<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 December 31, 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)
Check 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 X No
--- ---
As of February 9, 1999, the issuer had 6,116,562 shares of
Common Stock issued and outstanding.
Traditional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
<PAGE>
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of December 31, 1998 (unaudited) and
September 30, 1998 . . . . . . . . . . . . . . . .2
Consolidated Statements of Operations for the
Three Months Ended December 31, 1998
and 1997 (unaudited) . . . . . . . . . . . . . . .3
Consolidated Statements of Cash Flows for the
Three Months Ended December 31, 1998 and 1997
(unaudited) . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements. . . . . . 7
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . 9
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. . . . . . . . . . .13
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . .13
Item 5. Other Information. . . . . . . . . . . . . . . . . .13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . .13
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . .15
1
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
---------- ------------
(Unaudited)
Assets
------
<S> <C> <C>
Cash $ 4,304,929 $ 3,572,309
Interest bearing deposits in other banks 12,974,680 20,299,970
Federal funds sold 29,305,982 9,134,202
Investment securities, held to maturity 13,364,742 12,610,823
Loans receivable, net 184,389,986 181,969,226
Mortgage backed securities, held to maturity 29,872,172 34,197,844
Foreclosed real estate, net 182,749 370,690
Investment in real estate development and
loans to joint venture 5,900 8,195
Premises and equipment, net 3,048,593 2,988,558
Federal Home Loan Bank of Atlanta stock 1,511,900 1,511,900
Accrued interest receivable - loans 595,242 725,065
- investments 161,716 528,231
- mortgage backed
securities 175,534 196,136
Prepaid income taxes 28,125 175,870
Intangible assets acquired, net 17,819 24,497
Other assets 709,986 526,733
------------ ------------
Total assets $280,650,055 $268,840,249
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
Deposits $231,076,870 $220,804,724
Advance payments by borrowers for taxes
and insurance 1,675,164 850,397
Income taxes payable 57,153 60,792
Deferred income taxes 112,417 143,929
Payables to disbursing agents 120,053 249,430
Other liabilities 2,162,855 1,587,929
------------ ------------
Total liabilities 235,204,512 223,697,201
Commitments and contingencies
Stockholders' Equity
Common stock (Par value $.01 - 13,500,000
authorized, 6,116,562 shares issued
and outstanding) 61,166 61,166
Additional paid-in capital 22,645,088 22,645,088
Retained earnings (substantially restricted) 25,466,073 25,221,308
------------ ------------
48,172,327 47,927,562
Employee Stock Ownership Plan (1,829,280) (1,829,280)
Stock held by Rabbi Trust (897,504) (955,234)
------------ ------------
45,445,543 45,143,048
------------ ------------
Total liabilities and retained earnings $280,650,055 $268,840,249
============ ============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
2<PAGE>
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
DECEMBER 31,
----------------------
1998 1997
------ ------
(Unaudited)
<S> <C> <C>
Interest and fees on loans $3,571,122 $3,328,159
Interest on mortgage backed securities 511,043 596,712
Interest and dividends on investment
securities 195,870 386,412
Other interest income 500,423 330,135
---------- ----------
Total interest income 4,778,458 4,641,418
---------- ----------
Interest on deposits 2,440,426 2,449,123
Interest on borrowings - short term 1,513 1,589
---------- ----------
Total interest expense 2,441,939 2,450,712
---------- ----------
Net interest income 2,336,519 2,190,706
Provision for losses on loans 194,587 36,250
Net interest income after provision for
losses on loans 2,141,932 2,154,456
Other Income (Loss)
Gain (loss) on sale of foreclosed
real estate 42,078 (1,949)
Servicing fee income 145 3,891
Fees and charges on loans 38,290 43,975
Fees on transaction accounts 49,130 41,469
Rental income 35,029 21,848
Gain from real estate development and
joint venture 6,038 --
Miscellaneous income 19,938 35,220
Gain on sale of branch deposits -- 339,000
---------- ----------
Net other income (loss) 190,648 483,454
Non-Interest Expenses
Salaries and related expense 1,132,955 933,330
Provision for losses on foreclosed
real estate -- 13,236
Occupancy expense 172,914 117,615
Deposit insurance premiums 42,359 54,422
Data processing expense 103,188 101,064
Property and equipment expense 118,881 88,893
Professional fees 79,917 28,895
Advertising 104,693 78,853
Telephone, postage and office supplies 81,184 69,764
Amortization of excess of cost over fair
value of net assets acquired 6,678 6,678
Other expenses 84,354 61,473
---------- ----------
Total non-interest expenses 1,927,123 1,554,223
---------- ----------
Income before tax provision 405,457 1,083,687
Income tax provision 160,692 426,375
---------- ----------
Net income $ 244,765 $ 657,312
========== ==========
Basic and diluted earnings per share $ 0.04
==========
</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 CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
DECEMBER 31,
----------------------
1998 1997
------ ------
<S> <C> <C>
Operating Activities
- --------------------
Net Income $ 244,765 $ 657,312
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Accretion of discount on investments (123) (29,743)
Loans originated for sale -- (133,000)
Proceeds from loans originated for sale -- 133,000
Loan fees deferred 14,711 39,336
Amortization of deferred loan fees (66,982) (65,467)
Provision for losses on loans 194,587 36,250
Amortization of premium on mortgage
backed securities 10,359 7,944
(Gain) loss on sale of foreclosed
real estate (42,078) 1,949
Provision for losses on foreclosed
real estate -- 13,236
Proceeds from joint venture 8,883 --
Gain from real estate development
and joint venture (6,038) --
Provision for depreciation 86,595 70,764
Decrease in accrued interest receivable
on loans 129,823 71,530
Decrease in accrued interest receivable
on investments 366,515 74,996
Decrease in accrued interest receivable
on mortgage backed securities 20,602 2,368
Decrease in prepaid income taxes 147,745 313,684
Increase (decrease) in deferred income
tax liabilities (31,512) 22,235
Amortization of excess of cost over fair
value of net assets acquired 6,678 6,678
Increase in other assets (183,253) (97,510)
Gain on sale of branch deposits -- (339,000)
Increase (decrease) in accrued interest
payable on deposits 31,184 (48,244)
Increase (decrease) in income taxes
payable (3,639) 90,456
Decrease in other liabilities and
payables to disbursing agents 503,279 (263,261)
---------- ----------
Net cash provided by operating
activities 1,431,551 565,513
</TABLE>
4<PAGE>
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
DECEMBER 31,
----------------------
1998 1997
------ ------
<S> <C> <C>
Cash Flows from Investing Activities
- ------------------------------------
Proceeds from maturing interest bearing
deposits $ 1,752,000 $ 99,000
Purchase of interest bearing deposits (8,694,000) (5,000,000)
Purchases of investment securities -
held to maturity (8,314,796) (6,750,000)
Proceeds from maturities of investment
securities - held to maturity 7,561,000 17,010,041
Longer term loans originated (8,189,906) (8,189,550)
Principal collected on longer term loans 2,588,993 5,334,268
Net decrease in short-term loans 3,037,837 1,853,463
Principal collected on mortgage backed
securities 4,797,278 3,060,708
Purchase of mortgage backed securities (481,965) (1,989,945)
Proceeds from sales of foreclosed real
estate 230,019 2,000
Investment in premises and equipment (146,630) (5,003)
----------- -----------
Net cash provided (used) by
investing activities (5,860,170) 5,424,982
Cash Flows from Financing Activities
- ------------------------------------
Proceeds from sale of branch deposits -- (5,827,235)
Net increase in demand deposits, money
market, passbook accounts and advances
by borrowers for taxes and insurance 4,151,135 2,222,161
Net increase in certificates of deposit 6,914,594 2,328,867
----------- -----------
Net cash provided (used) by
financing activities 11,065,729 (1,276,207)
----------- -----------
Increase in cash and cash equivalents 6,637,110 4,714,288
Cash and cash equivalents at beginning of
period 31,074,481 12,136,626
----------- -----------
Cash and cash equivalents at end of period $37,711,591 $16,850,914
=========== ===========
</TABLE>
5<PAGE>
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
DECEMBER 31,
----------------------
1998 1997
------ ------
<S> <C> <C>
The following is a summary of cash and
cash equivalents:
Cash $ 4,304,929 $ 2,857,216
Interest bearing deposits in other banks 12,974,680 20,158,923
Federal funds sold 29,305,982 5,816,775
----------- -----------
Balance of cash items reflected on
Statement of Financial Condition 46,585,591 28,832,914
Less - certificate of deposit with a
maturity of more than three months 8,874,000 11,982,000
----------- -----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $37,711,591 $16,850,914
=========== ===========
Supplemental Disclosures of Cash Flows
Information:
Cash paid during the period for:
Interest $ 2,416,591 $ 2,497,367
=========== ===========
Income taxes $ 48,035 $ --
=========== ===========
Transfer from loans to real estate acquired
through foreclosure $ -- $ 132,360
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
6<PAGE>
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 1 - Principal of Consolidation
--------------------------
BCSB Bankcorp, Inc. (the "Company") owns 100% of Baltimore
County Savings Bank, F.S.B. and subsidiaries (the "Bank")
and also invests in federal funds sold, interest-bearing
deposits in other banks and U.S. Agency bonds. 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 include 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 for Financial Statement Presentation
------------------------------------------
The accompanying consolidated financial statements have
been prepared in accordance with generally accepted
accounting principles and 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. The Company
did not own any shares of the Bank and had no assets,
liabilities, equity or operations at December 31, 1997.
Therefore financial statements presented in this Form 10-
QSB, for the three month period ended December 31, 1997
include only the accounts and operations of the Bank. The
results for the three months ended December 31, 1998 are
not necessarily indicative of the results of operations
that may be expected for the year ended September 30,
1999. The consolidated financial statements should be
read in conjunction with the consolidated financial
statements and related notes which are incorporated by
reference in the Company's Annual Report on Form 10-KSB
for the year ended September 30, 1998.
Note 3 - Cash Flow Presentation
----------------------
For purposes of the statements of cash flows, cash and
cash equivalents include cash and amounts due from
depository institutions, investments in federal funds, and
certificates of deposit with maturities of 90 days or
less.
Note 4 - Earnings Per Share
------------------
Basic per share amounts are based on the weighted average
shares of common stock outstanding. Diluted earnings per
share assume the conversion, exercise or issuance of all
potential common stock instruments such as options,
warrants and convertible securities, unless the effect is
to reduce a loss or increase earnings per share. No
adjustments were made to net income (numerator) for all
periods presented. Earnings per share data is not
presented for the three month period ended December 31,
1997, since the Bank converted to the stock form in July
1998, and such information would not be meaningful. The
basic and diluted weighted average shares outstanding for
the three months ended December 31, 1998 is as follows:
7<PAGE>
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 4 - Earnings Per Share (Continued)
------------------
<TABLE>
<CAPTION>
Income Shares Per Share
Basic EPS (Numerator) (Denominator) Amount
--------- ----------- ------------- ---------
<S> <C> <C> <C>
Income available to
shareholders $244,765 5,938,811 $ .04
Effect of dilutive shares -- -- --
-------- --------- ------
Diluted EPS
-----------
Income available to common
stockholders plus assumed
conversions $244,765 5,938,811 $ .04
======== ========= ======
</TABLE>
Note 5 - Retained Earnings
-----------------
The following table sets forth the Bank's capital position at December
31, 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) $33,937,351 12.52% $ 4,064,487 1.50% N/A N/A
Tier 1 capital (2) 33,937,351 22.42% N/A N/A $ 9,083,733 6.00%
Core (Leverage) (1) 33,937,351 12.52% 8,128,974 3.00% 13,548,289 5.00%
Risk-weighted (2) 35,156,184 23.22% 12,111,644 8.00% 15,139,556 10.00%
<FN>
____________
(1) To adjusted total assets.
(2) To risk-weighted assets.
</FN>
</TABLE>
8<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
General
The Company was formed in June 1998 by the Bank to become
the holding company of the Bank following the Reorganization.
The Reorganization was consummated on July 8, 1998. All
references to the Company prior to July 8, 1998, except where
otherwise indicated, are to the Bank.
The Company's net income is dependent primarily on its net
interest income, which is the difference between interest income
earned on its loan, investment securities and mortgage-backed
securities portfolio and interest paid on interest-bearing
liabilities. Net interest income is determined by (i) the
difference between yields earned on interest-earning assets and
rates paid on interest-bearing liabilities ("interest rate
spread") and (ii) the relative amounts of interest-earning
assets and interest-bearing liabilities. The Company's interest
rate spread is affected by regulatory, economic and competitive
factors that influence interest rates, loan demand and deposit
flows. To a lesser extent, the Company's net income also is
affected by the level of other income, which primarily consists
of fees and charges, and levels of non-interest expenses such as
salaries and related expenses.
The operations of the Company are significantly affected
by prevailing economic conditions, competition and the monetary,
fiscal and regulatory policies of governmental agencies.
Lending activities are influenced by the demand for and supply
of housing, competition among lenders, the level of interest
rates and the availability of funds. Deposit flows and costs of
funds are influenced by prevailing market rates of interest,
primarily on competing investments, account maturities and the
levels of personal income and savings in the Company's market
area.
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 READINESS DISCLOSURE
The following information constitutes "Year 2000 Readiness
Disclosure" under the Year 2000 Information and Readiness
Disclosure Act.
The Company's operations, like those of most financial
institutions, are substantially dependent upon computer systems
for lending and deposit activities. The Company is addressing
the potential problems associated with the possibility that the
computers which control its data processing activities,
facilities and networks may not be programmed to read four-digit
dates and, upon the arrival of the year 2000, may recognize the
two-digit code "00" as the year 1900 rather than 2000. This
could cause systems to fail to function or generate erroneous
information.
9<PAGE>
<PAGE>
The Company has formed a Year 2000 Committee with senior
representatives from every functional area of the Company. At
the direction of the Board, this Committee is leading the
efforts to ensure that the Company is ready for the Year 2000.
The Board of Directors has approved the Company's five phase
Year 2000 Plan that was developed in accordance with the
guidelines set forth by the Federal Financial Institutions
Examination Council.
The first phase, awareness, was intended to provide on-
going information to employees, directors and customers of the
impact of the Year 2000 issue. The Company has conducted Year
2000 training for all directors and employees.
The second phase, assessment, required the review of all
systems that are believed to be potential risks in order to
minimize any Year 2000 operating difficulties. This review
included all major computer and non-computer based systems, such
as vaults, security systems and telephone systems. This phase
is complete.
The third phase, renovation and/or replacement, includes
obtaining vendor certification and/or the necessary upgrades and
enhancements to ensure that existing systems are Year 2000
compliant. The Company is continuing to follow up with third
party vendors as necessary. At this time the Company believes
that all mission critical systems are compliant.
The fourth phase, testing, is currently underway. The
hardware has been successfully tested, and the Company has begun
testing the software. The Company has received representations
from mission critical third party vendors that they are Year
2000 compliant. All testing is expected to be completed by
March 31, 1999.
The last phase, implementation, has commenced and is
expected to be completed in the third quarter of calendar year
1999. The Company has developed contingency plans for processes
that are not yet Year 2000 compliant. This plan is updated as
test results are obtained. The contingency plan sets forth the
procedures that would allow the Company to conduct operations in
the event of one or more system failures, should such a failure
occur notwithstanding prior assurance from third party vendors.
The Company estimates that the total future cost of Year
2000 compliance, excluding internal staffing costs, will not
exceed $75,000. The Company believes that its policies, plans
and actions are in compliance with regulatory guidelines and
milestone dates.
The Bank's customers may also experience Year 2000
problems, which could adversely affect their ability to comply
with their obligations to the Bank. Management does not believe
that the failure of any single customer to be Year 2000
compliant would materially adversely affect the Company's
financial conditions or results of operations.
The Company believes that the potential effects on
internal operations from Year 2000 issues can and will be
addressed prior to the Year 2000. However, as unforeseen
circumstances arise, the Year 2000 issue could disrupt the
Company's normal business operations. The most reasonably
likely worst case Year 2000 scenarios foreseeable at this time
would include the inability to systematically process, in some
combination, various types of customer transactions. This could
affect the Company's ability to accept deposits or process
withdrawals, originate new loans or accept loan payments in the
automated manner currently utilized. Depending upon how long
this scenario lasted, this could have a material adverse effect
on the Company's operations. The contingency plan addresses
alternative methods to enable the Company to continue to offer
basic services to the Company's customers. The costs of the
Year 2000 project and the benchmark dates are based on
management's best estimates, which are based on a number of
assumptions including future events. The Company cannot
guarantee that these estimates will be achieved at the cost
disclosed or within the time frames indicated.
10<PAGE>
<PAGE>
RECENT DEVELOPMENTS
On February 5, 1999, the Bank announced an expansion in the
Bank's branch network. An agreement has been reached to open a
new office at the White Marsh Town Center. It will be located
on Campbell Boulevard in Nottingham Square in front of the new
Lowe's Home Improvement Center currently under construction. It
will be a full service facility, including an ATM and drive-up
lanes. The additional office will help the bank further develop
its lending operations and provide full service banking to new
market areas. The expenses associated with establishing the
branch offices will reduce the Bank's net income in the short
term.
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1998 AND
SEPTEMBER 30, 1998
During the three months ended December 31, 1998, the
Bank's assets increased by $11.8 million, or 4.4%, from $268.8
million at September 30, 1998 to $280.6 million at December 31,
1998. 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 $13.6 million, or 41.1%,
from $33.0 million at September 30, 1998 to $46.6 million at
December 31, 1998. This increase in short-term investments was
due to the low interest rates available on longer term
investments and increased payoffs for refinanced loans.
The Bank's investment securities increased by $754,000, or 6.0%
from $12.6 million at September 30, 1998 to $13.4 million at
December 31, 1998. Loans receivable, net increased by $2.4
million, or 1.3%, from $182.0 million at September 30, 1998 to
$184.4 million at December 31, 1998. The increase in the Bank's
loan portfolio was due primarily to increased originations of
home equity loans as a result of increased loan demand. The
Bank's deposits increased by $10.3 million, or 4.7%, from $220.8
million at September 30, 1998 to $231.1 million at December 31,
1998. The increase in deposits was due to competitive interest
rates being offered by the Bank, the usual increase of deposits
during the holiday season, and the volatile nature of the stock
market.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND DECEMBER 31, 1997
Net Income. Net income decreased by $412,000 from
$657,000 for the three months ended December 31, 1997 to
$245,000 for the three months ended December 31, 1998. The
decrease in net income was primarily attributable to a $339,000
gain on sale of branch deposits reported during the three months
ended December 31, 1997. The Bank recorded $195,000 for
provisions for loan losses for the three months ended December
31, 1998 as compared to $36,000 in provisions for loan losses
for the three months ended December 31, 1997.
Net Interest Income. Net interest income was $2.3 million
for the three months ended December 31, 1998, compared to $2.2
million for the three months ended December 31, 1997,
representing an increase of $146,000, or 6.7%. The increases in
net interest income were the result of an increase in the
interest earned on assets and the decrease in interest on
deposits.
Interest Income. Interest income increased by $137,000,
or 3.0%, from $4.6 million for the three months ended December
31, 1997 to $4.8 million for the three months ended December 31,
1998. This increase was due primarily to an increase in the
volume of loans issued.
Interest Expense. Interest expense, which consists almost
entirely of interest on deposits, was $2.5 million for the three
months ended December 31, 1997 and $2.4 million for the three
months ended December 31, 1998. This decrease was due primarily
to a decrease in interest expense on deposits.
Provision for Loan Losses. The Bank established provisions
for loan losses of $195,000 for the three months ended December
31, 1998 and $36,000 for the three months ended December 31,
1997, representing an increase of $159,000, or 441.7%. In
establishing such provisions, management considered the level of
the Bank's non-performing loans, which were $1.0 million and
$1.5 million at December 31, 1998 and 1997, respectively, and
the levels of the Bank's net charge-offs, which totaled $10,000
and $31,000 during the three months ended December 31, 1998 and
1997. In November 1998, a builder who had ten loans with the
Bank totaling $700,000, declared bankruptcy. The Bank
11<PAGE>
<PAGE>
foreclosed on November 9, 1998, which resulted in an
anticipated loss of $50,000, requiring the Bank to increase its
provision for loan losses.
Other Income. Other income decreased by $292,000, or
60.5% from $483,000 for the three months ended December 31, 1997
to $191,000 for the three months ended December 31, 1998. The
decrease in other income for the three months ended December 31,
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. During the three months ended December 31, 1998,
the Company recorded a $42,000 gain on the sale of foreclosed
real estate, as compared to a $2,000 loss during the three
months ended December 31, 1997.
Non-interest Expenses. Total non-interest expenses
increased by $373,000 or 24.0% from $1.6 million for the three
months ended December 31, 1997 to $1.9 million for the three
months ended December 31, 1998. The increase in non-interest
expenses was due primarily to an increase in salaries and
related expense, occupancy expense, professional fees and
advertising. The Bank's salaries and related expenses increased
by $200,000, or 21.4%, due primarily to payments made in
connection with the retirement of the Bank's former president.
Occupancy expense increased by $55,000, or 46.6%, due to the
expenses associated with the establishment of new offices.
Income Taxes. The Bank's income tax expense was $161,000
and $426,000 for the three months ended December 31, 1997 and
1998, respectively. The Bank's effective tax rates were 39.3%
and 39.6% for the three months ended December 31, 1997 and 1998,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Bank exceeded all regulatory
minimum capital requirements. For information reconciling the
Bank's retained earnings as reported in its financial statements
at December 31, 1998 to its tangible, core and risk-based
capital levels and compares such totals to the regulatory
requirements, see Note 5 of Notes to Consolidated Financial
Statements.
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 a predictable source of funds, deposit
flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions, competition and other
factors.
The primary investing activity of the Company are the
origination of loans and the purchase of investment securities
and mortgage-backed securities. During the three months ended
December 31, 1998 and 1997, the Bank had $8.2 million and $8.2
million, respectively, of loan originations. During the three
months ended December 31, 1998 and 1997, the Company purchased
investment securities in the amounts of $8.3 million and $6.8
million, respectively, and mortgage-backed securities in the
amounts of $482,000 and $2.0 million, respectively. The
purchase of interest bearing deposits increased from $5.0
million at December 31, 1998 to $8.7 million at December 31,
1998. Other investing activities include originations of loans
and purchases of mortgage-backed securities. The primary
financing activity of the Company is the attraction of savings
deposits.
The Company has other sources of liquidity if there is a
need for funds. The Bank has the ability to obtain advances
from the FHLB of Atlanta. In addition, the Company maintains a
portion of its investments in interest-bearing deposits at other
financial institutions that will be available, if needed.
<PAGE>
The Bank is required to maintain minimum levels of liquid
assets as defined by OTS regulations. This requirement, which
may be changed at the direction of the OTS depending upon
economic conditions and deposit flows, is based upon a
percentage of deposits and short-term borrowings. The required
minimum ratio is currently 4.0%. The Bank's average daily
liquidity ratio for the month of December was approximately
30.0%, which exceeded the required
12<PAGE>
<PAGE>
level for such period. Management 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 for lower
rates of return, the Bank'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, interest-bearing
deposits in other banks 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 December 31, 1998, cash,
interest-bearing deposits in other banks and federal funds sold
totaled $4.3 million, $13.0 million and $29.3 million,
respectively.
The Company anticipates that it will have sufficient funds
available to meet its current commitments. Certificates of
deposit which are scheduled to mature in less than three months
at December 31, 1998 totaled $50.8 million. Based on past
experience, management believes that a significant portion of
such deposits will remain with the Bank. The Bank is a party to
financial instruments with off-balance-sheet risk made in the
normal course of business to meet the financing needs of its
customers. These financial instruments are standby letters of
credit, lines of credit and commitments to fund mortgage loans
and involve to varying degrees elements of credit risk in excess
of the amount recognized in the statement of financial position.
The contract amounts of those instruments express the extent of
involvement the Bank has in this class of financial instruments
and represents the Bank's exposure to credit loss from
nonperformance by the other party.
The Bank generally requires collateral or other security
to support financial instruments with off-balance-sheet credit
risk. At December 31, 1998, the Bank had commitments under
standby letters of credit and lines of credit and commitments to
originate mortgage loans of $1.9 million, $9.0 million and $5.0
million, respectively.
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) List of Exhibits
Exhibit 27 - Financial Data Schedule
13<PAGE>
<PAGE>
(b) Form 8-K
A Form 8-K was filed on October 29, 1998 reporting
under Item 5 an announcement of the retirement of
Michael J. Dietz as President of the Company and the
Bank effective January 1, 1999.
A Form 8-K was filed on November 25, 1998 reporting
under Item 5 an announcement that Gary C. Loraditch
will succeed Michael J. Dietz as President of the
Company and the Bank effective January 1, 1999.
14<PAGE>
<PAGE>
SIGNATURES
In accordance with 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: February 11, 1999 /s/ Gary C. Loraditch
------------------------
Gary C. Loraditch
President
(Principal Executive
Officer)
Date: February 11, 1999 /s/ Bonnie M. Klein
------------------------
Bonnie M. Klein
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
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<PERIOD-END> DEC-31-1998
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