SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 September 30, 2000
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-24519
LIBERTY BANCORP, INC.
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(Exact name of registrant as specified in its charter)
UNITED STATES OF AMERICA 22-3593532
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1410 St. Georges Avenue, Avenel, New Jersey 07001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 732-499-7200
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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 October 23, 2000, 3,548,399 common shares, $1.00 par value, were
outstanding.
<PAGE>
LIBERTY BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
-----------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
September 30, 2000 and December 31, 1999 (Unaudited) 1
Consolidated Statements of Income for the Nine and Three
Months Ended September 30, 2000 and 1999 (Unaudited) 2
Consolidated Statements of Comprehensive Income
for the Nine and Three Months Ended September 30, 2000
and 1999 (Unaudited) 3
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 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 - 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 - 14
PART II OTHER INFORMATION 15
SIGNATURES 16
</TABLE>
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Assets
Cash and amounts due from depository institutions $ 1,284,186 $ 1,563,041
Interest-bearing deposits in other banks 2,272,414 2,049,256
------------- -------------
Total cash and cash equivalents 3,556,600 3,612,297
Securities held to maturity 19,482,939 19,468,185
Securities available for sale 41,144,146 48,707,248
Loans receivable 218,090,084 202,031,204
Premises and equipment 5,065,045 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 1,896,277 1,539,332
Other assets 1,173,883 608,061
------------- -------------
Total assets $ 292,844,296 $ 283,268,688
============= =============
Liabilities and stockholders' equity
Liabilities
Deposits $ 213,374,251 $ 220,532,547
Securities sold under agreements to repurchase $ 31,700,000 24,800,000
Advances from Federal Home Loan Bank of New York 10,400,000 0
Capitalized lease obligations 2,590,066 2,596,031
Advance payments by borrowers for taxes and insurance 2,287,184 2,262,379
Other liabilities 356,189 1,129,787
------------- -------------
Total liabilities 260,707,690 251,320,744
------------- -------------
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
3,548,399 and 3,621,329 shares outstanding at
September 30, 2000 and December 31, 1999, respectively 3,901,375 3,901,375
Paid-in-capital 13,766,369 13,796,320
Retained earnings - substantially restricted 19,406,633 18,695,283
Unearned Employee Stock Ownership Plan ("ESOP") shares (1,140,370) (1,246,874)
Unearned Recognition Retention Plan ("RRP") Stock (347,245) --
Treasury stock, at cost; 352,976 and 280,046 shares at September 30, 2000 and -- --
December 31, 1999, respectively (3,335,943) (2,849,415)
Accumulated other comprehensive income -
unrealized (loss) on securities available for sale, net (114,213) (348,745)
------------- -------------
Total stockholders' equity 32,136,606 31,947,944
------------- -------------
Total liabilities and stockholders' equity $ 292,844,296 $ 283,268,688
============= =============
</TABLE>
See notes to consolidated financial statements.
-1-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------------- --------------------------------
2000 1999 2000 1999
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Interest income:
Loans $11,440,184 $ 10,023,561 $ 3,945,688 $ 3,474,465
Securities held to maturity 902,963 611,122 297,752 $ 312,803
Securities available for sale 2,240,342 2,576,170 727,039 829,112
Other interest-earning assets 187,353 280,633 64,088 59,844
----------- ------------ ----------- -----------
Total interest income 14,770,842 13,491,486 5,034,567 4,676,224
----------- ------------ ----------- -----------
Interest expense:
Deposits 7,175,245 7,502,904 2,421,472 2,485,594
Borrowings 1,617,782 469,370 674,054 250,615
Capitalized lease obligations 201,413 156,592 67,110 67,123
----------- ------------ ----------- -----------
Total interest expense 8,994,440 8,128,866 3,162,636 2,803,332
----------- ------------ ----------- -----------
Net interest income 5,776,402 5,362,620 1,871,931 1,872,892
Provision for loan losses 90,000 45,000 30,000 15,000
----------- ------------ ----------- -----------
Net interest income after provision for loan losses 5,686,402 5,317,620 1,841,931 1,857,892
----------- ------------ ----------- -----------
Non-interest income:
Fees and service charges on deposits 148,700 141,794 60,157 47,157
Fees and service charges on loans 30,583 71,136 8,894 31,948
Gain on sale of assets -- 15,625 -- --
Miscellaneous 115,769 86,309 46,457 32,656
----------- ------------ ----------- -----------
Total non-interest income 295,052 314,864 115,508 111,761
----------- ------------ ----------- -----------
Non-interest expenses:
Salaries and employee benefits 2,023,163 1,845,988 659,269 654,373
Net occupancy expense of premises 616,188 464,954 214,972 163,467
Equipment 489,347 423,319 169,506 148,939
Directors' fees 131,000 137,088 42,967 43,588
Legal expenses 82,380 101,102 24,517 18,852
Advertising 321,600 251,892 105,929 95,642
Federal insurance premium 34,762 97,548 11,314 32,531
(Income) loss from foreclosed real estate 241 (8,265) 241 --
Miscellaneous 824,294 766,438 258,287 247,842
----------- ------------ ----------- -----------
Total non-interest expenses 4,522,975 4,080,064 1,487,002 1,405,234
----------- ------------ ----------- -----------
Income before income taxes 1,458,479 1,552,420 470,437 564,419
Income taxes 530,229 571,841 173,305 194,595
----------- ------------ ----------- -----------
Net income $ 928,250 $ 980,579 $ 297,132 $ 369,824
=========== ============ =========== ===========
Net income per common share - basic/diluted $ 0.27 $ 0.27 $ 0.09 $ 0.11
----------- ------------ ----------- -----------
Weighted average number of
common shares outstanding - basic/diluted 3,457,863 3,584,719 3,432,293 3,496,738
=========== ============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------- -------------------------
2000 1999 2000 1999
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 928,250 $ 980,579 $ 297,132 $ 369,824
----------- --------- --------- ---------
Other comprehensive income (loss) - unrealized holding gain
(loss) on securities available for sale, net of
income taxes (benefit) 234,532 (682,842) 147,112 31,669
----------- --------- --------- ---------
Total other comprehensive income (loss) 234,532 (682,842) 147,112 31,669
----------- --------- --------- ---------
Comprehensive income (loss) $ 1,162,782 $ 297,737 $ 444,244 $ 401,493
=========== ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 928,250 $ 980,579
------------ ------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 344,424 281,558
Amortization of premiums and accretion of discounts, net 113,832 284,723
Amortization of deferred loan fees, net 23,179 29,188
Provision for loan losses 90,000 45,000
Loss on sale of real estate owned -- (8,265)
(Increase) decrease in accrued interest receivable (356,945) (391,142)
(Increase) decrease in other assets (703,562) 55,174
Amortization of unearned ESOP shares 76,553 109,616
Amortization of RRP shares 149,502 --
(Decrease) in other liabilities (773,598) 597,527
------------ ------------
Net cash provided by operating activities (108,365) 1,983,958
------------ ------------
Cash flows from investing activities:
Purchases of securities held to maturity -- (19,421,865)
Purchases of securities available for sale -- (18,984,641)
Principal repayments on securities available for sale 7,806,788 27,149,775
Net (increase) in loans receivable (16,172,059) (19,099,177)
Proceeds from sale of real estate owned -- 113,885
Net additions to premises and equipment (542,430) (2,914,343)
Purchase of Federal Home Loan Bank of New York stock -- (347,600)
------------ ------------
Net cash (used in) investing activities (8,907,701) (33,503,966)
------------ ------------
Cash flows from financing activities:
Net (decrease) increase in deposits (7,158,296) 666,814
Advances from Federal Home Loan Bank of New York 10,400,000 2,300,000
Proceeds from securities sold under agreements to repurchase 6,900,000 18,300,000
Increase in advance payments by borrowers for taxes and insurance 24,805 154,933
Capitalized Lease Obligations 2,600,000
Repayment of capitalized lease obligations (5,965) (2,740)
Purchase of RRP Stock (496,747) --
Cash dividends paid (216,900) (137,238)
Purchase of treasury stock (486,528) (2,817,228)
------------ ------------
Net cash provided by financing activities 8,960,369 21,064,541
------------ ------------
Net increase (decrease) in cash and cash equivalents (55,697) (10,455,467)
Cash and cash equivalents - beginning 3,612,297 13,824,150
------------ ------------
Cash and cash equivalents - ending $ 3,556,600 $ 3,368,683
============ ============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 8,962,046 $ 7,727,467
------------ ------------
Income taxes $ 634,713 $ 623,523
------------ ------------
Supplemental disclosure of noncash activities:
Net change in unrealized gain (loss) on
securities available for sale $ 372,272 $ (1,083,877)
Deferred income taxes benefit (137,740) 401,035
------------ ------------
Net Non-Cash Activities $ 234,532 $ (682,842)
============ ============
</TABLE>
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 and nine months ended September 30, 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 or
other contracts to issue common stock, 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 September 30, 2000 and December 31, 1999
The Company's assets at September 30, 2000 totaled $292.8 million, which
represents an increase of $9.5 million or 3.35% as compared with $283.3 million
at December 31, 1999. Such increase was largely funded by a $17.3 million
increase in borrowings from the Federal Home Loan Bank of New York ("FHLB")
offset by a decrease of $7.2 million in deposits.
Cash and cash equivalents showed little change at September 30, 2000 from
December 31, 1999, with balances at $3.6 million.
Securities available for sale at September 30, 2000 decreased by $7.6 million,
or 15.5% to $41.1 million from $48.7 million at December 31, 1999. The decrease
during the nine months ended September 30, 2000, resulted from principal
repayments. There were no purchases or sales of securities available for sale
during the period.
Securities held to maturity increased by $15,000 due to accretions of discounts
during the nine month period.
Net loans increased $16.1 million or 7.9% to $218.1 million at September 30,
2000 from $202.0 million at December 31, 1999. The increase during the nine
months ended September 30, 2000, resulted from loan originations exceeding loan
principal repayments.
Foreclosed real estate amounting to $80,000 and consisting of one property at
September 30, 2000 was unchanged from the balance at December 31, 1999.
Deposits at September 30, 2000 decreased $7.1 million or 3.2% to $213.4 million
when compared with $220.5 million at December 31, 1999. The decrease in deposits
resulted from interest credited of $6.9 million offset by net withdrawals of
$14.0 million.
Stockholders' equity totaled $32.1 million and $31.9 million at September 30,
2000 and December 31, 1999, respectively. Such increase was largely due to net
income and a decrease in the unrealized loss on securities of $234,000 partially
offset by the repurchase of 72,930 shares of common stock at an average price of
$6.67 totaling $486,000 and the payment of dividends.
-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 September 30, 2000
and 1999
Net income decreased $73,000 or 19.7% to $297,000 for the three months ended
September 30, 2000 compared with $370,000 for the same period in 1999. The
decrease in net income during the 2000 period resulted primarily from an
increase in non-interest expense and an increase in the provision for loan
losses that were partially offset by a corresponding decrease in income tax
expense.
Interest income on loans increased by $471,000 or 13.6% to $3.9 million during
the three months ended September 30, 2000 from $3.5 million during the same
period in 1999. The increase during the 2000 period resulted from an increase of
$20.6 million in the average balances of loans outstanding and a 19 basis point
increase in the average yield earned on the loan portfolio.
Interest on securities held to maturity, consisting of short-term and mid-term
government agency bonds, decreased by $15,000, or 4.8%, to $298,000 during the
three months ended September 30, 2000 from $313,000 for the same period in 1999.
The decrease during the 2000 period resulted from a $33,000 decrease in average
balances of securities held to maturity and by a 32 basis point decrease in the
yield earned on such securities.
Interest on securities available for sale, consisting of adjustable rate
mortgage-backed securities and collateralized mortgage obligations, decreased by
$102,000, or 12.3%, to $727,000 during the three months ended September 30, 2000
from $829,000 for the same period in 1999. The decrease during the 2000 period
resulted from a $13.0 million decrease in average balances of securities
available for sale, partially offset by a 90 basis point increase in the yield
earned on such securities.
Interest income on other interest-earning assets increased by $4,000 during the
three months ended September 30, 2000 when compared to same period in 1999. The
increase during the 2000 period resulted from a $638,000 increase in the average
balance partially offset by a 61 basis point decrease in the yield on this
portfolio.
Interest expense on deposits decreased by $64,000 or 2.6% to $2.42 million
during the three months ended September 30, 2000 when compared to $2.49 million
for the same period in 1999. Such decrease during the 2000 period was
attributable to a $14.5 million or 6.6% decrease in average balances of interest
bearing deposits outstanding partially offset by a 21 basis point increase in
average cost of deposits. Interest expense on FHLB advances and other borrowings
increased by $423,000 or 168.5% to $674,000 during the three months ended
September 30, 2000 when compared to $251,000 for the same period in 1999. The
increase during the 2000 period was attributable to a $22.1 million or 113.5%
increase in average balances of FHLB advances and other borrowings outstanding
and a 133 basis point increase in cost of such liabilities. Interest expense on
capitalized leases was unchanged at $67,000 for the three months ended September
30, 2000 as compared with the same period in 1999.
Net interest income was unchanged at $1.87 million for the three months ended
September 30, 2000 when compared with the same period in 1999. The net interest
rate spread decreased 13 basis points to 2.13% for the three months ended
September 30, 2000. The yield on interest earning assets increased by 31 basis
points which was offset by a 44 basis point increase in the cost of interest
bearing liabilities.
During the three months ended September 30, 2000 and 1999, the Bank made
provisions for loan losses of $30,000 and $15,000, respectively. The allowance
for loan losses is based on management's evaluation of the risks inherent in the
Bank's 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.
-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 September 30, 2000
and 1999 (Cont'd.)
At September 30, 2000 and 1999, the Bank's non-performing loans which were
delinquent ninety days or more totaled $194,000 or 0.07% of total assets and
$624,000 or 0.22% of total assets, respectively; all such loans were on
non-accrual status.
Non-interest income increased by $3,700 or 3.34% to $115,500 during the three
months ended September 30, 2000 when compared to $111,800 during the same period
in 1999. The increase during the three months ended September 30, 2000 resulted
primarily from increases in fees and service charges on deposits and
miscellaneous fees of $13,000 and $13,800, respectively, partially offset by a
decrease in fees and service charges of $23,100.
Non-interest expenses increased by $81,700 or 5.8% to $1.49 million during the
three months ended September 30, 2000 when compared to the same period in 1999.
During the 2000 period salaries and employee benefits, net occupancy, equipment,
legal, advertising, loss on the sale of real estate and miscellaneous expenses
increased by $5,000, $51,500, $20,500, $5,600, $10,300, $241 and $10,400
respectively. Most of these increases are related to increased marketing
expenses and activities related to the branch expansion plan. During the same
period directors' fees and deposit insurance premiums decreased by $600 and
$21,200 respectively.
Income taxes totaled $173,000 and $195,000 for the three months ended September
30, 2000 and 1999 respectively.
Comparison of Operating Results for the Nine Months Ended September 30, 2000 and
1999
Net income decreased $52,000 or 5.3% to $928,000 for the nine months ended
September 30, 2000 compared with $980,000 for the same period in 1999. The
decrease in net income during the 2000 period resulted primarily from increases
in net-interest income offset by an increase in non-interest expense and a
decrease in non-interest income.
Interest income on loans increased by $1.4 million or 14.1% to $11.4 million
during the nine months ended September 30, 2000 from $10 million during the same
period in 1999. The increase during the 2000 period resulted from an increase of
$23.4 million in the average balances of loans outstanding and a 10 basis point
increase in the yield earned on the loan portfolio.
Interest on securities held to maturity, consisting of short-term and mid-term
government agency bonds, increased by $292,000, or 47.8%, to $903,000 during the
nine months ended September 30, 2000 from $611,000 for the same period in 1999.
The increase during the 2000 period resulted from a $6.6 million increase in
average balances of securities held to maturity partially offset by a 16 basis
points decrease in the yield earned on such securities.
Interest income on other interest-earning assets decreased by $94,000 during the
nine months ended September 30, 2000 when compared to same period in 1999. The
decrease during the 2000 period resulted from a $1.6 million decrease in the
average balance combined with a 42 basis point decrease in the yield on this
portfolio.
Interest on securities available for sale, consisting of adjustable rate
mortgage-backed securities and Collateralized Mortgage Obligations, decreased by
$336,000, or 13.00%, to $2.2 million during the nine months ended September 30,
2000 from $2.6 million for the same period in 1999. The decrease during the 2000
period resulted from an $16.4 million decrease in average balances of securities
available for sale partially offset by a 109 basis points increase in the yield
earned on such securities.
-9-
<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 Nine Months Ended September 30, 2000 and
1999 (Cont'd.)
Interest expense on deposits decreased by $328,000 or 4.4% to $7.2 million
during the nine months ended September 30, 2000 when compared to $7.5 million
for the same period in 1999. Such decrease during the 2000 period was
attributable to an $11.0 million or 5.0% decrease in average balances of
interest bearing deposits outstanding partially offset by a 3 basis point
increase in cost of funds.
Interest expense on FHLB advances and other borrowings increased by $1.1 million
or 245% to $1.6 million during the nine months ended September 30, 2000 when
compared to $469,000 for the same period in 1999. Such increase during the 2000
period was attributable to a $22.7 million or 178% increase in average balances
of FHLB advances and other borrowings outstanding coupled with a 119 basis point
increase in cost of such liabilities.
Interest expense on capitalized leases increased by $45,000, or 28.0% to
$201,000 during the nine month period ended September 30, 2000 when compared to
$157,000 for the same period in 1999. Such increase was attributable to an
$861,000 or 49.7% increase in the average balances of capitalized leases
partially offset by a 176 basis point decrease in the cost of such liabilities.
Net interest income increased $414,000 or 7.7% to $5.8 million during the nine
months ended September 30, 2000 when compared with $5.4 million for the same
period in 1999. Such increase was due to an increase in total interest income of
$1.3 million partially offset by an increase in total interest expense of
$866,000. The net interest rate spread increased 9 basis points to 2.21% for the
nine months ended September 30, 2000. The yield on interest earning assets
increased by 32 basis points which was partially offset by a 23 basis point
increase in the cost of interest bearing liabilities.
During the nine months ended September 30, 2000 and 1999, the Bank made
provisions for loan losses of $90,000 and $45,000, respectively. The allowance
for loan losses is based on management's evaluation of the risks inherent in the
Bank's 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 September 30, 2000 and 1999, the Bank's non-performing loans which were
delinquent ninety days or more totaled $194,000 or 0.07% of total assets and
$667,000 or 0.24% of total assets, respectively; all such loans were on
non-accrual status.
Non-interest income decreased by $20,000 or 6.3% to $295,000 during the nine
months ended September 30, 2000 when compared to $315,000 during the same period
in 1999. The decrease during the nine months ended September 30, 2000 resulted
from decreases in fees and service charges on loans and gain on sale of assets
of $41,000 and $16,000 respectively, partially offset by an increase in fees and
service charges on deposits and miscellaneous income of $7,000 and $29,000,
respectively.
Non-interest expenses increased by $443,000 or 10.8% to $4.5 million during the
nine months ended September 30, 2000 when compared to $4.1 million during the
same period in 1999. During the 2000 period salaries and employee benefits,
occupancy, equipment, advertising, foreclosed real estate and miscellaneous
expenses increased by $177,000, $151,000, $66,000, $70,000, $8,500 and $58,000
respectively. Most of these increases are related to increased marketing
activities and activities related to the branch expansion plans. During the same
period directors' fees, legal and deposit insurance premiums expenses decreased
by $6,000, $19,000 and $63,000 respectively.
Income taxes totaled $530,000 and $572,000 for the nine months ended September
30, 2000 and 1999 respectively.
-10-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Bank is required to maintain minimum levels of liquid assets as defined by
the Office of Thrift Supervision ("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 26.57% during
the month of September 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 September
30, 2000, the Bank had short-term outstanding advances of $10,400,000 and
securities sold under agreements to repurchase of $31,700,000 from the FHLB.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At September 30, 2000, the Bank had outstanding
commitments to originate loans of $4.6 million. Certificates of deposit
scheduled to mature in one year or less at September 30, 2000, totaled $108.8
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 September 30, 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) $27,859 20.00% $11,144 8.00% $13,930 10.00%
Tier I Capital
(to risk-weighted assets) 27,002 19.38% -- -- 8,358 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 27,002 9.31% 11,595 4.00% 14,494 5.00%
Tangible Capital
(to adjusted total assets) 27,002 9.31% 4,348 1.50% -- --
</TABLE>
-11-
<PAGE>
LIBERTY BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 OTS and the Federal Deposit Insurance Corporation ("FDIC") as part of their
regulatory oversight of the thrift industry periodically examine the Bank's
financial statements. As a result of these examinations, the regulators can
direct that the Bank make adjustments to its financial statements based on their
findings.
-12-
<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) increasing
adjustable rate home equity lending and fixed-rate home equity lending with
maturities of five years or less, (3) 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 (4) 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 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 September 30, 2000, the Bank had adjustable rate mortgage loans of $39
million, or 17.9% of total loans and $31.4 million or 76.4% 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.
-13-
<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 June 30, 2000, 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 June 30,
2000.
Percentage Change in Net Portfolio Value
-------------------------------------------------------------------
Changes
in Market Projected Estimated Amount of
Interest Rates Change NPV Change
------------------ ------------- ------------- ------------
(basis points)
300 (77.00)% 5,619 (18,987)
200 (51.00)% 12,145 (12,460)
100 (24.00)% 18,583 (6,023)
-- -- 24,605 --
(100) 21.00% 29,737 5,132
(200) 34.00% 32,849 8,244
(300) 45.00% 35,620 11,014
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.
-14-
<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 October 18, 2000 the Company declared a quarterly cash dividend of
$0.03 per share, to be paid on November 15, 2000, to stockholders of
record on November 1, 2000.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11. Computation of earnings per common share.
27. EDGAR Financial Data Schedule
(b) Reports on Form 8-K:
None
-15-
<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: November 13, 2000 By: /s/ John R. Bowen
--------------------- -------------------------------------
John R. Bowen
President and Chief Executive Officer
Date: November 13, 2000 By: /s/ Michael J. Widmer
--------------------- ------------------------------------
Michael J. Widmer
Executive Vice President and
Chief Financial Officer
-16-
