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 March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________to____________________
COMMISSION FILE NUMBER 33-93312
BEAL FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
Texas 75-2583551
- --------------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
Suite 300, LB 66, 15770 North Dallas Parkway, Dallas, Texas 75248
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972) 404-4000
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 ( )
As of March 31, 2000, there were 300,000 shares of the Registrant's common
stock issued and outstanding.
<PAGE>
BEAL FINANCIAL CORPORATION
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. - Financial Statements . . . . . . . . . . . . . . . . . . 1
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . .5
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
BEAL FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
<S> <C> <C>
ASSETS
Cash $ 449 $ 746
Interest bearing deposits 83,606 114,670
---------- ----------
CASH AND CASH EQUIVALENTS 84,055 115,416
Accrued interest receivable 11,882 12,879
Securities available for sale 68,304 70,080
Net loans receivable 1,135,239 1,128,753
Less allowance for losses (11,547) (12,344)
---------- ----------
1,123,692 1,116,409
Federal Home Loan Bank stock 11,148 9,670
Real estate held for investment or sale 93,941 93,166
Premises and equipment, net 5,380 5,520
Other assets 7,526 6,766
---------- ----------
TOTAL ASSETS $1,405,928 $1,429,906
========== ==========
LIABILITIES
Deposit accounts $ 939,514 $ 993,289
Federal Home Loan Bank advances 220,000 191,000
Senior notes, net 39,834 44,336
Other borrowings 7,217 7,272
Other liabilities 12,266 13,847
---------- ----------
TOTAL LIABILITIES 1,218,831 1,249,744
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $1 per share
authorized 375
issued and outstanding 300 300 300
Paid-in capital 2,740 2,740
Accumulated other comprehensive income (loss) (324) (443)
Retained earnings 244,381 237,565
---------- ----------
247,097 240,162
Stockholder note receivable (60,000) (60,000)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 187,097 180,162
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,405,928 $1,429,906
========== ==========
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
BEAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
---------- ------------
<S> <C> <C>
Interest Income:
Loans, including fees $28,832 $29,946
Purchased discount accretion 6,534 9,673
Investment securities 2,287 2,622
------- -------
TOTAL INTEREST INCOME 37,653 42,241
Interest expense:
Deposits 13,782 12,529
Federal Home Loan Bank advances
and other borrowings 1,947 1,290
Senior notes 1,546 2,035
------- -------
TOTAL INTEREST EXPENSE 17,275 15,854
------- -------
NET INTEREST INCOME 20,378 26,387
Provision for loan losses 624 1,173
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 19,754 25,214
Other income
Gain on real estate transactions 889 1,110
Other real estate operations, net 936 1,323
Other operating income 311 1,281
------- -------
TOTAL NONINTEREST INCOME 2,136 3,714
Other expense
Salaries and employee benefits 2,100 1,930
Occupancy and equipment 584 526
SAIF deposit insurance premium 59 155
Other operating expenses 2,149 2,122
------- -------
TOTAL NONINTEREST EXPENSES 4,892 4,733
------- -------
INCOME BEFORE INCOME TAXES 16,998 24,195
Income Taxes 182 1,594
------- -------
NET INCOME $16,816 $22,601
======= =======
Income per common share $ 56.05 $ 75.34
Weighted average number of common shares
outstanding 300 300
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
BEAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
---------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 16,816 $ 22,601
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 498 487
Accretion of purchased discount (6,534) (9,673)
Provision for loan losses 624 1,173
Amortization of bond premium and underwriting costs 231 202
Gains on real estate transactions (889) (1,110)
Changes in operating assets and liabilities
Accrued interest receivable 972 (864)
Prepaid expenses and other assets (477) (1,827)
Accrued interest payable-bonds (1,488) (1,833)
Other liabilities and accrued expenses 172 2,138
-------- --------
Net cash provided by operating activities 9,925 11,294
INVESTING ACTIVITIES
Proceeds from:
Loan collections, less originations and advances 22,307 69,799
Maturities of securities available for sale 1,992 5,326
Sales of real estate 3,657 5,037
Purchase of:
Loans and bid deposits on loan purchases (26,758) (123,211)
Federal Home Loan Bank stock (1,478) (457)
Real estate held for investment or sale (1,572) (709)
Premises and equipment (69) (225)
-------- --------
Net cash used in investing activities (1,921) (44,440)
FINANCING ACTIVITIES
Net decrease in deposit accounts (53,775) (34,023)
Prepayment of senior notes (4,535) -
Repayments of long-term debt (55) (117)
Proceeds from advances from the Federal Home Loan Bank 29,000 124,000
Loan to shareholder - (60,000)
Cash dividends paid (10,000) -
-------- --------
Net cash provided by (used in)
financing activities (39,365) 29,860
-------- --------
Net decrease in cash and cash equivalents (31,361) (3,286)
Cash and cash equivalents at beginning of period 115,416 72,139
-------- --------
Cash and cash equivalents at end of period $ 84,055 $ 68,853
======== ========
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 17,525 $ 15,613
Income taxes (360) 1,063
Supplemental disclosure of noncash investing
and financing activities
Real estate acquired in foreclosure or in
settlement of loans $ 3,373 $ 3,992
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- COMPREHENSIVE INCOME
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Although certain changes in net assets and
liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income.
The components of other comprehensive income are as follows:
Three months ended March 31,
----------------------------
2000 1999
------------ ------------
Net income $16,816 $22,601
Other comprehensive income net
unrealized gains (losses) on investment
securities - available-for-sale 119 (718)
------- -------
Comprehensive income $16,935 $21,883
======= =======
4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
WHEN USED IN THIS FORM 10-Q, THE WORDS "BELIEVES", "ANTICIPATES", "EXPECTS", AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. SUCH
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD LOOKING STATEMENTS WHICH SPEAK ONLY AS OF THE DATE
HEREOF, AND TO ADVISE READERS THAT VARIOUS FACTORS INCLUDING REGIONAL AND
NATIONAL ECONOMIC CONDITIONS, CHANGES IN LEVELS OF MARKET INTEREST RATES, CREDIT
RISK OF LENDING ACTIVITIES, AND COMPETITIVE AND REGULATORY FACTORS, COULD AFFECT
THE COMPANY'S FINANCIAL PERFORMANCE AND COULD CAUSE THE COMPANY'S ACTUAL RESULTS
FOR FUTURE PERIODS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED. THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO FORWARD LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
FINANCIAL CONDITION
Beal Financial Corporation ("Beal Financial" and with it's subsidiaries,
the "Company"), the parent company of Beal Bank, ssb, (the "Bank") had total
assets of $1.4 billion at both March 31, 2000 December 31, 1999. Cash and cash
equivalents decreased $31.4 million, as the Bank maintained excess cash
liquidity in anticipation of possible Year 2000 issues.
Total liabilities likewise remained relatively unchanged at $1.2 billion at
March 31, 2000 and December 31, 1999. A $53.8 million decrease in deposits and a
$4.5 million decrease in senior notes, net, were primarily funded by the
decrease in cash and cash equivalents and a $29.0 million increase in FHLB
advances.
Stockholders' equity increased $6.9 million or 3.85%, from $180.2 million
at December 31, 1999 to $187.1 million at March 31, 2000. The increase was the
result of $16.8 million in net income less dividends to stockholders of $10.0
million.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NET INCOME. For the three months ended March 31, 2000, net income of $16.8
million represented a decrease of $5.8 million, or 25.6% from the three months
ended March 31, 1999. As discussed in more detail below, the decrease was
primarily due to a decrease in net interest income of $6.0 million and a
decrease in total noninterest income of $1.6 million, which was partially offset
by a decrease in the provision for loan losses of $549,000 and a decrease in
income taxes of $1.4 million.
INTEREST INCOME. Interest income decreased $4.6 million, or 10.86%, from
$42.2 million at March 31, 1999 to $37.6 million at March 31, 2000. The primary
reason for the decrease was a decrease in purchase discount accretion of $3.1
million, and a
5
<PAGE>
decrease in interest income on loans, including fees of $1.1 million. The
average balance of interest-earning assets increased $33.0 million during this
period, as compared to the same period a year ago, primarily due to an increase
in the average balance of loans receivable of $68.3 million, partially offset by
a decrease in the average balance of investment securities, primarily
mortgage-backed securities, of $18.1 million and a decrease in the average
balance of interest-earning deposits of $17.0 million. The net interest spread
decreased from 7.98% for the three months ended March 31, 1999, to 5.51% for the
same period ended March 31, 2000, primarily due to a decrease in the yield on
average earning assets from 13.43 to 11.51% for the three month periods ending
March 31, 1999 and 2000, respectively. This decrease was due primarily to a
decrease in the amount of purchased discount accretion taken in relation to the
amount of loans outstanding, specifically one loan relationship prepaid during
the first quarter of 1999 resulting in purchase discount of $2.1 million being
taken into income during that quarter. Adding to the decrease was an increase in
the yield on average interest-bearing liabilities from 5.45% to 6.00%.
INTEREST EXPENSE. Interest expense increased $1.4 million, or 8.96%, from
$15.9 million at March 31, 1999 to $17.3 million at March 31, 2000. The increase
resulted primarily from an increase in the average rate paid on interest-bearing
liabilities which increased from 5.45% at March 31, 1999 to 6.00% at March 31,
2000. The increase in the rate paid on average interest-bearing liabilities was
due primarily to an increase in the yield on the average balance of certificate
accounts from 5.11% at March 31, 1999 to 5.74% at March 31, 2000 and an increase
in the rate paid on the average balance of FHLB advances from 4.87% to 5.88% for
the same time period reflecting the general rise in interest rates. The average
balance of interest bearing liabilities decreased by $11.6 million, from March
31, 1999 to March 31, 2000.
PROVISION FOR LOAN LOSSES. The provision for loan losses is determined by
management as an amount sufficient to maintain the allowance for loan losses at
a level considered adequate to absorb future losses inherent in the loan
portfolio in accordance with generally accepted accounting principles. The
provision for loan losses decreased $549,000 to $624,000 for the three months
ended March 31, 2000, as compared to $1.2 million for three months ended March
31, 1999.
The Company establishes an allowance for loan losses based upon a
systematic analysis of risk factors in the loan portfolio as well as a specific
analysis of certain impaired loans. This analysis includes an evaluation of the
Company's loan portfolio, past loan loss experience, current economic
conditions, loan volume and growth, composition of the loan portfolio and other
relevant factors. Management's analysis results in the establishment of
allowance amounts by loan type based on allocations by asset classification. The
allowance for loan losses as a percentage of net non-performing loans was 12.26%
at March 31, 1999 as compared to 15.15% at March 31, 2000. Net non-performing
loans decreased $37.9 million, from $114.1 million at March 31, 1999 to $76.2
million at March 31, 2000.
6
<PAGE>
Although management believes that it uses the best information available to
determine the allowance for loan losses, unforeseen market conditions could
result in adjustments and net earnings could be significantly affected if
circumstances differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowance for loan losses will
be the result of periodic loan, property and collateral reviews and thus cannot
be predicted with absolute certainty in advance. In addition, bank regulatory
agencies, as an integral part of the examination process, periodically review
the Company's allowance for loan losses. Such agencies may require the Company
to recognize additions to the allowance level based upon their judgment of the
information available to them at the time of their examination.
NON-INTEREST INCOME. Total non-interest income decreased $1.6 million, or
42.49% to $2.1 million at March 31, 2000 from $3.7 million at March 31, 1999.
The decrease was due primarily to a decrease in other operating income of
$970,000, a decrease in other real estate operations, net of $387,000 and a
decrease in gain on real estate transactions of $221,000. The decrease in other
operating income is primarily the result of the Bank collecting on a deficiency
in excess of $1.0 million in the first quarter of 1999.
Gains on the sales of loans and real estate generally are dependent on
various factors which are not necessarily within the control of the Company,
including market and economic conditions. As a result, there can be no assurance
that the gains on sales of loans and real estate reported by the Company in
prior periods will be reported in future periods or that there will not be
substantial periodic variation in the results from such activities.
NON-INTEREST EXPENSE. Non-interest expense increased $159,000, or 3.36% to
$4.9 million at March 31, 2000 from $4.7 million at March 31, 1999. The increase
was primarily due to an increase in salaries and employee benefits of $170,000,
offset by a decrease in SAIF deposit insurance premium of $96,000.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION. Beal Financial and all of its subsidiaries have elected
Subchapter-S status for federal income tax purposes. Concurrent with the change
to Subchapter-S status, Beal Financial and all subsidiaries changed their tax
and fiscal year-ends to December 31, from their previous June 30 year-ends.
Beal Financial generally will not be responsible to pay any federal taxes
on its net income. The only exception will involve possible Subchapter-C tax
liabilities on net built -in gains which the Company had as of January 1, 2000,
which may have to be recognized during the 10 year period ending December 31,
2006. Recognition of built-in gains/losses are also subject to certain
limitations. Approximately $300,000 of the tax expense for the three months
ended March 31, 2000, related to tax on recognized built-in
7
<PAGE>
gains. It is not anticipated that the tax expenses related to recognized
built-ins gains will be material in any given quarter. The future tax liability
for the taxable earnings of Beal Financial will be the responsibility of the
shareholders of Beal Financial. The Board of Directors of Beal Financial in
February, 2000, declared and paid dividends to the shareholders, of $10.0
million. It is anticipated that future dividends to shareholders will be
declared in an amount equal to at least their tax liability related to the
earnings of Beal Financial.
TEXAS STATE INCOME TAXATION. Beal Financial currently files Texas franchise
tax returns. Texas imposes a franchise tax on the taxable income of savings
institutions and other corporations. The franchise tax equals the greater of
$2.50 per $1,000 of taxable capital apportioned to Texas, or $45.00 per $1,000
of net taxable earned surplus apportioned to Texas. Taxable earned surplus is
the federal corporate taxable income of each company within the corporate group
determined on a separate company basis with certain modifications. Franchise tax
expense for the three months ended March 31, 2000 was $152,000, primarily
relating to Texas franchise tax. During this same period however, the Company
received a $270,000 refund of California state taxes which had the net effect of
decreasing franchise tax expense by $118,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds for operations are deposits obtained
from its market area, principal and interest payments on loans, brokered
deposits, and advances from the FHLB of Dallas and to a lesser extent, from the
sale of assets. While maturities and scheduled amortization of loans are
predictable sources of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions, and competition.
Historically, the primary investing activity of the Company has been the
purchase of discounted loans from various U.S. government agencies through the
sealed bid process or auctions and from other private sellers. During the three
month period ended March 31, 2000, the Company purchased $26.8 million of net
loans, as compared to purchases of $123.2 million on for the same period ended
last year. Loan originations for the three month period, ended March 31, 2000
totaled $64.6 million of which $50.5 has been funded, as compared to loan
originations of $21.8 million for the same period last year.
The Company's primary financing activity has historically been the
attraction of deposits. During the three months ended March 31, 2000, the
Company 's deposit levels remained virtually unchanged, decreasing only $53.8
million. The Company had senior notes, net, of $39.8 million and other
borrowings of $7.2 million at March 31, 2000.
The Company continues to have the ability to borrow additional funds from
the FHLB by pledging assets as collateral, subject to certain restrictions. At
March 31, 2000, the Company had an undrawn advance arrangement with the FHLB for
$54.7 million.
8
<PAGE>
The Bank is required to maintain minimum levels of liquid assets as defined
by the Texas Savings and Loan Department ("Texas Department"). Unless approved
in advance by the Texas Department, a Texas savings bank is required to maintain
a minimum of 10% of the previous quarters average deposits in liquid assets. At
March 31, 2000, the Bank's liquidity ratio was 15.05%.
The Company's most liquid asset is cash and cash equivalents. The level of
cash equivalents is dependent on the Company's operating, financing, and
investing activities during any given period. At March 31, 2000, the Company had
cash and cash equivalents of $84.1 million.
The Company anticipates that it will have sufficient funds available to
meet its current foreseeable commitments. At March 31, 2000, the Company had one
outstanding commitment to originate a loan for $12.5 million and no outstanding
commitments to purchase loans. Certificates of deposit which are scheduled to
mature in one year or less at March 31, 2000 totaled $736.0 million. Due to the
Company's high interest rate spread, management has typically relied upon
interest rate sensitive short-term deposits to fund its loan purchases. The
Company believes the potential interest rate risk is acceptable in view of the
Company's belief that it can maintain an acceptable net interest spread.
At March 31, 2000, the Bank exceeded each of its three capital requirements
and is considered well capitalized for regulatory purposes. The following is a
summary of the Bank's regulatory capital position at March 31, 2000.
<TABLE>
<CAPTION>
At March 31, 2000
----------------------------------------
Required Actual
------------------ ------------------
Amount Percent Amount Percent
-------- -------- --------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Leverage capital........................ $ 70,288 5.0% $219,985 15.6%
Tier 1 capital.......................... 62,420 6.0 219,985 21.2
Total risk-based capital................ 104,033 10.0 231,532 22.3
</TABLE>
The Bank recently submitted a new business plan for consideration by the
Texas Savings and Loan Department. This plan reflects the Senior Notes being
repaid upon maturity in the third quarter of 2000. In addition it anticipates
loan growth of approximately $500.0 million in the third quarter of 2000
primarily through the expected purchase of a number of loan pools being offered
by various third party sellers. The plan reflects Tier 1 capital remaining in
excess of 9% during the three year period set forth in the plan. Until this plan
is approved by the Texas Savings and Loan Department, the Bank operates under
its current plan which generally anticipates a decline in total assets, absent
the Bank being the successful bidder for additional bulk asset purchases; a
continued improvement in the Bank's level of classified assets; the
discontinuation of the Bank's foreign lending program; and the Bank maintaining
a Tier 1 capital ratio of at least 10%. The Texas Department must be provided
with prior written notice of any actions planned or anticipated that might
reasonably be expected to result in a material deviation from the approved
business plan. The Bank requested and received approval to
9
<PAGE>
deviate from its business plan during the last quarter of 1999 due to the bulk
purchase of single family residential loans. Aside from this bulk loan purchase,
the Bank is in compliance with the plan, as classified asset levels continue to
improve, the Bank's Tier 1 capital level is significantly above 10% and the Bank
discontinued its foreign lending program prior to October, 1999 when the plan
was submitted.
IMPACT ON INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars without considering the change in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Nearly all the
assets and liabilities of the Company's are financial, unlike most industrial
companies. As a result, the Company's performance is directly impacted by
changes in interest rates, which are indirectly influenced by inflationary
expectations. Since the Company has historically placed more emphasis on
increasing net interest margin rather than on matching the maturities of
interest rate sensitive assets and liabilities, changes in interest rates may
have a greater impact on the Company's financial condition and results of
operations. Changes in investment rates do no necessarily move to the same
extent as changes in the price of goods and services.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratios of earnings to fixed charges for the
three months ended March 31, 2000 are set forth below. Earnings used in
computing the ratios shown consist of earnings from continuing operations before
taxes and interest expense. Fixed charges, excluding interest on deposits,
represent interest expense on borrowings. Fixed charges, including interest on
deposits, represent all of the foregoing items plus interest on deposits.
Interest expense (other than on deposits) includes interest on FHLB borrowings,
the Senior Notes and other borrowed funds.
For the Three Months Ended
March 31, 2000
--------------------------
Excluding interest on deposits........... 5.9:1
Including interest on deposits........... 1.2:1
MARKET RISK
The Company's estimated sensitivity to interest rate risk, as measured by
the estimated interest earnings sensitivity profile and the interest sensitivity
gap analysis, has not materially changed from the information disclosed in the
Company's annual report on Form 10-K for the year ended December 31, 1999.
10
<PAGE>
YEAR 2000
No disruptions in systems, service to customers or operation of the Company
were experienced as a result of the year 2000, referring to the date rollover
from December 31, 1999 to January 1, 2000. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the computer programs used by the Company that have
time-sensitive software could have recognized a date using "00" as the year 1900
rather that the year 2000. This could have resulted in system failure or
miscalculations, had management not made the Year 2000 preparations disclosed
previously in its filings with the Securities and Exchange Commission. The
Company expensed all costs associated with its preparations for the Year 2000
which were immaterial.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal proceedings occurring in the
ordinary course of business. Management of the Company, based on discussions
with litigation counsel, believes that such proceedings will not have a material
adverse effect on the financial condition or operations of the Company. There
can be no assurance that any of the outstanding legal proceedings to which the
Company is a party will not be decided adversely to the Company's interests and
have a material adverse effect on the financial position or results of
operations of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item. 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 27 - Financial Data Schedule
11
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
BEAL FINANCIAL CORPORATION
Registrant
/s/ D. Andrew Beal
Date: May 13, 2000 -------------------------------
D. Andrew Beal
Chairman and President
/s/ James W. Lewis, Jr.
Date: May 13, 2000 -------------------------------
James W. Lewis, Jr.
Chief Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 449
<INT-BEARING-DEPOSITS> 83,606
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,304
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,135,239
<ALLOWANCE> 11,547
<TOTAL-ASSETS> 1,405,928
<DEPOSITS> 939,514
<SHORT-TERM> 259,834
<LIABILITIES-OTHER> 12,266
<LONG-TERM> 7,217
0
0
<COMMON> 300
<OTHER-SE> 189,513
<TOTAL-LIABILITIES-AND-EQUITY> 1,405,928
<INTEREST-LOAN> 35,366
<INTEREST-INVEST> 2,287
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 37,653
<INTEREST-DEPOSIT> 13,782
<INTEREST-EXPENSE> 17,275
<INTEREST-INCOME-NET> 20,378
<LOAN-LOSSES> 624
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,149
<INCOME-PRETAX> 16,998
<INCOME-PRE-EXTRAORDINARY> 16,998
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,816
<EPS-BASIC> 56.05
<EPS-DILUTED> 56.05
<YIELD-ACTUAL> 6.00
<LOANS-NON> 76,193
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,344
<CHARGE-OFFS> 2,304
<RECOVERIES> 883
<ALLOWANCE-CLOSE> 11,547
<ALLOWANCE-DOMESTIC> 11,547
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
