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, 2000
[ ] 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) 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 July 25, 2000, the issuer had 5,887,902 shares of Common Stock issued and
outstanding.
Traditional Small Business Disclosure Format (check one):
Yes No X
--------- -------
<PAGE>
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 2000 (unaudited) and September 30, 1999............2
Consolidated Statements of Operations for the Nine Months and
Three Months Ended June 30, 2000 and 1999 (unaudited).......3
Consolidated Statements of Cash Flows for the Nine Months Ended
June 30, 2000 and 1999 (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...................................................15
Item 2. Changes in Securities and Use of Proceeds...........................15
Item 3. Defaults Upon Senior Securities.....................................15
Item 4. Submission of Matters to a Vote of Security Holders.................15
Item 5. Other Information...................................................15
Item 6. Exhibits and Reports on Form 8-K....................................16
SIGNATURES...................................................................17
1
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
BALTIMORE, MARYLAND
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
2000 1999
------------ ------------
(Unaudited)
Assets
------
<S> <C> <C>
Cash $ 6,450,374 $ 5,976,961
Interest bearing deposits in other banks 7,435,479 8,651,267
Federal funds sold 1,422,549 448,945
Investment securities, held to maturity 38,783,403 35,232,306
Loans receivable, net 237,697,086 215,383,087
Mortgage backed securities, held to maturity 20,809,848 23,499,794
Foreclosed real estate, net 72,828 89,091
Investment in real estate development and loans to joint venture 5,672 5,287
Premises and equipment, net 6,528,934 4,846,121
Federal Home Loan Bank of Atlanta stock 1,834,400 1,650,300
Accrued interest receivable - loans 729,721 834,424
- investments 752,912 635,757
- mortgage backed securities 126,151 140,005
Prepaid income taxes 317,325 361,211
Other assets 759,471 547,171
-------------- --------------
Total assets $ 323,726,153 $ 298,301,727
============== ==============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits $ 262,363,891 $ 233,364,564
Borrowed money 12,500,000 16,000,000
Advance payments by borrowers for taxes and insurance 2,855,964 1,101,971
Income taxes payable 61,309 60,670
Dividends payable 265,868 294,797
Payables to disbursing agents 300,434 163,923
Other liabilities 2,042,421 2,035,343
-------------- --------------
Total liabilities 280,389,886 253,021,268
Commitments and contingencies
Stockholders' Equity
--------------------
Common stock (Par value $.01 - 13,500,000 authorized,
5,887,902 shares issued and 6,116,562 outstanding
at June 30, 2000 and September 30, 1999 respectively) 58,879 61,166
Additional paid-in capital 20,138,917 21,918,472
Retained earnings (substantially restricted) 25,554,955 25,788,692
Employee Stock Ownership Plan (1,371,960) (1,509,156)
Stock held by Rabbi Trust (1,044,524) (978,715)
-------------- --------------
43,336,267 45,280,459
-------------- --------------
Total liabilities and stockholders' equity $ 323,726,153 $ 298,301,727
============== ==============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
2
<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,
-------------------------- -------------------------------
2000 1999 2000 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income
---------------
Interest and fees on loans $ 12,570,032 $10,852,836 $ 4,315,361 $ 3,699,671
Interest on mortgage-backed securities 1,109,353 1,336,944 368,046 386,083
Interest and dividends on investment securities 1,793,016 1,066,517 642,672 501,131
Other interest income 293,289 1,126,885 86,532 234,743
------------- ----------- ------------ ------------
Total interest income 15,765,690 14,383,182 5,412,611 4,821,628
Interest Expense
----------------
Interest on deposits 7,754,278 7,228,521 2,745,147 2,374,372
Interest on borrowings - short term 683,187 12,282 243,912 12,282
Other interest expense 4,174 6,456 1,721 2,917
------------- ----------- ------------ ------------
Total interest expense 8,441,639 7,247,259 2,990,780 2,389,571
------------- ----------- ------------ ------------
Net interest income 7,324,051 7,135,923 2,421,831 2,432,057
Provision for losses on loans 79,353 288,531 27,953 56,170
------------- ----------- ------------ ------------
Net interest income after provision
for losses on loans 7,244,698 6,847,392 2,393,878 2,375,887
Other Income (Loss)
------------------
Gain (loss) on sale of foreclosed real estate (5,654) 4,318 -- 3,311
Servicing fee income 6,132 374 1,805 93
Fees and charges on loans 109,939 114,493 36,611 36,902
Fees on transaction accounts 148,562 126,022 52,158 36,730
Rental income 87,483 84,604 29,280 20,744
Gain from real estate development and joint venture 386 6,110 (147) 72
Gain on sale of Fixed Assets 3,475 -- -- --
Miscellaneous income 56,263 57,611 22,689 24,270
------------- ----------- ------------ ------------
Net other income (loss) 406,585 393,532 142,395 122,122
Non-Interest Expenses
---------------------
Salaries and related expense 3,392,854 3,033,840 1,169,368 874,753
Occupancy expense 727,609 509,790 263,032 169,105
Deposit insurance premiums 113,457 118,014 28,994 49,071
Data processing expense 458,224 381,770 181,441 116,921
Property and equipment expense 603,141 452,655 195,683 204,372
Professional fees 144,567 139,246 36,596 26,417
Advertising 681,710 309,292 225,385 108,376
Telephone, postage and office supplies 357,393 259,814 109,636 93,061
Amortization of excess of cost over fair value of net
assets acquired -- 20,034 -- 6,678
Other expenses 194,098 279,244 36,832 85,031
------------- ----------- ------------ ------------
Total non-interest expenses 6,673,053 5,503,699 2,246,967 1,733,785
------------- ----------- ------------ ------------
Income before tax provision 978,230 1,737,225 289,306 764,224
Income tax provision 383,124 681,079 112,952 298,679
------------- ----------- ------------ ------------
Net income $ 595,106 $ 1,056,146 $ 176,354 $ 465,545
============= =========== ============ ============
Basic earnings per share $ 0.11 $ 0.18 $ 0.03 $ 0.08
============= =========== ============ ===========
Diluted earnings per share $ 0.10 $ 0.18 $ 0.03 $ 0.08
============= =========== ============ ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
BALTIMORE, MARYLAND
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED
JUNE 30,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating Activities
--------------------
Net Income $ 595,106 $ 1,058,146
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Accretion of discount on investments (1,097) 5,368
Loan fees deferred, net (113,520) 36,270
Amortization of deferred loan fees, net (35,384) (160,676)
Provision for losses on loans 79,353 288,531
Non-cash compensation under Stock-Based Benefit Plan 109,228 83,695
Amortization of premium on mortgage backed securities 28,852 31,414
(Gain)/ loss on sale of foreclosed real estate 5,654 (4,318)
Gain from real estate development and joint venture (386) (6,110)
Provision for depreciation 460,633 281,256
Gain on Sale of Fixed Assets (3,475) --
(Increase) decrease in accrued interest receivable on loans 104,703 (34,253)
Increase in accrued interest receivable on investments (117,155) (11,311)
Decrease in accrued interest receivable on mortgage
backed securities 13,854 55,283
Increase (decrease) in prepaid income taxes 113,794 (368,321)
Decrease in deferred income tax liabilities (69,908) (93,023)
Amortization of excess of cost over fair value of net assets acquired -- 22,260
Increase in other assets (212,300) (964,695)
Decrease in accrued interest payable on deposits (85,863) (35,342)
Increase in income taxes payable 639 49,882
Increase in other liabilities and payables to
disbursing agents 131,356 523,742
----------- -----------
Net cash provided by operating activities 1,004,084 757,798
</TABLE>
4
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
BALTIMORE, MARYLAND
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED
JUNE 30,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash Flows from Investing Activities
------------------------------------
Proceeds from maturing interest bearing deposits $ 4,284,000 $ 2,837,000
Purchase of interest bearing deposits (1,178,000) (8,694,000)
Purchases of investment securities - held to maturity (4,050,000) (32,052,819)
Proceeds from maturities of investment securities - held to maturity 500,000 10,926,000
Longer term loans originated (25,123,204) (32,570,300)
Principal collected on longer term loans 18,147,276 15,284,958
Net increase in short-term loans (15,276,825) (3,403,365)
Principal collected on mortgage backed securities 5,489,359 11,392,959
Purchase of mortgage backed securities (2,828,265) (1,983,790)
Proceeds from sales of foreclosed real estate 16,263 437,149
Proceeds from joint venture -- 8,260
Investment in premises and equipment (2,139,971) (704,506)
Purchase of Federal Home Loan Bank of Atlanta stock (184,100) (138,400)
------------- -------------
Net cash provided (used) by investing activities (22,334,467) (38,660,854)
Cash Flows from Financing Activities
------------------------------------
Net increase in demand deposits, money market, passbook
accounts and advances by borrowers for taxes and
insurance 6,135,945 11,919,878
Increase in Federal Home Loan Bank of Atlanta advances 18,675,000 3,000,000
Repayment of Federal Home Loan Bank of Atlanta advances (22,175,000) --
Net increase in certificates of deposit 24,703,238 1,323,608
Acquisition of stock for Rabbi Trust (65,809) --
Treasury stock purchase (1,704,671) --
Acquisition of stock for Management Retention Plan (37,665) --
Increase in dividends payable (28,929) 295,201
Dividends declared on stock (828,843) (295,201)
------------- -------------
Net cash provided by financing activities 24,673,266 16,243,486
------------- -------------
Increase (decrease) in cash and cash equivalents 3,337,229 (21,659,570)
Cash and cash equivalents at beginning of period 7,188,173 31,074,481
------------- -------------
Cash and cash equivalents at end of period $ 10,525,402 9,414,911
============= =============
</TABLE>
5
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
BALTIMORE, MARYLAND
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED
JUNE 30,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
The following is a summary of cash and cash equivalents:
Cash $ 6,450,374 $ 3,825,242
Interest bearing deposits in other banks 7,435,479 12,316,208
Federal funds sold 1,422,549 1,062,461
------------- -------------
Balance of cash items reflected on Statement of
Financial Condition 15,308,402 17,203,911
Less - certificate of deposit with an original maturity of
more than three months 4,783,000 7,789,000
------------- -------------
Cash and cash equivalents reflected on the
Statement of Cash Flows $ 10,525,402 $ 9,414,911
============= =============
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Interest $ 5,618,253 $ 7,285,012
============= =============
Income taxes $ 235,200 $ 554,661
============= =============
Transfer from loans to real estate acquired through foreclosure $ -- $ 110,161
============= =============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
6
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
BALTIMORE, MARYLAND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 1 - Principals of Consolidation
---------------------------
BCSB Bankcorp, Inc. (the "Company") owns 100% of Baltimore County
Savings Bank, F.S.B. (the "Bank") and subsidiaries, 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. 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 has 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 results for the three months and nine
months ended June 30, 2000 are not necessarily indicative of the
results of operations that may be expected for the year ended September
30, 2000. 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, 1999.
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. The basic and diluted weighted average shares outstanding
for the three months and nine months ended June 30, 2000 are as
follows:
7
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
BALTIMORE, MARYLAND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 4 - Earnings Per Share (Continued)
------------------
<TABLE>
<CAPTION>
For the Nine months Ended June 30, 2000
--------------------------------------------
Income Shares Per Share
Basic EPS (Numerator) (Denominator) Amount
--------- ----------- ------------- ---------
<S> <C> <C> <C>
Income available to shareholders $ 595,106 5,660,487 $ 0.11
Effect of dilutive shares -- 104,176 (0.01)
----------- ---------- ---------
Diluted EPS
-----------
Income available to common stockholders
plus assumed conversions $ 595,106 5,764,663 $ 0.10
=========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 2000
--------------------------------------------
Income Shares Per Share
Basic EPS (Numerator) (Denominator) Amount
--------- ----------- ------------- ---------
<S> <C> <C> <C>
Income available to shareholders $ 176,354 $5,524,388 $ 0.03
Effect of dilutive shares -- 107,794 --
----------- ---------- ---------
Diluted EPS
-----------
Income available to common stockholders
plus assumed conversions $ 176,354 5,632,182 $ 0.03
=========== ========== =========
</TABLE>
Note 5 - Regulatory Capital
------------------
The following table sets forth the Bank's capital position at June 30,
2000.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
----------------------- ------------------------ -------------------------
Actual % of Required % of Required % of
Amount Assets Amount Assets Amount Assets
------ ------ ------ ------ ------ ------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Tangible (1) $ 34,245,202 10.81%$ 4,752,844 1.50% N/A N/A
Tier 1 capital (2) 34,245,202 17.85 N/A N/A 11,509,195 6.00%
Core (1) 34,245,202 10.81 9,505,689 3.00 15,837,082 5.00
Risk-weighted (2) 35,535,167 18.53 15,345,593 8.00 19,181,992 10.00
<FN>
------------
(1) To adjusted total assets.
(2) To risk-weighted assets.
</FN>
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Company was formed in May 1998 by the Bank to become the holding
company of the Bank following the Bank's reorganization to the mutual holding
company form of organization (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.
9
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2000 AND SEPTEMBER 30, 1999
During the nine months ended June 30, 2000, the Company's assets
increased by $25.4 million, or 8.5%, from $298.3 million at September 30, 1999
to $323.7 million at June 30, 2000. The Company has sought to increase loans in
order to take advantage of the higher yields on loans compared to investment
securities and mortgage-backed securities. Loans receivable, net increased by
$22.3 million, or 10.4%, from $215.4 million at September 30, 1999 to $237.7
million at June 30, 2000. The Company's mortgage-backed securities decreased by
$2.7 million or 11.4%, from $23.5 million at September 30, 1999 to $20.8 million
at June 30, 2000. The Company's investment securities increased by $3.5 million,
or 10.1%, from $35.2 million at September 30, 1999 to $38.8 million at June 30,
2000. The Company's premises and equipment increased $1.7 million or 34.7% from
$4.8 million at September 31, 1999 to $6.5 million at June 30, 2000. The
increase was due to the construction and improvements to new and existing branch
offices. The Company's deposits increased by $29.0 million, or 12.4%, from
$233.3 million at September 30, 1999 to $262.4 million at June 30, 2000. The
increase in deposits was achieved through the opening of new offices, increased
advertising and promotion activities. The Company repaid $3.5 million in
advances from the Federal Home Loan Bank of Atlanta during the quarter ended
June 30, 2000. Common stock and Additional Paid in Capital decreased from
$61,000 and $21.9 million, respectively at September 30, 1999 to $59,000 and
$20.1 million respectively at June 30, 2000, this was due to the repurchase of
5% of the Company's stock which began at the beginning of this fiscal year and
was completed this quarter.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 2000 AND 1999
Net Income. Net income decreased by $461,000, or 43.7%, from $1.1
million for the nine months ended June 30, 1999 to $595,000 for the nine months
ended June 30, 2000. The decrease in net income was primarily attributable to
increased non-interest expense, which was only partially offset by an increase
in net interest income.
Net Interest Income. Net interest income was $7.3 million for the nine
months ended June 30, 2000, compared to $7.1 million for the nine months ended
June 30, 1999, representing an increase of $188,000 or 2.6%. The increase was
primarily due to an increase in the average balance in loans from $190.4
million, at June 30, 1999 to $226.9 million at June 30, 2000, offset by
decreases in interest rate spread and net interest margin.
Interest Income. Interest income increased by $1.4 milllion or 9.6%,
from $14.4 million for the nine months ended June 30, 1999 to $15.8 million for
the nine months ended June 30, 2000. This increase was due primarily to a $1.7
million, or 15.8%, increase in interest and fees on loans from $10.8 million for
the nine months ended June 30, 1999 to $12.6 million for the nine months ended
June 30, 2000. The increase in interest and fees on loans was primarily due to a
$36.5 million increase in the average balance of loans receivable. This increase
more than offsets decreases in interest on mortgage-backed securities and other
interest income. Other interest income, which consists of interest earned on
deposits in banks and Federal Funds sold, decreased by $836,000, or 74.0%, from
$1.1million for the nine months ended June 30, 1999 to $293,000 for the nine
months ended June 30, 2000. This decrease was due to the investment of lower
yielding federal funds transferred to higher yielding loans. Interest on
mortgage-backed securities decreased by $228,000, or 17.0%, from $1.3 million
for the nine months ended June 30, 1999 to $1.1million for the nine months ended
June 30, 2000. This decrease was primarily due to a $5.0 million decrease in the
average balance of mortgage-backed securities. Interest and dividends on
investment securities increased $726,000, or 68.1%, from $1.1 million for the
nine months ended June 30, 1999 to $1.8 million for the nine months ended June
30, 2000. This increase was primarily due to a 44 basis point increase in the
average yield on investment securities, due to the purchase of higher yielding
securities.
10
<PAGE>
Interest Expense. Interest expense, which consists of interest on
deposits and interest on short-term borrowings, was $7.2 million for the nine
months ended June 30, 1999 and $8.4 million for the nine months ended June 30,
2000. This increase was primarily due to an increase in interest on short term
borrowings from $12,000 for the nine months ended June 30, 1999 to $683,000 for
the nine months ended June 30, 2000. Interest on deposits increased $525,000
from 7.2 million for the nine months ended June 30, 1999 to $7.8 million for the
nine months ended June 30, 2000. This increase was due to the increase in the
average balance of deposits from $229.8 million at June 30, 1999 to $246.0
million at June 30, 2000 and increased interest rates paid on deposit accounts.
11
<PAGE>
Average Balance Sheet. The following tables sets forth certain
information relating to the Company's average balance sheet and reflects the
average yield on assets and cost of liabilities for the periods indicated and
the average yields earned and rates paid. Such yield and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods presented. Average balances are computed using
month-end balances.
The table also presents information for the periods indicated with
respect to the differences between the average yield earned on interest-earning
assets and average rate paid on interest-bearing liabilities, or "interest rate
spread," which banks have traditionally used as an indicator of profitability.
Another indicator of net interest income is "net interest margin," which is its
net interest income divided by the average balance of interest-earning assets.
<TABLE>
<CAPTION>
Nine months Ended June 30,
---------------------------------------------------------------------------
2000 1999
--------------------------------- -----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans............................ $ 226,853 $ 12,570 7.39% $ 190,399 $ 10,854 7.60%
Mortgage-backed securities............... 22,737 1,109 6.50 27,787 1,337 6.42
Dividends and investment securities...... 37,589 1,793 6.36 24,031 1,067 5.92
Other Investments........................ 6,910 293 5.65 28,756 1,129 5.23
--------- --------- ---------- --------
Total interest-earning assets........ 294,089 15,765 7.15 270,973 14,387 7.08
Noninterest-earning assets.................. 15,825 9,742
--------- ----------
Total assets......................... $ 309,914 $ 280,715
========= ==========
Interest-bearing liabilities:
Deposits................................. $ 246,085 7,754 4.20 $ 229,839 7,229 4.19
Borrowings-short term.................... 15,419 683 5.91 444 12 3.60
Other liabilities........................ 1,954 4 0.27 2,210 6 0.36
--------- --------- ---------- --------
Total interest-bearing liabilities.......... 263,458 8,441 4.27 223,493 7,247 4.16
--------- -------- -------- ------
Noninterest-bearing liabilities............. 2,162 2,594
--------- ----------
Total liabilities.................... 265,620 235,087
Stockholders' equity ....................... 44,294 45,628
--------- ----------
Total liabilities and stockholders'
equity.......................... $ 309,914 $ 280,715
========= ==========
Net interest income......................... $ 7,324 $ 7,140
========= ========
Interest rate spread........................ 2.88% 2.92%
====== =======
Net interest margin......................... 3.32% 3.51%
======= ========
Ratio average interest earning assets/
interest bearing liabilities............ 111.63% 116.55%
====== ======
</TABLE>
Provision for Loan Losses. The Company charges provisions for loan
losses to earnings to maintain the total allowance for loan losses at a level
management considers adequate to provide for probable loan losses, based on
prior loss experience. The Company established provision for losses on loans of
$79,000 for the nine months ended June 30, 2000, as compared to $289,000 for the
nine months ended June 30, 1999, representing a decrease of $209,000. Loan
chargeoffs for the nine months ended June 30, 2000 were $145,000 as compared to
$123,000 for the nine months ended June 30, 1999. Loan recoveries were $83,000
for the nine months ended June 30, 2000, compared to $31,000 for the nine months
ended June 30 1999. Non performing loans at June 30, 2000 were $317,000 as
compared to $554,000 at June 30, 1999. The total loss allowance allocated to
domestic loans is $1.3 million. In establishing such provisions, management
considered an analysis of the risk inherent in the loan portfolio.
12
<PAGE>
Other Income. Other income increased by $13,000, or 3.3%, from $394,000
for the nine months ended June 30, 1999 to $407,000 for the nine months ended
June 30, 2000. The increase in other income for the nine months ended June 30,
2000 was attributable primarily to a $23,000, or a 17.5% increase in fees from
transaction accounts, from $126,000 at June 30, 1999 as compared to $149,000 at
June 30, 2000.
Non-interest Expenses. Total non-interest expenses increased by $1.2
million, or 21.2%, from $5.5 million for the nine months ended June 30, 1999 to
$6.7 million for the nine months ended June 30, 2000. The increase in
non-interest expenses was due to increases in salaries and related expenses,
occupancy expense, telephone postage and office supplies, data processing
expense, property and equipment expense and advertising expense primarily due to
the opening of new branch offices. The Company's salaries and related expenses
increased by $359,000, or 11.8%, due to the recruitment of personnel for new
offices. Occupancy expense increased by $218,000, or 42.7% and property and
equipment expense increased by $150,000, or 33.2%. Data processing expense
increased by $76,000, or 20.0%, both due to the increased cost associated with
the new offices and increased deposit and loan accounts being serviced.
Telephone, postage and office supplies increased by $98,000, or 37.3% due to the
expenses associated with the establishment of new offices. The Company increased
its advertising expense by $372,000, or 120.3%, in an effort to increase market
share and promote the new offices.
Income Taxes. The Company's income tax expense was $383,000 and
$681,000 for the nine months ended June 30, 2000 and 1999, respectively. The
Company's effective tax rates were 39.2% and 39.2% for the nine months ended
June 30, 2000 and 1999, respectively.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND
1999
Net Income. Net income decreased by $289,000, or 62.2%, from $465,000
for the three months ended June 30, 1999 to $176,000 for the three months ended
June 30, 2000. The decrease in net income was primarily attributable to
increased non-interest expenses.
Net Interest Income. Net interest income remained stable at $2.4
million for the three months ended June 30, 2000, and the three months ended
June 30, 1999.
Interest Income. Interest income increased by $591,000, or 12.3% from
$4.8 million for the three months ended June 30, 1999 to 5.4 million for the
three months ended June 30, 2000. Interest and fees on loans increased by
$616,000, or 16.6%, from $3.7 million for the three months ended June 30, 1999
to $4.3 million for the three months ended June 30, 2000 primarily due to a
$35.4 million increase in the average balance of loans receivable as the Company
implemented its strategy of increasing loan originations. The increase in the
average volume of loans receivable more than offset a 6 basis point decrease in
the average yield on loans. Additionally, interest and dividends on investment
securities increased by $142,000 or 28.3%. This increase virtually offsets a
$148,000 decrease in other interest income.
Interest Expense. Interest expense, which consists of interest on
deposits and interest on borrowed money increased form $2.4 million for the
three months ended June 30, 1999 to $3.0 million for the three months ended June
30, 2000 a change of $601,000 or 25.2%. Interest on deposits increased $371,000
during the three months ended June 30, 2000, due to an increase in the average
volume of deposits and their interest cost. Interest on short-term borrowings
was $244,000 for the three months ended June 30, 2000, as compared to $12,000
for the three months ended June 30, 1999. The increase was primarily due to the
$12.5 million in advances obtained from the Federal Home Loan Bank of Atlanta at
June 30, 2000. The borrowed money was used to fund loan demand.
13
<PAGE>
Average Balance Sheet. The following tables sets forth certain
information relating to the Company's average balance sheet and reflects the
average yield on assets and cost of liabilities for the periods indicated and
the average yields earned and rates paid. Such yield and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods presented. Average balances are computed using
month-end balance.
<TABLE>
<CAPTION>
Three months Ended June 30,
---------------------------------------------------------------------------
2000 1999
--------------------------------- -----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------ ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans.................................... $ 234,561 $ 4,315 7.36% $ 199,166 $ 3,700 7.42%
Mortgage-backed securities............... 21,744 368 6.77 24,680 386 6.26
Investment Securities and FHLB stock..... 40,618 643 6.33 33,716 501 5.94
Other Investments........................ 6,915 87 5.03 16,566 235 5.67
--------- --------- ---------- --------
Total interest-earning assets........ 303,776 5,413 7.13 274,128 4,822 7.04
Noninterest-earning assets.................. 13,698 9,625
--------- ----------
Total assets......................... $ 317,536 $ 283,753
========= ==========
Interest-bearing liabilities:
Deposits................................. $ 254,463 2,745 4.31 231,523 2,374 4.10
Borrowings-short term.................... 16,092 244 6.07 1,333 12 --
Other liabilities........................ 2,550 2 0.31 3,078 3 0.39
--------- --------- ---------- --------
Total interest-bearing liabilities.......... 273,105 2,991 4.38 235,934 2,389 4.05
--------- -------- -------- ------
Noninterest-bearing liabilities............. 1,012 1,902
--------- ----------
Total liabilities.................... 274,117 237,836
Stockholders' equity ....................... 43,419 45,917
--------- ----------
Total liabilities and stockholders'
equity.......................... $ 317,536 $ 283,753
========= ==========
Net interest income......................... $ 2,422 $ 2,433
========= ========
Interest rate spread........................ 2.75% 2.99%
======= =======
Net interest margin......................... 3.19% 3.55%
===== ========
Ratio average interest earning assets/
interest bearing liabilities............ 111.25% 116.19%
====== ======
</TABLE>
Provision for Loan Losses. The Company established provisions for
losses on loans of $28,000 for the three months ended June 30, 2000, as compared
to $56,000 for the three months ended June 30, 1999, representing a decrease of
$28,000. In establishing such provisions, management considered an analysis of
the risk inherent in the loan portfolio.
Other Income. Other income increased by $20,000, or 16.4%, from
$122,000 for the three months ended June 30, 1999 to $142,000 for the three
months ended June 30, 2000. The increase in other income for the three months
ended June 30, 2000 was attributable primarily to a $15,000 increase in fees on
transaction accounts, from $37,000 for the three months ended June 30, 1999 to
$52,000 for the three months ended June 30, 2000. Additionally, rental income
increased by $8,000 or 38.1%, from $21,000 for the three months ended June 30,
1999 to $29,000 for the three months ended June 30, 2000. These increases more
than offset a $2,000 decrease in miscellaneous income.
Non-interest Expenses. Total non-interest expenses increased by
$513,000, or 29.6%, from $1.7 million for the three months ended June 30, 1999
to $2.2 million for the three months ended June 30, 2000. The increase in
non-interest expenses was due to increases in salaries and related expenses,
occupancy expense, data processing expense, property and equipment expense and
advertising expense. The Company's salaries and related expenses increased by
$295,000, or 33.6%, due to the recruitment of personnel for the new offices.
Occupancy expense increased by $94,000, or 55.6%, due to the expenses associated
with the establishment of new offices. Data
14
<PAGE>
processing expense increased $64,000, or 54.7%, due to the increased cost
associated with the new offices and increased number of deposit and loan
accounts. The Company increased its advertising expense by $117,000, or 108%, in
an effort to increase market share.
Income Taxes. The Company's income tax expense was $113,000 and
$299,000 for the three months ended June 30, 2000 and 1999, respectively. The
Company's effective tax rates were 39.1% for both the three months ended June
30, 2000 and 1999.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Bank exceeded all regulatory minimum capital
requirements. For information comparing the Bank's tangible, core and risk-based
capital levels 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 activities of the Company are the origination of
loans and the purchase of investment securities and mortgage-backed securities.
During the nine months ended June 30, 2000 and 1999, the Company had $68.4
million and $72.6 million, respectively, of mortgage and consumer loan
originations. During the nine months ended June 30, 2000 and 1999, the Company
purchased investment securities in the amounts of $4.1 million and $32.1
million, respectively, and mortgage-backed securities in the amounts of $2.8
million and $2.0 million, respectively. The purchase of interest-bearing
deposits decreased from $8.7 million for the nine months ended June 30, 1999 to
$7.4 million for the nine months ended June 30, 2000. 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.
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 June was approximately 28.5%, which exceeded the required 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 June 30, 2000, cash, interest-bearing deposits in other banks and
federal funds sold were $6.4 million, $7.4 million and $1.4 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 one year or less at June 30, 2000 totaled $102.3 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
15
<PAGE>
the extent of involvement the Company has in this class of financial instruments
and represents the Company's exposure to credit loss from nonperformance by the
other party.
The Company generally requires collateral or other security to support
financial instruments with off-balance-sheet credit risk. At June 30, 2000, the
Company had commitments under standby letters of credit and lines of credit and
commitments to originate mortgage loans of $469,000, $11.9 million and $2.4
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.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
Exhibit 27 - Financial Data Schedule
(b) Form 8-K
No Reports on Form 8-K were filed during the quarter ended
June 30, 2000.
17
<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: August 11, 2000 /s/ Gary C. Loraditch
--------------------------------------------
Gary C. Loraditch
President
(Principal Executive Officer)
Date: August 11, 2000 /s/ Bonnie M. Klein
--------------------------------------------
Bonnie M. Klein
Vice President and Treasurer
(Principal Financial and Accounting Officer)
