactions have been eliminated in the
accompanying consolidated financial statements.
NOTE 2: The Patapsco Bank
The Bank is regulated by The Federal Reserve Bank of Richmond
("the Federal Reserve Bank") and The State of Maryland. The
primary business of the Bank is to attract deposits from
individual and corporate customers and to originate residential
and commercial mortgage loans, consumer loans and commercial
business loans. The Bank competes with other financial and
mortgage institutions in attracting and retaining deposits and
originating loans. In October, 1998 the Bank created a leasing
company called Prime Business Leasing, Inc. The Bank conducts
operations through one office located at 1301 Merritt Boulevard,
Dundalk, Maryland 21222.
NOTE 3: Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with instructions for Form
10-QSB and therefore, do not include all disclosures necessary
for a complete presentation of the statements of condition,
statements of operations and statements of cash flows in
conformity with generally accepted accounting principles.
However, all adjustments which are, in the opinion of
management, necessary for the fair presentation of the interim
financial statements have been included. Such adjustments were
of a normal recurring nature. The results of operations for the
three and three months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for
the entire year.
NOTE 4: Cash and Cash Equivalents
Cash equivalents include short-term investments which consists
of Federal funds sold. Cash equivalents and other liquidity and
short-term investments are carried at cost, which approximates
market value.
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NOTE 5: Regulatory Capital Requirements
At September 30, 1999, the Bank met each of the three minimum
regulatory capital requirements. The following table summarizes
the Bank's regulatory capital position at September 30, 1999 (in
thousands).
<TABLE>
<CAPTION>
Well Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
----------------- ------------------- --------------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk
Weighted Assets) $ 8,937 15.28% $ 4,678 8.00% $ 5,848 10%
Tier 1 Capital (to Risk
Weighted Assets) $ 8,276 14.15% $ 2,339 4.00% $ 3,509 6%
Tier 1 Capital (to
Average Assets) $ 8,276 8.79% $ 3,765 4.00% $ 4,706 5%
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
When used in this Form 10-QSB, the words or phrases "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 certain risks and uncertainties
including changes in economic conditions in the Company's market
area, changes in policies by regulatory agencies, fluctuations
in interest rates, demand for loans in the Company's market
area, and competition that could cause actual results to differ
materially from historical earnings and those presently
anticipated or projected. The Company wishes to caution readers
not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The Company
wishes to advise readers that the factors listed above could
affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially
from any opinions or statements expressed with respect to future
periods in any current statements.
The Company does not undertake, and specifically disclaims
any obligation, to publicly release the result of any revisions
which may be made to any forward-looking statements to reflect
events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.
YEAR 2000 COMPUTER READINESS DISCLOSURE
The following information constitutes "Year 2000 readiness
Disclosure" under the Year 2000 Information and Readiness
Disclosure Act.
A great deal of information has been disseminated about the
global computer crash that may occur in the year 2000. Many
computer programs that can only distinguish the final two digits
of the year entered (a common programming practice in earlier
years) are expected to read entries for the year 2000 as the
year 1900 and compute payment, interest or delinquency based on
the wrong date or are expected to be unable to compute payment,
interest or delinquency. Rapid and accurate data processing is
essential to the operations of the Company. Data processing is
also essential to most other financial institutions and many
other companies.
All of the material data processing of the Company that could
be affected by this problem is provided by a third party service
bureau. Management closely monitors the progress of the service
bureau in resolving this potential problem and reports the
status of the service bureau's progress to the Company's Audit
Committee on a quarterly basis. This service bureau has advised
the Company that testing of internal mission-critical systems
was substantially complete as of December 31, 1998 and it is
currently developing and testing contingency plans. However, if
the service bureau is unable to resolve this potential problem
in time, the Company would seek to retain a replacement service
bureau and would likely experience significant data processing
delays, mistakes or failures. These delays, mistakes or failures
could have a significant adverse impact on the financial
condition and results of
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operation of the Company. Our contingency plan addresses
alternative methods to provide basic services to our customers.
The Company estimates costs related to the year 2000 are less
than $25,000.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1999 AND JUNE
30, 1999
The Company's assets decreased by $1.2 million, or 1.35% to
$94.0 million at September 30, 1999 from $95.3 million at June
30, 1999. The decrease in the Company's assets during the three
months ended September 30, 1999 was primarily due to the Company
utilizing low yielding cash to fund $2.9 million in net loan
growth, $733,000 in deposits outflows and $875,000 in
disbursements from loan escrow accounts. The Company's net loans
receivable increased by $2.9 million or 3.8% to $80.7 million at
September 30, 1999 from $77.8 million at June 30, 1999. The
increase in net loans receivable was comprised of $1.7 million
in commercial equipment leases, $1.0 million in commercial real
estate loans, $0.8 million in commercial loans, $0.3 million in
consumer loans and decreases of $0.6 million in residential real
estate loans and $0.3 million in construction loans.
Deposits decreased by $733,000 or by 1.0% to $68.9 million
at September 30, 1999 from $69.7 million at June 30, 1999. The
decrease in deposits was largely attributable to the decrease of
$1.1 million in interest-bearing deposits consisting of
primarily higher yielding certificate of deposit accounts.
Noninterest-bearing deposits increased by $360,000 during the
three months ended September 30, 1999.
The Company's stockholders' equity increased by $41,000 to
$9.3 million at September 30, 1999 from $9.2 million at June 30,
1999. In July 1999 the Company initiated a 5% (17,221 shares)
stock repurchase program of which 4,225 shares had been
repurchased as of September 30, 1999 at a cost of $108,251.
COMPARISON OF OPERATING RESULTS FOR THE QUARTER ENDED SEPTEMBER
30, 1999 AND SEPTEMBER 30, 1998
Net Income
- ----------
The Company's net income increased by $40,000 or 25.2% to
$197,600 for the quarter ended September 30, 1999 from $157,900
for the quarter ended September 30, 1998. The increase in the
Company's net income during the three-month period was primarily
due to a $94,000 increase in net interest income partially
offset by a $20,000 higher provision for loan loss expense.
Noninterest income and noninterest expense increased by $8,000
and $9,000, respectively in the quarter ended September 30, 1999
over the quarter ended September 30, 1998.
Interest Income
- ---------------
Total interest income increased by $102,000 or 5.7% to $1.89
million for the quarter ended September 30, 1999 from $1.79
million for the quarter ended September 30, 1998. The increases
in interest income resulted primarily from the growth in the
Company's loan portfolio that was funded from cash from lower
yielding investments in overnight federal funds. The Company's
average yield on interest-earning assets increased by 2 basis
points during the three-month period ended September 30, 1999 as
compared to the 8.14% for the three-month period ended September
30, 1998. The average balance of interest-earning assets
increased by $4.0 from September 30,1998 to September 30, 1999.
Interest income on loans receivable increased by $95,000 or
5.9% to $1.7 million for the quarter ended September 30, 1999
from $1.6 million for the quarter ended September 30, 1998. The
increase in interest income on loans receivable during the
three-month period is due to both an increase in the average
balance of loans receivable and an increase in the average yield
on the loan portfolio. During the three months ended September
30, 1999 as compared to the same period ended September 30, 1998
the average loans receivable balance increased by $2.1 million
or 2.7% to $79.7 million from $77.5 million and the average
yield increased by 19 basis points to 8.54% from 8.35%.
Interest Expense
- ----------------
Total interest expense increased by $8,000 or 1.0% to
$856,000 for the quarter ended September 30, 1999 from $848,000
for the quarter ended September 30, 1998. The increase in
interest expense during the comparable quarter was primarily due
to the increase in interest expense on borrowed money exceeding
the decrease in interest expense on deposits.
Interest expense on deposits decreased by $46,000 or 6.6% to
$654,000 for the quarter ended September 30, 1999 from
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$700,000 for the quarter ended September 30, 1998. The decrease
in interest expense on deposits s was primarily attributable to
a decrease in the average rate by 30 basis points to 3.88% from
4.19%. The Company has directed it's marketing effort towards
attracting lower interest-bearing transaction type deposits and
noninterest-bearing deposits while allowing higher priced
deposits to mature rather than pay above market rates.
Interest expense on borrowings from the Federal Home Loan
Bank of Atlanta increased by $54,000 or 36.50% to $202,000 for
the quarter ended September 30, 1999 from $148,000 for the
quarter ended September 30, 1998. The increase was primarily
attributable to an increase of $4.2 million in the average
balance of outstanding balances.
Net Interest Income
- -------------------
The Company's net interest income increased by $94,000 or
9.9% to $1.0 million for the quarter ended September 30, 1999
from $941,000 for the quarter ended September 30, 1998. The
increase in net interest income during the comparable three-
month period was primarily due to the 27 basis point increase in
the net interest margin to 4.53% from 4.27%.
Average Balance Sheet
- ---------------------
The following table sets forth certain information relating to
the Company's average interest-earning assets and interest-
bearing liabilities and reflects the average yield on
assets and average cost of liabilities for the periods and at
the date indicated. Dividing income or expense by the average
daily balance of assets or liabilities, respectively, derives
such yields and costs for the periods presented. Average
balances are derived from daily balances.
The table also presents information for the periods indicated
with respect to the institution's net interest margin, which is
net interest income divided by the average balance of interest
earning assets. This is an important indicator of commercial
bank profitability. The net interest margin is affected by
yields on interest earning assets, the costs of interest bearing
liabilities and the relative amounts of interest earning assets
and interest bearing liabilities. Another indicator of an
institution's net interest income is the interest rate spread or
the difference between the average yield on interest earning
assets and the average rate paid on interest bearing
liabilities.
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<TABLE>
<CAPTION>
Three Months Ended September 30, (1)
----------------------------------------------------------------------
1999 1998
--------------------------- --------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (2) $79,655 $1,714 8.54% $77,533 $1,618 8.35%
Investment securities -- -- -- 5,014 87 6.94%
Mortgage-backed securities 4,870 85 6.90% -- -- --
Federal funds sold and other
interest-earning assets 7,599 93 4.83% 5,607 84 5.99%
------- ----- ---- ------- ----- ----
Total interest earning assets 92,125 1,891 8.14% 88,154 1,789 8.12%
----- ---- ----- ----
Noninterest-earning assets 2,293 1,783
------- -------
Total assets $94,418 $89,937
======= =======
Interest-bearing liabilities:
Interest-bearing deposits (3) $66,871 $ 654 3.88% $67,000 $ 700 4.18%
Borrowings 13,900 202 5.71% 9,671 148 6.12%
------- ------ ---- ------- ------ ----
Total interest-bearing liabilities 85,035 856 4.20% 76,671 848 4.42%
------ ---- ------ ----
Noninterest-bearing liabilities 4,264 4,095
------- -------
Total liabilities 80,420 80,766
Stockholders' equity 9,383 9,171
------- -------
Total liabilities and stockholders'
equity $94,418 $89,937
======= =======
Net interest income $1,035 $ 941
====== ======
Interest rate spread 3.94% 3.69%
====== ======
Net yield on interest-earning assets 4.53% 4.27%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 114.06% 114.98%
====== ======
<FN>
___________
(1) Yields and rates are annualized.
(2) Includes nonaccrual loans.
(3) Includes interest-bearing escrow accounts.
</FN>
</TABLE>
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Provision For Loan Losses
- -------------------------
Provision for Loan losses. The allowance for loan losses is a
valuation reserve established by management in an amount it
deems adequate to provide for losses in the loan portfolio.
Provisions for loan losses are charged to earnings in order to
maintain the total allowance for loan losses at a level
considered adequate by management to provide for probable loan
losses. Management assesses the adequacy of the allowance for
loan losses based on a number of factors including, among
others: lending risks associated with new products and markets,
loss allocations for specific problem credits, the level of the
allowance to nonperforming loans, historical loss experience,
economic conditions, portfolio trends and credit concentrations
and management's judgment with respect to current and expected
economic conditions and their impact on the existing loan
portfolio.
The provision for loan losses was $80,000 in quarter ended
September 30, 1999, an increase of $20,000 or 33% from the
quarter ended September 30, 1998 provision of $60,000. The
Company has increased the allowance for loan losses as a
percentage of total loans outstanding to 0.80% at June 30, 1999
from 0.72% at June 30, 1998 as a result of the greater inherent
risk in the loan portfolio caused by the shift in the loan
portfolio from single-family mortgage loans to commercial real
estate, commercial business, consumer and construction loans.
The Company's allowance for loan losses as a percentage of loans
outstanding was 0.81% at September 30, 1999 as compared to 0.73%
at September 30, 1998.
Noninterest Income
- ------------------
The Company's noninterest income consists of deposit fees,
service charges, late fees and gains and losses on sales of
securities and loans. Total noninterest income increased by
$8,400 or 14.5% to $67,000 for the quarter ended September 30,
1999 from $5,800 for the quarter ended September 30, 1998. The
increase in noninterest income is primarily the result of the
higher balance and number of checking accounts. These types of
deposit accounts typically generate more fee income for the
Company than other deposit account types.
Noninterest Expenses
- --------------------
Total noninterest expenses increased by $9,500 or 1.4% to
$698,000 for the quarter ended September 30, 1999 from $689,000
for the quarter ended September 30, 1998. The increase in
operating expenses primarily resulted from increases in data
processing, $14,000 or 46% and equipment expenses, $12,000 or
42% in the quarter ended September 30, 1999 from the quarter
ended September 30, 1998. These increases were somewhat offset
by decreases in other operating expenses, advertising, occupancy
costs, insurance premiums and compensation and benefits.
Liquidity and Capital Resources
- -------------------------------
An important component of the Company's asset/liability
structure is the level of liquidity available to meet the needs
of customers and creditors. The Company's Asset/Liability
Management Committee has established general guidelines for the
maintenance of prudent levels of liquidity. The Committee
continually monitors the amount and source of available
liquidity, the time to acquire it and its cost. Management of
the Company seeks to maintain a relatively high level of
liquidity in order to retain flexibility in terms of investment
opportunities and deposit pricing. Because liquid assets
generally provide lower rates of return, the Company's
relatively high liquidity will, to a certain extent,
result in lower rates of return on assets.
The Company's most liquid assets are cash on hand,
interest-bearing deposits and Federal funds sold, which are
short-term, highly liquid investments with original maturities
of less than three months that are readily convertible to known
amounts of cash. The levels of these assets are dependent on the
Company's operating, financing and investing activities during
any given period. At September 30, 1999, the Company's cash on
hand, interest-bearing deposits and Federal funds sold totaled
$5.2 million. In addition, the Company has approximately $5.0
million of investment securities classified as
available-for-sale.
The Company anticipates that it will have sufficient funds
available to meet its current loan commitments of $2.6 million.
Certificates of deposits that are scheduled to mature in less
than one year at September 30, 1999 totaled $32.1 million.
Historically, a high percentage of maturing deposits have
remained with the Company.
The Company's primary sources of funds are deposits and
proceeds from maturing investment securities and
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mortgage-backed securities and principal and interest payments
on loans. While maturities and scheduled amortization of
mortgage-backed securities and loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions,
competition and other factors.
The Company's primary uses of cash in investing activities
during the three months ended September 30, 1999 were loan
principal disbursements and purchases, net of repayments, of
$3.1 million. The Company's primary sources of cash provided
from investing activities during the three months ended
September 30, 1999 was the $68,000 principal payment on the
mortgage-backed security.
The Company's primary use of cash in financing activities
during the three months ended September 30, 1999 consisted of
$733,000 decrease in deposits and the repurchase of stock and
payment of cash dividends of $148,000.
As discussed in Note 5 - Regulatory Capital Requirements, the
Company and the Bank exceeded all regulatory minimum capital
requirements.
ACCOUNTING PRONOUNCEMENTS WITH FUTURE EFFECTIVE DATES
SFAS no. 132, "Employers' Disclosures About Pensions and
Other Postretirement Benefits" was issued in February 1998.
This statement standardizes the disclosure requirements for
pensions and other postretirement benefits r to the extent
practicable. The Statement, which is effective for fiscal
years beginning after July 1, 1998 will not effect the Company's
financial position or its results of operations.
SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" was issued in June 1998.. The Statement
standardizes the accounting for derivative instruments,
including certain derivative instruments embedded in other
contracts, by requiring that an entity recognize these items as
assets or liabilities in the statement of financial position and
measure them at fair value. This Statement generally provides
for matching the timing of gain or loss recognition on the
hedging instrument which the recognition of the changes in the
fair value of the hedged asset or liability that are
attributable to the hedged risk or the earnings effect of the
hedged forecasted transaction. The Statement, which is
effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999, will not affect the Company's
financial position or its results of operations.
Statement of Position ("SOP") 98-5, "Reporting the Costs of
Start-Up Activities." This Statement provides guidance on the
financial reporting of start-up cost and organizational cost.
It requires costs of start-up activities and organization cost
to be expensed as incurred. The "SOP" also requires that
initial application to be reported as a cumulative effect of a
change in accounting principals. This "SOP" which is effective
for fiscal years beginning after December 15, 1998 will not
affect the Company's financial position or results of
operations.
13
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and use of proceeds.
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security-Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed herewith:
Exhibit 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. During the quarter, the Company filed
one Current Report on Form 8-K. In that current report on Form
8-K, dated July 21, 1999, the Company announced under Item 5
that it was commencing a stock repurchase program to acquire up
to 17,000 shares of its common stock, representing approximately
5% of the outstanding common stock of the Company.
14
<PAGE>
<PAGE>
Signatures
In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
PATAPSCO BANCORP, INC.
Date: November 10, 1999 /s/ Joseph J. Bouffard
------------------------------
Joseph J. Bouffard
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 10, 1999 /s/ Michael J. Dee
------------------------------
Michael J. Dee
Chief Financial Officer & Controller
(Principal Financial Officer)
15
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