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, 2000
[ ] Transition Report 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
----- -----
As of November 10, 2000, the issuer had 327,390 shares of Common Stock
issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
------- -------
<PAGE>
CONTENTS
--------
PAGE
----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition at September
30, 2000 (Unaudited) and June 30, 2000 3
Consolidated Statements of Income for the Three-Month Periods
Ended September 30, 2000 and 1999 (Unaudited) 4
Consolidated Statements of Comprehensive Income Three-Month
Periods Ended September 30, 2000 and 1999 (Unaudited) 5
Consolidated Statements of Cash Flows for the Three-Month Periods
Ended September 30, 2000 and 1999 (Unaudited) 6
Notes to Consolidated 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
<PAGE>
PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
2000 2000
------------ --------
Assets
------
<S> <C> <C>
Cash:
On hand and due from banks $ 1,551,189 $ 2,251,850
Interest bearing deposits in other banks 1,592,112 282,929
Federal funds sold 1,497,893 903,004
Investment securities, at fair value 484,353 462,842
Mortgage-backed securities, at fair value 4,416,362 4,456,047
Loans receivable, net 91,548,840 91,002,476
Investment in securities required by law, at cost 950,850 950,850
Property and equipment, net 981,366 1,004,443
Deferred income taxes 424,451 442,000
Accrued interest, prepaid expenses and other assets 1,185,656 908,470
------------ ------------
Total assets $104,633,072 $102,664,911
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Savings deposits:
Interest bearing deposits $ 73,689,845 $ 72,357,957
Non interest bearing deposits 3,648,250 3,293,950
Borrowings 15,900,000 14,900,000
Accrued expenses and other liabilities 1,601,392 2,533,706
------------ ------------
Total liabilities 94,839,487 93,085,613
Stockholders' equity:
Common stock $0.01 par value: authorized 4,000,000
shares: issued and outstanding 327,390 and
327,390 shares, respectively 3,274 3,274
Additional paid-in capital 1,471,254 1,471,253
Contra equity - Employee stock ownership plan (254,045) (254,045)
Contra equity - Management recognition plan (154,761) (154,761)
Retained income, substantially restricted 8,782,272 8,625,749
Unrealized net holding losses on available-for-sale
portfolios, net of taxes (54,408) (112,172)
------------ ------------
Total stockholders' equity 9,793,585 9,579,298
------------ ------------
Total liabilities and stockholders' equity $104,633,072 $102,664,911
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2000 1999
---------- -------
<S> <C> <C>
Interest income:
Loans receivable $2,046,218 $1,713,703
Mortgage-backed securities 78,401 84,717
Investment securities 2,852 --
Federal funds sold and other investments 67,106 92,512
---------- ----------
Total interest income 2,194,577 1,890,932
---------- ----------
Interest expense:
Savings deposits 842,995 653,727
Borrowings 242,873 202,323
---------- ----------
Total interest expense 1,085,868 856,050
---------- ----------
Net interest income 1,108,709 1,034,882
Provision for losses on loans 75,000 80,000
----------- ----------
Net interest income after provision
for losses on loans 1,033,709 954,882
Noninterest income:
Fees and service charges 67,262 62,159
Net gain (loss) on sale of foreclosed real estate 17,145 --
Other 5,293 4,534
----------- ----------
Total noninterest income 89,700 66,693
----------- ----------
Noninterest expenses:
Compensation and employee benefits 503,530 436,793
Insurance premiums 10,874 16,224
Professional fees 37,115 35,644
Equipment expense 32,841 41,025
Net occupancy costs 22,489 21,100
Advertising 23,286 6,703
Data processing 40,189 45,040
Other 123,697 95,810
----------- ----------
Total noninterest expense 794,021 698,339
----------- ----------
Income before provision for income taxes 329,388 323,236
Provision for income taxes 127,212 125,646
----------- ----------
Net Income $ 202,176 $ 197,590
=========== ==========
Basic earnings per share $ 0.65 $ 0.62
=========== ==========
Diluted earnings per share 0.62 0.58
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
------------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
SEPTEMBER 30
-----------------------------
2000 1999
---------- -------
<S> <C> <C>
Net income $ 202,179 $ 197,590
Other comprehensive income, net of tax:
Unrealized net holding (losses)/gains on
available-for-sale portfolios 57,764 (137,592)
---------- ---------
Comprehensive income $ 259,940 $ 59,700
========== =========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
PATAPSCO BANCORP, INC. AND SUBSIDIARY
DUNDALK, MARYLAND
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION> FOR THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
2000 1999
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 202,176 $ 197,590
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 33,213 34,181
Provision for losses on loans 75,000 80,000
Gain from sale of foreclosed real estate (17,145) --
Non-cash compensation under stock-based benefit plans -- 55,287
Amortization of premiums and discounts, net 1,019 1,417
Deferred loan origination fees, net of costs (70,942) (4,965)
Change in deferred income taxes (17,549) 34,106
Decrease in Income Taxes payable 147,782 133,909
(Increase)Decrease in accrued interest on investments,
prepaid expenses and other assets (277,186) 62,697
Decrease in accrued expenses and other liabilities (1,080,096) (1,136,305)
----------- --------------
Net cash used in operating activities (1,003,728) (542,083)
----------- --------------
Cash flows from investing activities:
Loan principal disbursements, net of repayments (621,364) (3,054,194)
Proceeds from sale of real estate owned 72,113 --
Purchase of property and equipment (10,136) (29,854)
Principal repayment on mortgage-backed securities
available-for-sale 125,991 68,046
----------- --------------
Net cash used in investing activities (433,396) (3,016,002)
Cash flows from financing activities:
Net increase (Decrease) in deposits 1,686,188 (733,152)
Stock repurchase -- (108,251)
Dividends paid (45,653) (39,774)
Increase in Checks written in excess of bank balance -- 264,360
Increase in borrowings 1,000,000 --
----------- --------------
Net cash (used in) provided by financing activities 2,640,535 (616,817)
----------- --------------
Net increase(Decrease) in cash and cash equivalents $ 1,203,411 $ (4,174,902)
Cash and cash equivalents at beginning of period 3,437,783 9,351,950
----------- --------------
Cash and cash equivalents end of period $ 4,611,194 $ 5,177,048
=========== ==============
Supplemental information:
Interest paid on deposits and borrowed funds 1,085,002 856,050
Income taxes paid 0 0
=========== ==============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
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"). The Patapsco Bank's wholly owned subsidiary is Prime Business Leasing.
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. 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 that
are, in the opinion of management, necessary for the fair presentation of the
interim financial statements have been included. Such adjustments were of a
normal recurring nature. The results of operations for the three months ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the entire year. For additional information, refer to the
consolidated financial statements and footnotes thereto included in the Bank's
Annual report of form 10-KSB for the year ended June 30, 2000.
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.
7
<PAGE>
Note 5: Regulatory Capital Requirements
At September 30, 2000, the Bank met each of the three minimum regulatory capital
requirements. The following table summarizes the Bank's regulatory capital
position at September 30, 2000 (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) $ 10,062 14.23% $ 5,656 8.00% $ 7,070 10%
Tier 1 Capital (to Risk
Weighted Assets) $ 9,284 13.13% $ 2,828 4.00% $ 4,242 6%
Tier 1 Capital (to Average
Assets) $ 9,284 8.98% $ 4,137 4.00% $ 5,171 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.
ACQUISITION
On May 16, 2000, the Company announced that it had agreed to purchase
Northfield Bancorp, Inc., the parent company of Northfield Federal Savings Bank.
Under the terms of the agreement of merger, each share of Northfield Bancorp
common stock outstanding at the effective time of the merger will be canceled
and converted into the right to receive $12.50 in cash and .24 shares of
Patapsco Bancorp's Series A Noncumulative Convertible Perpetual Preferred Stock.
At any time after issuance, this preferred stock will be convertible into shares
of Patapsco Bancorp common stock, on a one for one basis. Each share of Patapsco
Bancorp's outstanding preferred stock will earn dividends at the annual rate of
7.5% of its liquidation preference of $25.00 per share. Dividends are
noncumulative, which means that if the Company's Board does not pay dividends
for a quarterly period, it is not obligated to pay a dividend for that period at
a later date. After five years from the date of issuance of the Patapsco Bancorp
preferred stock, Patapsco Bancorp may redeem some or all of the outstanding
Patapsco Bancorp preferred stock at $25.00 per share plus any declared but
unpaid dividends for the then current quarter. The transaction was completed on
November 13, 2000.
8
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND JUNE 30, 2000
The Company's assets increased by $1.9 million, or 1.9% to $104.6 million
at September 30, 2000 from $102.7 million at June 30, 2000. Cash, cash
equivalents and fed funds sold increased by $1.2 million or 35.0% to $4.6
million at September 30, 2000 from $3.4 at September 30, 1999. The Company's net
loans receivable increased by $.6 million or .6% to $91.5 million at September
30, 2000 from $91.0 million at June 30, 2000. The increase in net loans
receivable was comprised of $1.0 million in consumer loans, $0.9 million in
commercial business loans, $0.6 million in commercial equipment leases, $0.3
million in construction loans and decreases of $2.2 million in fixed and
adjustable rate residential real estate loans.
Deposits increased by $1.7 million or by 2.2% to $77.3 million at September
30, 2000 from $75.7 million at June 30, 2000. The increase in deposits was
largely attributable to the increase of $1.3 million in interest-bearing
deposits consisting of primarily certificate of deposit accounts.
Noninterest-bearing deposits increased by $354,000 during the three months ended
September 30, 2000.
COMPARISON OF OPERATING RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2000 AND
SEPTEMBER 30, 1999
Net Income
----------
The Company's net income increased by $4,600 or 2.3% to $202,176 for the
quarter ended September 30, 2000 from $197,590 for the quarter ended September
30, 1999. The increase in the Company's net income during the three-month period
was due to a $74,000 increase in net interest income, a $5,000 decrease in the
provision for loan losses, a $23,000 increase in noninterest income partially
offset by a $96,000 increase in noninterest expense. The increase in noninterest
income was primarily due to a $17,000 gain on the sale of foreclosed real estate
recognized in the quarter.
Interest Income
---------------
Total interest income increased by $304,000 or 16.0% to $2.2 million for
the quarter ended September 30, 2000 from $1.9 million for the quarter ended
September 30, 1999. The increases in interest income resulted from the increase
in the Company's average yield on interest-earning assets increased of 52 basis
points to 8.66% in the three-month period ended September 30, 2000 as compared
to the 8.14% for the three-month period ended September 30, 1999 and the
increase in the average balance of interest-earning assets by $8.4 million from
September 30,1999 to September 30, 2000.
Interest income on loans receivable increased by $333,000 or 19.4% to $2.0
million for the quarter ended September 30, 2000 from $1.7 million for the
quarter ended September 30, 1999. 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, 2000 as compared to
the same period ended September 30, 1999 the average loans receivable balance
increased by $12.0 million or 15.1% to $91.7 million from $79.7 million and the
average yield increased by 32 basis points to 8.86% from 8.54%.
Interest Expense
----------------
Total interest expense increased by $230,000 or 26.9% to $1.1 million for
the quarter ended September 30, 2000 from $856,000 for the quarter ended
September 30, 1999. The increase in interest expense during the comparable
quarter was primarily due to the increase in interest expense on deposits as a
result of higher balances and costs.
Interest expense on deposits increased by $187,000 or 28.7% to $841,000 for
the quarter ended September 30, 2000 from $700,000 for the quarter ended
September 30, 1999. The increase in interest expense on deposits was primarily
attributable to an increase of $6.8 million in the average balance of interest
bearing deposits as well as an increase of 65 basis points to 4.53% in the cost
of interest bearing deposits.
Interest expense on borrowings from the Federal Home Loan Bank of Atlanta
increased by $41,000 or 20.1% to $243,000 for the quarter ended September 30,
2000 from $202,000 for the quarter ended September 30, 1999. The increase is
attributable
9
<PAGE>
to both higher balances and costs.
Net Interest Income
-------------------
The Company's net interest income increased by $74,000 or 7.1% to
$1.1million for the quarter ended September 30, 2000 from $1.0 million for the
quarter ended September 30, 1999. The increase in net interest income during the
comparable three- month period was due to higher balances partially offset by a
15 basis point decrease in the net interest margin to 4.38% from 4.53%.
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.
10
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------------------------------
2000 1999
--------------------------------- -------------------------------------
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) $ 91,660 2,046 8.86% 79,655 1,714 8.54%
Investment securities -- -- -- -- -- --
Mortgage-backed securities 4,489 78 6.93% 4,870 85 6.90%
Federal funds sold and other
interest-earning assets 4,385 71 6.33% 5,607 93 4.83%
-------- ------ ------ ------- ------ ------
Total interest earning assets 100,534 2,195 8.66% 92,125 1,891 8.14%
------ ------ ------ ------
Noninterest-earning assets 2,639 2,293
-------- -------
Total assets $103,173 $94,418
======== =======
Interest-bearing liabilities:
Interest-bearing deposits (3) $ 73,752 $ 843 4.53% $66,871 $ 654 3.88%
Borrowings 15,617 243 6.17% 13,900 202 5.71%
-------- ------ ------ ------- ------ ------
Total interest-bearing liabilities 89,369 1,086 4.82% 80,771 856 4.20%
Noninterest-bearing liabilities 4,164 ------ ------ 4,264 ------ ------
-------- -------
Total liabilities 93,533 85,035
Stockholders' equity 9,640 9,383
-------- -------
Total liabilities and stockholders'
equity $103,173 $94,418
======== =======
Net interest income $1,109 $1,035
====== ======
Interest rate spread 3.84% 3.94%
====== ======
Net yield on interest-earning assets 4.38% 4.53%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 112.49% 114.06%
====== ======
<FN>
-----------
(1) Yields and rates are annualized.
(2) Includes nonaccrual loans.
(3) Includes interest-bearing escrow accounts.
</FN>
</TABLE>
11
<PAGE>
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 $75,000 in quarter ended September 30,
2000, a decrease of $5,000 or 6.3% from the quarter ended September 30, 1999
provision of $80,000. The Company has increased the allowance for loan losses as
a percentage of total loans outstanding to 0.84% at September 30, 2000 from
0.81% at June 30, 2000 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 following table shows the activity in the allowance for loan losses.
<TABLE>
<CAPTION>
Three Months
Ended September 30,
-------------------
2000 1999
---- ----
<S> <C> <C>
Allowance for loan losses, beginning of period $743 $631
Provision for loan losses 75 80
Loans Charged Off:
Consumer 33 50
Real Estate 0 0
Commercial 17 4
---- ----
Total Charge-Offs 50 54
Recoveries:
Consumer 10 4
Real Estate 0 0
Commercial 0 0
---- ----
Total Recoveries 10 4
---- ----
Allowance for loan losses, end of period $778 $661
==== ====
</TABLE>
Noninterest Income
------------------
The Company's noninterest income consists of deposit fees, service charges,
late fees and gains on the sale of repossessed real estate. Total noninterest
income increased by $23,000 or 34.5% to $90,000 for the quarter ended September
30, 2000 from $67,000 for the quarter ended September 30, 1999. The increase in
noninterest income is primarily the result of a $17,000 gain on the sale of
foreclosed real estate. Absent this gain, noninterest income increased $6,000 or
8.9% in the comparative quarter. This increase is primarily due to 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 $96,000 or 13.7% to $794,000 for
the quarter ended September 30, 2000 from $698,000 for the quarter ended
September 30, 1999. Increases in compensation and benefits, advertising and
other expenses were partially offset by decreases in equipment, insurance and
data processing expense.
12
<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 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, 2000, the Company's cash on hand, interest-bearing deposits and
Federal funds sold totaled $4.6 million. In addition, the Company has
approximately $4.8 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 $4.0 million. Certificates of deposits that
are scheduled to mature in less than one year at September 30, 2000 totaled
$24.8 million. Historically, a high percentage of maturing deposits have
remained with the Company. The cash consideration of the pending acquisition of
Northfield Bancorp will be funded through the use of borrowed money and
internally generated funds.
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 three
months ended September 30, 2000 were loan principal disbursements and purchases,
net of repayments, of $600,000. The Company's primary sources of cash provided
from investing activities during the three months ended September 30, 2000 was
the $100,000 principal payment on the mortgage-backed security.
The Company's primary use of cash in financing activities during the three
months ended September 30, 2000 consisted of a $1.7 million decrease in deposits
and a $1.0 million increase in advances from the Federal Home Loan Bank of
Atlanta.
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. 133 "Accounting for Derivative Instruments and Hedging Activities"
was issued in June 1999. 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, 2000, will not affect the Company's financial position
or its results of operations.
13
<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. None.
14
<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 13, 2000 /s/ Joseph J. Bouffard
-------------------------------------
Joseph J. Bouffard
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 2000 /s/ Michael J. Dee
-------------------------------------
Michael J. Dee
Chief Financial Officer & Controller
(Principal Financial Officer)
15
