FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER: 0-23299
BAY BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
TEXAS 76-0046244
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 HIGHWAY 146 SOUTH
LA PORTE, TEXAS 77571
(Address of principal executive offices)
(281) 471-4400
(Issuer'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 April 28, 2000, there were 1,990,983 shares of the registrant's Common
Stock, par value $1.00 per share outstanding.
<PAGE>
BAY BANCSHARES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
PART I - FINANCIAL INFORMATION
ITEM 1. - Financial Statements
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999
Consolidated Statements of Earnings for Three Months ended
March 31, 2000 and 1999
Consolidated Statements of Comprehensive Income for the Three Months
ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999
Notes to Interim Consolidated Financial Statements
ITEM 2. - Management's Discussion and Analysis or Plan of Operation
PART II - OTHER INFORMATION
ITEM 1. - Legal Proceedings
ITEM 2. - Changes in Securities and Use of Proceeds
ITEM 3. - Defaults Upon Senior Securities
ITEM 4. - Submission of Matters to a Vote of Security Holders
ITEM 5. - Other Information
ITEM 6. - Exhibits and Reports on Form 8-K
Signatures
1
<PAGE>
PART I - FINANCIAL INFORMATION
BAY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(Unaudited)
ASSETS
Cash and cash equivalents
Cash and due from banks ...................... $ 10,812 $ 11,170
Federal funds sold ........................... 8,972 2,715
--------- ------------
Total cash and cash equivalents ........... 19,784 13,885
Securities available-for-sale ..................... 81,615 75,551
Loans, net of allowance for credit losses of $2,050
and $1,985 ................................... 199,552 197,427
Bank premises and equipment, net .................. 8,716 8,881
Other assets ...................................... 13,770 13,437
--------- ------------
Total assets .............................. $ 323,437 $ 309,181
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing ....................... $ 65,814 $ 56,556
Interest-bearing deposits ................. 217,374 212,670
--------- ------------
Total deposits ............................ 283,188 269,226
Borrowings ................................... 11,000 11,000
Other liabilities ............................ 2,356 2,343
--------- ------------
Total liabilities ......................... 296,544 282,569
Stockholders' equity
Common stock ................................. 2,092 2,092
Additional paid-in capital ................... 17,548 17,548
Retained earnings ............................ 10,296 9,660
Accumulated other comprehensive income ....... (1,947) (1,592)
--------- ------------
27,989 27,708
Less: Treasury stock ............................. (1,096) (1,096)
--------- ------------
Total stockholders' equity ................ 26,893 26,612
--------- ------------
Total liabilities and stockholders'
equity .................................. $ 323,437 $ 309,181
========= ============
(See accompanying notes to interim consolidated financial statements)
2
<PAGE>
BAY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
--------- ---------
Interest income
Loans, including fees ............................. $ 4,326 $ 3,735
Securities ........................................ 1,203 1,018
Federal funds sold ................................ 181 316
--------- ---------
Total interest income ............................. 5,710 5,069
Interest expense
Deposits .......................................... 2,220 1,901
Other ............................................. 163 42
--------- ---------
Total interest expense ............................ 2,383 1,943
--------- ---------
Net interest income ............................ 3,327 3,126
Provision for credit losses ....................... 225 130
--------- ---------
Net interest income after provision for credit losses .. 3,102 2,996
Noninterest income
Service charges ................................... 574 582
Other ............................................. 468 308
--------- ---------
Total noninterest income ....................... 1,042 890
Noninterest expense
Salaries and employee benefits .................... 1,563 1,580
Occupancy expense, net ............................ 476 464
Other noninterest expense ......................... 971 974
--------- ---------
Total noninterest expense ......................... 3,010 3,018
--------- ---------
Earnings before federal income taxes ................... 1,134 868
Provision for income taxes ........................ 378 294
--------- ---------
Net earnings ................................... $ 756 $ 574
========= =========
Net earnings per share (basic) ................. $ 0.38 $ 0.29
Net earnings per share (diluted) ............... 0.36 0.28
(See accompanying notes to interim consolidated financial statements)
3
<PAGE>
BAY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
Net earnings ........................................... $ 756 $ 574
Other comprehensive income, net of tax:
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising
during period ................................. (355) (272)
Less: reclassification adjustment for gains
included in net earnings ...................... -- (32)
-------- --------
Comprehensive income ................................... $ 401 $ 270
======== ========
(See accompanying notes to interim consolidated financial statements)
4
<PAGE>
BAY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
Cash flows from operating activities:
Net earnings .................................. $ 756 $ 574
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Provision for credit losses ................ 225 130
Depreciation and amortization .............. 240 376
Gain on sale of available-for-sale ......... -- (49)
Amortization of premiums, net of accretion
on securities ........................... 28 37
Effect of phantom stock plan ............... -- 16
Increase in other assets ................... (145) (543)
Increase in other liabilities .............. 195 149
-------- --------
Net cash provided by operating activities 1,299 690
Cash flows from investing activities:
Proceeds from sale of available-for-sale
securities ................................. -- 3,442
Proceeds from principal repayments, maturities,
and calls of available-for-sale securities . 1,861 6,413
Purchases of available-for-sale securities .... (8,490) (11,971)
Net (increase) decrease in loans .............. (2,576) 1,034
Purchases of bank premises and equipment ...... (37) (280)
-------- --------
Net cash used by investing activities .... (9,242) (1,362)
Cash flows from financing activities:
Purchase of treasury stock .................... -- (317)
Net increase in deposits ...................... 13,962 13,573
Dividends paid ................................ (120) (120)
-------- --------
Net cash provided by financing activities 13,842 13,136
Net increase in cash and cash equivalents 5,899 12,464
Cash and cash equivalents at beginning of period ....... 13,885 25,456
-------- --------
Cash and cash equivalents at end of period ............. $ 19,784 $ 37,920
======== ========
(See accompanying notes to interim consolidated financial statements)
5
<PAGE>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDING MARCH
31, 2000
(1) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bay
Bancshares, Inc. (the "Company") and its wholly-owned subsidiaries Bayshore
National Bank (the "Bank"), Bay Bancshares of Delaware, Inc. ("BBDI") and
BayBanc Independent Insurance Agency ("BBIIA"). All significant intercompany
transactions and balances have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the financial position, results
of operations and cash flows of the Company on a consolidated basis, and all
such adjustments are of a normal recurring nature. These financial statements
and the notes thereto should be read in conjunction with the Company's 1999
Annual Report on Form 10-KSB. Operating results for the three month period ended
March 31, 2000, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
(2) EARNINGS PER COMMON SHARE
Earnings per common and common equivalent share were computed based on the
following:
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
------ ------
(Dollars in thousands
except per share data)
Net earnings available to common shareholders ....... $ 756 $ 574
Basic weighted average shares outstanding ........... 1,991 2,004
Diluted weighed average shares outstanding........... 2,076 2,086
Basic earnings per common share ..................... $ 0.38 $ 0.29
Diluted earnings per common share ................... $ 0.36 $ 0.28
(3) COMPREHENSIVE INCOME
Comprehensive income includes net earnings plus unrealized gain or loss on
securities.
Other comprehensive income and its tax effects are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------------------------- -------------------------------------
(UNAUDITED) (UNAUDITED)
TAX TAX
BEFORE TAX (EXPENSE) NET OF BEFORE TAX (EXPENSE) NET OF
AMOUNT BENEFIT TAX AMOUNT AMOUNT BENEFIT TAX AMOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains(losses on securities):
Unrealized holding gains (losses) arising
during period............................. $ (476) $ 121 $ (355) $ (410) $ 138 $ (272)
Less: reclassification adjustments for gains
included in net earnings ................. -- -- -- (49) 17 (32)
---------- ---------- ---------- ---------- ---------- ----------
Comprehensive income ............................. $ (476) $ 121 $ (355) $ (456) $ 155 $ (304)
========== ========== ========== ========== ========== ==========
</TABLE>
6
<PAGE>
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this document and in the documents
incorporated into this document by reference, including matters discussed under
the captions "Management's Discussion and Analysis or Plan of Operation," may
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. The words "expects," "estimates," "anticipates,"
"contemplated," "intends," "indicates," "plans," "believes," "seek," "will,"
"would," "should," "projected" and similar expressions are intended to identify
such forward-looking statements.
The Company's actual results or experience may differ materially from the
results anticipated in such forward-looking statements due to a variety of
factors, including, but not limited to: (1) the effects of future acquisitions,
if any; (2) increased credit risk in the Company's assets and increased
operating risk caused by a material change in commercial, consumer, including
indirect automobile dealer paper, and/or real estate loans as a percentage of
the total loan portfolio; (3) the effects of future economic conditions on the
Company and its customers; (4) governmental monetary and fiscal policies, as
well as legislative and regulatory changes; (5) the impact of changes in market
rates and prices on the level and composition of deposits, loan demand and the
values of loan collateral, securities and interest rate protection agreements;
(6) increased competition for deposits and loans adversely affecting rates and
terms; (7) the failure of assumptions underlying the establishment and provision
made to the allowance for credit losses; (8) the Company's ability to acquire,
operate and maintain cost effective and efficient systems without incurring
unexpectedly difficult or expensive but necessary technological changes; and (9)
other uncertainties set forth in the Company's other public reports and filings
and public statements. All written or oral forward-looking statements
attributable to the Company are expressly qualified in their entirety by these
cautionary statements.
ITEM 2. -MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Bay Bancshares, Inc. (the "Company") was incorporated as a business
corporation in 1982 under the laws of the State of Texas to be a multi-bank
holding company for Bayshore National Bank (the "Bank"). The Company currently
serves its market areas from its headquarters in La Porte with ten full-service
banking office locations in La Porte, Liberty, Cleveland, Seabrook, Pasadena,
Baytown, Deer Park and Mont Belvieu, Texas. Additionally, the Company operates
three Loan Production Offices ("LPOs") in the Houston area, one LPO in the
Longview/Dallas area and a Internet banking site (www.bankbnb.com).
Net income for the three months ended March 31, 2000 was $756,000 compared
with $574,000 for the three months ended March 31, 1999, an increase of $182,000
or 31.71%. Per share (basic) earnings increased $0.09 to $0.38 for the three
months ended March 31, 2000 from $0.29 for the same period ended March 31, 1999.
Per share (diluted) earnings increased $0.08 to $0.36 for the three months ended
March 31, 2000 from $0.28 for the same period ended March 31, 1999.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income represents the amount by which interest income on
interest-earning assets, including securities and loans, exceeds interest
expense incurred on interest-bearing liabilities, including deposits and other
borrowed funds. Net interest income is the principal source of the Company's
income. Interest rate fluctuations, as well as changes in the amount and type of
earning assets and liabilities, combine to affect net interest income.
7
<PAGE>
Net interest income for the three months ended March 31, 2000 was $3.3
million compared with $3.1 million for the three months ended March 31, 1999, an
increase of $201,000 or 6.43%. Net interest income increased as a result of a
higher dollar amount of interest-earning assets derived primarily from
internally generated loan growth. Average interest-earning assets increased from
88.86% of total average assets at March 31, 1999 to 89.16% of total average
assets at March 31, 2000. Average gross loans increased to $198.7 million for
the three months ended March 31, 2000 from $170.1 million for the three months
ended March 31, 1999, an increase of $28.6 million or 16.81%. Average
interest-bearing deposits increased to $218.0 million for the three months ended
March 31, 2000 from $203.4 million for the three months ended March 31, 1999, an
increase of $14.6 million or 7.18%.
The Company posted net interest margins of 4.65% and 4.70% and net
interest spreads of 3.82% and 3.85% for the periods ended March 31, 2000 and
March 31, 1999, respectively. The decrease in net interest margin from the first
quarter of 1999 to the first quarter of 2000 reflects a 36 basis point increase
in the yield on average interest-earning assets and a 39 basis point increase in
the cost of interest-bearing liabilities. The Company's Asset/Liability
Management policies and procedures continue to provide management with the
necessary guidelines for effective interest rate risk management in a rising
rate environment. Net interest margin decreased during the first quarter 2000
compared to the same period in 1999 due primarily to competition and economic
rate pressures resulting in a higher cost of funds.
8
<PAGE>
The following table presents for the periods indicated the total dollar
amount of average balances, interest income from average interest-earning assets
and the resultant yields, as well as the interest expense on average
interest-bearing liabilities, expressed both in dollars and rates. No tax
equivalent adjustments were made and all average balances are daily average
balances.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------
2000 1999
---------------------------------- ----------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE
----------- --------- ------- ----------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Loans .............................................. $ 198,704 $ 4,326 8.71% $ 170,076 $ 3,735 8.78%
Securities ......................................... 75,870 1,203 6.34% 69,950 1,018 5.82%
Federal funds sold and other
temporary investments .......................... 11,494 181 6.30% 25,918 316 4.88%
----------- --------- ------- ----------- --------- -------
Total interest-earning assets .................. 286,068 5,710 7.98% 265,944 5,069 7.62%
----------- --------- ------- ----------- --------- -------
Less allowance for credit losses ................... (2,052) (1,937)
----------- -----------
Total interest-earning assets,
net of allowance ............................... 284,016 264,007
Nonearning assets .................................. 36,840 35,294
----------- -----------
Total assets ................................... $ 320,856 $ 299,301
=========== ===========
Liabilities and stockholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits ................... $ 32,385 $ 84 1.04% $ 31,279 $ 82 1.05%
Public fund deposits ............................... 8,148 87 4.27% 9,727 105 4.32%
Savings and money market accounts .................. 55,802 450 3.23% 67,214 512 3.05%
Certificates of deposit ............................ 121,683 1,599 5.26% 95,193 1,202 5.05%
Federal funds purchased, FHLB
credit and other borrowings .................... 11,000 163 5.93% 3,000 42 5.60%
----------- --------- ------- ----------- --------- -------
Total interest-bearing liabilities.............. 229,018 2,383 4.16% 206,413 1,943 3.77%
----------- --------- ------- ----------- --------- -------
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits ................ 63,886 65,125
Other liabilities .................................. 1,499 1,419
----------- -----------
Total liabilities .............................. 294,403 272,957
----------- -----------
Stockholders' equity ................................... 26,453 26,344
----------- -----------
Total liabilities and
stockholders' equity ....................... $ 320,856 $ 299,301
=========== ===========
Net interest income ................................ $ 3,327 $ 3,126
========= =========
Net interest spread ................................ 3.82% 3.85%
======= =======
Net interest margin ................................ 4.65% 4.70%
======= =======
</TABLE>
Provision for Credit Losses
The provision for credit losses increased to $225,000 for the three months
ended March 31, 2000 from $130,000 for the same time period in 1999, an increase
of $95,000 or 73.08%.
Noninterest Income
Noninterest income is an important source of revenue for financial
institutions. The Company's primary source of noninterest income is service
charges on deposit accounts and other banking service related fees. Noninterest
income for the three months ended March 31, 2000 was $1.0 compared with $890,000
for the three months ended March 31, 1999, an increase of $152,000 or 17.08%.
The increase during the first quarter 2000 compared to the first quarter 1999
was primarily attributable to an increase in the gain on the sale of SBA loans
and an increase in ATM fee income. Even though the timing of the loan sales
varies from quarter to quarter, SBA applications and loans in the process of
funding during the
9
<PAGE>
first quarter 2000 indicate a strong revenue source for the remainder of 2000.
Also contributing to other noninterest income during the first quarter 2000 was
a $30,000 gain on the sale of other real estate and fee income of $28,000 on the
Company's mutual fund sweep products.
The following table presents for the periods indicated the major
categories of noninterest income:
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
------ ------
(Dollars in thousands)
Service charges on deposit accounts .............. $ 574 $ 582
Gain on sale of SBA loans ........................ 81 38
ATM fee income ................................... 123 91
Alternative investments .......................... 30 29
Other noninterest income ......................... 234 150
------ ------
Total noninterest income .................... $1,042 $ 890
====== ======
Noninterest Expense
In the three month period ended March 31, 2000, noninterest expense
decreased $8,000 or 0.27% to $3.0 million compared with the three month period
ended March 31,1999. The Company continues to grow while controlling operating
costs and anticipates operating costs to remain flat during 2000.
Non-staff expense increased to $1.4 million for the three month period
ended March 31, 2000 from $1.4 million for the same period in 1999, an increase
of $9,000 or 0.63%. The slight increase was due to expenses related to the
Company's internal growth. Employee compensation and benefit expense for the
three months ended March 31, 2000 was $1.6 million, a decrease of $17,000 or
1.08% from $1.6 for the same period during 1999. The decrease is the result of a
limited staff reorganization that provided improved efficiencies while reducing
costs.
10
<PAGE>
The following table presents for the periods indicted the major categories
of noninterest expense:
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
(Dollars in thousands)
Employee compensation and benefits ................... $ 1,563 $ 1,580
Non-staff expense:
Net bank premises expense ....................... 221 210
Equipment rentals, depreciation and maintenance.. 255 254
Data processing ................................. 65 79
Professional fees ............................... 86 113
Regulatory assessments/FDIC insurance............ 32 31
Ad valorem and franchise taxes .................. 67 72
Other ........................................... 721 679
-------- --------
Total non-staff expenses ..................... 1,447 1,438
-------- --------
Total noninterest expense .................... $ 3,010 $ 3,018
======== ========
Financial Condition
Total assets as of March 31, 2000 were $323.4 million compared with $309.2
million at December 31, 1999 an increase of $14.2 million or 4.59%. At March 31,
2000, investment securities totaled $81.6 million, an increase of $6.0 million
or 7.94% from $75.6 million at December 31, 1999. Net loans were $199.6 million
at March 31, 2000, an increase of $2.2 million or 1.11% from $197.4 million at
December 31, 1999. First quarter 2000 balance sheet growth is a result of the
Company's continued efforts to increase market share through intense marketing
efforts and technology based products along with seasonal growth in public
deposits.
The allowance for credit losses is a reserve established through charges
to earnings in the form of a provision for credit losses. The Houston economy
has historically been affected by the price of oil and gas. The Company has no
extensions of credit to production or exploration companies and has not
historically pursued this line of business. The Company provides financing and
other banking services to companies that service the petrochemical industry.
While the Company maintains a reasonably diverse commercial and consumer loan
portfolio, any major downturn in the energy industry could have an adverse
affect on borrowers' ability to repay loans and, therefore, could potentially
affect the results of operations and the financial condition of the Company.
While loan volume has increased, asset quality ratios have remained consistent
with historical trends and reflect the Company's ongoing commitment to
conservative lending. The allowance for credit losses as of March 31, 2000 was
$2.1 million or 1.04% of outstanding loans.
The Company's total deposits for the three months ended March 31, 2000
were $283.2 million, an increase of $14.0 million or 5.20% from $269.2 million
at December 31, 1999. First quarter 2000 deposit growth was primarily
attributable to internal growth from the Company's continued efforts to increase
market share through intense marketing efforts and seasonally higher public fund
deposits.
Stockholders' equity increased to $26.9 million at March 31, 2000 from
$26.6 million at December 31, 1999, an increase of $281,000 or 1.06%. The first
quarter 2000 increase was primarily the result of net income of $756,000 less a
decrease in other accumulated comprehensive income of $355,000 and dividends
paid of $120,000. As of March 31, 2000, the Company's ratio of stockholders'
equity to total assets was 8.31% as compared with 8.61% as of December 31, 1999.
11
<PAGE>
Liquidity involves the Company's ability to raise funds to support asset
growth or reduce assets to meet deposit withdrawals and other payment
obligations, to maintain reserve requirements and otherwise to operate the
Company on an ongoing basis. The Company's liquidity needs are primarily met by
growth in core deposits. Although access to purchased funds from correspondent
banks is available and has been utilized on occasion to take advantage of
investment opportunities, the Company does not rely on these external funding
sources. The cash and federal funds sold position, supplemented by amortizing
investment along with payments and maturities within the loan portfolio, have
historically created an adequate liquidity position.
The Company's cash flows are composed of three classifications: cash flows
from operating activities, cash flows from investing activities and cash flows
from financing activities. Net cash provided by operating activities was $1.3
million and $690,000 for the three months ended March 31, 2000 and 1999
respectively. The increase in net cash provided by operating activities for the
three months ended March 31, 2000 compared with the same period in 1999 was
primarily due to the (increase) decrease in other assets and liabilities in
2000.
Net cash used in investing activities was $9.2 million and $1.4 million
for the three months ended March 31, 2000 and 1999, respectively. The increase
in net cash used in investing activities for the three months ended March 31,
2000 compared with the same period in 1999 was primarily due to activity in the
Company's investment portfolio and a increase in the loan portfolio.
Net cash provided by financing activities was $13.8 million and $13.1
million for the three months ended March 31, 2000 and 1999, respectively. The
net cash used in financing activities for the three months ended March 31, 2000
compared with the same period in 1999 was primarily due to the increase in
deposits in 2000.
12
<PAGE>
Capital management consists of providing equity to support both current
and future operations. The Company is subject to capital adequacy requirements
imposed by the Board of Governors of the Federal Reserve System ("Federal
Reserve Board") and the Bank is subject to capital adequacy requirements imposed
by the Office of the Comptroller of Currency ("OCC"). Both the Federal Reserve
Board and the OCC have adopted risk-based capital requirements. The following
table provides a comparison of the Company's and the Bank's leverage and risk
weighted capital ratios as of March 31, 2000 and the regulatory standards.
MINIMUM ACTUAL RATIO
REQUIRED MARCH 31, 2000
-------- --------------
THE COMPANY
Leverage ratio ................................. 4.00% 6.98%
Tier 1 risk-based capital ...................... 4.00% 9.48%
Risk-based capital ratio ....................... 8.00% 10.35%
THE BANK
Leverage ratio ................................. 4.00% 6.98%
Tier 1 risk-based capital ...................... 4.00% 9.47%
Risk-based capital ratio ....................... 8.00% 10.35%
- --------------------------------------------------
PART II - Other Information
ITEM 1. - Legal Proceedings
Not Applicable
ITEM 2. - Changes in Securities and Use of Proceeds
Not Applicable
ITEM 3. - Defaults Upon Senior Securities
Not Applicable
ITEM 4. - Submission of Matters to a Vote of Security Holders
Not Applicable
ITEM 5. - Other Information
Not Applicable
ITEM 6. - Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report;
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27 Financial Data Schedule
13
<PAGE>
(b) No reports on Form 8-K were filed by the Company during the three months
ended March 31, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAY BANCSHARES, INC.
By: /S/ L. D. WRIGHT
Larry D. Wright
Chief Executive Officer
By: /S/ KIM E. LOVE
Kim E. Love
Controller
14
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,812
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,972
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,615
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 81,615
<LOANS> 201,602
<ALLOWANCE> 2,050
<TOTAL-ASSETS> 323,437
<DEPOSITS> 283,188
<SHORT-TERM> 0
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<LONG-TERM> 0
0
0
<COMMON> 2,092
<OTHER-SE> 24,801
<TOTAL-LIABILITIES-AND-EQUITY> 323,437
<INTEREST-LOAN> 4,326
<INTEREST-INVEST> 1,203
<INTEREST-OTHER> 181
<INTEREST-TOTAL> 5,710
<INTEREST-DEPOSIT> 2,220
<INTEREST-EXPENSE> 163
<INTEREST-INCOME-NET> 2,383
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,010
<INCOME-PRETAX> 1,134
<INCOME-PRE-EXTRAORDINARY> 1,134
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 756
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.36
<YIELD-ACTUAL> 7.98
<LOANS-NON> 0
<LOANS-PAST> 150
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,813
<ALLOWANCE-OPEN> 1,985
<CHARGE-OFFS> 205
<RECOVERIES> 45
<ALLOWANCE-CLOSE> 2,050
<ALLOWANCE-DOMESTIC> 2,050
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 790
</TABLE>