SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for Quarterly period ended
March 31, 1996 or
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from __________ to __________.
No. 0-24114
(Commission File Number)
BCB FINANCIAL SERVICES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 232444807
(State of Incorporation) (IRS Employer ID Number)
400 WASHINGTON STREET, READING, PA 19603
(Address of Principal Executive Offices) (Zip Code)
(610) 376-5933
(Registrant's Telephone Number)
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 Outstanding as of April 25, 1996
COMMON STOCK ($2.50 Par Value) 1,724,420
(Title of Class) (Outstanding Shares)
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
FORM 10-QSB
For the Quarter Ended March 31, 1996
Contents
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
as of March 31, 1996 and December 31,
1995 1
Consolidated Statements of Income (Unaudited)
for the Three-Month Period Ended March 31,
1996 and 1995 2
Consolidated Statement of Stockholders'
Equity (Unaudited) for the Three-Month
Period Ended March 31, 1996 3
Consolidated Statements of Cash Flows
(Unaudited) for the Three-Month Period
Ended March 31, 1996 and 1995 4&5
Notes to Consolidated Financial Statements
(Unaudited) 6&7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
ASSETS March 31,
December 31,
1996
1995
- -----------------------------
<S> <C>
<C>
Cash and due from banks $ 8,977,384
$ 7,656,846
Interest-bearing deposits with banks 19,535,765
10,043,324
Federal funds sold 2,490,000
3,045,000
Securities available for sale 26,891,170
20,359,157
Securities held to maturity, fair value
March 31, 1996 $15,968,291;
December 31, 1995 $9,366,552 16,021,077
9,207,069
Loans receivable, net of allowance for
loan losses March 31, 1996 $1,777,484;
December 31, 1995 $1,674,057 152,883,381
146,290,946
Mortgages held for sale 432,694
452,900
Due from mortgage investors 1,969,588
3,204,383
Bank premises and equipment, net 3,418,458
3,494,618
Accrued interest receivable 1,373,070
1,226,026
Other real estate owned 1,334,032
1,315,532
Prepaid expenses and other assets 244,874
168,752
Deferred income taxes 474,641
208,712
------------
- ------------
TOTAL ASSETS $236,046,134
$206,673,265
============
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 20,084,304
$ 18,421,557
Demand, interest bearing 61,434,115
48,024,548
Savings 9,846,378
9,418,076
Time, $100,000 and over 10,628,105
8,377,643
Time, other 101,112,635
95,696,046
------------
- ------------
TOTAL DEPOSITS 203,105,537
179,937,870
Accrues interest payable 805,769
844,459
Other liabilities 7,852,518
1,466,396
Federal Home Loan Bank borrowings 6,000,000
6,000,000
------------
- ------------
TOTAL LIABILITIES 217,763,824
188,248,725
------------
- ------------
Redeemable common stock, issued and out-
standing March 31, 1996 294 shares;
December 31, 1995 12,539 shares 3,827
129,969
------------
- ------------
Stockholders' equity:
Common stock, par value $2.50 per share;
authorized 3,000,000 shares; issued
and outstanding March 31, 1996
1,724,126 shares; December 31, 1995
1,710,389 shares 4,310,315
4,275,973
Surplus 10,733,602
10,628,354
Retained earnings 3,485,263
3,233,574
Net unrealized appreciation (depreciation)
on securities available for sale, net of
taxes (250,697)
156,670
------------
- ------------
TOTAL STOCKHOLDERS' EQUITY 18,278,483
18,294,571
------------
- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $236,046,134
$206,673,265
============
============
</TABLE>
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended
- -----------------------------
March 31,
March 31,
1996
1995
- -----------------------------
<S> <C>
<C>
Interest Income:
Loan Receivable, including fees $3,129,207
$2,588,370
Interest and dividends on investment
securities:
U.S. Treasury 69,882
100,206
U.S. Government agencies and
corporations 147,312
68,921
State and political subdivisions,
tax exempt 204,944
57,220
Dividends 14,416
18,945
Interest-bearing deposits with banks 209,174
43,347
Interest on federal funds sold 63,097
11,942
- ---------------------------
Total interest income 3,838,032
2,888,951
- ---------------------------
Interest expense:
Interest on deposits 2,060,104
1,305,516
Interest on borrowed funds 71,599
167,865
- ---------------------------
Total interest expense 2,131,703
1,473,381
- ---------------------------
Net interest income 1,706,329
1,415,570
Provision for loan losses 80,000
100,000
- ---------------------------
Net interest income after
provision for loan losses 1,626,329
1,315,570
- ---------------------------
Other income:
Customer service fees 142,382
98,253
Mortgage banking activities 114,641
74,685
Net realized loss on sale of securities (682)
---
Other 7,355
2,545
- ---------------------------
Total other income 263,696
175,483
- ---------------------------
Other expenses:
Salaries and wages 498,054
439,764
Employee benefits 124,322
113,034
Occupancy 138,720
93,354
Equipment depreciation and maintenance 107,173
92,000
Other operating expenses 571,090
492,469
- ---------------------------
Total other expenses 1,439,359
1,230,621
- ---------------------------
Income before income taxes 450,666
260,432
Federal income taxes 95,509
86,006
- ---------------------------
Net Income $ 355,157
$ 174,426
===========================
Earnings per common and common equivalent
share $0.20
$0.10
- ---------------------------
Weighted average common and common
equivalent shares outstanding 1,737,765
1,724,702
- ---------------------------
</TABLE>
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the Three Months Ended March 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Net unrealized
Appreciation
(Depreciation)
on Securities
Common
Retained Available for
Stock Surplus
Earnings Sale Total
- -----------------------------------------------------------------
- -
<S> <C> <C>
<C>
Balance, December 31, 1995 $4,275,973
$10,628,354 $3,233,574 $156,670 $18,294,571
Issuance of common stock upon
exercise of stock options 3,730
10,682 --- --- 14,412
Net change in unrealized depreciation
on securities available for sale,
net of taxes ---
- --- --- (407,367) (407,367)
Transfer 12,245 shares of redeemable
common stock upon expiration of
statute of limitations 30,612
95,531 --- --- 126,143
Cash dividends ---
- --- (103,468) --- (103,468)
Payment of discount on DRIP ---
(965) --- --- (965)
Net income ---
- --- 355,157 --- 355,157
- -----------------------------------------------------------------
- -
Balance, March 31, 1996 $4,310,315
$10,733,602 $3,485,263 ($250,697) $18,278,483
=================================================================
=
</TABLE>
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended
- -----------------------------
March 31,
March 31,
1996
1995
- -----------------------------
<S> <C>
<C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 355,157
$ 174,426
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan and other real estate
losses 92,613
100,000
Provision for depreciation 91,992
72,569
Loss on sale of bank equipment ---
22,415
Net realized loss on sale of securities 682
---
Net loss on sale of loans 19,222
---
Net amortization of security premiums
and discounts (15,931)
(8,438)
Change in assets and liabilities:
(Increase) decrease in:
Due from mortgage investors 1,234,795
182,750
Accrued interest receivable (147,044)
(46,178)
Prepaid expenses and other assets (76,122)
(179,691)
Deferred income taxes (56,074)
5,867
Increase (decrease) in:
Accrued interest payable (38,690)
131,549
Other liabilities 6,368,800
443,093
- ----------------------------
Net cash provided by operating
activities 7,829,400
898,362
- ----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of and principal
repayments on available for sale securities 66,137
117,305
Proceeds for sales of securities available
for sale 2,882,065
---
Proceeds from maturities of held to
maturity securities 665,000
400,000
Purchases of available for sale securities (10,091,713)
(1,131,798)
Purchases of held to maturity securities (7,469,483)
(1,067,509)
(Increase) in interest-bearing deposits
with banks (9,492,441)
(766,908)
Federal funds sold, net 555,000
---
Loans made to customers, net of principal
collected (6,702,564)
(1,527,270)
Purchases of bank premises and equipment (15,832)
(955,877)
- ----------------------------
Net cash used in investing
activities (29,603,831)
(4,932,057)
- ----------------------------
</TABLE>
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
(Unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended
- -----------------------------
March 31,
March 31,
1996
1995
- -----------------------------
<S> <C>
<C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $23,167,667
$ 5,969,318
Proceeds from exercise of stock options 14,413
2,177
Payment of 5% discount - DRIP (965)
---
Cash dividends (86,146)
(81,954)
- ----------------------------
Net cash provided by financing activities 23,094,969
5,889,541
- ----------------------------
Increase in cash and due from banks 1,320,538
1,855,846
Cash and due from banks:
Beginning 7,656,846
5,318,720
- ----------------------------
Ending $ 8,977,384
$ 7,174,566
============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash payments for:
Interest $ 2,170,393
$ 1,341,832
============================
Income taxes $ 15,000
$ 20,000
============================
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Other real estate acquired in settlement
of loans $ 31,113
$ 864,365
============================
</TABLE>
<PAGE>
BCB FINANCIAL SERVICES CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERKS COUNTY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
NOTE A. BASIS OF PRESENTATION
The financial statements include the accounts of the
BCB Financial Services Corporation and its wholly-owned
subsidiary, Berks County Bank. All significant
intercompany accounts and transactions have been
eliminated. The accompanying unaudited consolidated
financial statements have been prepared in accordance
with generally accepted accounting principles for
interim financial information. Accordingly, they do
not include all of the information and footnotes
required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments considered necessary for
fair presentation have been included. Operating
results of the three-month period ended March 31, 1996
are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996.
NOTE B. LONG-LIVED ASSETS
In 1995, the Financial Accounting Standards Board
(FASB) issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" which establishes accounting
and measurement standards for the impairment of
long-lived assets such as property and equipment,
certain identifiable intangibles and goodwill related
to those assets. The Bank adopted the Statement
effective January 1, 1996 and the effect of its
implementation did not have a material impact on the
Bank's financial position or results of operation
during the quarter ended March 31, 1996.
NOTE C. MORTGAGE SERVICING RIGHTS
In 1995, the FASB issued Statement No. 122, "Accounting
for Mortgage Servicing Rights", which amends Statement
No. 65, "Accounting for Certain Mortgage Banking
Activities". The Statement applies to all mortgage
banking activities in which a mortgage loan is
originated or purchased and then sold or securitized
with the right to service the loan retained by the
seller. The total cost of the mortgage loans is
allocated between the mortgage servicing rights and the
mortgage loans based on their relative fair values.
The mortgage servicing rights are capitalized as assets
and amortized over the period of estimated net
servicing income. Additionally, they are subject to an
impairment analysis based on their fair value in future
periods. The impact on the Bank's financial position
and results of operations will be dependent upon the
future volume of mortgage loans sold with servicing
rights retained. The Bank adopted the Statement
effective January 1, 1996, however, since adoption the
volume of mortgage loans sold with servicing rights
retained has not been material.
NOTE D. EARNINGS PER SHARE
Primary and fully diluted earnings per share are
computed based on the weighted average number of common
shares outstanding during the period. Common share
equivalents included in the computations represent
shares issuable upon the assumed exercise of
outstanding stock option and grants that have an
exercise price less than market price. These common
stock equivalents had a dilutive effect for the three
months ended March 31, 1996 and 1995. The number of
common shares outstanding was increased by the number
of shares issuable under the common stock options and
grants and was reduced by the number of common shares
which are assumed to have been repurchased with the
proceeds from the exercise of the options.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis is intended to assist
in understanding and evaluating the major changes in the
financial condition and earnings performance of BCB Financial
Services Corporation (the "Company") with a primary focus on an
analysis of operating results.
Total assets increased to $236,046,134 at March 31, 1996, an
increase of $29,372,869 or 14.21% from $206,673,265 at
December 31, 1995. The increase in assets is the result of
higher levels of loans, investment securities, and cash and due
from banks.
Loans, net of allowance for possible loan losses of
$1,777,484 at March 31, 1996 and $1,674,057 at December 31, 1995,
increased to $152,883,381 at March 31, 1996 from $146,290,946 at
December 31, 1995. The increase of $6,592,435, or 4.51%, was
primarily from an increase in commercial loans of $3,548,652 to
$67,768,617 at March 31, 1996 from $64,219,965 at December 31,
1995, and an increase in fixed rate residential mortgage loans of
$2,579,805 to $51,944,082 at March 31, 1996 from $49,364,277 at
December 31, 1995. There was very little change in adjustable
rate mortgage loans or consumer installment/line of credit loans
during the quarter.
Securities increased to $42,912,247 at March 31, 1996 from
$29,566,226 at December 31, 1995. The increase of $13,346,021 or
45.14% was due primarily to the purchase of $9,602,782 in
additional Municipal Securities and $7,771,915 in U.S. Treasury
and Government Agency Securities as part of an arbitrage strategy
by the bank to increase earnings.
Cash and due from banks, including interest-bearing deposits
with banks of $19,535,765 at March 31, 1996 and $10,043,324 at
December 31, 1995 increased to $28,513,149 at March 31, 1996,
from $17,700,170 at December 31, 1995. The $10,812,979 increase
was primarily the result of an increase in the bank's liquidity
position due to an increase in deposits, a major source of funds,
in excess of the uses of those funds, primarily net new loans and
securities purchases, as of March 31, 1996.
The Company's primary source of funds, deposits, aggregated
$203,105,537 at March 31, 1996, an increase of $23,167,667, or
12.88%, from $179,937,870 at December 31, 1995. The increase
came primarily in moneymarket savings accounts, classified within
"Demand, interest bearing", on the March 31, 1996 consolidated
balance sheet. Moneymarket savings accounts increased
$12,843,410, or 31.10%, from $41,297,520 at December 31, 1995 to
$54,140,930 at March 31, 1996. Time deposits less than $100,000
increased $5,416,589 from $95,696,046 at December 31, 1995 to
$101,112,635 at March 31, 1996, an increase of 5.66%. Time
deposits of $100,000 and over increased $2,250,462 from
$8,377,643 to $10,628,105. Non-interest bearing demand
(checking) increased $1,662,747, or 9.03%, from $18,421,557 at
December 31, 1995 to $20,084,304 at March 31, 1996. It is the
bank's policy not to accept any brokered deposits. The
significant increase in most of the deposit categories is
attributable to (a) the added convenience and new market
locations provided by the Pottstown and Wyomissing branches, both
of which opened in the second quarter of 1995, (b) deposit fee
and rate pricing that was better for customers than at the
Company's local banking and thrift competition, (c) continued
aggressive account promotion and advertising in response to the
announced CoreStates acquisition of Meridian, expected to occur
in the second quarter of 1996.
Stockholders' equity decreased $16,088, or 0.09%, to
$18,278,483 at March 31, 1996 from $18,294,571 at December 31,
1995. The decrease was primarily attributable to the fact that
interest rates in the economy rose, causing the market value of
available-for-sale securities to fall slightly. FAS 115 requires
banks to record the net unrealized appreciation (depreciation) on
securities available-for-sale, net of taxes, as an adjustment to
stockholders' equity. Thus, when interest rates rise, equity is
reduced and when interest rates fall, equity is increased. The
fluctuations are temporary and stockholders' equity would only be
permanently reduced if the securities were sold at losses, or
reclassified as held-to-maturity during a period of time when the
market value is less than book value for these securities. The
decrease was net of the retention of $251,689, which is the first
three months of earnings after taxes, net of cash dividends
declared of $103,468, the reclassification of 12,245 shares of
redeemable common stock to common stock and surplus, and the
increase in unrealized depreciation on securities
available-for-sale from $156,670 appreciation at December 31,
1995 to $(250,697) at March 31, 1996. The transfer of 12,245
shares, or $126,143, from redeemable common stock back to
stockholders' equity was due to the expiration of the three-year
statute of limitations applicable to the sale of shares in
unregistered transactions.
Retained Earnings increased $251,689, or 7.78%, to
$3,485,263 at March 31, 1996 from $3,233,574 at December 31,
1995. The increase was the result of the retention of $355,157
of first quarter earnings less the declaration of $103,468 in
cash dividends due to be payable in April of 1996.
RESULTS OF OPERATION
Net income for the three months ended March 31, 1996 was
$355,157, 103.6% more than the $174,426 reported for the same
period in 1995. The earnings for the first quarter were up from
the prior year's first quarter primarily due to an increase in
net interest income.
Net Interest Income
Net interest income is the difference between interest
income on assets and interest expenses on liabilities. Net
interest income was $1,706,329 for the first quarter of 1996, up
$290,759 from $1,415,570 for the first quarter of 1995. The
increase in net interest income was primarily due to an increase
in average interest-earning assets.
Net interest margin decreased 42 basis points to 3.45% in
the first quarter of 1996 compared to 3.87% in the first quarter
of 1995, calculated on a tax-equivalent basis. Net interest
margin is the difference between interest earned and interest
paid, divided by average total interest-earning assets. Net
interest margin decreased during the first quarter of 1996 versus
the first quarter of 1995, due primarily to an increase in
interest expense on interest bearing liabilities and a decrease
in interest income as a percentage of total interest-earning
assets (i,e., average yield).
Average total interest-earning assets increased $58,574,000,
or 38.74%, to $209,762,000 in the first quarter of 1996 compared
to $151,188,000 in the first quarter of 1995. The average yield
on interest-earning assets decreased 29 basis points, or 3.71%,
to 7.53% in the first quarter of 1996 versus 7.82% in the first
quarter of 1995. The reason for the decline was an increase in
the average balance of lower yielding assets such as interest-
bearing deposits at banks, and federal funds sold, as a
percentage of average total interest-earning assets at March 31,
1996 versus March 31, 1995. This percentage of average interest-
earning assets in lower yielding assets was 9.73% at March 31,
1996 versus 2.67% at March 31, 1995. This occurred primarily
because deposit growth exceeded the growth in loans and
securities during the past year, primarily the result of
successful funds gathering by the Bank's new Pottstown and
Wyomissing branches. During the first quarter of 1996, the bank
hired several new business development officers (private bankers)
to help accelerate the growth in quality loans.
Interest expense increased $658,322, or 44.68%, to
$2,131,703 for the first quarter of 1996 versus $1,473,381 for
the same period in 1995. This increase was due primarily to an
increase in the volume of average interest-bearing liabilities of
$54,166,000, or 38.65%, to $194,324,000 for the quarter ended
March 31, 1996 versus $140,158,000 for the quarter ended
March 31, 1995, largely the result of the success of our two new
branches, Pottstown and Wyomissing. The average rate paid on
interest-bearing liabilities increased 15 basis points, or 3.52%,
to 4.41% in the first quarter of 1996 compared to 4.26% in the
first quarter of 1995. This reflected a conscious decision by
the Bank to establish an above market 4.00% interest rate (4.08%
annual percentage yield) on moneymarket savings deposits in order
to significantly increase its market share of these core
deposits. The thinking here is that while in the short run this
pricing strategy may increase the Bank's overall cost of funds,
it will produce the benefit of improving the Bank's deposit mix
in the long run. Since moneymarket savings accounts at 4.00% are
less costly than certificates of deposit (that typically are
paying over 5.00%), it is the Company's expectation that in the
long run this strategy will actually lower its overall cost of
funds as certificates of deposit shrink as a percentage of total
deposits.
Provision For Loan Losses
The Company's provision for possible loan losses was $80,000
in the first quarter of 1996 versus $100,000 in the first quarter
of 1995. The provision necessary this quarter was complemented
by recoveries that exceeded charge offs during the first quarter
of 1996 in the amount of $23,427. Given this $80,000 first
quarter provision plus the $23,427 net recoveries, the Company
increased its balance in the allowance for possible loan losses
to $1,777,484. This increase was deemed to be necessary in order
to maintain a reserve proportionate to the increasing size of the
loan portfolio.
Other Income
Total other income increased $88,213, or 50.27%, in the
first quarter of 1996 versus the first quarter of 1995, to
$263,696 from $175,483. The increase was due primarily to an
increase in customer service fees, which are primarily derived
from deposit services, of $44,129; and an increase in fees from
mortgage banking activities of $39,956.
Other Expenses
Total other expenses increased $208,738, or 16.96%, during
the first quarter of 1996 versus the same period in 1995, to
$1,439,359 from $1,230,621. The reason for the significant
increase was primarily due to the costs associated with operating
two new full service branches, Pottstown and Wyomissing, which
both opened after the first quarter of 1995. The increase in
total other expenses compares favorably with the 46.19% increase
in total assets, from $161,469,016 at March 31, 1995 to
$236,046,134 at March 31, 1996.
Salaries, wages, and employee benefits increased $69,578, or
12.59%, for the first quarter of 1996 versus the first quarter of
1995, to $622,376 from $552,798. These increases were largely
due to staff additions for the Pottstown and Wyomissing offices.
Occupancy expense increased $45,366, or 48.60%, to $138,720
for the three months ended March 31, 1996 versus $93,354 for the
three months ended March 31, 1995. These increases were largely
due to building, lease, and other occupancy expenses related to
the operation of the two new branches.
Equipment depreciation and maintenance expenses increased
$15,173, or 16.49%, to $107,173 for the first quarter of 1996
versus $92,000 for the first quarter of 1995. This increase was
primarily due to the operation of the two new branches in 1996.
Other operating expenses increased $78,621, or 15.96%, to
$571,090 in the first quarter of 1996 versus $492,469 in the
first quarter of 1995. The net increase was due primarily to an
$85,074, or 119.75%, increase in advertising from $71,041 during
last year's first quarter to $156,115 during this year's first
quarter. The Company elected to increase its advertising
expenses in order to improve its market share in the light of the
announced Meridian merger into Corestates. All other expenses in
total were approximately the same during the first quarters of
1996 versus 1995. Significant changes quarter to quarter
occurred in FDIC insurance premium expenses, corporate taxes
other than income, and "other" expenses. For the first six
months of 1996, the amount of FDIC insurance premiums have been
reduced to $1,000 for the Bank. These rates are subject to
legislative action by Congress and there is no guarantee that
required FDIC insurance premiums may not be increased in the
future. Also declining was "other" expenses, which were $46,890
less during the first quarter of 1996 than the first quarter of
1995. The reason for this decline was the incurring of a loss in
1995 on an obsolete computer system used in the mortgage
department that did not recur in 1996 as well as the incurring of
expenses in 1995 related to the opening of our new branches that
did not recur in 1996. On the other hand, corporate taxes other
than income increased significantly, by $35,705, from $7,233 in
the first quarter of 1995 to $42,938 in the first quarter of
1996. The reason for this increase was a timing difference in
the recognition of the Pennsylvania Shares Tax in 1995 versus
1996 related to the preparation of the return.
Provision for Income Taxes
The provision for income taxes was $95,509 for the first
quarter of 1996, an effective tax rate of 21.19%, versus $86,006
for the first quarter of 1995, an effective tax rate of 33.02%.
The significant decrease in 1996's effective tax rate from the
statutory tax rate of 34% and 1995's first quarter effective tax
rate was due to the significant increase in bank qualified
municipal securities' interest income. This increased $147,724,
or 258.17%, from $57,220 during the first quarter of 1995 to
$204,944 during the first quarter of 1996.
Asset Quality
Non-performing assets increased 13.85% to $3,259,292 as of
March 31, 1996 compared to $2,862,794 as of December 31, 1995.
The ratio of the allowance for possible loan losses to
non-performing assets was 54.54% at March 31, 1996 compared to
58.48% at December 31, 1995. The bank elected to charge-off
approximately $52,611 of previously non-performing assets during
the first three months of 1996 versus $113,648 during the first
three months of 1995. Non-performing assets are comprised of
non-accrual loans and other real estate owned (assets acquired in
foreclosures) and restructured loans. It is the Company's policy
to classify a loan, other than a loan insured for credit loss, as
non-accrual within ten days after the month end in which the loan
becomes 90 days past due for either principal or interest. At
March 31, 1996, non-performing assets were 1.38% of total assets.
At December 31, 1995, non-performing assets were 1.39% of total
assets.
The balance in the allowance for possible loan losses was
$1,777,484, or 1.15% of total loans at March 31, 1996 compared to
$1,674,057, or 1.13% of total loans at December 31, 1995.
As a financial institution which assumes lending and credit
risks as a principal element of its business, the Company
anticipates that credit losses will be experienced in the normal
course of business. Accordingly, management of the Company makes
a quarterly determination as to an appropriate provision from
earnings necessary to maintain an allowance for loan losses that
is adequate for potential yet undetermined losses. The amount
charged against earnings is based upon several factors including,
at a minimum, each of the following:
* a continuing review of delinquent, classified and
non-accrual loans, large loans, and overall portfolio
quality. This continuous review assesses the risk
characteristics of both individual loans and the total
loan portfolio.
* regular examinations and reviews of the loan portfolio
by representatives of the regulatory authorities.
* analytical review of loan charge-off experience,
delinquency rate, and other relevant historical and
peer statistical ratios.
* management's judgement with respect to local and
general economic conditions and their impact on the
existing loan portfolio.
When it is determined that the prospects for recovery of the
principal of a loan have significantly diminished, the loan is
immediately charged against the allowance account, subsequent
recoveries, if any, are credited to the allowance account. In
addition, non-accrual and large delinquent loans are reviewed
monthly to determine potential losses.
Management believes the allowance for loan losses was
adequate to cover risks inherent in its loan portfolio at
March 31, 1996. However, there can be no assurance that the
Company will not have to increase its provision for loan losses
in the future as a result of changes in economic conditions or
for other reasons. Any such increase could adversely affect the
Company's results of operations.
Liquidity and Capital Resources
Financial institutions must maintain liquidity to meet
day-to-day requirements of depositors and borrowers, take
advantage of market opportunities, and provide a cushion against
unforeseen needs. Liquidity needs can be met by either reducing
assets or increasing liabilities. Sources of asset liquidity are
provided by short-term investment securities, cash and amounts
due from banks, interest-bearing deposits with banks, and federal
funds sold. These assets totaled $33,114,000 at March 31, 1996
compared to $24,123,507 at December 31, 1995. This increase was
due to an increase in deposits.
Liability liquidity can be met by attracting deposits with
competitive rates, buying federal funds or utilizing the
facilities of the Federal Reserve System or the Federal Home Loan
Bank System. The Company utilizes a variety of these methods of
liability liquidity. At March 31, 1996, the Company had
approximately $73.6 million of unused lines of credit available
under informal arrangements with correspondent banks compared to
$70.4 million at December 31, 1995. These lines of credit enable
the Company to purchase funds for short-term needs at current
market rates.
Capital
Total stockholders' equity decreased $16,088, or .09%, to
$18,278,483 at March 31, 1996 compared to $18,294,571 at
December 31, 1995. The ratio of stockholders' equity to total
assets decreased to 7.74% at March 31, 1996 compared to 8.85% at
December 31, 1995. The decrease was due primarily to an increase
in interest rates in the economy, which had the effect of causing
a decrease in net unrealized appreciation (depreciation) on
securities available for sale, net of taxes, (an account required
by FAS 115 to be included in the stockholders' equity section of
the balance sheet) of $407,367. Should interest rates decline
from their position at March 31, 1996, this account should
reverse itself and provide an increase to stockholders' equity.
Except for this paper loss on securities, stockholders' equity
actually increased $391,279. This increase was the result of net
income earned for the first three months of 1996, net of
dividends declared and the transfer of redeemable common stock
back into stockholders' equity. Stockholders' equity increased
by $251,689, which is the first three months of earnings after
taxes, net of dividends declared of $103,468. The Company also
transferred 12,245 shares back to stockholders' equity from
redeemable common stock due to the expiration of the three-year
rescission period applicable to the sale of shares in
unregistered transactions several years ago.
The Company's consolidated capital ratios at March 31, 1996
exceed all regulatory requirements. The Federal Reserve board
requires a bank holding company, such as the Company, to maintain
a Tier 1 capital to risk-adjusted assets ratio of 4.00%, a total
capital to risk-adjusted assets ratio of 8.00% and a leverage
ratio of 3.00% plus a cushion of at least 100 to 200 basis
points. The Company's Tier 1 capital to risk-weighted assets
ratio was 12.50% at March 31, 1996 compared to 12.43% at
December 31, 1995. The Company's total capital to risk-weighted
assets ratio was 13.71% at March 31, 1996 compared to 13.58% at
December 31, 1995. The Company's leverage ratio was 8.56% at
March 31, 1996 versus 10.29% at December 31, 1995. The Company
was categorized as "well-capitalized" under applicable regulatory
guidelines as of March 31, 1996. Federal Reserve Board
guidelines define a "well-capitalized" institution as having a
Tier 1 capital to risk-adjusted assets ratio of 6% or more, a
total capital to risk-adjusted assets ratio of 10.00% or more,
and a leverage ratio of 5.00% or more.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Statement regarding computation of per share
earnings (is included in Note D to Consolidated
Financial Statements (Unaudited)).
27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
<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.
May 9, 1996 BCB FINANCIAL SERVICES CORPORATION
(Registrant)
By /s/ Robert D. McHugh, Jr.
Robert D. McHugh, Jr.,
Senior Vice President and
Treasurer (Authorized Officer
and Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
___________ ___________
11 Statement regarding computation of
per share earnings (is included in
Note D to Consolidated Financial
Statements (Unaudited)).
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,977
<INT-BEARING-DEPOSITS> 19,536
<FED-FUNDS-SOLD> 2,490
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,891
<INVESTMENTS-CARRYING> 16,021
<INVESTMENTS-MARKET> 15,968
<LOANS> 154,660
<ALLOWANCE> 1,777
<TOTAL-ASSETS> 236,046
<DEPOSITS> 203,106
<SHORT-TERM> 0
<LIABILITIES-OTHER> 8,662
<LONG-TERM> 6,000
0
0
<COMMON> 4,310
<OTHER-SE> 13,968
<TOTAL-LIABILITIES-AND-EQUITY> 236,046
<INTEREST-LOAN> 3,129
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<INTEREST-OTHER> 272
<INTEREST-TOTAL> 3,838
<INTEREST-DEPOSIT> 2,060
<INTEREST-EXPENSE> 2,132
<INTEREST-INCOME-NET> 1,706
<LOAN-LOSSES> 80
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 1,439
<INCOME-PRETAX> 451
<INCOME-PRE-EXTRAORDINARY> 355
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 355
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 3.27
<LOANS-NON> 1,842
<LOANS-PAST> 445
<LOANS-TROUBLED> 84
<LOANS-PROBLEM> 1,316
<ALLOWANCE-OPEN> 1,674
<CHARGE-OFFS> 53
<RECOVERIES> 76
<ALLOWANCE-CLOSE> 1,777
<ALLOWANCE-DOMESTIC> 1,777
<ALLOWANCE-FOREIGN> 0
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