<PAGE>
<PAGE>
U.S. 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 June 30, 1998
Transition Report under Section 13 or 15(d) of the
Exchange Act
For the transition period from ______ to ______
Commission File Number: 0-24589
BCSB BANKCORP, INC.
- ---------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its
Charter)
United States 52-2108333
- ------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4111 E. Joppa Road, Suite 300, Baltimore, Maryland 21236
- ---------------------------------------------------------
(Address of Principal Executive Offices)
(410) 256-5000
-----------------------------------------------
Issuer's Telephone Number, Including Area Code)
N/A
- ---------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate whether the issuer (1) has 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 No X
--- -----
As of August 7, 1998, the issuer had 6,116,562 shares of
Common Stock issued and outstanding.
<PAGE>
<PAGE>
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of June 30, 1998 (unaudited) and
September 30, 1997 . . . . . . . . . . . . . . . .3
Consolidated Statements of Operations for the
Nine Months and Three Months Ended June
30, 1998 and 1997 (unaudited) . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 1998 and 1997
(unaudited) . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . 8
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . .10
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . .13
Item 2. Changes in Securities and Use of Proceeds. . . . . .13
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
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<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
---------- ------------
(Unaudited)
Assets
------
<S> <C> <C>
Cash $ 3,586,163 $ 3,909,276
Interest bearing deposits in other banks 38,929,563 8,206,119
Federal funds sold 43,274,158 7,102,231
Investment securities, held to maturity 20,860,005 30,323,460
Loans receivable, net 171,952,999 158,676,168
Mortgage backed securities, held to maturity 35,025,267 37,189,081
Foreclosed Real Estate 196,488 --
Investment in real estate development
and loans to joint venture 7,855 12,732
Premises and equipment 2,760,559 2,856,988
Federal Home Loan Bank of Atlanta stock 1,511,900 1,433,200
Accrued interest receivable
- loans 701,538 738,906
- investments 558,209 456,687
- mortgage backed securities 208,185 218,686
Prepaid income taxes 700 314,384
Intangible assets acquired, net 31,175 51,209
Other assets 1,021,911 249,097
------------ ------------
Total assets $320,626,675 $251,738,224
============ ============
Liabilities and Retained Earnings
---------------------------------
Liabilities
- -----------
Deposits $222,781,398 $224,656,081
Proceeds from subscription offering 67,741,975 --
Advance payments by borrowers for
taxes and insurance 3,024,692 727,272
Income taxes payable 46,344 1,909
Deferred income taxes 136,453 83,538
Payables to disbursing agents 272,741 120,459
Other liabilities 935,760 2,290,516
------------ ------------
Total liabilities 294,939,363 227,879,775
Commitments and contingencies
Retained earnings (substantially restricted) 25,687,312 23,858,449
------------ ------------
Total liabilities and retained earnings $320,626,675 $251,738,224
============ ============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
3<PAGE>
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED FOR THREE MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- ----------
<S> <C> <C> <C> <C>
Interest and fees on loans $ 9,969,617 $9,891,969 $3,363,408 $3,292,834
Interest on mortgage backed securities 1,768,508 1,834,635 597,746 598,933
Interest and dividends on investment
securities 1,077,975 2,171,537 335,573 714,678
Other interest income 1,163,690 820,109 472,093 272,430
----------- ----------- ---------- ----------
Total interest income 13,979,790 14,718,250 4,768,820 4,878,875
Interest on deposits 7,314,047 7,832,350 2,429,635 2,491,040
Interest on borrowings - short term 8,917 8,489 4,852 3,828
----------- ----------- ---------- ----------
Total interest expense 7,322,964 7,840,839 2,434,487 2,494,868
Net interest income 6,656,826 6,877,411 2,334,333 2,384,007
Provision (reduction of provision)
for losses on loans 37,981 (17,297) 77,255 (71,611)
----------- ----------- ---------- ----------
Net interest income after provision
(reduction of provision) for losses
on loans 6,618,845 6,894,708 2,257,078 2,455,618
Other Income (Loss)
- -------------------
Gain (loss) on sale of foreclosed
real estate (17,111) 42,680 -- 2,430
Servicing fee income 9,263 14,107 3,411 4,408
Fees and charges on loans 142,595 153,666 41,051 47,990
Fees on transaction accounts 117,779 125,226 39,137 42,028
Rental income 93,968 110,516 31,313 32,509
Gain from real estate development
and joint venture -- 4,140 -- 262
Gain on sale of investment securities -- 51,376 -- --
Gain on sale of branch deposits 339,000 -- -- --
Miscellaneous income 72,884 32,450 17,868 2,518
----------- ----------- ---------- ----------
Net other income (loss) 758,378 534,161 132,780 132,145
Non-Interest Expenses
- ---------------------
Salaries and related expenses 2,411,201 2,513,610 783,440 851,748
Occupancy expense 401,098 446,151 158,239 161,339
Deposit insurance premiums 159,152 233,670 52,020 38,142
Data processing expense 319,562 299,604 103,154 93,931
Property and equipment expenses 283,279 257,212 105,097 87,663
Professional fees 90,646 46,829 30,764 15,669
Advertising 239,821 139,517 101,241 61,404
Telephone, postage and office
supplies 231,510 223,281 78,064 71,953
Amortization of excess of cost
over fair value of net assets
acquired 20,156 20,075 6,777 6,692
Other expenses 220,901 232,578 59,936 97,980
----------- ----------- ---------- ----------
Total non-interest expenses 4,377,326 4,412,527 1,478,732 1,486,521
Income before tax provision 2,999,897 3,016,342 911,126 1,101,242
Income tax provision 1,171,035 1,210,004 345,992 444,102
----------- ----------- ---------- ----------
Net income $ 1,828,862 $ 1,806,338 $ 565,134 $ 657,140
=========== =========== ========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
4<PAGE>
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED
JUNE 30,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Operating Activities
Net Income $ 1,828,862 $ 1,806,338
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
------------------------------------------
Accretion of discount on investments 30,722 (20,774)
Gain on sale of investment securities -- (51,376)
Loans originated for sale (133,000) (675,000)
Proceeds from loans originated for sale 133,000 675,000
Loan fees deferred 39,147 102,359
Amortization of deferred loan fees (258,452) (308,362)
Provision (reduction of provision) for
losses on loans 37,981 (17,297)
Amortization of premium on mortgage
backed securities 22,858 39,233
(Gain) loss on sale of foreclosed real estate 17,111 (40,250)
Gain from real estate development and
joint venture -- (4,140)
Provision for depreciation 212,529 200,013
Decrease in accrued interest receivable
on loans 37,368 17,945
(Increase) decrease in accrued interest
receivable on investments (101,522) 246,499
Decrease in accrued interest receivable on
mortgage backed securities 10,501 23,234
Decrease in prepaid income taxes 313,684 321,334
Decrease in deferred income taxes 52,915 514,432
Amortization of excess of cost over fair
value of net assets acquired 20,156 20,075
(Increase) decrease in other assets (772,814) 253,305
Gain on sale of branch deposits (339,000) --
Increase (decrease) in accrued interest
payable on deposits (87,064) 111,392
Increase (decrease) in income taxes payable 44,435 (427)
Decrease in other liabilities and payables
to disbursing agents (1,202,474) (839,655)
----------- -----------
Net cash provided by operating activities (93,057) 2,373,878
</TABLE>
5<PAGE>
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED
JUNE 30,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash Flows from Investing Activities
Proceeds from maturing interest
bearing deposits $ 198,000 $ 792,000
Purchase of interest bearing deposits (19,000,000) --
Purchases of investment securities -
held to maturity (22,360,091) (12,197,590)
Proceeds from maturities of investment
securities - held to maturity 31,792,824 14,304,608
Proceeds from sale of investment
securities - available for sale -- 101,376
Longer term loans originated (34,221,141) (22,573,792)
Principal collected on longer term loans 20,830,161 15,720,613
Net decrease in short-term loans 157,118 4,683,464
Principal collected on mortgage backed
securities 9,013,179 4,770,972
Purchases of mortgage backed securities (6,872,223) (1,494,999)
Proceeds from sales of foreclosed real estate 2,000 174,231
Investment in foreclosed real estate (77,365) --
Net investment and loans to joint ventures 4,877 350,768
Investment in premises and equipment (116,100) (423,831)
Purchase of Federal Home Loan Bank of
Atlanta stock (78,700) (132,000)
------------ ------------
Net cash provided by investing activities (20,727,461) 4,075,820
Cash Flows from Financing Activities
Proceeds from sale of branch deposits (5,827,235) --
Proceeds from subscription offer 67,741,975 --
Net increase in demand deposits, money
market, passbook accounts and advances
by borrowers for taxes and insurance 4,276,381 1,163,074
Net increase (decrease) in certificates
of deposit 2,399,655 (3,811,257)
------------ ------------
Net cash provided by financing
activities 68,590,776 (2,648,183)
------------ ------------
Increase in cash and cash equivalents 47,770,258 3,801,515
Cash and cash equivalents at beginning
of period 12,136,626 11,111,733
------------ ------------
Cash and cash equivalents at end of period $ 59,906,884 $ 14,913,248
============ ============
</TABLE>
6<PAGE>
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BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED
JUNE 30,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
The following is a summary of cash and
cash equivalents:
- --------------------------------------
Cash $ 3,586,163 $ 4,663,112
Interest bearing deposits in other banks 38,929,563 8,290,424
Federal funds sold 43,274,158 10,130,712
----------- -----------
Balance of cash items reflected on
Statement of Financial Condition 85,789,884 23,084,248
Less - certificate of deposit with a
maturity of more than three months 25,883,000 8,171,000
----------- -----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $59,906,884 $14,913,248
----------- -----------
Supplemental Disclosures of Cash Flows
Information:
- --------------------------------------
Cash paid during the period for:
Interest $ 7,412,431 $ 7,732,419
=========== ===========
Income taxes $ 760,000 $ 367,614
=========== ===========
Transfer from loans to real estate acquired
through foreclosure $ 138,234 $ --
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
7<PAGE>
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------
Note 1 Principles of Consolidation
---------------------------
BCSB Bankcorp, Inc. (the "Company") will own 100% of
Baltimore County Savings Bank, F.S.B. and subsidiaries
(the "Bank"). The Bank owns 100% of Baltimore County
Service Corporation and Ebenezer Road, Inc. Baltimore
County Service Corporation owns 100% of Route 543, Inc.
The accompanying consolidated financial statements
includes the accounts and transactions of these
companies on a consolidated basis since the date of
acquisition. All intercompany transactions have been
eliminated in the consolidated financial statements.
Ebenezer Road, Inc. sells insurance products. Baltimore
County Service Corporation and Route 543, Inc. have
invested in several joint ventures formed for the
purpose of developing real estate. These investments
have been accounted for on the equity method and
separate summary statements are not presented since the
data contained therein is not material in relation to
the consolidated financial statements.
Note 2 Basis of Financial Statement Presentation
-----------------------------------------
The accompanying consolidated financial statements have
been prepared in conformity with generally accepted
accounting principles and in accordance with the
instructions to Form 10-QSB. Accordingly, they do not
include all of the disclosures required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all
adjustments (none of which were other than normal
recurring accruals) necessary for a fair presentation of
the financial position and results of operations for the
periods presented have been included. The financial
statements of the Company are presented on a
consolidated basis with those of the Bank, although the
Company did not own any shares of the Bank and had no
assets, liabilities, equity or operations at June 30,
1998. Therefore, financial statements presented in this
Form 10-QSB include only the accounts and operations of
the Bank. The results for the nine months ended June
30, 1998 are not necessarily indicative of the results
of operations that may be expected for the year ended
September 30, 1998. For further information, refer to
the consolidated financial statements and footnotes
thereto included in the Prospectus of the Company dated
May 14, 1998.
8
<PAGE>
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------
Note 3 Retained Earnings
-----------------
The following table sets forth the Bank's capital
position at June 30, 1998.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
------------------ -------------------- -----------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Tangible (1) $24,725,404 7.71% $ 4,808,815 1.50% N/A N/A
Tier 1 capital (2) 24,725,404 15.95% N/A N/A $ 9,301,122 6.00%
Core (Leverage) (1) 24,725,404 7.71% 9,617,629 3.00% 16,029,382 5.00%
Risk-weighted (2) 25,699,732 16.58% 12,401,497 8.00% 15,501,871 10.00%
<FN>
____________
(1) To adjusted total assets.
(2) To risk-weighted assets.
</FN>
</TABLE>
Current Requirements
--------------------
Retained earnings $ 25,687,312
Less: Non-allowable items:
Intangible assets acquired, net (31,175)
Investment in and advances to
non-includable subsidiaries (930,733)
------------
Tangible and core capital 24,725,404
General valuation allowance 974,328
------------
Risk-based capital $ 25,699,732
============
Total assets $320,626,675
Less: Non-allowable items:
Intangible assets acquired, net (31,175)
Assets of non-includable
subsidiaries not eliminated
for regulatory purposes (7,855)
------------
Tangible and adjusted
tangible assets $320,587,645
============
Risk-weighted assets $155,018,708
============
9<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
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 PROGRAM COMPLIANCE
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 Bank. Data processing is
also essential to most other financial institutions and many
other companies.
All of the material data processing of the Bank 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 Board of
Directors on a quarterly basis. The service bureau has advised
the Bank that it expects to resolve this potential problem
before the year 2000 by completing all implementation procedures
by December 31, 1998 to allow for testing to occur in 1999.
However, if the service bureau is unable to resolve this
potential problem in time, the Bank would seek to retain a
replacement service bureau and would likely experience
significant data processing delays, mistakes or failures. These
delays, mistakes or failures could have a significant adverse
impact on the financial condition and results of operation of
the Bank.
The OTS has advised the Bank that it needs to take actions to
improve its preparedness for potential Year 2000 problems.
Specifically, the OTS has advised the Bank that it must prepare
and adopt a written plan detailing the procedures to be followed
by the Board of Directors and management to identify and solve
potential problems and monitor the progress made by the Bank and
its service bureau to accomplish the procedures and actions
required by the plan to be taken. The plan must also contain
contingency plans in the event the Bank's service bureau is
unable to take necessary corrective actions. In addition, the
Board of Directors will be required to monitor effective
implementation of the plan. The Bank has advised the OTS that
it intends to implement the mandated actions, and has adopted a
written plan for Year 2000 preparedness, which plan has been
provided to the OTS for their review. The OTS conditioned its
approval of the Bank's proposed reorganization (the
"Reorganization") as a wholly owned subsidiary of BCSB Bankcorp,
Inc. (the "Company"), which in turn will be a majority-owned
subsidiary of Baltimore County Savings Bank, M.H.C., and the
Company's application to acquire control of the Bank, on the
implementation of the specified actions. The Bank has been
advised that it has complied with the conditions set forth in
the OTS approval of the reorganization.
10<PAGE>
<PAGE>
RECENT DEVELOPMENTS
On June 12, 1998, the Bank announced an expansion in the
Bank's Harford County Branch network. Agreements have been
reached to open three additional offices in Abingdon, Forest
Hill and Hickory.
The Abingdon office is to be located in the Constant
Friendship Business Park opposite Wal-Mart. The Forest Hill
office will be located at the intersection of Route 24 and Route
23 near Klein's Grocery Store. Both of these offices are on
schedule to open during the first half of 1999. The Bank's
Hickory location will be located in a new retail shopping area,
planned near the intersection of Route 1 and Route 543. No firm
date has been set for the Hickory opening.
All three offices will be full service facilities, and
will include ATMs and drive-up lanes. The new offices will
complement the Bank's existing Bel Air office, which was
recently relocated to a free standing/full service facility
located in the Bel Air Plaza Shopping Center. The additional
offices will help the Bank further develop its lending
operations and provide full service banking to new market areas.
In a related branch development, the Bank announced the
closure of its 6368 York Road office. It will be consolidated
into an expanded facility in Timonium, Maryland. The new
Timonium facility should be open sometime in 1999 and will
provide full service banking services including drive-up lanes
and ATM access to the Bank's expanding ATM network.
The expenses associated with establishing and improving
the branch offices will reduce the Bank's net income in the
short term.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1998 AND SEPTEMBER
30, 1997
During the nine months ended June 30, 1998, the Bank's
assets increased by $68.9 million, or 27.4%, from $251.7 million
at September 30, 1997 to $320.6 million at June 30, 1998. Most
of the increase is attributable to the $67.7 million received
from the Bank's subscription offering. The funds received were
invested in short-term investments to await the closing of the
initial public offering. Thus, most of the increase in assets
was attributable to an increase in cash, interest-bearing
deposits in other banks and federal funds sold, which increased
by $66.6 million, or 346.4%, from $19.2 million at September 30,
1997 to $85.8 million at March 31, 1998. The Bank invested
proceeds from maturing investment securities in federal funds
sold in order to have funds available to fund loans expected to
close during the quarter ending June 30, 1998. The Bank's
investment securities decreased by $9.5 million, or 31.2%, from
$30.3 million at September 30, 1997 to $20.9 million at June 30,
1998, as described above. Loans receivable, net increased by
$13.3 million, or 8.4%, from $158.7 million at September 30,
1997 to $172.0 million at June 30, 1998. The increase in the
Bank's loan portfolio was due primarily to increased
originations of single-family residential mortgage loans as a
result of increased loan demand. The Bank's deposits were
$224.7 million at September 30, 1997 and $222.8 million at June
30, 1998.
COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS
ENDED JUNE 30, 1998 AND JUNE 30, 1997
Net Income. Net income decreased by $92,000, from
$657,000 for the three months ended June 30, 1997 to $565,000
for the three months ended June 30, 1998. The decrease in net
income was primarily attributable to a $110,000 reduction in
interest income during the three months ended June 30, 1998, as
compared to the three months ended June 30, 1997. Net income
increased $23,000, and was $1.8 million for the nine months
ended June 30, 1998 and June 30, 1997. The increase in net
income during the nine months ended June 30, 1998 was due
primarily to a $224,000 increase in other income, offset by a
$221,000 decrease in net interest income and a $35,000 decrease
in non interest expenses. There was a $38,000 provision for
loan losses in the nine months ended June 30, 1998 as opposed to
a $17,000 reduction of the provision for loan losses in the nine
months ended June 30, 1997.
11<PAGE>
<PAGE>
Net Interest Income. Net interest income was $2.3 million
for the three months ended June 30, 1998, compared to $2.4
million for the three months ended June 30, 1997, representing a
decrease of $50,000, or 2.1%. Net interest income was $6.7
million for the nine months ended June 30, 1998, as compared to
$6.9 million for the nine months ended June 30, 1997,
representing a decrease of $221,000, or 3.2%. The decreases in
net interest income were the result of decreases in the Bank's
interest rate spread during the respective periods. The Bank's
interest rate spread decreased as the yield on interest-earning
assets, primarily loans receivable, decreased during a
decreasing market interest rate environment while competitive
pressures did not permit the Bank to lower deposit rates as
quickly.
Interest Income. Interest income decreased by $110,000,
or 2.3%, from $4.9 million for the three months ended June 30,
1997 to $4.8 million for the three months ended June 30, 1998.
This decrease was due primarily to a decrease in the yield on
interest-earning assets, despite an increase in loans made.
Interest income decreased by $738,000, or 5.0%, from $14.7
million for the nine months ended June 30, 1997 to $14.0 million
for the nine months ended June 30, 1998. This decrease was due
primarily to a decrease in the yield on interest-earning assets.
Interest Expense. Interest expense, which consists almost
entirely of interest on deposits, decreased by $60,000, or 2.4%,
from $2.5 million for the three months ended June 30, 1997 to
$2.4 million for the three months ended June 30, 1998. This
decrease was due primarily to a $5.9 million, or 2.6%, decrease
in the balance of deposits from $228.7 million for June 30, 1997
to $222.8 million June 30, 1998, primarily due to a decrease in
the balances of passbook savings accounts and certificates of
deposits as a result of the sale of the deposits of the Severna
Park branch office in October 1997. Likewise, interest expense
decreased by $518,000, or 6.6%, from $7.8 million for the nine
months ended June 30, 1997 to $7.3 million for the nine months
ended June 30, 1998.
Provision for Loan Losses. The Bank established
provisions for loan losses of $77,000 for the three months ended
June 30, 1998 and reduced its provision for loan losses by
$72,000 during the three months ended June 30, 1997. The Bank
established provisions for loan losses of $38,000 for the nine
months ended June 30, 1998 and reduced its provisions for loan
losses by $17,000 during the nine months ended June 30, 1997.
In establishing such provisions, management considered the level
of the Bank's non-performing loans which were $900,000 and $1.8
million at June 30, 1998 and 1997, respectively, and the levels
of the Bank's net charge-offs, which totaled $2,000, $64,000,
$41,000 and $202,000 during the three months ended June 30, 1998
and 1997 and the nine months ended June 30, 1998 and 1997,
respectively.
Other Income. Other income was $132,000 for the three
months ended June 30, 1997 and for the three months ended June
30, 1998. Total other income increased by $224,000, or 41.9%,
from $534,000 for the nine months ended June 30, 1997 to
$758,000 for the nine months ended June 30, 1998. The increase
in other income for the nine months ended June 30, 1998 was
attributable to a $339,000 gain on sale of branch deposits, as
the Bank sold the deposits of its Severna Park branch in October
1997. In connection with such sale, the Bank sold deposits
totaling $6.2 million and recognized a gain of $339,000
representing a premium paid by the buyer on the deposits sold.
Such increase was offset, in part, by the absence during the
nine months ended June 30, 1998 of a gain on sale of investment
securities; the Bank earned a $51,000 gain on sale of investment
securities during the nine months ended June 30, 1997.
Non-interest Expenses. Total non-interest expenses were
$1.5 million for the three months ended June 30, 1998 and June
30, 1997. Total non-interest expenses were $4.4 million for the
nine months ended June 30, 1997 and 1998. For the three and
nine month periods, reduced salaries and related expense and
reduced occupancy expense attributable to closing the Severna
Park branch office were offset by increased advertising
expenses, as the Bank sought to increase both loan and deposit
market share.
Management believes that salaries and related expense will
increase in future periods as a result of the adoption of the
ESOP and other stock benefit plans, if adopted. Furthermore,
the Bank expects other expenses will increase as a result of the
costs associated with being a public institution. Further, the
Company expects to incur
12<PAGE>
<PAGE>
an expense, currently estimated to be $457,000, net of taxes,
during the third quarter of calendar year 1998 in connection
with the establishment of a charitable foundation in connection
with the Bank's mutual holding company reorganization.
Income Taxes. The Bank's income tax expense was $444,000
and $346,000 for the three months ended June 30, 1997 and 1998,
respectively, and $1,210,000 and $1,171,000 for the nine months
ended June 30, 1997 and 1998, respectively. The Bank's
effective tax rates were 40.3%, 38.0%, 40.1% and 39.0% for the
three months ended June 30, 1997 and 1998 and the nine months
ended June 30, 1997 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's liquidity and capital resources at June 30,
1998 increased from March 31, 1997 primarily due to the bank's
subscription offering being in progress. The Bank anticipates
that it will have sufficient funds available to meet commitments
outstanding at June 30, 1998 to originate loans. As of June 30,
1998, the Bank's ratios of tangible capital and core capital to
adjusted total assets were 7.7%, as compared to the required
levels of 1.5% and 3.0%, respectively. The risk-based capital
ratio at that date was 16.6%, as compared to the requirement of
8.0%.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 8, 1998, the Company issued 3,754,960 shares of
its common stock, par value $.01 per share (the "Common
Stock"), to Baltimore County Savings Bank M.H.C. (the
"MHC") pursuant to the terms of the Plan of Stock Issuance
adopted by the Bank on October 22, 1997 and subsequently
amended. The shares were issued in connection with the
Bank's reorganization into the stock form of ownership as
a wholly owned subsidiary of the Company. As part of the
reorganization, the Company sold 2,286,602 shares of
Common Stock to the public, donated 75,000 shares of
Common Stock to a charitable foundation and issued the
remaining outstanding shares of Common Stock, aggregating
3,754,960 shares, to the MHC. The shares issued to the
MHC were not required to be registered under the
Securities Act of 1933, as amended (the "Act"), because
the issuance did not involve a sale, offer to sell or
offer for sale, for value, as such terms are defined in
Section 2(3) of the Act.
The following information is provided with respect to the
Company's sale of shares of Common Stock pursuant to its
Registration Statement on Form SB-2, Commission File No.
333-44831, declared effective by the Securities and
Exchange Commission ("SEC") on May 14, 1998. The offering
commenced on May 21, 1998 and terminated on June 18, 1998.
The Company retained Trident Securities, Inc. ("Trident
Securities"), a broker-dealer registered with the SEC and
a member of the National Association of Securities
Dealers, Inc., to provide financial and sales assistance
in connection with the offering. Trident Securities
agreed to use its best efforts to assist the Company with
the sale of the Common Stock in the offering. Trident
Securities was not obligated to take or purchase any
shares of Common Stock in the offering. In the offering,
the Company registered 2,424,478 shares of Common Stock
with an aggregate offering price of $24,244,780, all for
the account of the Company. On July 8, 1998, the Company
sold a total of 2,286,602 shares of Common Stock for
aggregate consideration of $22,866,020 and donated 75,000
shares of Common Stock to a charitable foundation named
Baltimore County Savings Bank Foundation, Inc.
13
<PAGE>
The following table sets forth expenses incurred or
estimated to have been incurred by the Company in
connection with the offering. An asterisk indicates that
the amount is an estimate. All of such amounts were paid
to persons or entities who were not officers, directors or
10% stockholders of the Company or their affiliates or an
affiliate of the Company.
Expenses Amount
-------- ------
Underwriting discounts and commissions $314,481
Finders' fees --
Expenses paid to or for underwriters --
Other expenses 571,979
--------
Total expenses $886,460
========
After deducting expenses, the net offering proceeds are
estimated to be $21,979,560.
The following table sets forth the purposes for which the
net offering proceeds were used and the amount of the net
offering proceeds used for each purpose. An asterisk
indicates that the amount is an estimate. All of such
amounts were paid to persons or entities who were not
officers, directors or 10% stockholders of the Company of
their affiliates or an affiliate of the Company.
Use of Proceeds Amount
--------------- ------
Construction of plant, building and
facilities $ 2,750,000 (1)
Purchase and installation of machinery
and equipment 500,000 (1)
Working capital 9,160,500
Investment in subsidiary 7,739,780
Loan to Employee Stock Ownership Plan 1,829,280
-----------
$21,979,560
===========
(1) Such amount will be contributed to the Company's
wholly owned subsidiary, the Bank, which will use
the indicated portion of the net offering proceeds
for the indicated purpose.
The uses of proceeds described above do not represent a
material change in the use of proceeds described in the
prospectus.
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 Form 8-K was filed on June 12, 1998 reporting under Item
5 an announcement of plans to open three branch offices in
Abingdon, Forest Hill and Hickory, Maryland. In addition,
the Bank announced the closure of its 6368 York Road
office, which will be consolidated into a new expanded
facility in Timonium, Maryland.
(a) The following exhibit is filed herewith:
Exhibit 27 Financial Data Schedule
14<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BCSB BANKCORP, INC.
Date: August 11, 1998 /s/ Michael J. Dietz
---------------------------
Michael J. Dietz
President
(Principal Executive Officer)
Date: August 11, 1998 /s/ Gary C. Loraditch
-----------------------------
Gary C. Loraditch
Vice President, Secretary and
Treasurer
(Principal Financial and
Accounting Officer)
15
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<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,586,163
<INT-BEARING-DEPOSITS> 38,929,563
<FED-FUNDS-SOLD> 43,274,158
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0
0
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<NET-INCOME> 1,828,862
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<LOANS-NON> 910,732
<LOANS-PAST> 0
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