SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________to____________
Commission File No. 0-24330
Bedford Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Virginia 54-1709924
------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 West Main Street, Bedford, Virginia 24523
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(Address of principal executive offices)
(540) 586-2590
----------------------------------------------------
(Registrant's telephone number, including area code)
Check whether issuer (1) filed all reports required to be filed by Sections 13
or 15(d) of the Exchange Act during the past 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 tNo .ast 90 days. Yes X No .
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class: Common Stock, par value $.10 per share
Outstanding at May 8, 1998: 1,148,950 shares
<PAGE>
BEDFORD BANCSHARES, INC. AND SUBSIDIARY
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
------ --------------------- ----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition at
March 31, 1998 and September 30, 1997 (unaudited) 1
Consolidated Statements of Income for the three and six months
ended March 31, 1998 and 1997 (unaudited) 2
Consolidated Statements of Cash Flows for the six months ended
March 31, 1998 and 1997 (unaudited) 3
Notes to Unaudited Interim Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
PART II OTHER INFORMATION
------- -----------------
Item 1. Legal proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
<PAGE>
BEDFORD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
March 31 September 30
1998 1997
-------------------------
(In Thousands)
<S> <C> <C>
Assets
- ------
Cash and cash equivalents ................................................................... $ 12,283 $ 5,446
Investment securities held for investment (estimated market value of $3,110 and $4,581) ..... 3,099 4,596
Mortgage-backed securities held for investment (estimated market value of $17 and $20) ...... 17 20
Marketable equity securities available for sale, at market value ............................ 4,294 4,238
Investment securities available for sale, at market value ................................... 8,535 5,006
Investment in Federal Home Loan Bank stock, at cost ......................................... 1,300 932
Loans receivable, net ....................................................................... 120,924 116,093
Foreclosed real estate, net ................................................................. 0 212
Property and equipment, net ................................................................. 1,157 1,214
Accrued interest receivable ................................................................. 889 847
Deferred income taxes ....................................................................... 58 58
Other assets ................................................................................ 593 427
--------- --------
Total assets ............................................................................ $ 153,149 $139,089
========= ========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities
- -----------
Deposits .................................................................................... 106,027 103,612
Advances from the Federal Home Loan Bank .................................................... 26,000 15,000
Advances from borrowers for taxes and insurance ............................................. 444 502
Dividends payable ........................................................................... 161 160
Other liabilities ........................................................................... 166 194
--------- --------
Total liabilities ...................................................................... 132,798 119,468
--------- --------
Commitments and contingent liabilities
Stockholders' equity
- --------------------
Preferred stock, par value $.10 per share, authorized 250,000; issued and outstanding, none.. -- --
Common stock, par value $.10 per share, authorized 2,750,000 shares; issued and outstanding
1,148,950 and 1,142,425 at March 31, 1998 and September 30, 1997, respectively ........... 115 114
Additional paid in capital .................................................................. 10,917 10,836
Retained earnings, substantially restricted ................................................. 10,231 9,763
Unrealized gain on securities available for sale ............................................ 27 22
Less stock acquired by ESOP and RRP ......................................................... (939) (1,114)
--------- --------
Total stockholders' equity ............................................................. 20,351 19,621
--------- --------
Total liabilities and stockholders' equity ............................................. $ 153,149 $ 139,089
========= =========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
BEDFORD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
------ ----- ------ ------
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C> <C> <C>
Interest Income:
Loans ................................................ $2,423 2,308 $4,827 $4,526
U.S. Government Obligations including agencies ....... 234 189 451 379
Other investments, including overnight deposits ...... 68 42 115 96
------ ----- ------ ------
Total interest income ............................... 2,725 2,539 5,393 5,001
------ ----- ------ ------
Interest Expense:
Deposits ............................................. 1,134 1,030 2,301 2,083
Borrowed funds ....................................... 245 222 449 437
------ ----- ------ ------
Total interest expense .............................. 1,379 1,252 2,750 2,520
------ ----- ------ ------
Net interest income ................................. 1,346 1,287 2,643 2,481
Provision for credit losses ........................... 30 25 60 50
------ ----- ------ ------
Net interest income after provision for credit losses 1,316 1,262 2,583 2,431
------ ----- ------ ------
Noninterest income:
Service charges and fees on loans .................... 115 63 210 150
Other customer service fees and commissions .......... 77 59 145 120
Other ................................................ 32 23 56 30
------ ----- ------ ------
Total noninterest income ............................ 224 145 411 300
------ ----- ------ ------
Noninterest expense:
Personnel compensation and benefits .................. 438 410 902 809
Occupancy and equipment .............................. 71 80 151 152
Data processing ...................................... 91 90 176 170
Federal insurance of accounts ........................ 16 15 32 57
Advertising .......................................... 28 25 61 59
Professional fees .................................... 53 38 125 65
Other ................................................ 93 82 178 177
------ ----- ------ ------
Total noninterest expense ........................... 790 740 1,625 1,489
------ ----- ------ ------
Income before income taxes ......................... 750 667 1,369 1,242
Provision for income taxes ............................ 290 253 525 471
------ ----- ------ ------
Net income .......................................... $ 460 $ 414 $ 844 $ 771
====== ====== ====== ======
Basic earnings per share ............................ $ 0.42 $ 0.38 $ 0.77 $ 0.71
====== ====== ====== ======
Diluted earnings per share ......................... $ 0.40 $ 0.37 $ 0.73 $ 0.69
====== ====== ====== ======
</TABLE>
See notes to consolidated financial statements
-2-
<PAGE>
BEDFORD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------ March 31 -------
1998 1997
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Operating activities:
Net income ......................................................................... $ 844 $ 771
Adjustments to reconcile net income to net cash provided by operating activities :
Provision for credit losses ...................................................... 60 50
Provision for depreciation and amortization ...................................... 65 65
Amortization of investment security premiums and accretion of discounts, net ..... (12) (3)
(Increase) decrease in deferred income taxes ..................................... 0 39
(Gain) loss on sale of loans, investments and foreclosed real estate ............. (2) (5)
Loans originated for sale ........................................................ -- 185
Proceeds from sale of loans originated for sale .................................. -- (185)
(Increase) decrease in accrued interest receivab.e ............................... (42) (117)
(Increase) decrease in other assets .............................................. (166) 212
Increase (decrease) in other liabilities ......................................... (28) (723)
-------- --------
Net cash provided by (used in) operating activities ............................ 719 289
-------- --------
Investing activities:
Proceeds from the sale of investments ............................................ 992 --
Proceeds from the maturities of investments ...................................... 2,500 400
Purchases of investment securities ............................................... (5,568) (1,626)
Purchase of Federal Home Loan Bank stock ......................................... (368) --
Net increase in loans to customers ............................................... (4,891) (3,605)
Principal collected on mortgage-backed securities ................................ 3 15
Purchases of premises, equipment and leasehold improvements ...................... (8) (63)
Proceeds from the sale of REO .................................................... 212 48
-------- --------
Net cash provided by (used in) investing activities ............................ (7,128) (4,831)
-------- --------
Financing activities:
Exercise of stock options ........................................................ 103 --
Allocation of ESOP and RRP shares ................................................ 189 --
Dividends paid ................................................................... (288) (253)
Net increase (decrease) in customer deposits ..................................... 2,415 2,464
Proceeds from advances and other borrowed money .................................. 11,000 2,000
Purchase of stock by ESOP and RRP ................................................ (86) (23)
Net increase (decrease) in advance payments from borrowers for taxes and insurance (58) (44)
Other, net (29) --
-------- --------
Net cash provided by financing activities ........................................ 13,246 4,144
-------- --------
Increase (decrease) in cash and cash equivalents ................................. 6,837 (398)
Cash and cash equivalents at beginning of period ..................................... 5,446 3,075
-------- --------
Cash and cash equivalents at end of period ........................................... $ 12,283 $ 2,677
======== ========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
Notes to Unaudited Interim Consolidated Financial Statements
March 31, 1998
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") 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.
The accompanying unaudited interim consolidated financial statements
include the accounts of Bedford Bancshares, Inc. (the "Corporation") and Bedford
Federal Savings Bank (the "Bank"), a wholly owned subsidiary of the Corporation.
All significant intercompany balances and transactions have been eliminated in
consolidation.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for the fair presentations have been
included. The results of operations for the interim period ended March 31, 1998
is not necessarily indicative of the results which may may be expected for any
future period. For futher information, refer to consolidated financial
statements and footnotes thereto included in the Corporation's Annual Report on
Form 10-KSB for the year ended September 30, 1997.
NOTE 2: EARNINGS PER SHARE
The Corpoation adopted Statement of Fianancial Accounting Standards
("SFAS") 128, as of December 31, 1997. SFAS 128 is effective for financial
statements, including interim reports issued for periods ending after December
15, 1997. SFAS 128 provides a different method for calculating earnings per
share than was used in accordance with APB 15, "Earnings Per Share."
SFAS 128 provides for the calculation of basic and diluted earnings per
share. Basic earnings per share includes no dilution and is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in earnings of an entity,
similar to fully diluted earnings per share.
Earnings per share calculated in accordance with SFAS 128 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
----------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Basic Earnings Per Share:
<S> <C> <C> <C> <C>
Net Income ........................................... $ 460,000 $ 414,000 $ 844,000 $ 771,000
========== ========== ========== ==========
Average Shares Outstanding, Net of
unallocated ESOP Shares (54,667 and 61,793
at March 31, 1998 and March 31, 1997, respectively.) 1,089,056 1,081,005 1,088,290 1,081,297
========== ========== ========== ==========
Basic Earnings Per Share ............................. $ 0.42 $ 0.38 $ 0.77 $ 0.71
========== ========== ========== ==========
Diluted Earnings Per Share:
Net Income ........................................... $ 460,000 $ 414,000 $ 844,000 $ 771,000
========== ========== ========== ==========
Average Shares Outstanding, Net of
unallocated ESOP Shares (54,667 and 61,793
at March 31, 1998 and March 31, 1997, respectively.) 1,089,056 1,081,005 1,088,290 1,081,297
Dilutive effect of RRP Plan shares ............... 12,006 10,759 12,006 10,117
Dilutive effect of Stock Options ................. 59,399 36,918 59,399 33,710
---------- ---------- ---------- ----------
Average Shares Outstanding ........................... 1,160,461 1,128,682 1,159,695 1,125,124
========== ========== ========== ==========
Diluted Earnings Per Share ........................... $ 0.40 $ 0.37 $ 0.73 $ 0.69
========== ========== ========== ==========
</TABLE>
-4-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
Total assets of the Corporation were $153.1 million at March 31, 1998, an
increase of $14 million from September 30, 1997. During the second quarter of
fiscal 1998, the Bank increased its borrowings from the Federal Home Loan Bank
by $10 million. These funds, priced favorably to alternative funding sources for
the same maturity, moderating the interest rate risk, will be used to provide
additional funding for anticipated loan growth. The portion of these funds not
currently needed for loans or investments is kept in overnight funds, which is
reflected in a $6.8 million increase in cash and cash equivalents. In addition
to this increase, loans were up $4.8 million and investments reflected growth of
$2.0 million. Additional support for the asset growth was provided by a $2.4
million increase in deposits. Stockholders' equity was $20.4 million on March
31, 1998, up $730,000 from the $19.6 million on September 30, 1997.
At March 31, 1998, nonperforming assets were $653,000, or .43% of total
assets, compared to $730,000, or .52% of total assets at September 30, 1997.
During the quarter ended March 31, 1998, nonperforming mortgage loans increased
$141,000, while nonperforming consumer loans decreased $228,000. The increase in
mortgage loans was due to the addition of one credit which is well
collateralized, while the decrease in the consumer category was due primarily to
one large consumer credit which became current during the quarter.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1997
- --------------------------------------------------------
General. Net income for the three months ended March 31, 1998 was $460,000,
up 11.1% from the $414,000 earned in the comparable period of fiscal 1997. Net
interest income for the second quarter of fiscal 1998 was $1.35 million,compared
to $1.29 million for the second quarter of fiscal 1997. In addition, during the
second quarter of fiscal 1998, $30,000 was added to the allowance for credit
losses, compared to $25,000 for the comparable period of fiscal 1997.
Interest Income. Total interest income was $2.73 million for the three
months ended March 31, 1998, compared to $2.54 million earned in the comparable
quarter of fiscal 1997. The increase was due to a $7.1 million rise in the
average balance of loans receivable, offset somewhat by a 10 basis point decline
in the yield on the loan portfolio. In addition, interest income from U. S.
Government obligations and other investments increased $45,000 and $26,000,
respectively, due primarily to higher average balances.
Interest Expense. For the three months ended March 31, 1998, total interest
expense rose to $1.38 million from the $1.25 million for the three months ended
March 31, 1997, primarily due to an increase in the average balance of interest
bearing liabilities to $116.9 million for the second quarter of fiscal 1998 from
$106.5 million for the same quarter of fiscal 1997. Average interest bearing
deposits were $98.9 million for the second quarter of fiscal 1998, compared to
an average of $91.6 million for the same three months of fiscal 1997.
Net Interest Income. For the three months ended March 31, 1998, net
interest income was $1.35 million, up $59,000 from the net interest income
earned in the same period of 1997. During
-5-
<PAGE>
the three months ended March 31, 1998, the Corporation's interest rate spread
and net interest margin decreased to 3.12% and 3.87%, respectively, compared to
3.40% and 4.11%, respectively, for the same period of 1997. A 26 basis point
decline in the yield on earning assets combined with a 2 basis point rise in the
cost of funds were the primary reasons for the declines.
Provision for Credit Losses. For the three months ended March 31, 1998, the
Bank recorded a provision for credit losses of $30,000, compared $25,000 for the
same period of fiscal 1997. Strong growth in the commercial and consumer loan
portfolios during the second quarter of 1998 was the primary reason for the
higher provision.
Total Noninterest Income. Noninterest income totaled $224,000 for the
second quarter of fiscal 1998, compared to $145,000 for the same quarter of
fiscal 1997. The $79,000 increase was primarily attributable to an increase in
service charges and fees on loans, due to recently introduced processing fees on
consumer loans and charges related to refinancings and modifications of mortgage
loans. Other customer service fees and commissions were up $18,000 primarily due
to higher income on checking and increased ATM charges. Other income rose $9,000
due to income associated with the sale of mortgage insurance.
Total Noninterest Expense. Total noninterest expense was $790,000 for the
three months ended March 31, 1998, up $50,000 from the $740,000 total for the
comparable quarter of fiscal 1997. Personnel compensation and benefits totaled
$438,000 for the second quarter of fiscal 1998, an increase of $28,000 from the
comparable period of fiscal 1997. All other categories of noninterest expense
reflected a combined increase of 6.7% when comparing the three months ended
March 31, 1998 to the same three months of fiscal 1997.
Provision for Income Taxes. The provision for income taxes was $290,000 for
the three months ended March 31, 1998, up from the $253,000 provision recorded
in the three months ended March 31, 1997. The increase reflects the higher
profitability of the Company in the quarter ended March 31, 1998, as the
effective tax rate for both periods was 38%.
COMPARISON OF SIX MONTHS ENDED MARCH 31, 1998 AND 1997
- ------------------------------------------------------
General. Net income for the six months ended March 31, 1998 was $844,000,
up 9.5% from the $771,000 earned in the comparable period of fiscal 1997. Net
interest income for the first half of fiscal 1998 was $2.64 million, compared to
net interest income for the first half of fiscal 1997 of $2.48 million.
Noninterest income and expense for the six months ended March 31, 1998 were
$411,000 and $1.63 million, respectively, compared to $300,000 and $1.49
million, respectively, for the same period of fiscal 1997.
Interest Income. Total interest income amounted to $5.39 million for the
six months ended March 31, 1998, up from the $5.00 million earned in the
comparable period of fiscal 1997. The increase was primarily attributable to an
increase in the average balance of loans receivable to $118.2 million for the
six months ended ended March 31, 1998 from $111.5 million for the same period of
1997. This increase reflects the Bank's continued success in originating
mortgage loans and expanding the consumer and commercial loan portfolios.
Interest Expense. For the six months ended March 31, 1998, total interest
expense rose to $2.75 million from the $2.52 million for the six months ended
March 31, 1997, primarily
-6-
<PAGE>
due to an increase in the average balance of interest bearing liabilities to
$114.0 million for the first half of fiscal 1998 from $105.5 million for the
comparable period of fiscal 1997. The average balance of interest bearing
deposits increased $7.3 million from $91.0 million for the six months ended
March 31, 1997 to $98.3 million for the six months ended March 31, 1998.
Net Interest Income. For the six months ended March 31, 1998, net interest
income was $2.64 million, up 6.5% from the net interest income earned in the
same period of 1997. During the six months ended March 31, 1998, the
Corporation's interest rate spread and net interest margin declined to 3.13% and
3.90%, respectively, compared to 3.24% and 3.98%, respectively for the same
period of 1997. A 7 basis point decline in the yield on earning assets combined
with a 4 basis point rise in the cost of funds were the primary reasons for the
declines.
Provison for Credit Losses. For the six months ended March 31, 1998, the
Bank recorded a provision for credit losses of $60,000, compared to $50,000 for
the same six months of fiscal 1997. Expansion of the consumer and commercial
loan portfolios is the principal reason for the higher provision.
Total Noninterest Income. Noninterest income totaled $411,000 for the first
six months of fiscal 1998, compared to $300,000 for the same period of 1997.
Service charges and fees on loans were up $60,000 due to fees associated with
refinancings and loan modifications, and processing fess on consumer loans.
Other customer service fees and commissions rose $25,000 due to higher income on
checking and increased ATM usage. Other noninterest income was up $26,000 due
primarily to income from the sale of mortgage insurance.
Total Noninterest Expense. Total noninterest expense was $1.63 million for
the six months ended March 31, 1998, up $140,000 from the $1.49 million total
for the comparable period of fiscal 1997. Personnel compensation and benefits
totaled $902,000 for the six months ended March 31, 1998, up $93,000 from the
same six months of 1997, primarily due to merit increases and the increased
valuation of ESOP shares for fiscal 1998 which is based on the period end market
value of the Corporation's common stock. Professional fees totaled $125,000 for
the six months ended March 31, 1998, compared to $65,000 for the same period of
fiscal 1997 due primarily to consulting fees associated with the Corporation's
three year strategic business plan.
Provision for Income Taxes. The provision for income taxes was $525,000 for
the six months ended March 31, 1998, compared to $471,000 for the same six
months of fiscal 1997. The increase was due to the increase in taxable income as
the effective tax rate for both periods was 38%.
-7-
<PAGE>
CAPITAL COMPLIANCE
- ------------------
The following table presents the Bank's compliance with its regulatory
requirements of March 31, 1998. (Dollar amounts in thousands).
<TABLE>
<CAPTION>
March 31, 1998
---------------------------
Percentage
of assets
<S> <C> <C>
GAAP Capital ................................................ $18,135 11.82%
======= =====
Tangible capital ............................................ $18,135 11.82%
Tangible capital requirement ................................ 2,301 1.50
------- -----
Excess .................................................... $15,834 10.32%
======= =====
Core capital ................................................ $18,135 11.82%
Core capital requirement .................................... 6,135 4.00
------- -----
Excess .................................................... $12,000 7.82%
======= =====
Total risk-based capital (1) ................................ $18,786 24.07%
Total risk-based capital requirement (1)..................... 6,243 8.00
------- -----
Excess .................................................... $12,543 16.08%
======= =====
</TABLE>
- ----------------------------------------------
(1) Based on risk-weighted assets of $78,035
Management believes that under current regulations, the Bank will continue
to meet its minimum capital requirements in the foreseeable future. Events
beyond the control of the Bank, such as increased interest rates or a downturn
in the economy in areas in which the Bank operates could adversely affect future
earnings and as a result, the ability of the Bank to meet its future minimum
capital requirements.
LIQUIDITY
- ---------
The Bank's liquidity is a measure of its ability to fund loans, pay deposit
withdrawals, and other cash outflows in an efficient, cost effective manner. The
Bank's primary source of funds are deposits and scheduled amortization and
prepayment of loans. During the past several years, the Bank has used such funds
primarily to fund maturing time deposits, pay savings withdrawals, fund lending
commitments, purchase new investments, and increase liquidity. The Bank funds
its operations internally but also borrows funds from the Federal Home Loan Bank
("FHLB") of Atlanta. As of March 31, 1998, such borrowed funds totaled $26.0
million. Loan payments and maturing investments are greatly influenced by
general interest rates, economic conditions and competition.
The OTS adopted a new liquidity rule effective Novenber 24, 1997. The new
rule lowers liquidity requirements for savings associations from 5 to 4 percent
of the association's liquidity base. In
-8-
<PAGE>
addition, the liquidity base has been reduced by modifying the definition of net
withdrawable accounts to exclude accounts with maturities exceeding one year.
Another change removes the requirement that certain obligations must mature in
five years or less in order to qualify as a liquid asset. The new rule also
eliminates a separate limit that required savings associations to hold assets
equal to 1 percent of a thrift's liquidity base in cash or short term liquid
assets. At March 31, 1998, the Bank's regulatory liquidity as measured by the
new requirement was 20.88%.
The amount of certificate accounts which are scheduled to mature during the
next twelve months ending March 31, 1999, is approximately $39.9 million. To the
extent that these deposits do not remain at the Bank upon maturity, the Bank
believes that it can replace these funds with other deposits, excess liquidity,
FHLB advances, or other borrowings. It has been the Bank's experience that a
substantial portion of such maturing deposits remain at the Bank.
At March 31, 1998, the Bank had loan commitments outstanding of $ 9.9
million. Funds required to fulfill these commitments are derived primarily from
current excess liquidity, deposit inflows, borrowings or loan and investment
repayments.
-9-
<PAGE>
BEDFORD BANCSHARES, INC. AND SUBSIDIARY
Key Operating Ratios
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
----------------- -------------------
1998(1) 1997(1) 1998(1) 1997(1)
------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Basic earnings per share................................................ $ 0.42 $ 0.38 $ 0.77 $ 0.71
Diluted earnings per share.............................................. $ 0.40 $ 0.37 $ 0.73 $ 0.69
Return on average assets ............................................... 1.28% 1.26% 1.20% 1.18%
Return on average equity ............................................... 9.13% 8.81% 8.45% 8.27%
Interest rate spread ................................................... 3.12% 3.40% 3.13% 3.24%
Net interest margin .................................................... 3.87% 4.11% 3.90% 3.98%
Noninterest expense to average assets .................................. 2.26% 2.26% 2.28% 2.28%
Net charge-offs to average outstanding loans ........................... 0.01% 0.06% 0.01% 0.06%
</TABLE>
<TABLE>
<CAPTION>
March 31 September 30
1998 1997
--------- ------------
(DOLLARS IN THOUSANDS)
(Unaudited)
<S> <C> <C>
Nonaccrual and 90 days past due loans............................... $ 653 $ 518
Repossessed real estate ............................................ -- 212
------- ------
Total nonperforming assets ......................................... $ 653 $ 730
======= ======
Allowance for credit losses to nonperforming assets ................ 113.03% 92.81%
Nonperforming loans to total loans.................................. 0.54% 0.45%
Nonperforming assets to total assets ............................... 0.43% 0.52%
Book value per share................................................ $ 17.71 $17.17
======= ======
</TABLE>
- ---------------------
(1) The ratios for the three- and six-month periods are annualized
-10-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceeedings
------------------
Neither the Corporation nor the Bank was engaged in any
legal proceedings of a material nature at March 31, 1998. From
time to time, the Corporation is a party to legal proceedings
in the ordinary course of business wherein it enforces its
security interest in loans.
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
----------------------------------------------------
The annual meeting of shareholders of the Corporation was
held on January 28,1998 and the following items were acted
upon:
Election of Directors Hugh H. Bond, William T. Powell and
Macon C. Putney for terms of three years ending in 2001. All
were elected as indicated below:
Votes Votes Broker
For Withheld Non-votes
--- --------- ---------
Hugh H. Bond 993,168 39,695 124,334
William T. Powell 973,681 59,182 124,334
Macon C. Putney 993,018 39,845 124,334
Ratification of the appointment of BDO Seidman, LLP, as the
Corporation's auditors for the 1998 fiscal year. BDO SEIDMAN,
LLP, was ratified as follows:
Votes Votes Broker
For Against Abstain Non-votes
--- ------- ------- ---------
1,006,698 20,965 5,200 124,334
Consideration of a stockholder proposal recommending that
the Board of Directors take certain action. The proposal was
not adopted as shown below:
Votes Votes Broker
For Against Abstain Non-votes
--- ------- ------- ---------
272,720 610,907 24,902 124,334
Item 5. Other Information
-----------------
Not applicable.
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
<S> <C>
(a) Exhibit
Exhibit 27: Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
Not applicable.
</TABLE>
-11-
<PAGE>
BEDFORD BANCSHARES, INC. AND SUBSIDIARY
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.
BEDFORD BANCSHARES, INC.
Date: May 11, 1998 By: /s/ Harold K. Neal
---------------------------------
Harold K. Neal
President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 11, 1998 By: /s/ James W. Smith
---------------------------------
James W. Smith
Vice President and Treasurer
(Principal Accounting and
Financial officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM
THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,283
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,829
<INVESTMENTS-CARRYING> 4,416
<INVESTMENTS-MARKET> 17,256
<LOANS> 121,657
<ALLOWANCE> 733
<TOTAL-ASSETS> 153,149
<DEPOSITS> 106,027
<SHORT-TERM> 3,000
<LIABILITIES-OTHER> 771
<LONG-TERM> 23,000
0
0
<COMMON> 115
<OTHER-SE> 20,236
<TOTAL-LIABILITIES-AND-EQUITY> 153,149
<INTEREST-LOAN> 4,827
<INTEREST-INVEST> 566
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,393
<INTEREST-DEPOSIT> 2,301
<INTEREST-EXPENSE> 2,750
<INTEREST-INCOME-NET> 2,643
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,625
<INCOME-PRETAX> 1,369
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 844
<EPS-PRIMARY> .77
<EPS-DILUTED> .73
<YIELD-ACTUAL> 3.90
<LOANS-NON> 653
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 678
<CHARGE-OFFS> 7
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 733
<ALLOWANCE-DOMESTIC> 733
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 733
</TABLE>
