SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
Commission File Number 0-24519
LIBERTY BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
UNITED STATES OF AMERICA 22-3593532
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1410 St. Georges Avenue, Avenel, New Jersey 07001
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 732-499-7200
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes |X| No |_|
(2) Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of April 25, 2000, 3,584,829 common shares, $1.00 par value, were
outstanding.
<PAGE>
LIBERTY BANCORP, INC.
INDEX
Page
Number
------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of March 31, 2000 and December 31,
1999 (Unaudited) 1
Consolidated Statements of Income for the
Three Months Ended March 31, 2000 and 1999
(Unaudited) 2
Consolidated Statements of Comprehensive
Income for the Three Months Ended March 31, 2000
and 1999 (Unaudited) 3
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999
(Unaudited) 4 - 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 10
Quantitative and Qualitative Disclosures About
Item 3. Market Risk 11 - 12
PART II OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Assets
Cash and amounts due from depository institutions $ 1,180,928 $ 1,563,041
Interest-bearing deposits in other banks 2,313,476 2,049,256
------------- -------------
Total cash and cash equivalents 3,494,404 3,612,297
Securities held to maturity 19,477,726 19,468,185
Securities available for sale 46,170,094 48,707,248
Loans receivable 207,411,128 202,031,204
Premises and equipment 5,219,624 4,867,039
Foreclosed real estate 80,222 80,222
Federal Home Loan Bank of New York stock 2,355,100 2,355,100
Interest receivable 1,684,170 1,539,332
Other assets 300,292 608,061
------------- -------------
Total assets $ 286,192,760 $ 283,268,688
============= =============
Liabilities and stockholders' equity
Liabilities
Deposits $ 218,189,674 $ 220,532,547
Advances from Federal Home Loan Bank of New York 30,800,000 24,800,000
Capitalized lease obligations 2,594,480 2,596,031
Advance payments by borrowers for taxes and insurance 2,282,287 2,262,379
Other liabilities 627,056 1,129,787
------------- -------------
Total liabilities 254,493,497 251,320,744
------------- -------------
Stockholders' equity
Preferred stock; $1.00 par value, 10,000,000 shares
authorized; issued and outstanding - none -- --
Common stock; $1.00 par value, 20,000,000 shares
authorized; 3,901,375 shares issued and
3,589,829 and 3,621,329 shares outstanding at
March 31, 2000 and December 31, 1999, respectively 3,901,375 3,901,375
Paid-in-capital 13,783,482 13,796,320
Retained earnings - substantially restricted 18,951,344 18,695,283
Unearned Employee Stock Ownership Plan ("ESOP") shares (1,210,201) (1,246,874)
Unearned Recognition Retention Plan ("RRP") Stock (395,245) --
Treasury stock, at cost; 311,546 and 280,046 shares at March 31, 2000 and -- --
December 31, 1999, respectively (3,051,665) (2,849,415)
Accumulated other comprehensive income -
unrealized (loss) on securities available for sale, net (279,827) (348,745)
------------- -------------
Total stockholders' equity 31,699,263 31,947,944
------------- -------------
Total liabilities and stockholders' equity $ 286,192,760 $ 283,268,688
============= =============
</TABLE>
See notes to consolidated financial statements.
-1-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
-------------------------
2000 1999
----------- -----------
Interest income:
Loans $ 3,685,139 $ 3,225,955
Securities held to maturity 305,610 --
Securities available for sale 774,326 836,792
Other interest-earning assets 63,598 157,497
----------- -----------
Total interest income 4,828,673 4,220,244
----------- -----------
Interest expense:
Deposits 2,371,665 2,522,887
Advances 406,584 58
Capitalized lease obligations 67,159 --
----------- -----------
Total interest expense 2,845,408 2,522,945
----------- -----------
Net interest income 1,983,265 1,697,299
Provision for loan losses 30,000 15,000
----------- -----------
Net interest income after provision for loan losses 1,953,265 1,682,299
----------- -----------
Non-interest income:
Fees and service charges on deposits 41,795 46,398
Fees and service charges on loans 5,275 6,046
Miscellaneous 26,505 24,347
----------- -----------
Total non-interest income 73,575 76,791
----------- -----------
Non-interest expenses:
Salaries and employee benefits 681,419 570,627
Net occupancy expense of premises 192,657 146,721
Equipment 157,628 139,216
Directors' fees 45,799 46,200
Legal expenses 23,218 44,359
Advertising 105,341 78,125
Federal insurance premium 11,905 32,203
(Income) loss from foreclosed real estate -- (8,265)
Miscellaneous 272,711 219,192
----------- -----------
Total non-interest expenses 1,490,678 1,268,378
----------- -----------
Income before income taxes 536,162 490,712
Income taxes 189,567 179,515
----------- -----------
Net income $ 346,595 $ 311,197
=========== ===========
Net income per common share - basic/diluted $ 0.10 $ 0.09
=========== ===========
Weighted average number of
common shares outstanding - basic/diluted 3,490,174 3,608,368
=========== ===========
See notes to consolidated financial statements.
-2-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Net income $ 346,595 $ 311,197
------------- -------------
Other comprehensive income (loss) - unrealized holding gain
(loss) on securities available for sale, net of
income taxes (benefit) $40,475 and (165,093), respectively 68,917 (281,106)
------------- -------------
Total other comprehensive income (loss) 68,917 (281,106)
------------- -------------
Comprehensive income $ 415,512 $ 30,091
============= =============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income 346,595 $ 311,197
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 106,319 59,400
Amortization of premiums and accretion of discounts, net 16,969 154,682
Amortization of deferred loan fees, net 9,440 (1,794)
Provision for loan losses 30,000 15,000
Loss on sale of real estate owned -- (8,265)
(Increase) decrease in accrued interest receivable (144,838) (58,405)
Decrease in other assets 307,769 148,960
Amortization of unearned ESOP shares 23,835 36,270
Amortization of RRP shares 24,279 --
(Decrease) in other liabilities (465,983) (61,931)
----------- -------------
Net cash provided by operating activities 254,385 595,114
----------- -------------
Cash flows from investing activities:
Purchases of securities available for sale -- (21,052,236)
Principal repayments on securities available for sale 2,620,037 12,905,282
Net (increase) in loans receivable (5,419,364) (1,871,102)
Proceeds from sale of real estate owned -- 113,885
Net additions to premises and equipment (458,904) (39,909)
Purchase of Federal Home Loan Bank of New York stock -- (347,600)
----------- -------------
Net cash (used in) investment activities (3,258,231) (10,291,680)
----------- -------------
Cash flows from financing activities:
Net (decrease) increase in deposits (2,342,873) 846,815
Advances from Federal Home Loan Bank of New York 6,000,000 400,000
Increase in advance payments by borrowers for taxes and insurance 19,908 66,987
Repayment of capitalized lease obligations (1,551) --
Cash dividends paid (90,534) (74,893)
Purchase of RRP Stock (496,747) --
Purchase of treasury stock (202,250) (2,817,228)
----------- -------------
Net cash provided by financing activities 2,885,953 (1,578,319)
----------- -------------
Net (decrease) in cash and cash equivalents (117,893) (11,274,885)
Cash and cash equivalents - beginning 3,612,297 13,824,150
----------- -------------
Cash and cash equivalents - ending 3,494,404 $ 2,549,265
========= =============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
----------------------------
2000 1999
------------ -------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 2,739,409 $ 2,522,945
=========== ===========
Income taxes $ 144,686 $ 254,523
=========== ===========
Supplemental disclosure of noncash activities:
Net change in unrealized (loss) gain on
securities available for sale $ 68,918 $ (281,106)
=========== ===========
See notes to consolidated financial statements.
-5-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements, representing the consolidation
of the financial results of Liberty Bancorp, Inc. (the "Company") and its
subsidiary Liberty Bank (the "Bank"), were prepared in accordance with
instructions for Form 10-QSB and regulation S-X and do not include information
or footnotes necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with generally accepted
accounting principles ("GAAP"). In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial statements have been included. The
results of operations for the three months ended March 31, 2000, are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
2. NET INCOME PER COMMON SHARE
Basic net income per common share is calculated by dividing net income by the
weighted average number of shares of common stock outstanding, adjusted for the
unallocated portion of shares held by the ESOP in accordance with the American
Institute of Certified Public Accountants' Statement of Position 93-6. Diluted
net income per share is calculated by adjusting the weighted average number of
shares of common stock outstanding to include the effect of stock options, if
dilutive, using the treasury stock method.
-6-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discussion of Forward-Looking Statements
When used or incorporated by reference in disclosure documents, the words
"anticipate", "estimate", "expect", "target", "goal" and similar expressions are
intended to identify forward-looking statements. Such forward-looking statements
are subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated, expected or projected. These forward-looking statements speak only as
of the date of the document. The Company expressly disclaims any obligation or
undertaking to publicly release any update or revisions to any forward-looking
statements contained herein to reflect any change in the Company's expectation
with regard thereto or any change in events, conditions or circumstances on
which such statement is based.
Comparison of Financial Condition at March 31, 2000 and December 31, 1999
The Company's assets at March 31, 2000 totaled $286.2 million, which represents
an increase of $3.0 million or 1.06% as compared with $283.2 million at December
31, 1999. Such increase was largely due to a $6.0 million increase in advances
from the Federal Home Loan Bank of New York ("FHLB") offset by a decrease of
$2.3 million in deposits.
Cash and cash equivalents decreased by $117,900 or 3.26% to $3.5 million at
March 31, 2000, from $3.6 million at December 31, 1999.
Securities available for sale at March 31, 2000 decreased by $2.5 million, or
5.2% to $46.2 million from $48.7 million at December 31, 1999. The decrease
during the three months ended March 31, 2000, resulted from principal
repayments. There were no purchases of securities available for sale during the
period.
Securities held to maturity increased by $10,000.00 due to accretions of
discounts during the three month period.
Net loans increased $5.4 million or 2.66% to $207.4 million at March 31, 2000
from $202 million at December 31, 1999. The increase during the three months
ended March 31, 2000, resulted primarily from loan originations exceeding loan
principal repayments.
Foreclosed real estate amounting to $80,200 and consisting of one property at
March 31, 2000 was unchanged from the balance at December 31, 1999.
Deposits at March 31, 2000 decreased $2.3 million or 1.04% to $218.2 million
when compared with $220.5 million at December 31, 1999. The decrease in deposits
resulted from interest credited of $2.2 million offset by withdrawals of $4.5
million.
Stockholders' equity totaled $31.7 million and $31.9 million at March 31, 2000
and December 31, 1999, respectively. Such decrease was largely due to the
repurchase of 31,500 shares of common stock at an average price of $6.42
totaling $202,230 and the payment of dividends partially offset by retained
earnings.
-7-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
1999
Net income increased $36,000 or 11.6% to $347,000 for the three months ended
March 31, 2000 compared with $311,000 for the same period in 1999. The increase
in net income during the 2000 period resulted from increases in net-interest
income that were partially offset by an increase in non-interest expense and a
decrease in non-interest income.
Interest income on loans increased by $460,000 or 14.3% to $3.7 million during
the three months ended March 31, 2000 from $3.2 million during the same period
in 1999. The increase during the 2000 period resulted from an increase of $26
million in the average balances of loans outstanding, partially offset by a
decrease of three basis points in the yield earned on the loan portfolio.
Interest on securities available for sale, consisting of adjustable rate
mortgage-backed securities and Collateralized Mortgage Obligations, decreased by
$63,000 to $774,000 during the three months ended March 31, 2000 from $837,000
for the same period in 1999. The decrease during the 2000 period resulted from a
$15.2 million decrease in average balances of securities available for sale
offset by a 121 basis points increase in the yield earned on such securities.
Interest income on securities held to maturity, consisting of short-term
government agency bonds, was $306,000 on an average balance of $19.5 million
with a yield of 6.28%. There were no securities held to maturity during the same
period in 1999.
Interest income on other interest-earning assets decreased by $94,000 during the
three months ended March 31, 2000 when compared to same period in 1999. The
decrease during the 2000 period resulted from an $6.8 million decrease in the
average balance offset by a 65 basis point increase in the yield on this
portfolio.
Interest expense on deposits decreased by $151,000 or 5.99% to $2.37 million
during the three months ended March 31, 2000 when compared to $2.52 million for
the same period in 1999. Such decrease during the 2000 period was attributable
to a $6.6 million or 3.00% decrease in average balances of interest bearing
deposits outstanding coupled with a 14 basis point decrease in cost of funds.
Interest expense on FHLB advances during the quarter ended March 31, 2000
amounted to $407,000 on an average balance of $29 million with an average cost
of 5.61%. Interest expense on FHLB advances for the same period in 1999 amounted
to $58 on an average balance of $4,000. Interest expense on capitalized leases
amounted to $67,000 on average balances of $2.6 million for the three months
ended March 31, 2000. There were no such liabilities for the same period in
1999.
Net interest income increased $286,000 or 17% to $1.98 million during the three
months ended March 31, 2000 when compared with $1.71 million for the same period
in 1999. Such increase was due to an increase in total interest income of
$608,000 partially offset by an increase in total interest expense of $322,000.
The Bank's net interest rate spread increased 24 basis points to 2.34% for the
three months ended March 31, 2000. The yield on interest earning assets
increased by 30 basis points which was partially offset by a 6 basis point
increase in the cost of interest bearing liabilities.
During the three months ended March 31, 2000 and 1999, the Bank made provisions
for loan losses of provided $30,000 and $15,000, respectively. The allowance for
loan losses is based on management's evaluation of the risks inherent in its
portfolio given due consideration to changes in general market conditions and
the nature and volume of the Bank's loan activity. The Bank intends to continue
to provide for loan losses as needed based on its periodic review of the loan
portfolio and general market conditions.
At March 31, 2000 and 1999, the Bank's non-performing loans which were
delinquent ninety days or more totaled $309,000 or 0.11% of total assets and
$734,000 or 0.28% of total assets, respectively; all such loans were on
non-accrual status.
-8-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
1999 (Cont'd.)
Non-interest income decreased by $3,000 or 4.19% to $74,000 during the three
months ended March 31, 2000 when compared to $77,000 during the same period in
1999. The decrease during the three months ended March 31, 2000 resulted
primarily from decreases in fees and service charges on deposits of $4,000.
Non-interest expenses increased by $222,000 or 17.5% to $1.49 million during the
three months ended March 31, 2000 when compared to the same period in 1999.
During the 2000 period salaries and employee benefits expense, occupancy
expense, equipment, advertising, and miscellaneous expenses increased by
$111,000, $46,000, $18,000, $27,000, and $54,000 respectively. Most of these
increases are related to increased marketing and branch expansion of activities.
During the same period legal expense, directors' fees and deposit insurance
premiums decreased by $21,000, $400, and 20,000 respectively.
Income taxes totaled $190,000 and $179,000 for the three months ended March 31,
2000 and 1999 respectively.
Liquidity and Capital Resources
The Bank is required to maintain minimum levels of liquid assets as defined by
OTS regulations. The requirement, which the OTS may vary from time to time,
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The required ratio currently is 4.0%. The
Bank's liquidity averaged 29.04% during the month of March 2000. The Bank
adjusts its liquidity levels in order to meet funding needs for deposit
outflows, payment of real estate taxes from escrow accounts on mortgage loans,
repayment of borrowings, when applicable, and loan funding commitments. The Bank
also adjusts its liquidity level as appropriate to meet its asset/liability
objectives.
The Bank's primary sources of funds are deposits, amortization and prepayments
of loans and mortgage-backed securities principal, maturities of investment
securities and funds provided by operations. While scheduled loan and
mortgage-backed securities amortization and maturing term deposits and
investment securities are relatively predictable source of funds, deposit flows
and loan and mortgage-backed securities prepayments are greatly influenced by
market interest rates, economic conditions and competition. The levels of these
assets are dependent on the Bank's operating, financing, lending and investing
activities during any given period. The Bank has other sources of liquidity if a
need for additional funds arises, including advances from the FHLB. At March 31,
2000, the Bank had short-term outstanding advances of $6,000,000 and securities
sold under agreements to repurchase of $24,800,000 from the FHLB.
-9-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (Cont'd.)
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At March 31, 2000, the Bank has outstanding
commitments to originate loans of $6.9 million. Certificates of deposits
scheduled to mature in one year or less at March 31, 2000, totaled $98.5
million. Management believes that, based upon its experience and the Bank's
deposit flow history, a significant portion of such deposits will remain with
the Bank.
Under OTS regulations, each savings institution must maintain tangible capital
equal to at least 1.5% of its total adjusted assets, core capital equal to at
least 4.0% of its total adjusted assets and total capital equal to at least 8.0%
of its risk-weighted assets. The following table sets forth the Bank's capital
position at March 31, 2000 as compared to the minimum regulatory capital
requirements:
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
Minimum Capital Corrective
Actual Requirements Actions Provisions
------------------------- ------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ --------- ------------ ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to risk-weighted assets) $ 27,149 21.05% $ 10,318 8.00% $ 12,897 10.00%
Tier I Capital
(to risk-weighted assets) 26,331 20.42% -- -- 7,738 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 26,331 9.30% 11,328 4.00% 14,160 5.00%
Tangible Capital
(to adjusted total assets) 26,331 9.30% 4,248 1.50% -- --
</TABLE>
Capability of the Bank's Data Processing Hardware to Accommodate the Year 2000
The Company had developed and implemented a plan to deal with the issues
associated with the programming code within the computer systems and related
embedded technology with respect to the rollover of the two digit year value to
00 ("Year 2000"). The issue was whether computer systems would properly
recognize date sensitive information when the year changed to 2000.
The Company has not experienced any significant issues associated with the Year
2000 problem as a result of the date change to January 1, 2000 or any date
subsequent thereto. The incremental costs related to the Year 2000 compliance
were approximately $3,000 in 1999 and $100,000 in 1998, respectively. Any
additional incremental costs associated with Year 2000 issues are not expected
to be material. Management will continue to monitor operations through the year
2000 and although no assurances can be given, it is not expected that any future
adverse developments will arise with respect to Year 2000.
Supervisory Examination
The Bank's financial statements are periodically examined by the OTS and the
Federal Deposit Insurance Corporation ("FDIC") as part of their regulatory
oversight of the thrift industry. As a result of these examinations, the
regulators can direct that the Bank make adjustments to its financial statements
based on their findings.
-10-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
As with other savings institutions, the Bank's most significant form of market
risk is interest rate risk. The Bank's assets, consisting primarily of mortgage
loans, have longer maturities than its liabilities, consisting primarily of
deposits. As a result, a principal part of the Bank's business strategy is to
manage interest rate risk and manage the exposure of the Bank's net interest
income to changes in market interest rates. Accordingly, the Board of Directors
has established an Asset/Liability Management Committee which is responsible for
evaluating the interest rate risk inherent in the Bank's assets and liabilities,
determining the level of risk that is appropriate given the Bank's business
strategy, operating environment, capital, liquidity and performance objectives,
and managing this risk consistent with the guidelines approved by the Board of
Directors. The Asset/Liability Management Committee consists of senior
management operating under a policy adopted by the Board of Directors and meets
at least quarterly to review the Bank's asset/liability polices and interest
rate risk position.
The Bank has pursued the following strategies to manage interest rate risk: (1)
originating one-to-four family adjustable rate mortgage loans, (2) purchasing
adjustable rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac
or GNMA, (3) increasing adjustable rate home equity lending and fixed-rate home
equity lending with maturities of five years or less, (4) investing in
shorter-term securities which generally have lower yields compared to longer
term investments, but which better position the Bank to reinvest its assets if
market interest rates increase and (5) originating commercial real estate loans
with shorter maturities than residential loans.
The Bank's current investment strategy is to maintain a securities portfolio
that provides a source of liquidity and that contributes to the Bank's overall
profitability and asset mix within given quality and maturity considerations.
The securities portfolio consists primarily of U.S. Treasury, Federal Government
and government sponsored corporation securities. Much of the Bank's investment
securities and mortgage-backed securities are classified as available for sale
to provide management with the flexibility to make adjustments to the portfolio
in the event of changes in interest rates, to fulfill unanticipated liquidity
needs, or to take advantage of alternative investment opportunities.
At March 31, 2000, the Bank had adjustable mortgage loans of $41.4 million, or
20% of total loans and $36 million or 78% of securities available for sale in
adjustable rate mortgage-backed securities.
Net Portfolio Value
The Bank's interest rate sensitivity is monitored by management through the use
of the OTS model which estimates the change in the Bank's net portfolio value
("NPV") over a range of interest rate scenarios. NPV is the present value of
expected cash flows from assets, liabilities, and off-balance sheet contracts.
The NPV ratio, under any interest rate scenario, is defined as the NPV in that
scenario divided by the market value of assets in the same scenario. The OTS
produces its analysis based upon data submitted on the Bank's quarterly Thrift
Financial Reports.
-11-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Net Portfolio Value (Cont'd.)
The following table presents the Bank's NPV at December 31, 1999, the latest
information available, as calculated by the OTS, which is based upon quarterly
information that the Bank provided voluntarily to the OTS. In the opinion of
management, there have been no material changes to the Bank's NPV since December
31, 1999.
Percentage Change in Net Portfolio Value
- -------------------------------------------------------------------
Changes
in Market Projected Estimated Amount of
Interest Rates Change NPV Change
- ------------------ ------------- ------------- ------------
(basis points)
300 (75.00)% 5,864 (17,768)
200 (48.00)% 12,178 (11,454)
100 (23.00)% 18,256 (5,376)
-- -- 23,632 --
(100) 18.00 % 27,773 4,141
(200) 31.00 % 30,905 7,273
(300) 39.00 % 32,865 9,233
Certain shortcomings are inherent in the methodology used in the above interest
rate risk measurement. Modeling changes in NPV requires making certain
assumptions which may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the NPV table
presented assumes that the composition of the Bank's interest sensitive assets
and liabilities existing at the beginning of a period remain constant over the
period being measured and assumes that a particular change in interest rates is
reflected uniformly across the yield curve regardless of the duration or
repricing of specific assets and liabilities. Accordingly, although the NPV
table provides an indication of the Bank's interest rate risk exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market interest rates on
the Bank's net interest income, and will differ from actual results.
Additionally, the guidelines established by the Board of Directors is to limit
projected NPV changes within the Board's guidelines, the Bank will not
necessarily limit projected changes in NPV if the required action would present
disproportionate risk to the Bank's continued profitability.
-12-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
PART II . OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business,
which involve amounts which in the aggregate are believed by management to
be immaterial to the financial condition or operations of the Company.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable
ITEM 5. Other Information
On April 19, 2000 the Company declared a quarterly cash dividend of $0.025
per share, to be paid on May 17, 2000, to stockholders of record on May 3,
2000.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
16. Computation of earnings per common share.
27. EDGAR Financial Data Schedule
(b) Reports on Form 8-K:
None
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIBERTY BANCORP, INC.
Date: May 12, 2000 By /s/ John R. Bowen
------------------------ -------------------
John R. Bowen
President and Chief Executive Officer
Date: May 12, 2000 By: /s/ Michael J. Widmer
------------------------ -----------------------
Michael J. Widmer
Executive Vice President and
Chief Financial Officer
-14-
Exhibit 1
LIBERTY BANCORP, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 2000 March 31, 1999
--------------- ---------------
<S> <C> <C>
Net income $ 346,595 $ 311,197
--------------- ---------------
Weighted average common shares outstanding 3,490,174 3,608,368
Common stock equivalents due to dilution effect
of stock options None None
--------------- ---------------
Total weighted average common shares and
equivalents outstanding 3,490,174 3,608,368
--------------- ---------------
Basic earnings per common share $ 0.10 $ 0.09
=============== ===============
Diluted earnings per common share $ 0.10 $ 0.09
=============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,181
<INT-BEARING-DEPOSITS> 2,313
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,170
<INVESTMENTS-CARRYING> 19,478
<INVESTMENTS-MARKET> 0
<LOANS> 207,411
<ALLOWANCE> 818
<TOTAL-ASSETS> 286,193
<DEPOSITS> 218,190
<SHORT-TERM> 30,800
<LIABILITIES-OTHER> 5,503
<LONG-TERM> 0
0
0
<COMMON> 3,901
<OTHER-SE> 27,798
<TOTAL-LIABILITIES-AND-EQUITY> 286,190
<INTEREST-LOAN> 3,685
<INTEREST-INVEST> 1,080
<INTEREST-OTHER> 64
<INTEREST-TOTAL> 4,829
<INTEREST-DEPOSIT> 2,372
<INTEREST-EXPENSE> 2,845
<INTEREST-INCOME-NET> 1,983
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,491
<INCOME-PRETAX> 536
<INCOME-PRE-EXTRAORDINARY> 536
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 347
<EPS-BASIC> .10
<EPS-DILUTED> .10
<YIELD-ACTUAL> 7.02
<LOANS-NON> 309
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 788
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 818
<ALLOWANCE-DOMESTIC> 751
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 67
</TABLE>
