BCSB BANKCORP, INC.
[LOGO]
2000 ANNUAL REPORT
<PAGE>
BCSB BANKCORP, INC.
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BCSB Bankcorp, Inc. (the "Company") serves as the holding company for its
wholly owned subsidiary, Baltimore County Savings Bank, F.S.B. (the "Bank").
Baltimore County Savings Bank, M.H.C. (the "MHC"), a federal mutual holding
company, owns 63.77% of the Company's outstanding common stock. The Company has
no significant assets other than its investment in the Bank. The Company is
primarily engaged in the business of directing, planning and coordinating the
business activities of the Bank.
The Bank is a federal mutual savings bank operating through ten banking
offices serving Baltimore and Harford Counties in Maryland. The Bank's principal
business consists of attracting deposits from the general public and investing
these funds in loans secured by first mortgages on owner-occupied, single-family
residences in the Bank's market area, and, to a lesser extent, other real estate
loans, consisting of construction loans, single-family rental property loans and
commercial real estate loans, and consumer loans, particularly automobile loans.
The Bank derives its income principally from interest earned on loans and, to a
lesser extent, interest earned on mortgage-backed securities and investment
securities and other income. Funds for these activities are provided principally
by operating revenues, deposits and repayments of outstanding loans and
investment securities and mortgage-backed securities.
MARKET INFORMATION
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The Company's common stock began trading under the symbol "BCSB" on the
Nasdaq National Market System on July 9, 1998. There are currently 5,887,072
shares of the common stock outstanding and approximately 1,153 holders of record
of the common stock. Following are the high and low bid prices, by fiscal
quarter, as reported on the Nasdaq National Market System during the periods
indicated, as well as dividends paid on the common stock during each quarter.
High Low Dividends Per Share
---- --- -------------------
Fiscal 2000
-----------
First quarter..................$ 7.50 $6.375 $ .125
Second quarter................. 7.25 5.6562 .125
Third quarter.................. 6.75 6.00 .125
Fourth quarter *............... 6.625 5.935 .125
Fiscal 1999
-----------
First quarter..................$10.375 $7.750 $ --
Second quarter................. 9.625 7.875 --
Third quarter.................. 9.375 8.125 .125
Fourth quarter................. 8.563 6.310 .125
-----------
* As of December 11, 2000
The stated high and low bid prices reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual
transactions.
TABLE OF CONTENTS
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BCSB Bankcorp, Inc..........................................................(i)
Market Information..........................................................(i)
Letter to Stockholders.......................................................1
Selected Consolidated Financial and Other Data...............................2
Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................4
Consolidated Financial Statements..........................................F-1
Corporate Information........................................Inside Back Cover
<PAGE>
[BCSB BANKCORP, INC. LETTERHEAD]
To our Depositors, Shareholders and Friends:
In this, our third annual report, we are beginning to see some of the
results of the plans we started 2 1/2years ago. With three new offices during
the year and enhancements to our financial products, continued with the
improvements in the prior year, your bank can successfully compete in today's
financial market place.
November saw the opening of the Essex office. In January, White Marsh
opened for business. It was followed with the Hickory office in April. The Essex
drive-in became operational in November, 2000 and we expect our Carney location
to begin operations in early 2001.
During the year we introduced an overdraft line of credit loan product and
started on-line banking through the bank's improved web site. We also have added
home improvement loans to our available consumer loan portfolio.
The result of this is that BCSB is a "full service community bank". I know
of no other bank our size that offers a similar range of financial products for
consumers. Our growth is evidence of the acceptance of BCSB in the community.
Our five new offices are exceeding deposit expectations. Overall, deposits grew
$35,500,000 in the fiscal year ended September 30, 2000, also better than
expected.
As we continue to grow, our financial performance will improve. Like
others, we suffered with a decreasing net interest margin in the year. Our net
interest income will increase as we grow, resulting in improved performance.
Discussion of this past years operation follows. You will see a good
foundation for growth and prosperity.
Very truly yours,
/s/ Gary C. Loraditch
Gary C. Loraditch
President
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
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SELECTED CONSOLIDATED FINANCIAL CONDITION DATA
<TABLE>
<CAPTION>
At September 30,
-----------------------------
2000 1999
-------- ---------
(In thousands)
<S> <C> <C>
Total assets.................................................... $ 325,879 $ 298,302
Loans receivable, net........................................... 241,520 215,383
Cash............................................................ 6,571 5,977
Interest-bearing deposits in other banks........................ 5,256 8,651
Federal funds sold.............................................. 455 449
Investment securities:
Held to maturity............................................ 41,158 35,232
Mortgage-backed securities:
Held to maturity............................................ 19,824 23,500
FHLB stock...................................................... 1,834 1,650
Deposits........................................................ 268,882 233,365
FHLB advances................................................... 9,500 16,000
Stockholders' equity - substantially restricted................ 43,343 45,280
</TABLE>
SELECTED CONSOLIDATED OPERATIONS DATA
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------
2000 1999
---------- ----------
(In thousands)
<S> <C> <C>
Interest income................................................. $ 21,480 $ 19,396
Interest expense................................................ 11,757 9,780
----------- -----------
Net interest income before
provision for loan losses.................................... 9,723 9,616
Provision for loan losses....................................... 162 339
----------- -----------
Net interest income............................................. 9,561 9,277
Other income.................................................... 530 547
Non-interest expense............................................ 8,967 7,482
----------- -----------
Income before income taxes...................................... 1,124 2,342
Income tax provision............................................ 437 957
----------- -----------
Net Income...................................................... $ 687 $ 1,384
=========== ===========
</TABLE>
2
<PAGE>
KEY OPERATING RATIOS:
<TABLE>
<CAPTION>
At or for the Year
Ended September 30,
---------------------------
2000 1999
---------- ---------
<S> <C> <C>
PERFORMANCE RATIOS:
Return on average assets (net income
divided by average total assets).......................... .22% .49%
Return on average equity (net income
divided by average equity)................................ 1.58 3.03
Interest rate spread (combined
weighted average interest rate
earned less combined weighted
average interest rate cost)............................... 2.77 2.94
Net interest margin (net interest
income divided by average
interest-earning assets).................................. 3.26 3.51
Ratio of average interest-earning assets
to average interest-bearing liabilities................... 112.46 116.05
Ratio of non-interest expense to
average total assets...................................... 2.86 2.63
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at
end of period............................................. .16 .39
Nonperforming loans to gross loans at
end of period............................................. .15 .46
Allowance for loan losses to gross loans
at end of period.......................................... .55 .57
Allowance for loan losses to nonperforming
loans at end of period.................................... 366.32 124.20
Provision for loan losses to gross loans .................... .06 .15
Net charge-offs to average loans
outstanding............................................... .01 .05
CAPITAL RATIOS:
Equity to total assets at end
of period................................................. 13.30 15.18
Average equity to average
assets.................................................... 13.83 16.07
</TABLE>
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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GENERAL
The Company was formed in June 1998 by the Bank to become the holding
company for the Bank following the Bank's reorganization into the mutual holding
company form of organization (the "Reorganization"). As part of the
Reorganization, the Company became a majority-owned subsidiary of the MHC. 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 Annual Report, 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, competition and information provided by
third-party vendors 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.
ASSET/LIABILITY MANAGEMENT
The Company strives to achieve consistent net interest income and
reduce its exposure to adverse changes in interest rates by attempting to match
the terms to repricing of its interest-sensitive assets and liabilities. Factors
beyond the Bank's control, such as market interest rates and competition, may
also have an impact on the Bank's interest income and interest expense.
4
<PAGE>
In the absence of any other factors, the overall yield or return
associated with the Bank's earning assets generally will increase from existing
levels when interest rates rise over an extended period of time, and conversely
interest income will decrease when interest rates decrease. In general, interest
expense will increase when interest rates rise over an extended period of time,
and conversely interest expense will decrease when interest rates decrease. By
controlling the increases and decreases in its interest income and interest
expense which are brought about by changes in market interest rates, the Bank
can significantly influence its net interest income.
The three senior officers of the Bank meet on a weekly basis to monitor
the Bank's interest rate risk position and to set prices on loans and deposits
to manage interest rate risk within the parameters set by the Board of
Directors. The President of the Bank reports to the Board of Directors on a
regular basis on interest rate risk and trends, as well as liquidity and capital
ratios and requirements. The Board of Directors reviews the maturities of the
Bank's assets and liabilities and establishes policies and strategies designed
to regulate the Bank's flow of funds and to coordinate the sources, uses and
pricing of such funds. The first priority in structuring and pricing the Bank's
assets and liabilities is to maintain an acceptable interest rate spread while
reducing the net effects of changes in interest rates. The Bank's management is
responsible for administering the policies and determinations of the Board of
Directors with respect to the Bank's asset and liability goals and strategies.
The Bank's principal strategy in managing interest rate risk has been
to emphasize the acquisition of short- and intermediate-term assets, including
locally originated 15-year fixed-rate mortgage loans and consumer loans,
particularly automobile loans. In addition, in managing its portfolio of
investment securities and mortgage-backed securities, the Bank in recent periods
has purchased short-term investment securities so as to reduce the Bank's
exposure to increases in interest rates. To further manage interest rate risk,
the Bank will occasionally sell loans into the secondary market, while retaining
the servicing of said loans.
In addition to shortening the average repricing period of its assets,
the Bank has sought to lengthen the average maturity of its liabilities by
adopting a tiered pricing program for its certificates of deposit, which
provides higher rates of interest on its longer term certificates in order to
encourage depositors to invest in certificates with longer maturities.
MARKET RISK
Management measures the Bank's interest rate risk by computing
estimated changes in the net portfolio value ("NPV") of its cash flows from
assets, liabilities and off-balance sheet items in the event of a range of
assumed changes in market interest rates. NPV represents the market value of
portfolio equity and is the difference between incoming and outgoing discounted
cash flows from assets and liabilities, with adjustments made for off-balance
sheet items. These computations estimate the effect on the Bank's NPV of sudden
and sustained 1% to 3% increases and decreases in market interest rates. The
Bank's Board of Directors has adopted an interest rate risk policy which
establishes maximum decreases in the Bank's estimated NPV of 10%, 17% and 23% in
the event of 1%, 2% and 3% increases in market interest rates, respectively, and
of 13%, 25% and 38% in the event of 1%, 2% and 3% decreases in market interest
rates, respectively. The following table presents the Bank's projected change in
NPV for the various rate shock levels at September 30, 2000.
5
<PAGE>
<TABLE>
<CAPTION>
Net Portfolio Value NPV as % of PV of Assets
Change ------------------------------------------- -------------------------
in Rates $ Amount $ Change(1) % Change(2) NPV Ratio (3) Change(4)
-------- -------- ----------- ----------- ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+ 300bp $ 22,619 (13,710) (38)% 7.48% (377) bp
+ 200bp 27,096 (9,233) (25) 8.77 (249) bp
+ 100bp 31,753 (4,576) (13) 10.06 (120) bp
0bp 36,329 11.26
- 100bp 39,993 3,663 10 12.16 91 bp
- 200bp 42,456 6,127 17 12.72 146 bp
- 300bp 44,579 8,250 23 13.17 191 bp
<FN>
---------------
(1) Represents the excess (deficiency) of the estimated NPV assuming the
indicated change in interest rates minus the estimated NPV assuming no
change in interest rates.
(2) Calculated as the amount of change in the estimated NPV divided by the
estimated NPV assuming no change in interest rates.
(3) Calculated as the estimated NPV divided by average total assets.
(4) Calculated as the excess (deficiency) of the NPV ratio assuming the
indicated change in interest rates over the estimated NPV ratio assuming no
change in interest rates.
***Risk Measures: 200 bp rate shock***
</FN>
</TABLE>
<TABLE>
<CAPTION>
At At
September 30, September 30,
2000 1999
---------------- -------------
<S> <C> <C>
Pre-Shock NPV Ratio: NPV as % of PV of Assets............... 11.26% 12.92%
Exposure Measure: Post Shock NPV Ratio...................... 8.77 9.83
Sensitivity Measure: Change in NPV Ratio.................... 249 bp 309 bp
</TABLE>
The above table indicates that at September 30, 2000, in the event of
sudden and sustained increases in prevailing market interest rates, the Bank's
NPV would be expected to decrease, and that in the event of sudden and sustained
decreases in prevailing market interest rates, the Bank's NPV would be expected
to increase. The Bank's Board of Directors reviews the Bank's NPV position
quarterly, and, if estimated changes in NPV are not within the targets
established by the Board, the Board may direct management to adjust its asset
and liability mix to bring interest rate risk within Board approved targets. At
September 30, 2000, the Bank's estimated changes in NPV were within the targets
established by the Board of Directors.
NPV is calculated by the OTS by using information provided by the Bank.
The calculation is based on the net present value of discounted cash flows
utilizing market prepayment assumptions and market rates of interest provided by
Bloomberg quotations and surveys performed during the quarter ended September
30, 2000, with adjustments made to reflect the shift in the Treasury yield curve
between the survey date and the quarter-end date.
Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and deposit decay, and should not be relied
upon as indicative of actual results. Further, the computations do not
contemplate any actions the Bank may undertake in response to changes in
interest rates.
Certain shortcomings are inherent in the method of analysis presented
in the computation of NPV. Actual values may differ from those projections set
forth in the table, should market conditions vary from assumptions used in the
preparation of the table. Additionally, certain assets, such as adjustable-rate
loans, have features which restrict changes in interest rates on a short-term
basis and over the life of the asset. In addition, the proportion of
adjustable-rate loans in the Bank's portfolio could decrease in future periods
if market interest rates remain at or decrease below current levels due to
refinance activity. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in the tables.
6
<PAGE>
Finally, the ability of many borrowers to repay their adjustable-rate debt may
decrease in the event of an interest rate increase.
AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES
The following table sets forth certain information relating to the
Company's average interest-earning assets and interest-bearing liabilities and
reflects the average yield on assets and average cost of liabilities for the
periods and at the date indicated. Such yields and costs are derived by dividing
income or expense by the average monthly balance of assets or liabilities,
respectively, for the periods presented. Average balances are derived from
month-end balances. Management does not believe that the use of month-end
balances instead of daily balances has caused any material difference in the
information presented.
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------------------------
2000 1999
--------------------------------- ---------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1)................. $ 230,409 $17,153 7.44% $ 195,781 $ 14,767 7.54%
Mortgage backed securities........... 22,107 1,446 6.54 26,711 1,719 6.44
Investment securities and FHLB stock. 38,619 2,456 6.36 27,202 1,623 5.97
Other interest-earning assets........ 6,837 425 6.22 24,026 1,287 5.36
--------- ------- --------- --------
Total interest-earning assets ... 297,972 21,480 7.21 273,720 19,396 7.09
Non-interest-earning assets............ 15,707 10,383
--------- ---------
Total assets..................... $ 313,679 $ 284,103
========= =========
Interest-bearing liabilities:
Deposits............................. $ 251,306 $10,867 4.32 $ 230,546 9,614 4.17
FHLB advances........................ 11,930 885 7.42 3,417 158 4.62
Other liabilities.................... 1,723 5 .29 1,899 8 0.42
--------- ------- --------- --------
Total interest-bearing
liabilities.................... 264,959 11,757 4.44 235,862 9,780 4.15
------- ------ -------- ------
Non-interest-bearing liabilities....... 4,652 2,573
--------- ---------
Total liabilities................ 269,611 238,435
Stockholders' equity................... 44,068 45,668
--------- ---------
Total liabilities and retained
earnings....................... $ 313,679 $284,103
========= ========
Net interest income.................... $ 9,723 $ 9,616
======= ========
Interest rate spread................... 2.77% 2.94%
====== =======
Net interest margin (2)................ 3.26% 3.51%
====== =======
Ratio of average interest-earning assets
to average interest-bearing liabilities 112.46% 116.05%
====== ========
<FN>
____________
(1) Includes nonaccrual loans.
(2) Represents net interest income divided by the average balance of
interest-earning assets.
</FN>
</TABLE>
7
<PAGE>
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of interest-earning asset and interest-bearing liability,
information is provided on changes attributable to: (i) changes in volume
(changes in volume multiplied by old rate); (ii) changes in rates (change in
rate multiplied by old volume); and (iii) changes in rate/volume (changes in
rate multiplied by the changes in volume).
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------
2000 vs. 1999
-------------------------------------------------
Increase (Decrease)
Due to
-------------------------------------------------
Rate/
Volume Rate Volume Total
------ ---- ------ -----
(In thousands)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable.......................... $ 2,612 $ (192) $ (34) $ 2,386
Mortgage-backed securities................ (296) 28 (5) (273)
Investment securities and
FHLB Stock............................ 682 107 45 834
Other interest-earning assets............. (921) 206 (148) (863)
-------- -------- -------- --------
Total interest-earning assets........... 2,077 149 (142) 2,084
Interest expense:
Deposits.................................. 866 355 32 1,253
FHLB advances............................. 42 133 702 877
Other liabilities......................... (78) (148) 73 (153)
-------- -------- -------- --------
Total interest-bearing
liabilities.......................... 830 340 807 1,977
-------- -------- -------- --------
Change in net interest income............... $ 1,247 $ (191) $ (949) $ 107
======== ======== ======== ========
</TABLE>
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND 1999
During the year ended September 30, 2000, the Company focused its
efforts on pursuing its growth strategy through the addition of new branch
offices. During the year ended September 30, 2000, the Bank opened three new
branch offices in Essex, Hickory and White Marsh. These three additional offices
are in addition to the two new branch offices opened during the year ended
September 30, 1999. While the building and opening of new branch offices has
resulted in additional expense in the short term, management believes that these
branch offices will enhance the profitability and growth of the Company over the
long term. Based on deposit growth to date in the new offices, all will break
even within three years of the date they opened.
Total assets increased by $27.6 million, or 9.3%, from $298.3 million
at September 30, 1999 to $325.9 million at September 30, 2000. The increase in
assets during fiscal year 2000 was attributable to a $26.1 million, or 12.1%,
increase in loans receivable, net from $215.4 million at September 30, 1999 to
$241.5 million at September 30, 2000.
In recent years, the Company has emphasized the origination of
automobile loans because of the higher rates and shorter terms to maturity of
those loans. Through these efforts, the Company increased automobile loans by
$21.1 million, or 45.3%, from $46.8 million at September 30, 1999 to $67.9
million at September 30, 2000. Most of the remaining increase in the loan
portfolio reflected an increase in single-family residential mortgage loans,
which increased by $5.6 million, or 3.8%, from $146.9 at September 30, 1999 to
$152.5 million at September 30, 2000, reflecting increased loan demand and the
addition of new customers from the new branch offices.
8
<PAGE>
The Company's loan growth was funded with deposits, which increased by
$35.5 million, or 15.2%, from $233.4 million at September 30, 1999 to $268.9
million at September 30, 2000. The Bank was able to increase its deposits
through the new branch offices and with increased marketing efforts. The growth
in deposits enabled the Company to reduce its reliance on Federal Home Loan Bank
advances, which decreased by $6.5 million, or 40.6%, from $16.0 million at
September 30, 1999 to $9.5 million at September 30, 2000.
Stockholders' equity decreased by $1.9 million, or 4.3%, from $45.3 million
at September 30, 1999 to $43.3 million at September 30, 2000 as the Company
repurchased 226,090 shares of its Common Stock during the year ended September
30, 2000 at a cost of $1.7 million.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
Net Income. Net income decreased by $698,000, or 50.4%, from $1.4 million
for the year ended September 30, 1999 to $687,000 for the year ended September
30, 2000. Although net interest income increased by $107,800, or 1.1%, from $9.6
million for the year ended September 30, 1999 to $9.7 million for the year ended
September 30, 2000, non-interest expenses increased by $1.5 million, or 2.0%,
from $7.5 million for the year ended September 30, 1999 to $9.0 million for the
year ended September 30, 2000.
Net Interest Income. Net interest income was $9.6 million for the year
ended September 30, 1999, as compared to $9.7 million for the year ended
September 30, 2000, representing an increase of $107,000, or 1.1%. The increase
in net interest income primarily was the result of increases in the volume of
interest-earning assets and interest-bearing liabilities. These increases
allowed the Company to improve net interest income despite a 17 basis point
decrease in the interest rate spread. The Company's ratio of average
interest-earning assets to average interest-bearing liabilities decreased from
116.05% for the year ended September 30, 1999 to 112.46% for the year ended
September 30, 2000, as the Company spent $1.7 million to repurchase Common Stock
during year ended September 30, 2000.
Interest income increased by $2.1, or 10.7%, from $19.4 million for the
year ended September 30, 1999 to $21.5 million for the year ended September 30,
2000. The increase was due primarily to an increase in interest and fees on
loans, which reflected an increase in the average balance of loans from $195.8
million for the year ended September 30, 1999 to $230.4 million for the year
ended September 30, 2000. The increase in the average balance of loans was
achieved primarily through increases in automobile loans, and to a lesser
extent, residential mortgage loans. Also contributing to the increase in
interest income was a $833,000, or 51.3%, increase in interest and dividends on
investment securities, which increased from $1.7 million for the year ended
September 30, 1999 to $2.5 million for the year ended September 30, 2000. The
increase in interest and dividends on investment securities reflected a 39 basis
point increase in the average yield, as well as an increase in the average
balance in investment securities. Interest on mortgage-backed securities
decreased by $273,000, or 15.9%, from $1.7 million for the year ended on
September 30, 1999 to $1.4 million for the year ended September 30, 2000 due to
decreases in the average balance of mortgage-backed securities as the Company
deployed assets into loans.
Interest Expense. Interest expense increased by $2.0 million, or 20.2%,
from $9.8 million for the year ended September 30, 1999 to $11.8 million for the
year ended September 30, 2000. This increase was due to an increase in the
average volume of deposits, which comprised the largest component of the
Company's interest-bearing liabilities. The average balance of deposits
increased by $20.8 million, 9.0%, from $230.5 million for the year ended
September 30, 1999 to $251.3 million for the year ended September 30, 2000. The
Company was able to increase its deposits through its advertising and through
its new branch offices.
Provisions for Loan Losses. Provisions for loan losses are charged to
earnings to maintain the total allowance for loan losses at a level considered
adequate by management to provide for probable loan losses, based on prior loss
experience, volume and type of lending conducted by the Company, industry
standards and past due loans in the Company's loan portfolio. The Company
established provisions for loan losses of $162,000 and $339,000 for the years
ended September 30, 2000 and 1999, respectively. In establishing such
provisions, management considered the lower delinquency on its loan portfolio as
well as the increased volume of automobile loans. In addition, management
considered the level of Company's non-performing loans, which were $383,000 and
$1.0 million at September 30, 2000 and 1999, respectively, and levels of the
Company's net charge-offs, which totaled $32,000 and $100,000 during the years
ended September 30, 2000 and 1999, respectively.
9
<PAGE>
Other Income. Total other income decreased by $17,000, or 3.1%, from
$547,000 for the year ended September 30, 1999 to $530,000 for the year ended
September 30, 2000. While the Company was able to increase the fees it earned on
transaction accounts, this was offset by a loss on the sale of foreclosed real
estate of $40,000 incurred during the year ended September 30, 2000.
Non-interest Expenses. Total non-interest expenses increased by $1.5
million, or 19.8%, from $7.5 million for the year ended September 30, 1999 to
$9.0 million for the year ended September 30, 2000. Much of the increase was
attributable to the opening of new branch offices, as the Company experienced
increases of $673,000, or 16.7%, in salaries and related expenses, $287,000, or
40.7%, in occupancy expense, $127,000, or 25.0%, in data processing expense, and
$191,000, or 30.9%, in property and equipment expense. In addition, during the
year ended September 30, 2000, the Company increased its advertising expense by
$320,000, or 65.2%, in an effort to increase market share and to promote its new
branch offices.
Income Taxes. The Company income tax expense was $437,000 and $957,000 for
the years ended September 30, 2000 and 1999, respectively. The Company's
effective tax rate was 38.9% and 40.9% for years ended September 30, 2000 and
1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company initially has no business other than that of the Bank and
investing the net stock issuance proceeds retained by it. The Bank is subject to
certain regulatory limitations with respect to the payment of dividends to the
Company.
At September 30, 2000, the Bank exceeded all regulatory minimum capital
requirements. For information regarding the Bank's retained earnings as reported
in its financial statements at September 30, 2000 to its tangible, core and
risk-based capital levels and compares such totals to the regulatory
requirements, see Note 15 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 years ended September 30, 2000 and 1999, the Bank had $89.6 million and
$99.6 million, respectively, of loan originations. During the years ended
September 30, 2000 and 1999, the Company purchased investment securities in the
amounts of $7.0 million and $33.0 million, respectively, and mortgage-backed
securities in the amounts of $3.7 million and $3.0 million, respectively. 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.
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
September 2000 was approximately 27.9%, 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.
10
<PAGE>
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 September 30, 2000, cash, interest-bearing deposits in other banks
and federal funds sold totaled $6.6 million, $5.3 million and $455,000,
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 one year at September 30, 2000 totaled $100.1 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.
On August 26, 1999 the Company commenced a stock repurchase program to
acquire up to 320,124 shares (which included 91,464 shares for the Management
Recognition Plan Trust), or approximately 5% of the Company's outstanding shares
of common stock as part of its capital management strategy. The Company
completed the repurchase in May 2000 acquiring 320,124 shares, for which it paid
an aggregate of $2.5 million.
In keeping with the Company's stated policy, quarterly dividends were
declared on April 7, July 7, and October 11, 2000 of 12 1/2(cent) each. In
keeping with Federal regulations, Baltimore County Savings Bank, M.H.C. (the
"MHC") applied for, and elected to waive receipt of, dividends from the Company
as to its shares, which amounted to 3,754,960 shares as of December 22, 2000, or
63.77% of all outstanding shares of the Company's common stock. The dividends
rate is based in part on the Bank's strong capital position (see foot note 15)
and the flexibility of the mutual holding company structure whereby the MHC,
with regulatory approval, has waived dividends otherwise payable to it. This has
enabled the Bank to reward its public shareholders with a strong dividend stream
while retaining sufficient capital to support Company operations, earnings
growth and the Bank's branch expansion business plan.
The Bank generally requires collateral or other security to support
financial instruments with off-balance-sheet credit risk. At September 30, 2000,
the Bank had commitments under standby letters of credit, lines of credit and
commitments to originate mortgage loans of $219,000, $20.1 million and $1.1
million, respectively. See Note 3 of Notes to Consolidated Financial Statements.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars without considering the change in the relative
purchasing power of money over time and due to inflation. The impact of
inflation is reflected in the increased cost of the Company's operations. Unlike
most industrial companies, nearly all the assets and liabilities of the Company
are monetary in nature. As a result, interest rates have a greater impact on the
Company's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June, 1998. This Statement standardizes the accounting
for derivative instruments including certain derivative instruments embedded in
other contracts, by requiring that an entity recognize these items as assets or
liabilities in the statement of financial position and measure them at fair
value. This Statement generally provides for matching the timing of gain or loss
recognition on the hedging instrument with the recognition of the changes in the
fair value of the hedged asset or liability that are attributable to the hedged
risk or the earnings effect of the hedged forecasted transaction.
11
<PAGE>
The Statement, which is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000, will not affect the Company's financial position
or its results of operations.
Statement of Position ("SOP") 98.5, "Reporting on the Costs of Start-Up
Activities." This Statement provides guidance on the financial reporting of
start-up cost and organization cost. It requires costs of start-up activities
and organization cost to be expensed as incurred. The "SOP" also requires the
initial application to be reported as a cumulative effect of a change in
accounting principle. This "SOP" which is effective for fiscal years beginning
after December 15, 1998 will not affect the Company's financial position or
results of operations.
12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Stockholders and Board of Directors
BCSB Bankcorp, Inc.
Baltimore, Maryland
We have audited the consolidated statements of financial condition of
BCSB Bankcorp, Inc. and Subsidiaries as of September 30, 2000 and September 30,
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the two years in the two year period ended September
30, 2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BCSB
Bankcorp, Inc. and Subsidiaries as of September 30, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the two
years in the two year period ended September 30, 2000, in conformity with
generally accepted accounting principles.
/s/ Anderson Associates, LLP
November 28, 2000
Baltimore, Maryland
F-1
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
September 30,
-------------
2000 1999
---- ----
Assets
------
<S> <C> <C>
Cash $ 6,570,657 $ 5,976,961
Interest bearing deposits in other banks 5,255,622 8,651,267
Federal funds sold 455,431 448,945
Investment securities, held to maturity (Note 2) 41,158,120 35,232,306
Loans receivable, net (Note 3) 241,519,815 215,383,087
Mortgage backed securities, held to maturity (Note 4) 19,824,152 23,499,794
Foreclosed real estate, net (Note 5) 50,000 89,091
Investment in real estate development and
loans to joint ventures (Note 6) -- 5,287
Premises and equipment, net (Note 7) 6,709,595 4,846,121
Federal Home Loan Bank of Atlanta stock 1,834,400 1,650,300
Accrued interest receivable - loans 863,647 834,424
- investments 730,607 635,757
- mortgage backed securities 121,088 140,005
Prepaid and deferred income taxes (Note 16) 257,581 361,211
Other assets 528,459 547,171
----------- -----------
Total assets $325,879,174 $298,301,727
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits (Note 8) $268,881,604 $233,364,564
Federal Home Loan Bank of Atlanta advances (Note 9) 9,500,000 16,000,000
Advance payments by borrowers for
taxes and insurance 1,190,057 1,101,971
Income taxes payable (Note 16) 25,532 60,670
Payables to disbursing agents 364,755 163,923
Dividends payable 265,954 294,797
Other liabilities 2,308,455 2,035,343
----------- -----------
Total liabilities 282,536,357 253,021,268
Commitments and contingencies (Notes 3, 7 and 11)
Stockholders' Equity (Notes 12, 13, 14 and 15)
--------------------
Common stock (Par value $.01 - 13,500,000 authorized,
5,887,072 and 6,113,162 shares issued and outstanding
at September 30, 2000 and 1999, respectively) 58,871 61,132
Additional paid-in capital 20,214,611 21,918,506
Retained earnings (substantially restricted) 25,447,089 25,788,692
----------- -----------
45,720,571 47,768,330
Employee Stock Ownership Plan (1,326,228) (1,509,156)
Stock held by Rabbi Trust (1,051,526) (978,715)
----------- -----------
Total stockholders' equity 43,342,817 45,280,459
----------- -----------
Total liabilities and stockholders' equity $325,879,174 $298,301,727
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-2
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
For Years Ended
September 30,
----------------------------------
2000 1999
---- ----
<S> <C> <C>
Interest and fees on loans (Note 3) $17,153,136 $14,766,745
Interest on mortgage backed securities 1,445,783 1,718,785
Interest and dividends on investment securities 2,455,989 1,622,897
Other interest income 425,153 1,287,340
------------ -----------
Total interest income 21,480,061 19,395,767
Interest on deposits (Note 8) 10,866,557 9,614,116
Interest on borrowings - short term 884,912 157,944
Other interest expense 5,288 7,753
------------ -----------
Total interest expense 11,756,757 9,779,813
------------ -----------
Net interest income 9,723,304 9,615,954
Provision for losses on loans (Note 3) 161,646 339,251
------------ -----------
Net interest income after provision for losses on loans 9,561,658 9,276,703
Other Income
------------
(Loss) gain on sale of foreclosed real estate (39,870) 17,437
Servicing fee income 8,040 8,223
Fees and charges on loans 145,927 149,494
Fees on transaction accounts 206,495 173,419
Rental income 119,763 113,253
Gain from real estate development and joint venture 5,082 5,352
Gain on sale of fixed assets 3,475 --
Loss on sale of mortgages (3,499) --
Miscellaneous income 84,669 79,885
------------ -----------
Net other income 530,082 547,063
Non-Interest Expenses
---------------------
Salaries and related expense 4,694,225 4,020,761
Occupancy expense 992,248 705,016
Deposit insurance premiums 143,435 184,498
Data processing expense 632,667 505,928
Property and equipment expense 807,164 616,613
Professional fees 224,279 263,048
Advertising 811,917 491,937
Telephone, postage and office supplies 445,107 350,156
Amortization of excess of cost over fair value of net assets acquired -- 24,497
Other expenses 216,312 319,456
------------ -----------
Total non-interest expenses 8,967,354 7,481,910
------------ -----------
Income before tax provision 1,124,386 2,341,856
Income tax provision (Note 16) 437,622 957,467
------------ -----------
Net income $ 686,764 $ 1,384,389
============ ===========
Net Income Per Share of Common Stock (Note 1)
Basic $ 0.12 $ 0.24
Diluted $ 0.12 $ 0.23
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-3
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
-----------------------------------------------
<TABLE>
<CAPTION>
Employee
Additional Stock Stock Total
Common Paid-In Retained Ownership Held By Stockholders'
Stock Capital Earnings Plan Rabbi Trust Equity
---------- ------------ --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance - September 30, 1998 $61,166 $ 22,645,088 $ 25,221,308 $ (1,829,280) $ (955,234) $ 45,143,048
Compensation under stock based
benefit plans -- (20,640) -- 320,124 -- 299,484
Acquisition of stock for Rabbi Trust -- -- -- -- (81,211) (81,211)
Adjust market value of Rabbi Trust
shares to cost -- -- -- -- 57,730 57,730
Refund of duplicate payment from
reorganization -- 55,000 -- -- -- 55,000
Acquisition of stock for Management
Retention Plan -- (732,073) -- -- -- (732,073)
Treasury stock purchase (34) (28,869) -- -- -- (28,903)
Cash dividends declared
($.365 per share) -- -- (817,005) -- -- (817,005)
Net income -- -- 1,384,389 -- -- 1,384,389
------- ------------ ------------ ------------ ------------ ------------
Balance - September 30, 1999 61,132 21,918,506 25,788,506 (1,509,156) (978,715) 45,280,459
Compensation under stock based
benefit plans -- 41,574 -- 182,928 -- 224,502
Acquisition of stock for
Rabbi Trust -- -- -- -- (72,811) (72,811)
Acquisition of stock for
Management Retention Plan -- (37,665) -- -- -- (37,665)
Treasury stock purchase (2,261) (1,707,804) -- -- -- (1,710,065)
Cash dividends declared
($.50 per share) -- -- (1,028,367) -- -- (1,028,367)
Net income -- -- 686,764 -- -- 686,764
------- ------------ ------------ ------------ ------------ ------------
Balance - September 30, 2000 $58,871 $ 20,214,611 $ 25,447,089 $ (1,326,228) $ (1,051,526) $ 43,342,817
======= ============ ============ ============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
For Years Ended
September 30,
----------------------------------
2000 1999
---- ----
<S> <C> <C>
Operating Activities
--------------------
Net income $ 686,764 $ 1,384,389
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Accretion of discount on investments (134) (254)
Proceeds from loans sold 1,081,495 --
Loss on loans sold 3,499 --
Loan fees and costs deferred, net 280,422 (87,312)
Amortization of deferred loan fees and costs (156,310) (180,770)
Provision for losses on loans 161,646 339,251
Non-cash compensation under Stock-Based
Benefit Plan 224,502 299,484
Amortization of premium on mortgage backed
securities 35,686 41,459
Loss (gain) on sale of foreclosed real estate 39,870 (17,437)
Gain from real estate development and joint venture (5,082) (5,352)
Provision for depreciation 638,266 405,309
Gain on sale of fixed assets (3,475) --
Increase in accrued interest receivable on loans (29,223) (109,359)
Increase in accrued interest receivable on investments (94,850) (107,526)
Decrease in accrued interest receivable on
mortgage backed securities 18,917 56,131
(Increase) decrease in prepaid income taxes (79,841) 12,839
Decrease (increase) in deferred income tax assets 183,471 (342,109)
Amortization of excess of cost over fair value of
net assets acquired -- 24,497
Decrease (increase) in other assets 18,712 (20,438)
(Decrease) increase in accrued interest payable
on deposits (202,850) 39,604
Decrease in income taxes payable (35,138) (122)
Increase in other liabilities and payables
to disbursing agents 473,944 361,907
------------ -----------
Net cash provided by operating activities 3,240,291 2,094,191
</TABLE>
F-5
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
For Years Ended
September 30,
---------------------------------
2000 1999
---- ----
<S> <C> <C>
Cash Flows from Investing Activities
------------------------------------
Proceeds from maturing interest bearing deposits $ 3,569,000 $ 2,045,000
Purchase of interest bearing deposits -- (8,002,000)
Purchases of investment securities - held to
maturity (6,975,680) (32,981,229)
Proceeds from maturities of investment securities -
held to maturity 1,050,000 10,360,000
Longer term loans originated (32,937,959) (52,987,170)
Principal collected on longer term loans 24,254,128 33,913,036
Net increase in short-term loans (18,077,072) (14,521,057)
Loans purchased (763,619) --
Principal collected on mortgage backed securities 7,325,050 13,664,157
Purchase of mortgage backed securities (3,685,094) (3,007,566)
Proceeds from sales of foreclosed real estate 16,263 409,197
Net investment and loans to joint ventures 10,369 8,260
Investment in premises and equipment (2,498,265) (2,262,872)
Purchase of Federal Home Loan Bank of Atlanta stock (184,100) (138,400)
------------ ------------
Net cash used by investing activities (28,896,979) (53,500,644)
Cash Flows from Financing Activities
------------------------------------
Net increase in demand deposits, money market,
passbook accounts and advances by borrowers
for taxes and insurance 1,656,256 4,937,630
Net increase in certificates of deposit 34,151,720 7,834,180
Increases in Federal Home Loan Bank of Atlanta
advances 10,500,000 16,000,000
Repayment of Federal Home Loan Bank of
Atlanta advances (17,000,000) --
(Decrease) increase in dividends payable (28,843) 294,797
Acquisition of stock for Rabbi Trust (72,811) (81,211)
Change in market value of Rabbi Trust stock -- 57,730
Refund of stock offering expense -- 55,000
Acquisition of stock for Management Retention Plan (37,665) (732,073)
Treasury stock purchase (1,710,065) (28,903)
Dividends on stock (1,028,367) (817,005)
------------ ------------
Net cash provided by financing activities 26,430,225 27,520,145
------------ ------------
</TABLE>
F-6
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
For Years Ended
September 30,
-----------------------------------
2000 1999
---- ----
<S> <C> <C>
Increase (decrease) in cash and cash equivalents $ 773,537 $(23,886,308)
Cash and cash equivalents at beginning of period 7,188,173 31,074,481
----------- -----------
Cash and cash equivalents at end of period $ 7,961,710 $ 7,188,173
=========== ===========
The following is a summary of cash and cash equivalents:
Cash $ 6,570,657 $ 5,976,961
Interest bearing deposits in other banks 5,255,622 8,651,267
Federal funds sold 455,431 448,945
----------- -----------
Balance of cash items reflected on Statement of
Financial Condition 12,281,710 15,077,173
Less - certificate of deposit with a maturity
of more than three months 4,320,000 7,889,000
----------- -----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $ 7,961,710 $ 7,188,173
=========== ===========
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Interest $ 12,059,372 $ 9,407,893
=========== ===========
Income taxes $ 390,908 $ 1,284,280
=========== ===========
Transfer from loans to real estate acquired
through foreclosure $ -- $ 110,161
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1 - Summary of Significant Accounting Policies
------------------------------------------
A. Principles of Consolidation - BCSB Bankcorp, Inc. (the "Company")
owns 100% of Baltimore County Savings Bank, F.S.B. (the "Bank").
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 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.
B. Business - The Company's primary purpose is ownership of the
Bank. The Bank's primary business activity is the acceptance of
deposits from the general public in their market area and using
the proceeds for investments and loan originations. The Bank is
subject to competition from other financial institutions. The
Bank is subject to the regulations of certain federal agencies
and undergoes periodic examinations by those regulatory
authorities.
C. Basis of Financial Statement Presentation - The consolidated
financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statement of financial
condition and revenues and expenses for the period. Actual
results could differ significantly from those estimates. Material
estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for
loan losses and the valuation of foreclosed real estate and real
estate development.
D. Federal Funds - Federal funds sold are carried at cost which
approximates market.
E. Investments and Mortgage Backed Securities - Investment
securities in equity mutual funds may be held for an indefinite
period of time and are carried at fair value. Investment
securities consisting of federal agency notes and bonds and all
of the mortgage backed securities are carried at cost, since
management has the ability and intention to hold them to
maturity. Amortization of related premiums and discounts are
computed using the level yield method over the life of the
security. Gains and losses on all investments and mortgage backed
securities are determined using the specific identification
method.
F-8
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
F. Loans Receivable - Loans receivable are stated at unpaid
principal balances, less undisbursed portion of loans in process,
unearned interest on consumer loans, deferred loan origination
fees and the allowance for loan losses, since management has the
ability and intention to hold them to maturity.
The Bank services loans for others and pays the participant its
share of the Bank's collections, net of a stipulated servicing
fee. Loan servicing fees are credited to income when earned and
servicing costs are charged to expense as incurred.
Unearned interest on consumer loans is amortized to income over
the terms of the related loans on the level yield method.
G. Allowance for Loan Losses - An allowance for loan losses is
provided through charges to income in an amount that management
believes will be adequate to absorb losses on existing loans that
may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in
the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic
conditions that may affect the borrowers' ability to pay.
Management believes the allowance for losses on loans is
adequate. While management uses available information to estimate
losses on loans, future additions to the allowances may be
necessary based on changes in economic conditions, particularly
in the State of Maryland. In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the Bank's allowances for losses on loans.
Such agencies may require the Bank to recognize additions to the
allowances based on their judgments about information available
to them at the time of their examination.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and
collection efforts, that the borrower's financial condition is
such that collection of interest is doubtful or when payment of
principal and interest has become ninety days past due unless the
obligation is well secured and in the process of collection. When
a payment is received on a loan on non-accrual status, the amount
received is allocated to principal and interest in accordance
with the contractual terms of the loan.
F-9
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
G. Loan origination fees and certain direct loan origination costs
are deferred and recognized by the interest method over the
contractual life of the related loan as an adjustment of yield.
H. Foreclosed Real Estate - Real estate acquired through foreclosure
is recorded at the lower of cost or fair value. Management
periodically evaluates the recoverability of the carrying value
of the real estate acquired through foreclosure using estimates
as described above in Allowance for Loan Losses. In the event of
a subsequent decline, management provides an additional allowance
to reduce real estate acquired through foreclosure to its fair
value less estimated disposal cost. Costs relating to holding
such real estate are charged against income in the current period
while costs relating to improving such real estate are
capitalized until a saleable condition is reached.
I. Investment in Real Estate Development and Loans to Joint Ventures
- Land development costs not in excess of net realizable value
are capitalized and charged to expense as revenue is recognized.
Revenues are recognized when a sale has been consummated.
Indirect costs and administrative expenses are charged as
incurred to periodic income and are not allocated to land
development costs. The Bank capitalizes interest on land
development projects in accordance with Statement 34 of the
Financial Accounting Standards Board. No interest was capitalized
for the years ended September 30, 2000 and 1999.
J. Premises and Equipment - Premises and equipment are recorded at
cost. Depreciation is computed on the straight-line method, based
on the useful lives of the respective assets.
K. Intangible Assets Acquired, Net - On September 16, 1994,
Baltimore County Savings Bank, F.S.B. purchased the deposits and
certain assets from the Resolution Trust Corporation, receiver of
Second National Federal Savings Association. The Bank classified
as an intangible asset the fair market value assigned to the
capacity of existing savings accounts acquired to generate future
earnings ("the Core Deposit Value"). The core deposit value of
$133,572 is being amortized on a straight-line method over five
years, the estimated life of the core deposit value. Accumulated
amortization was $133,572 at September 30, 2000 and 1999.
F-10
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
L. Income Taxes - Deferred income taxes are recognized for temporary
differences between the financial reporting basis and income tax
basis of assets and liabilities based on enacted tax rates
expected to be in effect when such amounts are realized or
settled. Deferred tax assets are recognized only to the extent
that is more likely than not that such amounts will be realized
based on consideration of available evidence. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
M. Earnings Per Share - As required, The Bank adopted Statement of
Financial Accounting Standards No. 128 during the year ended
September 30, 1999. This Statement requires dual presentation of
basic and diluted earnings per share ("ESP") with a
reconciliation of the numerator and denominator of the EPS
computations. 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). The basic and diluted weighted average shares
outstanding for the years ended September 30, 2000 and 1999 are
as follows:
<TABLE>
<CAPTION>
2000
------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- --------------
<S> <C> <C> <C>
Basic EPS
---------
Income available to share holders $686,764 5,637,180 $ 0.12
======
Diluted EPS
-----------
Effect of dilutive shares -- 106,612
-------- ----------
Income available to shareholders
plus assumed conversions $686,764 5,743,792 $ 0.12
======== ========== ======
<CAPTION>
1999
------------------------------------------------------
<S> <C> <C> <C>
Basic EPS
---------
Income available to share holders $1,384,389 5,859,344 $ 0.24
======
Diluted EPS
-----------
Effect of dilutive shares -- 89,803
---------- ----------
Income available to shareholders
plus assumed conversions $1,384,389 5,949,147 $ 0.23
========== ========== ======
</TABLE>
F-11
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
N. Statement of Cash Flows - In the staatement of cash flows, cash
and equivalents include cash, Federal Home Loan Bank of Atlanta
overnight deposits, federal funds and certificates of deposit and
Federal Home Loan Bank of Atlanta time deposits with an original
maturity date less than ninety days.
O. Employee Stock Ownership Plan -The Company accounts for its
Employee Stock Ownership Plan ("ESOP") in accordance with
Statement of Position 93-6 of the Accounting Standards Division
of the American Institute of Certified Public Accountants. (See
Note 12)
P. Reclassification and Restatement - Certain prior years' amounts
have been reclassified to conform to the current year's method of
presentation.
Note 2 - Investment Securities
---------------------
The amortized cost and fair values of investment securities are
as follows as of September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Held to Maturity:
September 30, 2000
U.S. Government and Agency
Obligations, held to maturity $41,158,120 $ 14,008 $ 815,838 $40,356,290
=========== ======== =========== ===========
September 30, 1999
U.S. Government and Agency
Obligations, held to maturity $35,232,306 $ -- $1,014,635 $34,217,671
=========== ======== =========== ===========
</TABLE>
F-12
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 2 - Investment Securities - Continued
---------------------
The following is a summary of investment securities:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
-------------------------- ------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------- ----- ------------- -----
<S> <C> <C> <C> <C>
Held to Maturity:
U.S. Government and Agency Obligations
--------------------------------------
Due within 12 months $ 750,000 $ 747,669 $ 500,000 $ 498,594
Due beyond 12 months but
within five years 28,636,269 28,122,424 21,985,811 21,460,136
Due beyond five years but
within ten years 11,021,851 10,786,979 11,996,495 11,542,144
Due beyond ten years 750,000 699,218 750,000 716,797
----------- ----------- ----------- -----------
$41,158,120 $40,356,290 $35,232,306 $34,217,671
=========== =========== =========== ===========
</TABLE>
Proceeds from maturities of held to maturity securities were
$1,050,000 and $10,360,000 for the years ended September 30, 2000 and
1999, respectively. There were no gross gains or losses realized for
the years ended September 30, 2000 and 1999.
Note 3 - Loans Receivable
---------------
Loans receivable at September 30, 2000 and 1999 consist of the
following:
<TABLE>
<CAPTION>
September 30,
----------------------------------
2000 1999
---- ----
<S> <C> <C>
Single-family residential mortgages $152,469,353 $146,867,904
Single-family rental property loans 5,079,532 4,831,931
Commercial real estate loans 13,648,781 10,215,951
Construction loans 5,905,435 5,592,033
Commercial loans secured 1,474,545 1,081,205
Commercial lines of credit 44,000 50,000
Automobile loans 67,851,872 46,753,355
Home equity loans 8,146,879 7,963,402
Other consumer loans 1,976,802 1,907,405
------------ ------------
256,597,199 225,263,186
Less - undisbursed portion of loans in process 3,849,592 2,579,374
- unearned interest 9,610,077 5,948,416
- deferred loan origination fees and costs 214,804 79,578
- allowance for loan losses 1,402,911 1,272,731
------------ ------------
$241,519,815 $215,383,087
============ ============
</TABLE>
F-13
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 3 - Loans Receivable - Continued
----------------
The following is a summary of the allowance for loan losses:
<TABLE>
<CAPTION>
September 30,
-------------------------------
2000 1999
---- ----
<S> <C> <C>
Balance - beginning of year $1,272,731 $1,033,907
Provision for losses on loans 161,646 339,251
Charge-offs (208,019) (231,991)
Recoveries 176,553 131,564
---------- ----------
Balance - end of year $1,402,911 $1,272,731
========== ==========
</TABLE>
Residential lending is generally considered to involve less
risk than other forms of lending, although payment experience on
these loans is dependent to some extent on economic and market
conditions in the Bank's lending area. Multifamily residential,
commercial, construction and other loan repayments are generally
dependent on the operations of the related properties or the
financial condition of its borrower or guarantor. Accordingly,
repayment of such loans can be more susceptible to adverse
conditions in the real estate market and the regional economy.
A significant portion of the Bank's loans receivable are
mortgage loans secured by residential and commercial real estate
properties located in the State of Maryland. Loans are extended
only after evaluation by management of customers' creditworthiness
and other relevant factors on a case-by-case basis. The Bank
generally does not lend more than 90% of the appraised value of a
property and requires private mortgage insurance on residential
mortgages with loan-to-value ratios in excess of 80%. In addition,
the Bank generally obtains personal guarantees of repayment from
borrowers and/or others for multifamily residential, commercial
and construction loans and disburses the proceeds of construction
and similar loans only as work progresses on the related projects.
Automobile loans are secured by vehicles and home equity loans are
secured by subordinated real estate properties. Repayments of
automobile loans and home equity loans are expected primarily from
the cash flows of the borrowers.
Non-accrual loans for which interest has been reduced totaled
approximately $382,539 and $1,025,577 at September 30, 2000 and
1999, respectively. There were no impaired loans as defined by
SFAS No. 114 at September 30, 2000 and 1999. There was no interest
income recognized on impaired loans during these periods. The Bank
was not committed to fund additional amounts on these loans.
F-14
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 3 - Loans Receivable - Continued
----------------
Interest income that would have been recorded under the original
terms of non-accrual loans and the interest actually recognized for
the years ended September 30, are summarized below:
<TABLE>
<CAPTION>
September 30,
-----------------------------
2000 1999
---- ----
<S> <C> <C>
Interest income that would have been recognized $31,327 $44,279
Interest income recognized 28,593 34,102
------ ------
Interest income not recognized $ 2,734 $10,177
====== ======
</TABLE>
The following table set forth the amount and activity of the
loans outstanding to officers and directors at September 30, 2000 and
1999.
<TABLE>
<CAPTION>
September 30,
-----------------------------
2000 1999
---- ----
<S> <C> <C>
Beginning balance $416,202 $318,411
New loans 39,132 208,268
Loan repayments (176,260) (110,477)
------- -------
Ending balance $279,074 $416,202
======= =======
</TABLE>
The Bank services loans for others. The amount of such loans
serviced at September 30, 2000 and 1999 was $2,906,435 and
$2,829,212, respectively. At September 30, 2000 and 1999, the
balance of loans sold by the Bank with recourse amounted to
$428,645 and $662,424, respectively.
Custodial escrow balances maintained in connection with the
foregoing loan servicings were approximately $35,909 and $35,199
at September 30, 2000 and 1999, respectively.
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.
F-15
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 3 - Loans Receivable - Continued
----------------
Unless noted otherwise, the Bank does not require collateral or
other security to support financial instruments with off-balance-sheet
credit risk.
<TABLE>
<CAPTION>
Contract Amount At
Financial Instruments Whose Contract -----------------------------------------------
Amounts Represent Credit Risk September 30, 2000 September 30, 1999
----------------------------------------- ------------------ -------------------
<S> <C> <C>
Standby letters of credit $ 219,300 $ 1,131,200
Lines of credit $20,126,800 $19,252,900
Mortgage loan commitments, fixed rate $ 1,005,100 $ 3,463,600
Mortgage loan commitments, variable rate $ 100,000 $ 200,000
</TABLE>
Standby letters of credit are conditional commitments issued
by the Bank guaranteeing performance by a customer to a third
party. Those guarantees are issued primarily to support private
borrowing arrangements, generally limited to real estate
transactions. Unless otherwise noted, the standby letters of
credit are not collateralized. The credit risk involved in issuing
letters of credit is essentially the same as that involved in
extending loan facilities to customers.
Lines of credit are loan commitments to individuals and
companies and have fixed expiration dates as long as there is no
violation of any condition established in the contract. The Bank
evaluates each customer's credit worthiness on a case-by-case
basis.
Rates on mortgage loan commitments for fixed rate loans
ranged from 7.375% to 9.0% and 6.5% to 7.875% at September 31,
2000 and 1999, respectively. Rates on mortgage loan commitments
for variable rate loans ranged from .25% under prime to prime at
September 30, 2000.
No amount was recognized in the statement of financial
position at September 30, 2000 and 1999, as liability for credit
loss nor was any liability recognized for fees received for
standby letters of credit.
The Bank grants loans to customers, substantially all of whom
are residents of the Metropolitan Baltimore and Harford County
areas.
F-16
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 4 - Mortgage Backed Securities
--------------------------
The amortized cost and fair values of mortgage backed securities
are as follows as of September 30, 2000 and 1999:
Held to Maturity:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
September 30, 2000
------------------
GNMA certificates $ 2,513,241 $11,873 $ 25,753 $ 2,499,361
FNMA certificates 11,763,732 7,247 97,501 11,673,478
FHLMC participating
certificates 5,547,179 31,911 46,534 5,532,556
----------- ------- -------- -----------
$19,824,152 $51,031 $169,788 $19,705,395
=========== ======= ======== ===========
September 30, 1999
------------------
GNMA certificates $ 1,263,787 $ 5,015 $ 4,283 $ 1,264,519
FNMA certificates 15,482,015 23,016 131,568 15,373,463
FHLMC participating
certificates 6,753,992 70,724 66,983 6,757,733
----------- ------- -------- -----------
$23,499,794 $98,755 $202,834 $23,395,715
=========== ======= ======== ===========
</TABLE>
No gains or losses were realized during the years ended
September 30, 2000 and 1999, respectively.
Note 5 - Foreclosed Real Estate
----------------------
Foreclosed real estate at September 30, 2000 and 1999 is
summarized by major classification as follows:
<TABLE>
<CAPTION>
September 30,
--------------------------
2000 1999
---- ----
<S> <C> <C>
EPIC loans $50,822 $50,822
Residential real estate 50,000 89,091
Allowance for losses (50,822) (50,822)
------- -------
$50,000 $89,091
======= =======
</TABLE>
F-17
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 5 - Foreclosed Real Estate - Continued
----------------------
The following is a summary of the allowances for losses on
foreclosed real estate:
<TABLE>
<CAPTION>
September 30,
---------------------------
2000 1999
---- ----
<S> <C> <C>
Balance - beginning of year $50,822 $89,151
Provision for losses -- --
Charge-offs -- (38,329)
------- -------
Balance - end of year $50,822 $50,822
======= =======
</TABLE>
Note 6 - Investment in Real Estate Development and Loans to Joint Ventures
-----------------------------------------------------------------
The subsidiary is a party to a joint venture formed for the
purpose of developing lots for resale. The subsidiary's interest in
the profits or losses of the joint venture is 20%. The joint venture
closed during the year ended September 30, 2000. The subsidiary's
equity in the joint venture was $5,287 at the period ended September
30, 1999.
During the periods ended September 30, 2000 and 1999, the Bank
made no acquisition, development and construction loans to the joint
venture mentioned above. There was no provision for or allowance for
losses on loans to the joint venture during the years ended September
30, 2000 and 1999.
Gain from real estate development and joint ventures consisted of
a cash payment of $5,352.
Note 7 - Premises and Equipment
----------------------
Premises and equipment at September 30, 2000 and 1999 are
summarized by major classification as follows:
<TABLE>
<CAPTION>
September 30,
-----------------------------
2000 1999 Life
---- ---- ----
<S> <C> <C> <C>
Office building $ 4,476,470 $3,400,332 50 Years
Leasehold improvements 282,127 169,995 7-31 Years
Furniture, fixtures and equipment 5,695,079 4,381,608 10 Years
----------- ----------
10,453,676 7,951,935
Accumulated depreciation 3,744,081 3,105,814
----------- ----------
$ 6,709,595 $4,846,121
=========== ==========
</TABLE>
F-18
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 7 - Premises and Equipment - Continued
---------------------
The Bank has entered into long-term leases for the land on which
the main office is located and the premises of its branch offices.
Rental expense under long-term leases for property for the years ended
September 30, 2000 and 1999 was $535,106 and $381,254, respectively.
At September 30, 2000, minimum rental commitments under noncancellable
leases are as follows:
Years Ended September 30, Amount
------------------------- ------
2001 $ 587,750
2002 595,801
2003 572,745
2004 515,912
After 2004 4,028,867
----------
$6,301,075
==========
Note 8 - Deposits
--------
Deposits are summarized as follows at September 30, 2000 and
1999:
<TABLE>
<CAPTION>
2000 1999
-------------------------------- ---------------------------------
Amount % Amount %
------ ----- ------ -----
<S> <C> <C> <C> <C>
Type of Account
---------------
Deposits
--------
NOW $ 20,106,386 7.48% $ 19,743,190 8.46%
Non-interest bearing NOW 10,418,364 3.87 6,940,410 2.97
Money market 7,333,022 2.73 8,530,901 3.66
Passbook savings 57,278,818 21.30 58,353,919 25.00
Certificates 173,182,377 64.41 139,030,657 59.58
------------ ------ ------------- ------
268,318,967 99.79 232,599,077 99.67
Accrued interest payable 562,637 .21 765,487 .33
------------ ------ ----------- ------
$268,881,604 100.00% $233,364,564 100.00%
============ ====== ============ ======
</TABLE>
The aggregate amount of jumbo certificates of deposit with a
minimum denomination of $100,000 was approximately $23,957,925 and
$15,134,298 at September 30, 2000 and 1999, respectively. Deposits
in excess of $100,000 are not insured by the Savings Association
Insurance Fund.
F-19
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 8 - Deposits - Continued
--------
At September 30, 2000, scheduled maturities of certificates of
deposit are as follows:
2001 $100,119,936
2002 36,359,623
2003 12,218,360
2004 4,153,408
2005 and thereafter 20,331,050
------------
$173,182,377
============
Interest expense on deposits for the years ended September 30,
2000 and 1999 is as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
NOW $ 450,413 $ 367,157
Money market 246,132 270,672
Passbooks savings 1,984,232 1,846,252
Certificates 8,185,780 7,130,035
----------- -----------
$10,866,557 $ 9,614,116
=========== ===========
</TABLE>
Note 9 - Federal Home Loan Bank of Atlanta Advances
------------------------------------------
The Bank has the following outstanding Federal Home Loan Bank
advances as of September 30:
<TABLE>
<CAPTION>
2000 1999
------------------------------- -------------------------------
Due Rate Total Rate Total
--- ---- ----- ---- -----
<S> <C> <C> <C> <C>
Less than one year 5.86% - 6.74% $6,500,000 5.44% - 6.26% $13,500,000
One to two years 6.41% - 7.48% 3,000,000 5.86% - 6.13% 2,500,000
---------- -----------
Total borrowings $9,500,000 $16,000,000
========== ===========
</TABLE>
F-20
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 10 - Pension Plan
------------
The Bank has a noncontributory, defined contribution, pension
plan covering substantially all employees. It is a money purchase plan
with contributions made each year for every participant in accordance
with actuarial recommended formula. There is no past service liability
or unfunded value of vested benefits as of December 31, 1999, the date
of latest available annual review and valuation of the plan.
The expense for the pension plan amounted to $221,912 and
$213,057 for the years ended September 30, 2000 and 1999,
respectively.
Note 11 - Directors Retirement Plan
-------------------------
The Directors Retirement Plan consists of a Rabbi Trust that is
invested primarily in the Company's stock. Compensation expense was
reduced by $75,099 and $269,323 for the years ended September 30, 2000
and 1999, respectively, principally because of a decline in value of
shares held in the Rabbi Trust.
Note 12 - Common Stock
------------
In 1998, the Bank reorganized from a federally chartered mutual
savings bank to a federally chartered stock savings bank.
Simultaneously, the Bank consummated the formation of a new holding
company, BCSB Bankcorp, Inc. Also simultaneously, a mutual holding
company was formed, Baltimore County Savings Bank, M.H.C. In
connection with the reorganization, the Company issued 6,116,562
shares of its common stock. A majority of that stock (3,754,960
shares) was issued to Baltimore County Savings Bank, M.H.C. The
remainder was issued to the general public. Also, the Bank established
the Baltimore County Savings Bank, F.S.B. Foundation through a
contribution of 75,000 shares of its common stock.
At the same time as the reorganization, the Bank established an
Employee Stock Ownership Plan ("ESOP") for its employees. On July 8,
1998 the ESOP acquired 182,928 shares of the Company's common stock in
connection with the Bank's Reorganization to a mutual holding company
form of organization. The ESOP holds the common stock in a trust for
allocation among participating employees, in trust or allocated to the
participants' accounts and an annual contribution from the Bank to the
ESOP and earnings thereon.
F-21
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 12 - Common Stock - Continued
------------------------
All employees of the Bank who attain the age of 18 and complete
one year of service with the Bank will be eligible to participate in
the ESOP. Participants must be employed at least 500 hours in a plan
year in order to receive an allocation. Each participant's vested
interest under the ESOP is determined according to the following
schedule: 0% for less than 2 years of service with the Company or the
Bank, 20% for 2 years of service, 40% for 3 years of service, 60% for
4 years of service, 80% for 5 years of service, and 100% for 6 years
of service. For vesting purposes, a year of service means any plan
year in which an employee completes at least 1,000 hours of service
(whether before or after the ESOP's January 1, 1998 effective date).
Vesting accelerates to 100% upon a participant's attainment of age 65,
death or disability.
The ESOP will be funded by contributions made by the Bank in cash
or common stock and dividends on the shares held in the Trust. The
Bank will recognize compensation expense as shares are committed for
release from collateral at their current market price. Dividends on
allocated shares are recorded as a reduction of retained earnings and
dividends on unallocated shares are recorded as a reduction of the
debt service. The compensation costs for the years ended September 30,
2000 and 1999 were $138,724 and $262,800, respectively.
The ESOP shares were as follows as of September 30:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Shares released and allocated 50,306 32,013
Unearned shares 132,624 150,917
-------- ----------
182,930 182,930
======== ==========
Fair value of unearned shares $820,611 $1,037,554
======== ==========
</TABLE>
F-22
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 13 - Management Recognition Plan
---------------------------
On July 15, 1999, the Bank established a Management Recognition
Plan ("MRP") to retain personnel of experience and ability in key
positions of responsibility. Members of the Board of Directors and
certain executive officers may be awarded a total of 91,464 shares of
stock, which will be held in a separate trust that manages the MRP.
The Bank funded the MRP during the year ended September 30, 1999 by
purchasing 87,000 shares of common stock in the open market. During
the year ended September 30, 2000, the remaining 4,464 shares were
purchased. The Bank initially awarded an aggregate of 45,600 shares of
common stock and intends to reserve the remaining 45,864 shares for
possible future awards. Shares awarded to the participants in the MRP
vest at a rate of 25% per year on each anniversary of the effective
date of the MRP. As of September 30, 2000, 11,400 shares have vested.
If a participant terminates employment for reasons other than death,
disability, change in control or retirement he or she forfeits all
rights to unvested shares. Compensation expense of $89,775 and $22,444
was recognized for the MRP for the year ended September 30, 2000 and
1999, respectively.
Note 14 - Stock Option Plan
-----------------
The Company has a Stock Option Plan (the "Plan") whereby 228,660
shares of common stock have been reserved for issuance under the Plan.
Options granted under the Plan may be Incentive Stock Options within
the meaning of Section 422 of the Internal Revenue Code of 1986 as
amended or Non-Incentive Stock Options. Options are exercisable in
four annual installments at the market price of common stock at the
date of grant. The Options must be exercised within ten years from the
date of grant. During the year ended September 30, 1999, the Company
granted options to purchase 80,000 shares at a weighted average price
of $8.00 per share. No options were granted during the year ended
September 30, 2000.
The following table summarizes the status of and changes in the
Company's stock option plan during the past two years.
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------ -------------------
<S> <C> <C>
Outstanding at September 30, 1998 -- --
Granted 80,000 $8.00
------
Outstanding at September 30, 1999 80,000 $8.00
Granted --
------
Outstanding at September 30, 2000 80,000 $8.00
======
Exercisable at September 30, 2000 20,000 $8.00
======
</TABLE>
F-23
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 14 - Stock Option Plan - Continued
-----------------
SFAS No. 123, "Accounting for Stock-Based Compensation", requires
the Company to make certain disclosures as if the fair value method of
accounting had been applied to the Company's stock option grants made
subsequent to 1994. Accordingly, the Company estimated the grant date
fair value of each option awarded in fiscal 1999 using the
Black-Scholes Option-Pricing model with the following relevant
assumptions: dividend yield of 6.25%, risk-free interest rate of 5.72%
and expected lives of 10 years. The assumption for expected volatility
was 31.55%. Had 2000 and 1999 compensation cost been determined
including the weighted-average estimate of fair value of each option
granted of $1.62, the Company's net income would be reduced to
proforma amount of $666,877 and $1,379,418, respectively. Proforma
earnings, basic and diluted, per share would have been $.12 in fiscal
2000 and $.24 and $.23, respectively, in fiscal 1999.
Note 15 - Retained Earnings
-----------------
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possible
additional discretionary, actions by the regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classifications are also subject to qualitative judgments
by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in
the regulations) and risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management
believes, as of September 30, 2000, that the Bank meets all capital
adequacy requirements to which it is subject.
As of September 30, 2000, the most recent notification from the
Office of Thrift Supervision categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
in the table. There are no conditions or events since that
notification that management believes have changed the Bank's
category. The Bank's actual capital amounts and ratios are also
presented in the table.
F-24
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 15 - Retained Earnings - Continued
----------------
The following table presents the Bank's capital position based on
the September 30 financial statements and the current capital
requirements.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------------- ------------------------ ---------------------------
Actual % of Required % of Required % of
Amount Assets Amount Assets Amount Assets
------ ------ --------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
September 30, 2000
------------------
Tangible (1) $33,822,029 10.6% $ 4,782,513 1.50% $ N/A N/A %
Tier I capital (2) 33,822,029 16.8 N/A N/A 12,098,760 6.00
Core (1) 33,822,029 10.6 12,753,367 4.00 15,941,709 5.00
Risk-weighted (2) 35,224,940 17.5 16,131,680 8.00 20,164,600 10.00
September 30, 1999
------------------
Tangible (1) $34,200,742 11.77% $ 4,358,431 1.50% $ N/A N/A %
Tier I capital (2) 34,200,742 19.57 N/A N/A 10,484,460 6.00
Core (1) 34,200,742 11.77 8,716,862 3.00 14,528,103 5.00
Risk-weighted (2) 35,473,473 20.30 13,979,280 8.00 17,474,100 10.00
<FN>
-----------
(1) To adjusted total assets.
(2) To risk-weighted assets.
</FN>
</TABLE>
The OTS has adopted an interest rate risk component of
regulatory capital requirements effective January 1, 1994. The
rule requires additional capital to be maintained if the Bank's
interest rate risk exposure, measured by the decline in the market
value of the Bank's net portfolio value, exceeds 2% of assets as a
result of a 200 basis point shift in interest rates. As of
September 30, 2000, the Bank is not subject to the interest rate
risk requirement.
OTS regulations limit the payment of dividends and other
capital distributions by the Bank. The Bank is able to pay
dividends during a calendar year without regulatory approval to
the extent of the greater of (i) an amount which will reduce by
one-half its surplus capital ratio at the beginning of the year
plus all its net income determined on the basis of generally
accepted accounting principles for that calendar year or (ii) 75%
of net income for the last four calendar quarters.
F-25
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 15 - Retained Earnings - Continued
-----------------
The Bank is restricted in paying dividends on its stock to the
greater of the restrictions described in the preceding paragraph, or
an amount that would reduce its retained earnings below its regulatory
capital requirement or the accumulated bad debt deduction.
The mutual holding company for the Company, Baltimore County
Savings Bank, M.H.C. ("M.H.C.") has waived receipt of its quarterly
dividends, thereby reducing the actual dividend payout by the Company
in 2000 and 1999. The dividends waived by M.H.C. are considered as a
restriction on the retained earnings of the Bank. The amount of any
dividend waived by M.H.C. is available for declaration as a dividend
solely to M.H.C. At September 30, 2000, the cumulative amount of such
waived dividends was $2,816,220.
Note 16 - Income Taxes
------------
The current tax provision consists of the following for the years
ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Current expense $ 254,151 $1,299,576
Deferred expense (benefit) 183,471 (342,109)
---------- ----------
Total tax expense $ 437,622 $ 957,467
========== ==========
</TABLE>
The tax effects to temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at September 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Deferred Tax Assets:
Charitable deduction carryforward $ 60,173 $ 70,047
ESOP and MRP 39,515 --
Market value change in Rabbi Trust assets -- 116,028
Allowance for loan losses 541,803 491,529
Allowance for uncollected interest 24,307 24,307
-------- ---------
Total gross deferred tax assets 665,798 701,911
</TABLE>
F-26
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 16 - Income Taxes - Continued
------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Deferred Tax Liabilities:
Federal Home Loan Bank of Atlanta
stock dividends $(151,928) $(151,928)
Depreciation (201,809) (123,317)
Bad debt deduction in excess of
base year reserves (152,323) (228,486)
Market value change in Rabbi Trust assets (145,029) --
--------- ---------
Total gross deferred tax liabilities (651,089) (503,731)
--------- ---------
Net Deferred Tax Assets $ 14,709 $ 198,180
========= =========
</TABLE>
The amount computed by applying the statutory federal income
tax rate to income before taxes and extraordinary item is greater
than the taxes provided for the following reasons:
<TABLE>
<CAPTION>
For the Years Ended September 30,
-----------------------------------------------------------------
2000 1999
---------------------------- ---------------------------
Percent Percent
of Pretax of Pretax
Amount Income Amount Income_
------ --------- ------ ----------
<S> <C> <C> <C> <C>
Statutory federal income tax rate $382,291 34.00% $796,231 34.00%
Increases (Decreases)
Resulting From
--------------------
State income tax net of
federal income tax benefit 52,906 4.70 111,542 4.76
Other 2,425 .22 49,694 2.12
-------- ----- -------- -----
$437,622 38.92% $957,467 40.88%
======== ===== ======== =====
</TABLE>
The Company and its subsidiaries file a consolidated income
tax return on a fiscal year basis. The returns have been audited
by the Internal Revenue Service through the year ended September
30, 1994.
Qualified thrift lenders such as the Bank are not required to
provide a deferred tax liability for bad debt reserves for tax
purposes that arose in fiscal years beginning before December 31,
1987. Such bad debt reserve for the Bank amounted to approximately
$4,227,000 with an income tax effect of approximately $1,633,000 at
September 30, 2000. This bad debt reserve would become taxable if
certain conditions are met by the Bank.
F-27
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 17 - Disclosures About Fair Value of Financial Instruments
-----------------------------------------------------
The estimated fair values of the Bank's financial instruments are
summarized below. The fair values of a significant portion of these
financial instruments are estimates derived using present value
techniques prescribed by the FASB and may not be indicative of the net
realizable or liquidation values. Also, the calculation of estimated
fair values is based on market conditions at a specific point in time
and may not reflect current or future fair values.
The carrying amount is a reasonable estimate of fair value for
cash, federal funds and interest-bearing deposits in other banks. Fair
value is based upon market prices quoted by dealers for investment
securities and mortgage backed securities. The carrying amount of
Federal Home Loan Bank of Atlanta stock is a reasonable estimate of
fair value. Loans receivable were discounted using a single discount
rate, comparing the current rates at which similar loans would be made
to borrowers with similar credit ratings and for the same remaining
maturities. These rates were used for each aggregated category of
loans as reported on the Office of Thrift Supervision Quarterly
Report. The fair value of demand deposits, savings accounts and money
market deposits is the amount payable on demand at the reporting date.
Federal Home Loan Bank advances are considered to be at fair value.
The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered on deposits of similar remaining
maturities.
The estimated fair values of the Bank's financial instruments are
as follows:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
------------------------ -------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Financial Assets
----------------
Cash $ 6,571 $ 6,571 $ 5,977 $ 5,977
Interest bearing deposits in other banks 5,256 5,256 8,651 8,651
Federal funds sold 455 455 449 449
Investment securities - held to maturity 41,158 40,356 35,232 34,218
Loans Receivable
----------------
Mortgage loans $172,328 $169,902 $164,142 $161,826
Share loans 593 593 581 581
Consumer loans 68,599 67,808 50,660 50,736
Mortgage backed securities 19,824 19,705 23,500 23,396
Federal Home Loan Bank of Atlanta stock 1,834 1,834 1,650 1,650
</TABLE>
F-28
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 17- Disclosures About Fair Value of Financial Instruments - Continued
-----------------------------------------------------
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
--------------------- ----------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Financial Liabilities
---------------------
Deposits $268,882 $269,049 $233,364 $233,481
Federal Home Loan Bank of Atlanta
advances 9,500 9,500 16,000 16,000
Mortgage loan commitments -- 1,105 -- 3,664
</TABLE>
Note 18 - Condensed Financial Information (Parent Company Only)
-----------------------------------------------------
Information as to the financial position of BCSB Bankcorp as of
September 30 and the results of operations and cash flows for the
years ended September 30 are summarized below.
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
--------------- -------------------
<S> <C> <C>
Statement of Financial Condition
Assets
------
Cash $ 1,859,917 $ 227,761
Interest bearing deposits in other banks 701,720 1,205,965
Investment securities, held to maturity 7,248,275 7,247,897
Employee Stock Ownership Plan loan 1,463,424 1,646,352
Accrued interest receivable 235,438 245,539
Investment in subsidiary 32,313,296 35,069,404
----------- -----------
Total assets $43,822,070 $45,642,918
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Accrued taxes payable $ 23,453 $ 57,860
Dividends payable 265,954 294,797
Other liabilities 189,846 9,802
----------- -----------
479,253 362,459
</TABLE>
F-29
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 18 - Condensed Financial Information (Parent Company Only) - Continued
----------------------------------------------------
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
--------------- --------------------
<S> <C> <C>
Stockholders' Equity
--------------------
Common stock (6,116,562 shares issued
and outstanding) $ 58,871 $ 61,132
Paid-in capital 20,214,611 21,918,506
Retained earnings (substantially restricted) 25,447,089 25,788,692
----------- ------------
45,720,571 47,768,330
Employee Stock Ownership Plan (1,326,228) (1,509,156)
Stock held by Rabbi Trust (1,051,526) (978,715)
----------- ------------
Total stockholders' equity 43,342,817 45,280,459
----------- ------------
Total liabilities and stockholders' equity $43,822,070 $ 45,642,918
=========== ============
Statement of Operations
Interest and fees on loans $ 62,501 $ 171,096
Interest and dividends on investment securities 443,237 234,152
Other interest income 23,532 275,790
----------- ------------
Total interest income 529,270 681,038
Interest on advances of Federal Home
Loan Bank of Atlanta 4,796 --
----------- -------------
Net interest income 524,474 681,038
Other Income
Income from subsidiary 475,440 1,068,093
----------- ------------
999,914 1,749,131
Non-Interest Expenses
Professional fees 109,162 95,015
Other expense 64,230 70,617
----------- ------------
Total non-interest expense 173,392 165,632
----------- ------------
Net income before tax provision 826,522 1,583,499
Income tax provision 139,758 199,110
----------- ------------
Net income $ 686,764 $ 1,384,389
=========== ============
</TABLE>
F-30
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 18 - Condensed Financial Information (Parent Company Only) - Continued
----------------------------------------------------
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
-------------- --------------
<S> <C> <C>
Statement of Cash Flows
Net income $ 686,764 $ 1,384,389
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
--------------------------------------
Accretion of discount on investments (378) (199)
Equity in net income of subsidiary (475,440) (1,068,093)
Decrease in accounts receivable intercompany 222,370 865,938
Decrease (increase) in accrued interest
receivable on loans 2,401 (95,694)
Decrease (increase) in accrued interest
receivable on investments 7,700 (146,792)
Increase in other assets -- (3,053)
(Decrease) increase in income taxes payable (34,407) 51,420
Decrease in other liabilities (42,326) (53,687)
------------- ------------
Net cash provided by operating activities 366,684 934,229
Cash Flows from Investing Activities
------------------------------------
Proceeds from maturing interest bearing deposits 590,000 293,000
Purchase of interest bearing deposits -- (883,000)
Purchases of investment securities - held to maturity -- (7,247,518)
Principal collected on longer term loans 182,928 182,928
------------- ------------
Net cash provided (used) by investing activities 772,928 (7,654,590)
Cash Flows from Financing Activities
------------------------------------
Dividends from subsidiary 3,300,000 --
Refund of stock offering expense -- 55,000
Stock held by Management Retention Plan (37,665) (732,073)
Stock repurchase (1,710,065) (28,903)
Dividends on stock (1,028,367) (817,005)
Stock vested in MRP 83,239 -
(Decrease) increase in dividends payable (28,843) 294,797
------------- ------------
Net cash provided (used) by financing activities 578,299 (1,228,184)
------------- ------------
</TABLE>
F-31
<PAGE>
BCSB BANKCORP, INC.
-------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 18 - Condensed Financial Information (Parent Company Only) - Continued
----------------------------------------------------
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
------------- --------------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents $ 1,717,911 $(7,948,545)
Cash and cash equivalents at beginning of period 843,726 8,792,271
------------ -----------
Cash and cash equivalents at end of period $ 2,561,637 $ 843,726
============ ===========
The following is a summary of cash and cash equivalents:
Cash $ 1,859,917 $ 227,761
Interest bearing deposits in other banks 701,720 1,205,965
Federal funds sold -- --
------------ -----------
Balance of cash items reflected on Statement of
Financial Condition 2,561,637 1,433,726
Less - certificate of deposit with a maturity
of more than three months -- 590,000
------------ -----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $ 2,561,637 $ 843,726
============ ===========
</TABLE>
NOTE 19 - RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June, 1999. This Statement standardizes the
accounting for derivative instruments including certain derivative
instruments embedded in other contracts, by requiring that an entity
recognize these items as assets or liabilities in the statement of
financial position and measure them at fair value. This Statement
generally provides for matching the timing of gain or loss recognition
on the hedging instrument with the recognition of the changes in the
fair value of the hedged asset or liability that are attributable to
the hedged risk or the earnings effect of the hedged forecasted
transaction. The Statement, which is effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000, will not affect the
Company's financial position or its results of operations.
F-32
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
<S> <C> <C>
HENRY V. KAHL GARY C. LORADITCH JOHN J. PANZER, JR.
Chairman of the Board President and Chief Executive Officer Self Employed
of the Company and the Bank
H. ADRIAN COX
Vice Chairman of the Board WILLIAM M. LOUGHRAN P. LOUIS ROHE, JR.
Insurance Agent for Rohe and Rohe Senior Vice President of the Bank and Retired
Associates, Baltimore, Maryland Director
FRANK W. DUNTON
Retired
EXECUTIVE OFFICERS
GARY C. LORADITCH WILLIAM M. LOUGHRAN BONNIE M. KLEIN
President and Chief Executive Officer Senior Vice President Vice President and Treasurer
DAVID M. MEADOWS RONALD J. WARD KELLIE T. RYCHWALSKI
Vice President, Secretary and General Vice President Vice President
Counsel
OFFICE LOCATIONS
4111 E. Joppa Road, Suite 300 4208 Ebenezer Road 563 Bel Air Plaza
Baltimore, Maryland 21236 Perry Hall, Maryland 21128 Bel Air, Maryland 21014
1736 Merritt Blvd. 2165 York Road 712 N. Rolling Road
Dundalk, Maryland 21222 Timmonium, Maryland 21093 Catonsville, Maryland 21228
515 Eastern Avenue 5340 Campbell Boulevard 2128 N. Fountain Green Road
Baltimore, Maryland 21221 Baltimore, Maryland 21236 Bel Air, Maryland 21015
2105 Rock Spring Road 402 Constant Friendship Boulevard
Forest Hill, Maryland 21050 Abingdon, Maryland 21009
CORPORATE INFORMATION
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS SPECIAL COUNSEL ANNUAL REPORT ON FORM 10-KSB
Anderson Associates, LLP Stradley Ronon Housley Kantarian &
7621 Fitch Lane Bronstein, LLP A COPY OF THE COMPANY'S ANNUAL
Baltimore, Maryland 21236 1220 19th Street, N.W., Suite 700 REPORT ON FORM 10-KSB FOR THE
Washington, D.C. 20036 FISCAL YEAR ENDED SEPTEMBER 30,
GENERAL COUNSEL 2000 AS FILED WITH THE SECURITIES
Moore, Carney, Ryan & AND EXCHANGE COMMISSION, WILL BE
Lattanzi, LLC ANNUAL MEETING FURNISHED WITHOUT CHARGE TO
4111 E. Joppa Road, Suite 201 The 2001 Annual Meeting of STOCKHOLDERS AS OF THE RECORD
Baltimore, Maryland 21236 Stockholders will be held on February DATE FOR THE 2000 ANNUAL MEETING
14, 2001 at 4:00 p.m. at the Bank's UPON WRITTEN REQUEST TO CORPORATE
TRANSFER AGENT AND REGISTRAR Perry Hall office located at 4208 SECRETARY, BCSB BANKCORP, INC.,
Chase-Mellon Shareholder Services Ebenezer Road, Baltimore, Maryland 4111 E. JOPPA ROAD, SUITE 300,
450 W. 33rd Street, 15th Floor BALTIMORE, MARYLAND 21236
New York, New York 10001
</TABLE>
