UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[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
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: 001-15933
BLUE VALLEY BAN CORP
(Exact name of registrant as specified in its charter)
Kansas 48-1070996
(State or other (I.R.S.
jurisdiction of Employer
incorporation or Identification
organization) No.)
11935 Riley
Overland Park, Kansas 66225-6128
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (913) 338-1000
Indicate by check mark 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. Yes [X] No [ ]
Number of shares of Common Stock ($1.00 par value) outstanding at the close
of business on September 30, 2000 was 2,141,720 shares.
<PAGE>
BLUE VALLEY BAN CORP
INDEX
<TABLE>
<CAPTION>
<S> <C>
Page No.
Part I. Financial Information
Item I. Financial Statements
Independent Accountants' Review Report 3
Consolidated Balance Sheets - September 30, 2000 (unaudited) and December 31, 1999 4
Consolidated Statements of Income (unaudited) - three months and nine months ended
September 30, 2000 and 1999 6
Consolidated Statements of Changes in Stockholders' Equity (unaudited) - nine months
ended September 30, 2000 and 1999 7
Consolidated Statements of Cash Flows (unaudited) - nine months ended
September 30, 2000and 1999 8
Notes to Consolidated Financial Statements (unaudited) - nine months ended
September 30, 2000 and 1999 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 16
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. FINANCIAL STATEMENTS
Independent Accountants' Review Report
Board of Directors
Blue Valley Ban Corp
Overland Park, Kansas 66225
We have reviewed the consolidated balance sheet of BLUE VALLEY BAN CORP as
of September 30, 2000 and the related consolidated statements of income for the
three-month and nine-month periods ended September 30, 2000 and the consolidated
statements of changes in stockholders' equity and cash flows for the nine-month
period ended September 30, 2000. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999 and the
related consolidated statements of income, retained earnings, and cash flows for
the year then ended (not presented herein), and in our report dated March 1,
2000 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1999 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ BAIRD, KURTZ & DOBSON
Kansas City, Missouri
November 9, 2000
3
<PAGE>
BLUE VALLEY BAN CORP
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(dollars in thousands, except share data)
ASSETS
September 30, December 31,
2000 1999
---------------- ----------------
(Unaudited)
Cash and due from banks $8,780 $15,460
Federal funds sold 26,920 8,000
---------------- ----------------
Cash and cash equivalents 35,700 23,460
Available-for-sale securities 63,086 48,646
Held-to-maturity securities 2,000
Mortgage loans held for sale 2,639 952
Loans 283,349 250,410
Less allowance for loan losses (4,355) (3,817)
---------------- ----------------
Net loans 278,994 246,593
Premises and equipment 6,158 5,574
Foreclosed assets held for sale, net 340 186
Interest receivable 2,691 2,039
Deferred income taxes 1,533 1,841
Prepaid expenses and other assets 1,704 840
Federal Home Loan Bank stock and other 1,465 1,034
securities
Excess of cost over fair value of net 1,334 1,448
assets acquired, at amortized cost
---------------- ----------------
Total Assets $397,644 $332,613
================ ================
See Accompanying Notes to Consolidated Financial Statements
and Independent Accountant's Review Report.
4
<PAGE>
BLUE VALLEY BAN CORP
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(dollars in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2000 1999
---------------- ----------------
(Unaudited)
LIABILITIES
Demand deposits $40,289 $36,950
Savings, NOW and money market deposits 143,646 126,398
Time deposits 137,733 104,797
---------------- ----------------
Total Deposits 321,668 268,145
Securities sold under agreements to
repurchase 14,206 11,260
Short-term debt 10,000 17,450
Long-term debt 11,804 11,908
Guaranteed preferred beneficial interest in
Company's subordinated debt 11,500
Advances from borrowers for taxes and
insurance 3,317 2,559
Accrued interest and other liabilities 3,174 2,422
---------------- ----------------
Total Liabilities 375,669 313,744
---------------- ----------------
STOCKHOLDERS' EQUITY
Capital stock
Common stock, pare value $1 per share;
Authorized 15,000,000 shares; issued
and outstanding 2000 - 2,141,720
shares; 1999 - 2,137,720 2,142 2,138
Additional paid-in capital 5,277 5,230
Retained earnings 15,051 12,458
Accumulated other comprehensive income
Unrealized depreciation on
available-for-sale securities, net of
income taxes of $(331) in 2000 and
$(638) in 1999 (495) (957)
---------------- ----------------
Total Stockholders' Equity 21,975 18,869
---------------- ----------------
Total Liabilities and Stockholders'
Equity $397,644 $332,613
================ ================
See Accompanying Notes to Consolidated Financial Statements
and Independent Accountant's Review Report.
5
<PAGE>
BLUE VALLEY BAN CORP
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(dollars in thousands, except share data)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
--------- --------- --------- ---------
(Unaudited)(Unaudited) (Unaudited)(Unaudited)
INTEREST INCOME
Interest and fees on loans $6,813 $5,141 $19,537 $14,174
Federal funds sold 390 57 443 361
Available-for-sale securities 905 676 2,472 2,021
--------- --------- --------- ---------
Total Interest Income 8,108 5,874 22,452 16,556
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits 3,852 2,473 10,004 7,045
Securities sold under repurchase
agreements 120 71 297 199
Long-term debt and advances 644 295 1,500 783
--------- --------- --------- ---------
Total Interest Expense 4,616 2,839 11,801 8,027
--------- --------- --------- ---------
NET INTEREST INCOME 3,492 3,035 10,651 8,529
PROVISION FOR LOAN LOSSES 495 369 1,440 1,175
--------- --------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,997 2,666 9,211 7,354
NONINTEREST INCOME
Service fees 758 696 2,052 1,980
Other income 59 39 219 144
--------- --------- --------- ---------
Total Noninterest Income 817 735 2,271 2,124
--------- --------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 1,466 1,155 4,299 3,279
Net occupancy expense 291 237 824 648
Other operating expense 832 714 2,459 2,129
--------- --------- --------- ---------
Total Noninterest Expense 2,589 2,106 7,582 6,056
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 1,225 1,295 3,900 3,422
PROVISION FOR INCOME TAXES 411 433 1,307 1,128
--------- --------- --------- ---------
NET INCOME $814 $862 $2,593 $2,294
========= ========= ========= =========
BASIC EARNINGS PER SHARE $0.38 $0.40 $1.21 $1.08
========= ========= ========= =========
DILUTED EARNINGS PER SHARE $0.37 $0.40 $1.19 $1.07
========= ========= ========= =========
See Accompanying Notes to Consolidated Financial Statements
and Independent Accountant's Review Report.
6
<PAGE>
<TABLE>
<CAPTION>
BLUE VALLEY BAN CORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(dollars in thousands, except share data)
Accumulated
Other
Comprehensive
Income
Unrealized
Additional Depreciation on
Comprehensive Common Paid-In Retained Available-for-Sale
Income Stock Capital Earnings Securities, Net Total
---- ----- ------- -------- ------------------ -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 $2,130 $5,159 $9,375 $352 $17,016
Issuance of 1324 shares of common
stock 2 4 6
Net income $2,294 2,294 2,294
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $(593) (893) (893) (893)
----------- ------------ -------------- ----------- --------------- ------------
BALANCE, SEPTEMBER 30, 1999 $1,401 $2,132 $5,163 $11,669 $(541) $18,423
----------- ------------ -------------- ----------- --------------- ------------
Issuance of 6,000 shares of common
stock 6 67 73
Net income $789 789 789
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $(277) (416) (416) (416)
----------- ------------ -------------- ----------- --------------- ------------
BALANCE, DECEMBER 31, 1999 $1,774 $2,138 $5,230 $12,458 $(957) $18,869
----------- ------------ -------------- ----------- --------------- ------------
Issuance of 4,000 shares of common
stock 4 47 51
Net income $2,593 2,593 2,593
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $307 462 462 462
----------- ------------ -------------- ----------- --------------- ------------
BALANCE, SEPTEMBER 30, 2000 $3,055 $2,142 $5,277 $15,051 $(495) $21,975
=========== ============ ============== =========== =============== ============
September 30, December 31, 1999 September 30,
------------- ----------------- -------------
2000 1999
---- ----
<S> <C> <C> <C>
RECLASSIFICATION DISCLOSURE:
Unrealized depreciation on available-for-sale securities, net of income taxes of
$307, $(277), and $(592) for the periods ended September 30, 2000,
December 31, 1999, and September 30, 1999, respectively $462 $(416) $(891)
Less: reclassification adjustments for appreciation
(depreciation) included in net income, net of income taxes of $1 for the
period ended September 30, 1999 (2)
----------- --------------- ------------
Change in unrealized depreciation on available-for-sale securities, net of
income taxes of $307, $(277), and $(593) for the periods ended September 30,
2000, December 31, 1999, and September 30, 1999, respectively $462 $(416) $(893)
=========== =============== ============
See Accompanying Notes to Consolidated Financial Statements
and Independent Accountant's Review Report.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
BLUE VALLEY BAN CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(dollars in thousands, except share data)
September 30, 2000 September 30, 1999
------------------------ -----------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $2,593 $2,294
Items not requiring (providing) cash:
Depreciation and amortization 464 384
Amortization of premiums and discounts on securities 60 27
Provision for loan losses 1,440 1,175
Gain on sales of available-for-sale securities (3)
Changes in:
Accrued interest receivable (652) (340)
Mortgage loans held for sale (1,687) (54)
Prepaid expenses and other assets 18 75
Accrued interest payable and other liabilities 752 411
------------------------ -----------------------
Net cash provided by operating activities 2,988 3,969
------------------------ -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans (35,084) (63,248)
Proceeds from sales of loan participations 658 1,741
Purchase of premises and equipment (931) (355)
Proceeds from the sale of foreclosed assets 431 134
Purchases of held-to-maturity securities (2,000)
Proceeds from sales of available-for-sale securities 2,003
Proceeds from maturities of available-for-sale securities 3,205 8,000
Purchases of available-for-sale securities (16,935) (5,350)
Purchases of Federal Home Loan Bank Stock and other securities (431) (399)
------------------------ -----------------------
Net cash used in investing activities (51,087) (57,075)
------------------------ -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, money market, NOW and savings
accounts 20,587 37,821
Net increase (decrease) in certificates of deposit 32,936 (9,944)
Repayments of long-term debt (104) (97)
Net proceeds from guaranteed preferred beneficial
interest in Company's subordinated debt 11,500
Net proceeds (payments) on short-term debt (7,450) 6,063
Proceeds from sale of common stock 51 6
Net increase in other borrowings 2,946 244
Net increase in advances from borrowers for taxes and
insurance 758 2,302
------------------------ -----------------------
Net cash provided by financing activities 61,224 36,395
------------------------ -----------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,240 (16,711)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 23,460 28,999
------------------------ -----------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $35,700 $12,288
======================== =======================
See Accompanying Notes to Consolidated Financial Statements
and Independent Accountant's Review Report.
</TABLE>
8
<PAGE>
BLUE VALLEY BAN CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
Company's consolidated financial position as of September 30, 2000 and December
31, 1999, and the consolidated results of its operations, changes in
stockholders' equity and cash flows for the periods ended September 30, 2000 and
1999, and are of a normal recurring nature.
Certain information and note disclosures normally included in the
company's annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form S-1 Registration
Statement filed with the Securities and Exchange Commission.
The results of operations for the period are not necessarily indicative of
the results to be expected for the full year.
The report of Baird, Kurtz & Dobson commenting upon their review
accompanies the consolidated financial statements included in Item 1 of Part I.
NOTE 2: EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted average number
of shares outstanding during each year. Diluted earnings per share is computed
using the weighted average common shares and all potential dilutive common
shares outstanding during the period.
The computation of per share earnings for the nine months ended September
30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
----------------------- -----------------------
(Unaudited) (Unaudited)
(dollars in thousands, except
share and per share data)
<S> <C> <C>
Net income $ 2,593 $ 2,294
----------------------- -----------------------
Average common shares outstanding 2,141,457 2,131,206
Average common share stock options outstanding 34,372 17,808
----------------------- -----------------------
Average diluted common shares 2,175,829 2,149,014
----------------------- -----------------------
Basic earnings per share $ 1.21 $ 1.08
======================= =======================
Diluted earnings per share $ 1.19 $ 1.07
======================= =======================
</TABLE>
9
<PAGE>
NOTE 3: LONG-TERM DEBT
Long-term debt at September 30, 2000 and December 31, 1999, consisted
of the following components:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
-------------------------- -----------------------
(Unaudited)
(in thousands)
<S> <C> <C>
Note Payable - other (A) $ 1,804 $ 1,908
Federal Home Loan Bank advances (B) 10,000 10,000
-------------------------- -----------------------
Total long-term debt $ 11,804 $ 11,908
========================== =======================
</TABLE>
[FN]
(A) Due in August 2009, payable in monthly installments of $23,175, plus
interest at 7.5%; collateralized by land, building and assignment of
future rents.
(B) Due in 2008; collateralized by various assets including mortgage-backed
loans and securities, and U.S. Treasury and Agency securities. The
interest rates on the advances range from 4.63% to 5.682%.
</FN>
Aggregate annual maturities of long-term debt at September 30, 2000 are as
follows:
(in thousands)
-----------------------
October 1 to December 31, 2000 $ 36
2001 151
2002 162
2003 175
2004 188
2005 203
Thereafter 10,889
------------------------
$ 11,804
========================
On July 21, 2000, BVBC Capital Trust I (the "Trust"), a Delaware
business trust formed by the Company, completed the sale of $11,500,000 of
10.375% trust preferred securities. The Trust also issued $355,672 of common
securities to the Company and used the net proceeds from the offering to
purchase $11,855,672 in principal amount of 10.375% junior subordinated
debentures of the Company due September 30, 2030. The junior subordinated
debentures are the sole assets of the Trust and will be eliminated, along with
the related income statement effects, in the Company's future consolidated
financial statements. The trust preferred securities are mandatorily redeemable
upon the maturity of the junior subordinated debentures or upon earlier
redemption as provided in the indenture. The Company has the right to redeem the
junior subordinated debentures, in whole or in part, on or after September 30,
2005, at a redemption price specified in the indenture plus any accrued but
unpaid interest to the redemption date.
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of those safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, can
generally be identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company is
unable to predict the actual results of its future plans or strategies with
certainty. Factors which could have a material adverse effect on the operations
and future prospects of the Company include, but are not limited to,
fluctuations in market rates of interest and loan and deposit pricing; a
deterioration of general economic conditions or the demand for housing in the
Company's market areas; legislative or regulatory changes; adverse developments
in the Company's loan or investment portfolio; any inability to obtain funding
on favorable terms; the loss of key personnel; significant increases in
competition; and the possible dilutive effect of potential acquisitions or
expansions. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements.
GENERAL
Results of Operations
Three months ended September 30, 2000 and 1999. Net income for the quarter
ended September 30, 2000, was $814,000, as compared to net income of $862,000
for the quarter ended September 30, 1999. This represents a $48,000, or
5.57%, decrease in the 2000 earnings over 1999. Diluted earnings per share
decreased 7.50% to $0.37 in the third quarter of 2000 from $0.40 in the same
period of 1999. The Company's annualized return on average assets and
average stockholders' equity for the three-month period ended September 30,
2000 were 0.85% and 15.28%, compared to 1.18% and 19.19%, respectively, for
the same period in 1999. Although we recorded increases in net interest
income and non-interest income for the three months ended September 30, 2000,
as compared to the prior year third quarter, these increases were offset by
the increase in non-interest expense in the current year third quarter
resulting from additional staff hired to facilitate our growth.
Net interest income for the three-month period ended September 30, 2000
increased to $3.5 million from $3.0 million in the prior year third quarter,
a $500,000, or 15.06%, increase. This increase was primarily the result of a
$87.8 million increase in average interest-earning assets, which more than
offset a $83.7 million increase in average interest-bearing liabilities. The
net interest margin decreased to 3.94% from 4.53%, resulting in a decrease in
net interest income of $250,000; however, the growth in volume generated
$750,000, resulting in the net increase in net interest income of $500,000.
Interest income for the current year third quarter was $8.1 million, an
increase of $2.2 million, or 38.03%, from $5.9 million in the prior year
third quarter, primarily as a result of growth in interest-earning assets.
Yields on interest-earning assets increased to 9.07% in the third quarter of
2000, as compared to 8.69% in the prior year third quarter, an increase of 38
basis points. Loan interest and fee income increased to $6.8 million from
$5.1 million because of greater volume of loans outstanding. The growth in
loans was primarily funded through growth in core deposits.
Interest expense for the current year third quarter was $4.6 million,
an increase of $1.8 million, or 62.59%, from $2.8 million in the prior year
third quarter. The increase is attributable to a $63.8 million, or 31.11%,
increase in our average interest-bearing deposits as well as a $20.0 million,
or 68.57%, increase in other interest-bearing liabilities and junior
subordinated debentures. Interest expense on long-term debt and advances for
the current year third quarter increased 118.31% over the prior year third
quarter. Overall, rates paid on average interest-bearing liabilities
increased to 5.78% in the current year period from 4.81% in the prior year
period, an increase of 97 basis points.
Nine months ended September 30, 2000 and 1999. Net income for the
nine-month period ended September 30, 2000, was $2.6 million, compared to net
income of $2.3 million for the nine-month period ended September 30, 1999.
This represents a 13.03% increase in the 2000 earnings over 1999. Diluted
earnings per share increased 11.21% to $1.19 in the third quarter of 2000
from $1.07 in the same period of 1999. The Company's annualized return on
average assets and average stockholders' equity for the nine-month period
ended September 30, 2000 were 0.99% and 17.28%, compared to 1.12% and 17.48%,
respectively, for the same period in 1999.
Net interest income for the nine-month period ended September 30, 2000
increased to $10.7 million from $8.5 million in the prior year nine-month
period, a $2.1 million, or 24.88%, increase. This increase was primarily the
result of a $72.6 million, or 28.45%, increase in average interest-earning
assets. Our net interest margin decreased to 4.42% during the current year
nine-month period, from 4.56% during the prior year nine-month period. One of
the major contributors to the decline in our net interest margin year-to-date
was an increase of $700,000 in interest expense on long-term debt and
advances, which includes interest expense on the junior subordinated
debentures.
11
<PAGE>
Interest income for the current year nine month period was $22.5 million,
an increase of $5.9 million, or 35.61%, from $16.6 million in the prior year
nine month period, primarily as a result of growth in interest-earning assets.
The yield on average interest-earning assets increased to 9.23% in 2000 from
8.77% in 1999, an increase of 46 basis points. This increase in yield combined
with the increase in interest-earning assets of $72.6 million, resulted in the
$5.9 million increase in interest income in the current year period, as compared
to the prior year period.
Interest expense for the nine-month period ended September 30, 2000 was
$11.8 million, up $3.8 million, or 47.02%, from $8.0 million for the nine month
period ended September 30, 1999. We attribute the increase to growth in our
deposit base, as well as increases in other funding sources such as the junior
subordinated debentures issued in July 2000. Overall, rates paid on average
interest-bearing liabilities increased to 5.44% in the current year period from
4.93% in the prior year period, an increase of 51 basis points.
Provision for Loan Losses
The provision for loan losses for the third quarter of 2000 was $495,000,
compared to $369,000 for the same period of 1999, resulting in a $126,000, or
34.15%, decrease. For the nine months ended September 30, 2000 and 1999, the
provision was $1.4 million and $1.2 million, respectively, resulting in a 22.55%
increase. We make provisions for loan losses in amounts management deems
necessary to maintain the allowance for loan losses at an appropriate level.
Non-interest Income
Non-interest income increased to $817,000, or 11.16%, during the three
months ended September 30, 2000, from $735,000 during the prior year third
quarter. This increase is primarily attributable to an increase in other service
charge income of $161,000 and an increase in non-sufficient funds charges of
$38,000. Other service charge income includes lease referral fees which
generated an additional $80,000 over the prior year quarter, investment
brokerage services which generated an additional $26,000 over the prior year
quarter, and commercial mortgage services which generated an additional $27,000
over the prior year quarter. The increase in other service charge income and
non-sufficient funds charges for the three months ended September 30, 2000 was
offset by a decrease in mortgage loans held for sale fee income of $137,000. For
the nine months ended September 30, 2000, non-interest income was $2.3 million,
a 6.92% increase from the $2.1 million reported for the same period in 1999.
Non-interest Expense
Non-interest expense increased to $2.6 million, or 22.93%, during the
three months ended September 30, 2000, from $2.1 million in the prior year
period. Year-to-date non-interest expense increased to $7.6 million, or 25.20%,
during the nine months ended September 30, 2000, from $6.1 million in the prior
year period. This increase is primarily attributable to an increase in salaries
and employee benefits expense. Our salaries and employee benefits expense
increased to $1.5 million and $4.3 million during the three month and nine month
ended periods in 2000, from $1.2 million and $3.3 million during the three month
and nine month ended periods in 1999, as we hired additional staff to facilitate
our growth. We had 120 full-time employees at September 30, 2000 as compared to
102 at September 30, 1999.
FINANCIAL CONDITION
Total assets for the Company at September 30, 2000, were $397.6 million,
an increase of $65.0 million, or 19.55%, compared to December 31, 1999. Deposits
and stockholders' equity at September 30, 2000, were $321.7 million and $22.0
million, respectively, compared with $268.1 million and $18.9 million,
respectively, at December 31, 1999, increases of $53.5 million, or 19.96%, and
$3.1 million, or 16.46%, respectively.
Loans at September 30, 2000 totaled $283.3 million, an increase of $32.9
million, or 13.15%, compared to December 31, 1999. The loan to deposit ratio at
September 30, 2000 was 88.09% compared to 93.44% at September 30, 1999.
Significant deposit growth and our trust preferred securities offering,
completed in July 2000, have provided the funding necessary to facilitate our
growth.
Non-performing assets consist primarily of loans past due 90 days or more
and nonaccrual loans and foreclosed real estate. The following table sets forth
our non-performing assets as of the dates indicated:
12
<PAGE>
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS
As of As of As of
and for the and for the and for the
nine months ended nine months ended year ended
September 30, September 30, December 31,
2000 1999 1999
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Real estate loans:
Past due 90 days or more $- $119 $-
Nonaccrual 394 338 -
Installment loans:
Past due 90 days or more - 79 -
Nonaccrual 59 75 87
Credit cards and related plans:
Past due 90 days or more - - -
Nonaccrual - - -
Commercial (time and demand) and all other loans:
Past due 90 days or more 649 9 50
Nonaccrual 633 402 375
Lease financing receivables:
Past due 90 days or more - - -
Nonaccrual 180 96 25
Debt securities and other assets (exclude other real estate owned and other
repossessed assets):
Past due 90 days or more - - -
Nonaccrual -
- -
Total non-performing loans 1,915 1,118 537
----------- ---------------- -------------
Foreclosed assets held for sale 340 174 186
----------- ---------------- -------------
Total non-performing assets $2,255 $1,292 $723
=========== ================ =============
Total nonperforming loans to total loans 0.68% 0.50% 0.21%
Total nonperforming loans to total assets 0.48% 0.38% 0.16%
Allowance for loan losses to nonperforming loans 227.42% 261.72% 710.80%
Nonperforming assets to loans and foreclosed assets held for sale 0.79% 0.58% 0.29%
</TABLE>
As of September 30, 2000, non-performing loans equaled 0.68% of total
loans. The non-performing loan ratios were above historical averages due in part
to three larger credit relationships, which are being closely monitored. Our
philosophy has been to value non-performing loans at their estimated collectible
value and to aggressively manage these situations. Generally, the Bank maintains
its allowance for loan losses in excess of its non-performing loans. As of
September 30, 2000, our ratio of allowance for loan losses to non-performing
loans was 227.42%.
13
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
AND RELATED INFORMATION
As of and for As of and for
the the As of and for
nine months nine months the
ended ended year ended
September 30, September 30, December 31,
2000 1999 1999
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Balance at beginning of period $ 3,817 $ 2,341 $ 2,341
Loans charged-off:
Commercial real estate
Residential real estate
Commercial 343 539 567
Personal 140 22 47
Home Equity
Construction
Leases 534 122 158
---------------- ---------------- -----------------
Total loans charged-off 1,017 683 772
Recoveries:
Commercial real estate
Residential real estate
Commercial 51 88 90
Personal 26 1 2
Home Equity
Construction
Leases 38 4 12
---------------- ---------------- -----------------
Total recoveries 115 93 104
---------------- ---------------- -----------------
Net loans charged-off 902 590 668
Provision for loan losses 1,440 1,175 2,144
---------------- ---------------- -----------------
Balance at end of period $ 4,355 $ 2,926 $ 3,817
================ ================ =================
Loans outstanding:
Average 263,104 195,527 206,310
End of period 283,349 222,099 250,410
Ratio of allowance for loan losses
to loans outstanding:
Average 1.66% 1.50% 1.85%
End of period 1.54% 1.32% 1.52%
Ratio of net charge-offs to:
Average loans 0.46% 0.40% 0.32%
End of period loans 0.43% 0.36% 0.27%
</TABLE>
The allowance for loan losses as a percent of total loans was 1.54% as of
September 30, 2000, compared to 1.52% at December 31, 1999. As of September 30,
2000, net charge-offs equaled 0.46% of average total loans. This ratio is
slightly above historical averages due in part to rising fuel prices, which have
contributed to defaults in the Bank's portfolio of over-the-road truck and
trailer leases. The over-the-road truck and trailer lease portfolio was $3.7
million, or 1.32%, of the $283.3 million loan portfolio as of September 30,
2000.
Liquidity is measured by a financial institution's ability to raise funds
through deposits, borrowed funds, capital, or the sale of marketable assets,
such as residential mortgage loans or a portfolio of SBA loans. Other sources of
liquidity, including cash flow from the repayment of loans, are also considered
in determining whether liquidity is satisfactory. Liquidity is also achieved
through growth of core deposits and liquid assets, and accessibility to the
money and capital markets. The funds are used to meet deposit withdrawals,
maintain reserve requirements, fund loans and operate the organization. Core
deposits, defined as demand deposits, interest-bearing transaction accounts,
savings deposits and certificates of deposit less that $100,000, were 68.69% of
our total assets at September 30, 2000, and 70.11% of total assets at December
31, 1999. Internal guidelines have been established to measure liquid assets as
well as relevant ratios concerning asset levels and purchased funds. These
indicators are reported to the board of directors monthly, and at September 30,
2000, the Bank was within the established guidelines.
At September 30, 2000, our total stockholders' equity was $22.0 million
and our equity to asset ratio was 5.53%. At September 30, 2000, our Tier 1
capital ratio was 9.29% compared to 6.82% at September 30, 1999, while our total
risk-based capital ratio was 10.54% compared to 8.07% at September 30, 1999.
Both exceed the capital minimums established in the risk-based capital
requirements.
14
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a continued part of our financial strategy, we attempt to manage the
impact of fluctuations in market interest rates on our net interest income. This
effort entails providing a reasonable balance between interest rate risk, credit
risk, liquidity risk and maintenance of yield. Our funds management policy is
established by our Board of Directors and monitored by our Risk Management
Committee. Our funds management policy sets standards within which we are
expected to operate. These standards include guidelines for exposure to interest
rate fluctuations, liquidity, loan limits as a percentage of funding sources,
exposure to correspondent banks and brokers, and reliance on non-core deposits.
Our funds management policy also establishes the reporting requirements to the
Board of Directors. Our investment policy complements our asset/liability policy
by establishing criteria by which we may purchase securities. These criteria
include approved types of securities, brokerage sources, terms of investment,
quality standards, and diversification.
We use an asset/liability modeling service to analyze the Bank of Blue
Valley's current sensitivity to changes in interest rates. The system simulates
the Bank's asset and liability base and projects future net interest income
results under several interest rate assumptions. We strive to maintain a
position such that changes in interest rates will not affect net interest income
by more than 10%, per 100 basis points, in any twelve-month period.
The following table indicates that, at September 30, 2000, in the event of
a sudden and sustained increase in prevailing market rates, our net interest
income would be expected to increase, while a decrease in rates would indicate a
decrease in income.
<TABLE>
<CAPTION>
Net Interest Percent
Changes in Interest Rates Income Actual Change Actual Change
------------------------- ------ ------------- -------------
<S> <C> <C> <C>
300 basis point rise $ 18,553 $ 2,162 13.19%
200 basis point rise 17,828 1,437 8.77%
100 basis point rise 17,107 716 4.37%
Base Rate Scenario 16,391 - -
100 basis point decline 15,291 (1,100) (6.71%)
200 basis point decline 14,210 (2,181) (13.30%)
300 basis point decline 13,356 (3,035) (18.51%)
</TABLE>
The asset/liability modeling service is also used to analyze the net
economic value of equity at risk under instantaneous shifts in interest rates.
By looking at the present value of all future cash flows on or off the balance
sheet, the economic value of equity modeling takes a longer term view of
interest rate risk. We strive to maintain a position that changes in interest
rates will not affect the economic value of equity by more than 10%, per 100
basis points.
The following table indicates that, at September 30, 2000, in the event of
a sudden increase in prevailing market rates, the economic value of our equity
would decrease, while a decrease in rates would indicate an increase in the
economic value of equity.
Changes in Interest Rates Equity Actual Change Actual Change
------------------------- ------ ------------- -------------
300 basis point rise $ 27,623 ($2,999) (9.79%)
200 basis point rise 28,506 (2,116) (6.91%)
100 basis point rise 29,504 (1,118) (3.65%)
Base Rate Scenario 30,622 - -
100 basis point decline 31,370 748 2.44%
200 basis point decline 31,352 730 2.38%
300 basis point decline 31,069 1.46%
15
<PAGE>
Part II: Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
On July 18, 2000, the Registration Statement on Form S-1 (File Nos. 333-34328
and 333-34328-01) filed by the Company and the Trust was declared effective by
the Securities and Exchange Commission. The offering of the 1,437,500 10.375%
trust preferred securities that was the subject of the Registration Statement
commenced on July 21, 2000. The offering was made through an underwriting
syndicate managed by Stifel, Nicolaus & Company, Incorporated. The public
offering price was $8.00 per trust preferred security, and the Company received
aggregate net proceeds of approximately $10.6 million, after deducting
underwriting commissions and estimated offering expenses of approximately
$900,000. Of these net proceeds, $7.1 million were used to retire outstanding
indebtedness under our bank stock loan and $2.0 million were contributed to the
Bank in the form of additional capital. The remainder of the proceeds have been
retained by the Company for general corporate purposes, including additional
investments from time to time in the Bank in the form of additional capital and
possible future acquisitions.
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
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(A) EXHIBITS
11. Computation of Earnings Per Share. Please see p. 7.
15. Letter regarding Unaudited Interim Financial Information
23. Consent of Baird, Kurtz & Dobson
27. Financial Data Schedule
(B) REPORTS ON FORM 8-K
Blue Valley filed no reports on Form 8-K during the quarter ended September
30, 2000.
16
<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.
Blue Valley Ban Corp
Date: November 10, 2000 By: /s/ Robert D. Regnier
Robert D. Regnier,
President and
Chief Executive Officer
Date: November 10, 2000 By: /s/ Mark A. Fortino
Mark A. Fortino, Treasurer
17
