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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 December 31, 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
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
--- ---
As of February 2, 2000, the issuer had 329,190 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
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition at
December 31, 1999 and June 30, 1999 3
Consolidated Statements of Income for the
Six and Three-Month Periods Ended December
31, 1999 and 1998 4
Consolidated Statements of Comprehensive
Income for the Six and Three-Month Periods
Ended December 31, 1999 and 1998 5
Consolidated Statements of Cash Flows
for the Six-Month Periods Ended
December 31, 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 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of
Security-Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
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PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
Assets 1999 (UNAUDITED) 1999
------ --------------- --------------
<S> <C> <C>
Cash:
On hand and due from banks $ 1,853,116 $ 1,601,598
Interest bearing deposits in other banks 304,240 2,170,254
Federal funds sold 1,065,730 5,580,098
Equity securities, at fair value 387,927 213,761
Mortgage Backed securities, at fair value 4,621,671 4,879,359
Loans receivable, net 84,587,626 77,777,163
Investment in securities required by law, at cost 950,850 800,850
Property and equipment, net 1,058,557 1,052,618
Deferred income taxes 439,794 441,000
Accrued interest, prepaid expenses and other assets 1,021,992 811,660
----------- -----------
Total assets $96,291,503 $95,328,361
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Savings deposits:
Interest bearing deposits $65,542,930 $66,792,156
Non interest bearing deposits 3,126,093 2,879,263
Borrowings 16,900,000 13,900,000
Accrued expenses and other liabilities 1,612,662 2,539,082
----------- -----------
Total liabilities 87,181,685 86,110,501
Stockholders' equity:
Common stock $0.01 par value: authorized 4,000,000
shares: issued and outstanding 344,426 and
362,553 shares, respectively 3,289 3,445
Additional paid-in capital 1,463,218 1,888,962
Contra equity - Employee stock ownership plan (325,100) (325,100)
Contra equity - Management recognition plan (154,761) (257,095)
Retained income, substantially restricted 8,290,401 8,017,059
Unrealized net holding losses on available-for-sale
portfolios, net of taxes (167,229) (109,411)
----------- -----------
Total stockholders' equity 9,109,818 9,217,860
----------- -----------
Total liabilities and stockholders'
equity $96,291,503 $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 SIX MONTHS ENDED FOR THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $3,485,374 $3,313,453 $1,771,672 $1,695,255
Investment & Mortgage-backed securities 168,069 158,759 83,352 71,938
Federal funds sold and other investments 140,118 126,639 47,606 42,337
---------- ---------- ---------- ----------
Total interest income 3,793,561 3,598,940 1,902,630 1,809,530
---------- ---------- ---------- ----------
Interest expense:
Savings deposits 1,306,741 1,380,103 653,014 680,265
Borrowings & Other 416,587 303,623 214,263 155,280
---------- ---------- ---------- ----------
Total interest expense 1,723,328 1,683,726 867,277 835,545
---------- ---------- ---------- ----------
Net interest income 2,070,233 1,915,214 1,035,353 973,985
Provision for losses on loans 140,000 110,000 60,000 50,000
---------- ---------- ---------- ----------
Net interest income after provision
for losses on loans 1,930,233 1,805,214 975,353 923,985
Noninterest income:
Fees and service charges 125,901 109,576 63,743 54,036
Net gain (loss) on sales of securities - - - -
Other 7,234 5,085 2,700 2,366
---------- ---------- ---------- ----------
Total noninterest income 133,135 114,661 66,443 56,402
---------- ---------- ---------- ----------
Noninterest expenses:
Compensation and employee benefits 905,467 860,537 468,673 422,356
Insurance premiums 34,061 34,465 17,837 16,664
Professional fees 67,059 64,326 31,414 34,266
Equipment expense 86,378 54,138 45,353 25,252
Occupancy Expense 40,032 45,330 18,933 21,120
Advertising 18,466 20,902 11,763 9,258
Data processing 81,518 61,258 36,477 30,478
Other 222,038 220,025 126,229 112,721
---------- ---------- ---------- ----------
Total noninterest expense 1,455,019 1,360,980 756,679 672,115
---------- ---------- ---------- ----------
Income before provision for income
taxes 608,349 558,894 285,117 308,272
Provision for income taxes 236,820 208,170 111,174 115,411
---------- ---------- ---------- ----------
Net Income $ 371,529 $ 350,724 $ 173,943 $ 192,861
========== ========== ========== ==========
Basic earnings per share $ 1.18 $ 1.06 $ 0.56 $ 0.58
========== ========== ========== ==========
Diluted earnings per share 1.11 1.04 0.52 0.57
</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 SIX MONTHS ENDED FOR THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 371,529 $ 350,724 $ 173,943 $ 192,861
Other comprehensive income, net of tax:
Unrealized net holding (losses)/gains on
available-for-sale portfolios (167,229) (109,411) (167,229) (109,411)
--------- --------- --------- ---------
Comprehensive income $ 204,300 $ 241,313 $ 6,714 $ 83,450
====== ======= ======= =======
</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 SIX MONTHS ENDED
DECEMBER 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 371,529 $ 350,724
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 68,726 59,144
Provision for losses on loans 140,000 110,000
Non-cash compensation under stock-based
benefit plans 113,320 82,130
Amortization of premiums and discounts, net 2,390 7,724
Deferred loan origination fees, net of costs (3,785) (41,823)
Gain on sales of mortgage-backed securities
and investment securities - -
Change in deferred income taxes 1,205 (12,235)
(Increase) in accrued interest on investments,
prepaid expenses and other assets (210,332) 3,590
Decrease in accrued expenses and other liabilities (926,421) (1,008,213)
----------- -----------
Net cash used in operating activities (443,368) (449,256)
----------- -----------
Cash flows from investing activities:
Loan principal disbursements, net of repayments (7,021,109) (2,268,557)
Purchase of loans 0 (730,000)
Purchase of property and equipment (64,399) (30,935)
Purchase of stock in Federal Home Loan Bank of Atlanta (150,000) -
Purchase of investment security available-for-sale (180,110) -
Principal repayment on mortgage-backed securities
available-for-sale 169,776 -
Principal repayment on investment securities
available-for-sale - 2,339,441
----------- -----------
Net cash used in investing activities (7,245,842) (690,051)
Cash flows from financing activities:
Net increase (decrease) in deposits (1,002,396) (1,229,225)
Net increase (decrease) in borrowings 3,000,000 (300,000)
Purchase of common stock for stock-based
benefit plans - (36,166)
Stock repurchase (349,537) (233,800)
Dividends paid (87,731) (79,792)
----------- -----------
Net cash (used in) provided by financing
activities 1,560,336 (1,878,983)
Net (decrease) increase in cash and cash equivalents $(6,128,874) $(3,018,290)
Cash and cash equivalents at beginning of period 9,351,960 8,538,420
Cash and cash equivalents end of period $ 3,223,086 $ 5,520,130
Supplemental information:
Interest paid on deposits and borrowed funds 1,306,741 1,679,425
Income taxes paid 191,625 500,500
</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
six and three months ended December 31, 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 December 31, 1999, the Bank met each of the three minimum
regulatory capital requirements. The following table summarizes
the Bank's regulatory capital position at December 31, 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) $ 9,219 14.68% $ 5,023 8.00% $ 6,279 10%
Tier 1 Capital (to Risk
Weighted Assets) $ 8,557 13.63% $ 2,511 4.00% $ 3,767 6%
Tier 1 Capital (to
Average Assets) $ 8,557 9.09% $ 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 were 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
8
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results of 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 $30,000.
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1999 AND JUNE
30, 1999
The Company's assets increased by $1.0 million or 1.0% to
$96.3 million at December 31, 1999 from $95.3 million at June
30, 1999. The increase in the Company's assets during the six
months ended December 31, 1999 was primarily due to the Company
utilizing cash and borrowed money to fund loan growth and
deposit outflows. The Company's net loans receivable increased
by $6.8 million or 8.8% to $84.6 million at December 31, 1999
from $77.8 million at June 30, 1999. The increase in net loans
receivable was comprised of $2.8 million in commercial equipment
leases, $2.2 million in commercial real estate loans, $1.6
million commercial business loans, $0.5 million in consumer
loans, $0.5 million in residential mortgages and a decrease of
$0.8 million in construction loans. The Company's mortgage-
backed securities portfolio decreased by $0.3 million to $4.6
million at December 31, 1999 from $4.9 million at June 30, 1999
due to amortization and prepayments.
The Company's borrowings increased by $3,000,000 or 22.0%
to $16.9 million at December 31, 1999 from $13.9 million at June
30, 1999. Deposits decreased by $1.0 million or by 1.4% to $68.7
million at December 31, 1999 from $69.7 million at June 30,
1999. The decrease in deposits was largely attributable to the
decrease of $1.2 million in interest-bearing deposits consisting
primarily of passbook savings and money market accounts.
Noninterest-bearing deposits increased by $247,000 during the
six months ended December 31, 1999.
The Company's stockholders' equity decreased by $108,000
to $9.1 million at December 31, 1999 from $9.2 million at June
30, 1999. In July 1999, the Company initiated a 5% (17,221
shares) stock repurchase program. This was completed in
November 1999 at a total cost of $457,788.
COMPARISON OF OPERATING RESULTS FOR THE QUARTERS AND SIX MONTHS
ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Net Income
- ----------
The Company's net income decreased by $19,000 or 9.8% to
$174,000 for the quarter ended December 31, 1999 from $192,000
for the quarter ended December 31, 1998. The Company's net
income increased by $21,000 or 5.9% to $372,000 for the six
months ended December 31, 1999 from $351,000 for the six months
ended December 31, 1998. The decrease in the Company's net
income during the comparable three-month period is a result of
higher compensation, and equipment expenses offsetting higher
net interest and noninterest income. The increase in the
Company's net income in the comparable six-month periods was
primarily due to increases in net interest and noninterest
income offsetting higher compensation, equipment and data
processing expenses
Interest Income
- ---------------
Total interest income before the provision for loan losses
increased by $93,000 or 5.1% to $1.90 million for the quarter
ended December 31, 1999 from $1.81 million for the quarter ended
December 31, 1998. Total interest income increased by $195,000
or 5.4% to $3.8 million for the six months ended December 31,
1999 from $3.6 million for the six months ended December 31,
1998. The increases in interest income resulted primarily from
the growth in the Company's loan portfolio that was funded with
additional borrowings from the Federal Home Loan Bank of Atlanta
as well as cash from lower yielding investments in overnight
federal funds. The Company's average yield on assets increased
by 9 basis points to 8.27% from 8.18% during the three-month
period ended December 31, 1999. For the comparative six-month
period, the Company's average yield on assets remained unchanged
at 8.21%. The Company's average balance of interest-earning
assets increased by $4.9 million and $4.0 million during the
comparable three and six-month periods ended December 31, 1999.
Interest income on loans receivable increased by $76,000
or 4.5% to $1.8 million for the quarter ended December 31, 1999
from $1.7 million for the quarter ended December 31, 1998.
Interest income on loans receivable increased by $172,000 or
5.2% to $3.5 million for the six months ended December 31, 1999
from $3.3 million for the six months ended December 31, 1998.
The increase in interest income on loans receivable during the
three and six month periods is primarily due to an increase in
the average balance of loans receivable. During the three months
ended December 31, 1999 as compared to the same period ended
December 31, 1998 the average loans receivable balance increased
by $2.9 million or 3.6% to $83.1
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million from $80.2 million and the average yield increased by 7
basis points to 8.46% from 8.39%. During the six months ended
December 31, 1999 as compared to the same period ended December
31, 1998 the average balance of loans receivable increased by
$3.1 million or 3.9% to $81.4 million from $78.3 million and the
average yield increased by 3 basis points to 8.50% from 8.47%.
The Company had no mortgage-backed securities outstanding
during the three and six month periods ended December 31, 1998
and therefore no interest income. The Company did however, have
$83,000 and $168,000 in interest income on mortgage-backed
securities during the three and six-month periods ended
December 31, 1999.
The Company had no investment securities outstanding during the
three and six month periods ended December 31, 1999 and
therefore no interest income. The Company did however, have
$72,000 and $159,000 in interest income on investment
securities during the three and six-month periods ended
December 31, 1998.
Interest income on federal funds sold and other investments
increased by $5,000 or 12.4% to $48,000 for the quarter ended
December 31, 1999 from $42,000 for the quarter ended December
31, 1998. Interest income on federal funds sold and other
investments increased by $13,000 or 10.2% to $140,000 for the
six months ended December 31, 1999 from $127,000 for the six
months ended December 31, 1998.
Interest Expense
- ----------------
Total interest expense increased by $31,000 or 3.8% to $867,000
for the quarter ended December 31, 1999 from $836,000 for the
quarter ended December 31, 1998. Total interest expense
increased by $40,000 or 2.3% to $1.7 million for the six months
ended December 31, 1999 from $1.7 million at December 31, 1998.
The increases in interest expense during the comparable periods
were primarily due to increases in the average balance of
Federal Home Loan Bank Advances used to fund loan growth and
deposit outflows. These borrowings carry higher interest rates
than core deposits. During the quarter ended December 31, 1999
as compared to the quarter ended December 31, 1998 the average
balance of interest-bearing liabilities increased by $4.9
million to $80.8 million from $75.9 million of which $4.5
million is attributable to increases in borrowings from the
Federal Home Loan Bank of Atlanta. The average rate on
interest-bearing liabilities decreased by 11 basis points to
4.26% from 4.37% in the quarterly period. During the six months
ended December 31, 1999 as compared to the six months ended
December 31, 1998 the average balance of interest-bearing
liabilities in increased by $4.3 million to $80.6 million from
$76.3 million and the average rate decreased 18 basis points to
4.24% from 4.42%.
Interest expense on deposits decreased by $27,000 or 4.0%
to $653,000 for the quarter ended December 31, 1999 from
$680,000 for the quarter ended December 31, 1998. Interest
expense on deposits decreased by $73,000 or 5.3% to $1.3 million
from $1.4 million for the six months ended December 31, 1998.
The decrease in interest expense on deposits during the
comparable quarters was attributable to a decrease in the
average rate by 19 basis points to 3.93% from 4.12% and a
reduction in the average balance of $480,000. The decrease in
interest expense on deposits during the comparable six-month
periods was primarily due to a $294,000 decrease in the average
balance to $65.9 million from $66.5 million and a decrease in
the average rate to 3.90% from 4.17%.
Interest expense on borrowings increased by $58,000 or 38.0% to
$209,000 for the quarter ended December 31, 1999 from $151,000
for the quarter ended December 31, 1998. Interest expense on
borrowings increased by $112,000 or 37.4% to $411,000 during the
six months ended December 31, 1999 from $299,000 during the six
months ended December 31, 1998. The increase for the comparable
quarters was primarily attributable to an increase of $4.5
million in the average balance and a decrease of 32 basis points
in the average rate. For the six-month comparable periods the
increase was attributable to a $4.1 million increase in the
average balance. The average rate decreased 26 basis points to
5.85% from 6.11%.
Net Interest Income
- -------------------
The Company's net interest income before the provision for
loan losses increased by $61,000 or 6.3% to $1.04 million for
the quarter ended December 31, 1999 from $974,000 for the
quarter ended December 31, 1998. Net interest income before the
provision for loan losses increased by $155,000 or 8.1% to $2.1
million for the six months ended December 31, 1999 from $1.9
million during the six months ended December 31, 1998. The
increase in net interest income during the comparable quarters
and six month periods were primarily due to an increase of 28
basis points and 11 basis points in the net interest margin to
4.68% and 4.48% from 4.40% and 4.37%, respectively.
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Average Balance Sheet
- ---------------------
The following tables sets forth certain information relating to
the Company's average balance sheet and reflects the average
yield on assets and cost of liabilities for the periods
indicated and the average yields earned and rates paid. Dividing
income or expense by the average balance of assets or
liabilities, respectively, for the periods presented derives
these yield and costs. Average balances are daily balances.
The table presents information for the periods indicated
with respect to the net interest margin, which is its net
interest income divided by the average balance of
interest-earning assets. Also presented is the difference
between the average yield earned on interest-earning assets and
average rate paid on interest-bearing liabilities, or interest
rate spread ,which is also used to measure the earnings power of
financial institutions.
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<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
----------------------------------------------------------------------
1999 1998
--------------------------- --------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE(1) BALANCE INTEREST RATE(1)
------- -------- ------ ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (2) $81,371 $3,485 8.50% $78,266 $3,314 8.47%
Investment securities -- -- -- 4,753 159 6.69%
Mortgage-backed securities 4,824 168 6.91% -- -- --
Federal funds sold and other
interest-earning assets 5,514 140 5.04% 4,659 127 5.45%
------- ----- ------- -----
Total interest earning assets 91,709 3,794 8.21% 87,678 3,600 8.21%
---- ----- ----
Noninterest-earning assets 2,734 2,091
------- -------
Total Average Assets $94,443 $89,769
======= =======
Interest-bearing liabilities:
Savings deposits (3) $66,677 $1,312 3.90% $66,479 $1,385 4.17%
Borrowings 13,933 411 5.85% 9,785 299 6.11%
------- ------ ------- ------ ----
Total interest-bearing liabilities 80,610 1,723 4.24% 76,264 1,684 4.42%
------ ------
Noninterest-bearing liabilities 4,473 4,264
------- -------
Total liabilities 85,083 80,528
Stockholders' equity 9,360 9,241
------- -------
Total liabilities and stockholders'
equity $94,443 $89,769
======= =======
Net interest income $2,070 $1,916
====== ======
Interest rate spread 3.96% 3.80%
====== ======
Net Interest Margin 4.48% 4.37%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 113.77% 114.97%
====== ======
<FN>
___________
(1) Yields and rates are annualized.
(2) Includes nonaccrual loans.
(3) Includes interest-bearing escrow accounts.
</FN>
</TABLE>
12
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<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
----------------------------------------------------------------------
1999 1998
--------------------------- --------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE(1) BALANCE INTEREST RATE(1)
------- -------- ------ ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (2) $83,087 $1,772 8.46% $80,171 $1,695 8.39%
Investment securities -- -- -- 4,514 72 6.32%
Mortgage-backed securities 4,753 83 6.96% -- -- --
Federal funds sold and other
interest-earning assets 3,433 48 5.50% 5,189 84 6.45%
------- ----- ------- -----
Total interest earning assets 91,273 1,903 8.27% 87,735 1,810 8.18%
----- -----
Noninterest-earning assets 3,195 2,358
------- -------
Total assets $94,468 $90,093
======= =======
Interest-bearing liabilities:
Savings deposits (3) $66,409 $ 659 3.93% $65,984 $ 685 4.12%
Borrowings 14,443 208 5.73% 9,900 151 6.05%
------- ------ ------- ------
Total interest-bearing liabilities 80,852 867 4.26% 75,884 836 4.37%
------ ------
Noninterest-bearing liabilities 4,279 4,913
------- -------
Total liabilities 85,131 81,797
Stockholders' equity 9,337 9,296
------- -------
Total liabilities and stockholders'
equity $94,468 $90,093
======= =======
Net interest income $1,035 $ 974
====== ======
Interest rate spread 4.01% 3.81%
====== ======
Net interest margin 4.68% 4.40%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 112.89% 115.62%
====== ======
<FN>
___________
(1) Yields and rates are annualized.
(2) Includes nonaccrual loans.
(3) Includes interest-bearing escrow accounts.
</FN>
</TABLE>
Provision For Loan Losses
- -------------------------
Provisions for loan losses are charged to earnings to
maintain the total allowance for loan losses at a level
considered adequate by management to provide for probable loan
losses, based on prior loss experience, volume and type of
collateral by the Company, industry standards and past due loans
in the Company's loan portfolio. The Company's management
periodically monitors and adjusts its allowance for loan losses
based upon its analysis of the loan portfolio. The Company
provided $60,000 for loan losses during the quarter ended
December 31, 1999 and $50,000 in the quarter ended December 31,
1998. The Company provided $140,000 and $110,000 for loan losses
during each of the six-month periods ended December 31, 1999 and
December 31, 1998. The provision for loan losses were made due
to the Company's higher levels of consumer, construction and
commercial loans, which generally entail a greater risk than
single-family residential loans. The Company's allowance for
loan losses as a percentage of total loans outstanding, net of
unearned origination fees of 0.78% at December 31, 1999 is
unchanged from December 31, 1998. The Company's ratio of net
charge-offs to average loans outstanding was 0.31% for the
quarter ended December 31, 1999 on an annualized basis.
13
<PAGE>
<PAGE>
Activity in the allowance for loan losses is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Allowance for loan losses, beginning of period $631 $554
Provision for loan losses 140 110
Loans Charged Off:
Consumer 114 47
Real Estate 0 0
Commercial 5 0
---- ----
Total Charge-Offs 119 47
Recoveries:
Consumer 10 1
Real Estate 0 0
Commercial 0 0
---- ----
Total Recoveries 10 0
---- ----
Allowance for loan losses, end of period $662 $618
==== ====
</TABLE>
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
$10,000 or 17.8% to $66,000 for the quarter ended December 31,
1999 from $56,000 for the quarter ended December 31, 1998. Total
noninterest income increased by $18,000 or 16.1% to $133,000
during the six months ended December 31, 1999 from $115,000
during the six months ended December 31, 1998. The increases in
noninterest income in the two comparable periods is primarily
due to higher checking account balances. These account types
generate more fee income than other account types.
Noninterest Expenses
- --------------------
Total noninterest expenses increased by $85,000 or 13.0%
to $757,000 for the quarter ended December 31, 1999 from
$672,000 for the quarter ended December 31, 1998. Total
noninterest expense increased by $94,000 to $1.5 million during
the six months ended December 31, 1999 from $1.4 million during
the six months ended December 31, 1998. Compensation and
employee benefits expense increased by $46,000 or 10.9% and
$45,000 or 5.2% to $469,000 and $905,000 for the quarter and six
month periods ended December 31, 1999 from $422,000 and $905,000
for the quarter and six months ended December 31, 1998,
respectively. The increase was largely attributable to expenses
relating to the hiring of additional personnel and the higher
cost of employee benefits, particularly health insurance.
Equipment expenses, consisting primarily of depreciation and
maintenance of the Company's internal computer systems increased
by $20,000 or 79.6% and $32,000 or 59.5% in the three and six-
month periods ended December 31, 1999 compared to the comparable
periods ended December 31, 1998.
<PAGE>
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 an adequate 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, a high level of liquidity will, to a
certain extent, result in lower net interest margins and lower
net income.
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
14
<PAGE>
<PAGE>
investing activities during any given period. At December 31,
1999, the Company's cash on hand, interest-bearing deposits and
Federal funds sold totaled $3.2 million. In addition, the
Company has approximately $5.0 million of mortgage-backed and
equity securities classified as available-for-sale.
The Company anticipates that it will have sufficient funds
available to meet its current loan commitments of $3.1 million.
These funds will be internally generated, raised through deposit
operations, or borrowed. Certificates of deposits that are
scheduled to mature in less than one year at December 31, 1999
totaled $33.5 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 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 six months ended December 31, 1999 were loan
principal disbursements, net of repayments, of $7.0 million. The
Company's primary sources of cash provided from investing
activities during the six months ended December 31, 1999 was the
borrowing of $3,000,000 from the federal Home Loan Bank of
Atlanta.
The Company's primary use of cash in financing activities
during the six months ended December 31, 1999 consisted of a $1
million decrease in deposits and the repurchase of stock and
payment of cash dividends of $438,000.
As discussed in Note 5 - Regulatory Capital Requirements,
the Company and the Bank exceeded all regulatory minimum capital
requirements.
Impact of New Accounting Standards
- ----------------------------------
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.
15
<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
The following table sets forth matters that were voted
upon at the Company's Annual Meeting of Stockholder's
held on October 28, 1999:
<TABLE>
<CAPTION>
Votes Votes Votes
For Against Withheld
----- ------- --------
<S> <C> <C> <C>
Election of Directors:
Douglas H. Ludwig 287,133 - -
Theodore C. Patterson 286,933 - 200
William R. Waters 281,394 - 5,739
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed herewith:
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1999.
16
<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: February 2, 1999 /s/ Joseph J. Bouffard
------------------------------
Joseph J. Bouffard
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 2, 1999 /s/ Michael J. Dee
------------------------------
Michael J. Dee
Chief Financial Officer & Controller
(Principal Financial Officer)
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,853,116
<INT-BEARING-DEPOSITS> 304,240
<FED-FUNDS-SOLD> 1,065,730
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,621,671
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 84,587,626
<ALLOWANCE> 662,024
<TOTAL-ASSETS> 96,291,503
<DEPOSITS> 68,669,023
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,520,002
<LONG-TERM> 16,900,000
0
0
<COMMON> 3,289
<OTHER-SE> 9,106,529
<TOTAL-LIABILITIES-AND-EQUITY> 96,291,503
<INTEREST-LOAN> 3,484,374
<INTEREST-INVEST> 168,069
<INTEREST-OTHER> 140,118
<INTEREST-TOTAL> 3,793,561
<INTEREST-DEPOSIT> 1,306,741
<INTEREST-EXPENSE> 1,723,328
<INTEREST-INCOME-NET> 2,070,233
<LOAN-LOSSES> 140,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,455,019
<INCOME-PRETAX> 608,349
<INCOME-PRE-EXTRAORDINARY> 608,349
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 371,529
<EPS-BASIC> 1.18
<EPS-DILUTED> 1.11
<YIELD-ACTUAL> 4.48
<LOANS-NON> 18,000
<LOANS-PAST> 42,000
<LOANS-TROUBLED> 9,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 631,239
<CHARGE-OFFS> 119,678
<RECOVERIES> 10,464
<ALLOWANCE-CLOSE> 662,024
<ALLOWANCE-DOMESTIC> 662,024
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
