1
UNITED STATES
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 the quarterly period ending December 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 0-28120
---------------------------------------
Lexington B & L Financial Corp.
-------------------------------
Missouri 43-1739555
- ---------------------------------------- ----------------------
(State or other jurisdiction of I.R.S. (I.R.S. Employer
Employer Incorporation or organization) Identification NO.)
919 Franklin Avenue, Lexington, Mo 64067
- --------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
816-259-2247
- ------------------------------------
(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 twelve 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 January 31, 2001 there were 784,173 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.
Transitional Small Business Disclosure Format
Yes No X
---------- ---------
2
LEXINGTON B & L FINANCIAL CORP.
FORM 10-QSB
December 31, 2000
INDEX PAGE
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 3
CONSOLIDATED STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 11-16
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1 - LEGAL PROCEEDINGS 17
ITEM 2 - CHANGES IN SECURITIES 17
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY-HOLDERS 17
ITEM 5 - OTHER INFORMATION 17
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
3
LEXINGTON B & L FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
December 31, September 30,
2000 2000
---- ----
(Unaudited)
ASSETS
Cash and due from banks $ 1,704 $ 1,658
Interest-bearing deposits 2,129 3,088
Investment securities
Available-for-sale, at fair value 7,959 7,790
Held-to-maturity (fair value of $21,914 and $21,592, respectively,) 22,128 22,231
Federal funds sold 2,312 1,374
Stock in Federal Home Loan Bank of Des Moines ("FHLB") 543 543
Loans held for sale 224 328
Loans receivable, less allowance for loan losses of $662 at
December 31, 2000 and $648 at September 30, 2000 65,478 64,680
Accrued interest receivable 1,134 1,132
Premises and equipment 3,729 2,832
Foreclosed real estate - -
Cost in excess of net assets acquired 844 863
Other assets 1,120 1,168
---------- ----------
TOTAL ASSETS $ 109,304 $ 107,687
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 86,738 $ 85,339
Advances from borrowers for taxes and insurance 19 180
Advances from FHLB 6,971 7,003
Notes payable 178 178
Other liabilities 1,172 1,043
---------- ----------
TOTAL LIABILITIES 95,078 93,743
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 500,000 shares authorized, none issued - -
Common stock, $.01 par value; 8,000,000 shares authorized,
1,265,000 shares issued 13 13
Additional paid-in-capital 12,297 12,293
Retained earnings 9,601 9,491
Accumulated other comprehensive loss (34) (160)
Unearned ESOP shares (537) (562)
Unearned MRDP shares (60) (77)
Treasury stock at cost (480,827 shares, respectively) (7,054) (7,054)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 14,226 13,944
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 109,304 $ 107,687
========== ==========
See accompanying notes to consolidated financial statements.
-3-
4
LEXINGTON B & L FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
Three Months Ended
December 31,
2000 1999
---- ----
(Unaudited)
Interest Income
Mortgage loans $ 1,107 $ 981
Other loans 374 338
Investment securities and interest-bearing deposits 510 539
Federal funds sold 34 10
------- ------
TOTAL INTEREST INCOME 2,025 1,868
Interest Expense
Deposits 1,118 1,008
Advances from FHLB 65 67
Notes payable 4 7
------- ------
TOTAL INTEREST EXPENSE 1,187 1,082
------- ------
NET INTEREST INCOME 838 786
Provision for loan losses 18 12
------- ------
Net Interest Income After Provision for loan losses 820 774
Noninterest Income
Service charges and other fees 88 95
Commission, net 9 9
Income (loss) from foreclosed assets - -
Gain ( loss) on sale of investments - -
Other 16 16
------- ------
TOTAL NONINTEREST INCOME 113 120
Noninterest Expense
Employee compensation and benefits 348 359
Occupany costs 51 49
Advertising 10 12
Data processing 26 25
Federal insurance premiums 4 8
Professional and consulting fees 34 34
Amortization of intangible assets arising from acquisitions 19 19
Other 105 118
------- ------
TOTAL NONINTEREST EXPENSE 597 624
------- ------
INCOME BEFORE INCOME TAXES 336 270
Income taxes 109 84
------- ------
NET INCOME $ 227 $ 186
======= ======
Basic Earnings Per Share $ 0.32 $ 0.23
======= ======
Diluted Earnings Per Share $ 0.31 $ 0.22
======= ======
See accompanying notes to consolidated financial statements.
-4-
5
LEXINGTON B & L FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended
December 31,
2000 1999
---- ----
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 227 $ 186
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 22 22
Amortization of premiums and discounts (3) (2)
Amortization of deferred loan fees 3 1
Provision for salary continuation plan costs 22 21
Amortization of cost in excess of net assets acquired 19 19
Provision for loan losses 18 12
Originations of loans held for sale (1,454) (1,235)
Proceeds from sale of loans held for sale 1,486 1,463
ESOP shares released 29 33
Amortization of MRDP 17 31
Changes to assets and liabilities increasing (decreasing) cash flows (29) 107
------- -------
NET CASH FLOW PROVIDED BY OPERATING ACTIVIES 357 658
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities/sales of securities available-for-sale 28 1,031
Proceeds from maturities/sales of securities held-to-maturity 100 600
Net (increase) decrease in federal funds sold (938) (51)
Loans originated, net of repayments (747) 374
Purchase of premises and equipment (919) (129)
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,476) 1,825
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 1,399 (1,995)
Net increase (decrease) in advances from borrowers for property taxes/insurance (161) (159)
Repayments of FHLB advances (32) (28)
Purchase of treasury stock - (314)
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,206 (2,496)
------- -------
NET INCREASE (DECREASE) IN CASH (913) (13)
Cash and due from banks, beginning of period 4,746 6,091
------- -------
CASH AND DUE FROM BANKS, END OF PERIOD $ 3,833 $ 6,078
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for Interest $ 1,168 $ 1,035
======== ========
Cash paid for income taxes $ 65 $ -
======== ========
See accompanying notes to consolidated financial statements.
-5-
6
LEXINGTON B& L FINANCIAL CORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Dollars in thousands)
Accumulated
Additional Other Unearned Unearned Total
Common Paid-in Retained Comprehensive ESOP MRDP Treasury Stockholders'
Stock Capital Earnings Income Shares Shares Stock Equity
----- ------- -------- ------ ------ ------ ----- ------
Balance at September 30, 1999 $ 13 $ 12,277 $ 8,905 $ (133) $ (665) $ (182) $ (5,105) $ 15,110
Comprehensive income:
Net income - - 835 - - - - 835
Other Comprehensive income
(loss) - unrealized loss on
securities available-for-sale,
net of reclassification
adjustments for amounts
included in net income, net
of tax benefit of $15 - - - (27) - - - (26)
------ --------- ---------- --------- --------- -------- --------- ----------
Total comprehensive income - - 835 (27) - - - 808
------ --------- ---------- --------- --------- -------- --------- ----------
Repurchase of common stock - - - - - - (1,949) (1,949)
Release of ESOP shares - 16 - - 103 - - 119
Release of MRDP shares - - - - - 105 - 105
Dividends paid ($.15 per share) - - (249) - - - - (249)
------ --------- ---------- --------- --------- -------- --------- ----------
Balance at September 30, 2000 13 12,293 9,491 (160) (562) (77) (7,054) 13,944
(Unaudited)
Comprehensive income:
Net income - - 227 - - - - 227
Other Comprehensive income
(loss) - unrealized loss on
securities available-for-sale,
net of reclassification
adjustments for amounts
included in net income, net
of tax benefit of $65 - - - 126 - - - 126
------ --------- ---------- --------- --------- -------- --------- ----------
Total comprehensive income - - 227 126 - - - 353
------ --------- ---------- --------- --------- -------- --------- ----------
Repurchase of common stock - - - - - - - -
Release of ESOP shares - 4 - - 25 - - 29
Release of MRDP shares - - - - - 17 - 17
Dividends paid ($.15 per share) - - (117) - - - - (117)
------ --------- ---------- --------- --------- -------- --------- ----------
Balance at December 31, 2000 $ 13 $ 12,297 $ 9,601 $ (34) $ (537) $ (60) $ (7,054) $ 14,226
====== ========= ========== ========= ========= ======== ========= ==========
See accompanying notes to consolidated financial statements.
-6-
7
LEXINGTON B & L FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A--Basis of Presentation
- -----------------------------
The consolidated interim financial statements as of December 31, 2000 and for
the period then ended include the accounts of Lexington B & L Financial Corp.,
and its wholly-owned subsidiaries, B &L Bank, Lafayette County Bank, and B & L
Mortgage, Inc. This report has been prepared by Lexington B & L Financial Corp.
("Registrant" or "Company") without audit. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation are reflected in the December 31, 2000, interim financial
statements. The results of operations for the period ended December 31, 2000,
are not necessarily indicative of the operating results that may be expected for
the full year. The consolidated interim financial statements as of December 31,
2000, should be read in conjunction with the Registrant's audited consolidated
financial statements as of September 30, 2000 and for the year then ended
included in the Registrant's 2000 Annual Report to Shareholders. The significant
accounting policies followed in the preparation of the quarterly financial
statements are the same as disclosed in the 2000 Annual Report to Shareholders
to which reference is made.
NOTE B--Investment Securities
- -----------------------------
Investment securities consist of the following at December 31, 2000 and
September 30, 2000 (in thousands):
December 31, September 30,
2000 2000
---- ----
Available-for-Sale, at fair value:
U.S. Government and federal agencies obligations $ 7,959 $ 7,790
============= =============
Amortized cost $ 8,011 $ 8,032
============= =============
Held-to-Maturity, at amortized cost:
U.S. Government and federal agencies obligations 18,279 18,380
State and municipal obligations 3,849 3,851
------------- -------------
Total held-to-maturity $ 22,128 $ 22,231
============= =============
Fair market value $ 21,914 $ 21,592
============= =============
NOTE C--Loans
The following table summarizes the composition of the loan portfolio as of the
December 31, 2000 and September 30, 2000 (in thousands):
December 31, September 30,
2000 2000
---- ----
Mortgage $ 51,028 $ 49,818
Commercial 2,019 1,941
Agriculture 2,812 3,087
Consumer 10,195 10,403
---------- ----------
66,054 65,249
Add deferred loan fees 86 79
---------- ----------
Total loans 66,140 65,328
Less allowance for loan losses 662 648
---------- ----------
Net loans $ 65,478 $ 64,680
========== ==========
-7-
8
LEXINGTON B & L FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE D--Allowance for Loans Losses
The following table is a summary of the activity in the allowance for loan
losses (in thousands):
Three Months Ended
December 31,
2000 1999
---- ----
$ 648 $ 599
Provision for loan losses 18 12
Recoveries on loans charged-off 3 7
Charge-offs (7) (7)
-------- --------
$ 662 $ 611
======== ========
At December 31, 2000, non-performing assets were $479,000, which was .72% of
total loans and .44% of total assets. This balance consisted of $392,000 in
loans not accruing interest and $87,000 in loans past due 90 days or more and
still accruing interest.
NOTE D--Deposits
The following table summarizes the composition of deposits as of December 31,
2000 and September 30, 2000 (in thousands):
December 31, September 30,
2000 2000
---- ----
Noninterest-bearing $ 5,537 $ 6,164
NOW 7,507 7,378
Money Market 6,753 6,044
Savings 5,780 7,364
Certificates of deposit 61,161 58,389
------------- -------------
Total deposits $ 86,738 $ 85,339
------------- -------------
-8-
9
LEXINGTON B & L FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE E--Earnings Per Share
- --------------------------
Basic EPS is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
The following table presents the computation of EPS (in thousands, except for
per share amounts):
Three Months Ended
December 31,
2000 1999
---- ----
Basic earnings per share:
Income available to common stockholders $ 227 $ 186
========= =========
Weighted average shares
Average common shares outstanding 709 823
Options and MRDP plans 22 20
--------- ---------
Weighted average diluted common shares 731 843
========= =========
Basic earnings per share $ 0.32 $ 0.23
========= =========
Dilutive earnings per share $ 0.31 $ 0.22
========= =========
NOTE F--Stock Options
- ---------------------
Under the Company's stock option plan, options to acquire 126,500 shares of the
Company's common stock may be granted to certain officers, directors and
employees of the Company or B&L Bank. The options will enable the recipient to
purchase stock at an exercise price equal to the fair market value of the stock
at the date of the grant. On June 11, 1997, the Company granted options for
101,200 shares for $15.125 per share. The options will vest over the five years
following the date of grant and are exercisable for up to ten years. No options
have been exercised as of December 31, 2000.
NOTE G--Management Recognition and Development Plan
- ---------------------------------------------------
The Board of Directors adopted (November 27, 1996) and the shareholders
subsequently approved (January 27, 1997) a management recognition and
development plan ("MRDP"). Under the MRDP, 50,600 shares of common stock were
awarded to certain directors, officers and employees of the Company and B&L
Bank. The award will not require any payment by the recipients and will vest
over five years beginning one year after the date of the award (June 11, 1997).
At December 31, 2000, 30,360 shares were vested. The Company recognized $17,410
and $30,307 as MRDP compensation expense for the three months ended December 31,
2000 and 1999, respectively. The amortization method used attributes a higher
percentage of compensation cost to earlier years than to the later years of the
service period.
-9-
10
LEXINGTON B & L FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE H--Employee Stock Ownership Plan
- -------------------------------------
B & L Bank established an ESOP for the exclusive benefit of participating
employees (all salaried employees who have completed at least 1000 hours of
service in a twelve-month period and have attained the age of 21). The ESOP
borrowed $1,012,000 from the Company to fund the purchase of 101,200 shares of
the Company's common stock. The loan is secured solely by the shares purchased
and will be repaid by the ESOP in equal quarterly installments of principal and
interest payable at 8.25% through March 2006. B & L Bank makes quarterly
contributions to the ESOP which are equal to the debt service less dividends
received on unallocated ESOP shares. B & L Bank contributes approximately
$149,600, including interest, annually to the ESOP. Shares are released from
collateral and allocated to participating employees, based on the proportion of
loan principal and interest repaid and compensation of the participants.
Forfeitures will be reallocated to participants on the same basis as other
contributions in the plan year. Benefits are payable upon a participant's
retirement, death, disability or separation from service. Since B & L Bank's
annual contributions are discretionary, benefits payable under the ESOP cannot
be estimated.
The Company accounts for its ESOP in accordance with Statement of Position
("SOP") 93-6, EMPLOYERS' ACCOUNTING FOR EMPLOYEE STOCK OWNERSHIP PLANS.
Accordingly, the debt and related interest expense of the ESOP are eliminated in
consolidation and the shares pledged as collateral are reported as unearned ESOP
shares in the consolidated statements of financial condition. As shares are
committed to be released from collateral, the Company reports compensation
expense equal to the average fair value of the shares committed to be released.
Dividends on allocated shares will be charged to stockholders' equity. Dividends
on unallocated shares are recorded as a reduction of the ESOP loan. ESOP expense
was $29,013 for the three months ended December 31, 2000 compared to $32,218 for
the same period ended December 31, 1999,
A summary of ESOP shares at December 31, 2000 is as follows:
Shares Allocated 44,972
Shares released for allocation 2,556
Unreleased shares 53,672
---------
Total 101,200
---------
Fair value of unreleased shares $ 670,900
=========
NOTE I--Contingencies
- ---------------------
On March 28, 2000 the Company entered into a contract in the amount of
$2,642,000 for the construction of a new banking facility to be located in
Lexington, Missouri. The new facility is being built to accommodate the merger
of the Company's two banking subsidiaries. Construction is expected to be
completed in February 2001. As of December 31, 2000, a total of $2,412,000 has
been paid.
-10-
11
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
The discussion and analysis included herein covers material changes in
results of operations during the three month periods ended December 31, 2000 and
1999 as well as those material changes in liquidity and capital resources that
have occurred since September 30, 2000.
The following should be read in conjunction with the Company's 2000 Annual
Report to Shareholders, which contains the latest audited financial statements
and notes thereto, together with Management's Discussion and Analysis of
Financial Condition and Results of Operations contained therein. Therefore, only
material changes in financial condition and results of operation are discussed
herein.
Three Months Ended
December 31,
------------
2000 1999
---- ----
PER SHARE DATA
Basic earnings per share $0.32 $0.23
Dulited earnings per share $0.31 $0.22
Cash dividends $0.15 $0.15
SELECTED RATIOS
Return on average assets 0.86% 0.70%
Return on stockholders' equity 6.53% 4.97%
Efficiency ratio 60.78% 66.78%
------------------At-------------------
December 30, September 30,
2000 2000
---- ----
Book value (tangible) $17.06 $16.68
Market price (closing price at end of period $12.50 $11.00
Selected Ratios:
Loans to deposits 76.12% 76.55%
Allowance for loan losses to loans 1.00% 0.99%
Equity to total assets 13.00% 12.95%
SUMMARY
Consolidated net income for the three months ended December 31, 2000 was
$227,000, a $41,000 or 22.0% increase over the same period last year. Basic
earnings per share of 32 cents increased 9 cents compared to the same period
ended December 31,1999. Diluted earnings per share of 31 cents, increased 9
cents over the 22 cents per share earned for the three-month period ended
December 31, 1999. The increase in net income for the quarter ended December 31,
2000 compared to the same period a year ago was the result of a $52,000 increase
in net interest income and a decline of $27,000 in non-interest expense.
-11-
12
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
NET INTEREST INCOME
The following table summarizes the changes in net interest income, by
major categories of earning assets and interest bearing liabilities, identifying
changes related to volume and rate. Changes not solely due to volume or rate
changes are allocated pro rata to volume and rate. Management believes this
allocation method, applied on a consistent basis, provides meaningful
comparisons between periods (in thousands):
Three Months Ended Three Months Ended
------------------------------------ ----------------------------------
December 31, 2000 vs 1999 December 31, 1999 vs 1998
------------------------- -------------------------
Change Due To Change Due To
------------- -------------
Average Average Average Average
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
Interest income:
Loans $ 71 $ 91 $ 162 $ 16 $ (25) $ (9)
Investment securities & interest
bearing deposits (90) 61 $ (29) 172 (26) 146
Federal funds sold 20 4 24 (13) 2 (11)
------ -------- ------- --------- --------- --------
Total interest income 1 156 157 175 (49) 126
Interest expense:
Deposits 24 86 110 82 (42) 40
Advances from FHLB 20 (22) (2) 47 (3) 44
Notes payable (2) (1) (3) (2) - (2)
------ -------- ------- --------- --------- --------
Total interest expense 42 63 105 127 (45) 82
------ -------- ------- --------- --------- --------
Net interest income $ (41) $ 93 $ 52 $ 48 $ (4) $ 44
====== ======== ======= ========= ========= ========
-12-
13
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Total interest income for the three months ended December 31, 2000 increased
$157,000 over comparable period last year. Interest expense for the quarter
increased $105,000 for the three months ended December 31, 2000 over the same
period a year ago. The following table provides summaries of average assets and
liabilities and the corresponding average rates earned/paid (in thousands):
Three Months Ended Three Months Ended
December 31, 2000 December 31, 1999
--------------------------------- -----------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
Interest Earning Assets
Loans $ 65,988 $ 1,481 8.90% $ 62,711 $ 1,319 8.34%
Investment securities & interest
bearing deposits 33,081 510 6.12% 39,200 539 5.46%
Federal funds sold 2,129 34 6.34% 810 10 4.90%
-------- ------- -------- -------
Total Earning Assets/Average Yield 101,198 2,025 7.94% 102,721 1,868 7.22%
Interest Bearing Liabilities
Deposits 80,606 1,118 5.50% 78,798 1,008 5.08%
Advances from FHLB 6,992 65 3.69% 5,151 67 5.16%
Notes payable 178 4 8.92% 273 7 10.17%
-------- ------- -------- -------
Total Interest Bearing Liabilities/
Average Yield 87,776 1,187 5.37% 84,222 1,082 5.10%
------- -------
Net Interest Income $ 838 $ 786
======= =======
Net interest Spread 2.57% 2.12%
Net Interest Margin 3.29% 3.04%
Net interest income for the three-period ended December 31, 2000 was $838,000
compared to $786,000 for the three-month period ended December 31, 1999. The
increase in net interest income for the quarter ended December 31, 2000 can be
attributed to an improvement in the net interest spread. The net interest spread
of 2.57% increased 45 basis points over the comparable period last year.
Contributing to the increase in net interest income and a wider net interest
spread was the capitalization of $38,000 of interest expense on the construction
cost of a new bank building during the quarter ended December 31, 2000. The
capitalization of interest expense increased the net interest spread from 2.40%
to 2.57%. A total of $73,000 of interest has been capitalized since construction
started in March 2000. The increase in the net interest spread can also be
attributed to a higher yield on earning assets resulting from the portfolio of
mortgage loans which are adjustable to changes in interest rates. The higher
cost of funds for the quarter, which increased 27 basis points over the compared
period a year ago, is the result of the a general rise in interest rates over
the past twelve months.
The improvement in the net interest margin of 25 basis points over the same
period last year can be attributed to the a wider net interest spread an
improved mix of earning assets.
-13-
14
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
RISK ELEMENTS OF LOAN PORTFOLIO
Non-performing assets include non-accrual loans, loans 90 days or more
delinquent and still accruing interest, foreclosed real estate and other
repossessed assets. The following table presents non-performing assets for the
periods indicated, (in thousands):
December 31, September 30,
2000 2000
---- ----
Non-accrual loans $ 392 $ 394
Loans past due 90 days or more and still accruing interest 87 47
Foreclosed real estate and other repossessed assets - -
--------- ---------
Total non-performing assets $ 479 $ 441
========= =========
Non-performing assets at December 31, 2000 were .44% of total assets, compared
to .41% of total assets at September 30, 2000. Non-accrual loans at December 31,
2000 consisted primarily of residential real estate loans, commercial and
commercial real estate loans. Classified assets at December 31, 2000 totaled
$1,107,000 or 1.67% of total loans and 1.01% of total assets, compared to
$725,000 or 1.11% of total loans and .67% of total assets at September 30, 2000.
Classified assets consisted entirely of loans classified substandard and special
mention.
PROVISION FOR LOAN LOSSES/ALLOWANCE FOR LOAN LOSSES
The provision for loan losses for the three months ended December 31, 2000
was $18,000 compared to a $12,000 provision for the three month period ended
December 31, 1999. Loan charge-offs totaled $7,000 for three-month period ended
December 31, 2000 compared to $7,000 for the same period a year ago. Loan
recoveries for the three-period ended December 31, 2000 were $3,000 compared to
$7,000 for the comparable period last year. The allowance for loan losses at
December 31, 2000 was $662,000 or 1.00% of outstanding loans compared to
$648,000 or .99% at September 30, 2000. The higher provision for loan losses can
be attributed to the methodologies in determining the adequacy of the allowance
for loan losses and to an increase in outstanding loans. Loans increased
$812,000 since September 30, 2000.
NON-INTEREST INCOME
Non-interest income for the three-month period ended December 31, 2000 of
$113,000 decreased $7,000 from the three-month period ended December 31, 1999.
The decrease in non-interest income for the three months ended December 31, 2000
resulted primarily from decreases in service charge income.
NON-INTEREST EXPENSE
Non-interest expense of $597,000 for the three months ended December 31,
2000, decreased $27,000 from the comparable period a year ago. Accounting for
the majority of the decrease was a reduction in salaries and benefit cost, which
decreased $11,000 during the three-month ended December 31, 2000 from the same
period last year. The decrease in salaries and benefits is primarily from a
reduction in the cost of Management Recognition and Development Plan. The
Management Recognition Development Plan expense of $17,000 for the quarter ended
December 31, 2000, decreased $31,000 from amount reported for the same period
last year.
The operating expense efficiency ratio, which is non-interest expense less
amortization of goodwill divided by net revenue, was 60.8% for the three months
ended December 31, 2000, an improvement from 66.8% for the same period a year
ago. The improvement in the expense efficiency ratio can be attributed to lower
operating expenses and to an increase in net revenues.
-14-
15
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's subsidiaries, B & L Bank and Lafayette County Bank, must
maintain an adequate level of liquidity to ensure availability of sufficient
funds to support loan growth and deposit withdrawals, satisfy financial
commitments and to take advantage of investment opportunities.
The primary source of liquidity for the Company's subsidiaries is liability
liquidity, which is the ability to raise new funds and renew maturing
liabilities. Principal sources of liability liquidity are customer deposits and
advances from Federal Home Loan Bank, of which both bank subsidiaries are
members. Asset liquidity is typically provided through proceeds from principal
and interest payments on loans, mortgage-backed securities, investment
securities and net operating income. While scheduled maturities and amortization
of loans, investment securities and mortgage-backed securities are somewhat
predictable source of funds; deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition.
Liquid funds necessary for normal daily operations are maintained with the
Federal Home Loan Bank of Des Moines (FLHB) and correspondent banks. Excess
funds over balances required to cover bank charges for services, are sold in
overnight Federal funds or transferred to time deposit accounts at the FHLB.
At December 31, 2000, total stockholders' equity of $14,226,000 represented
13.0% of total assets compared to $13,944,000 or 12.9% of total assets at
September 30, 2000. These levels of primary capital exceed regulatory
requirements and the Company's peer group average.
B & L BANK
The Office of Thrift Supervision currently requires a thrift institution to
maintain an average daily balance of liquid assets (cash and eligible
investments) equal to at least 4% of the average daily balance of its net
withdraw able deposits and short-term borrowing. B & L Bank's liquidity ratio
was 15.14 at December 31, 2000. B & L Bank consistently maintains liquidity
levels in excess of regulatory requirements, and believes this is an appropriate
strategy for proper asset and liability management.
The Office of Thrift Supervision requires institutions such as B & L Bank to
meet certain tangible, core, and risk-based capital requirements. Tangible
capital generally consists of stockholders' equity minus certain intangible
assets. Core capital general consists of stockholders' equity. The risk-based
capital requirements presently address risk related to both recorded assets and
off-balance sheet commitments and obligations. The following table summarizes B
& L Bank's capital ratios and the ratios required by regulation at December 31,
2000.
Minimum
B & L Bank Required
Ratios at Capital
December 31, 2000 Ratios
----------------- -----
Risk-based capital 22.7% 8.0%
Tier 1 capital to risk-weighted assets 22.1% 4.0%
Tangible capital 13.2% 1.5%
-15-
16
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES CON'T
- --------------------------------------
LAFAYETTE COUNTY BANK
Under Federal Deposit Insurance Corporation regulations, a bank will be
adequately capitalized if it: (i) had a risk-based capital ratio of 8% or
greater; (ii) had a ratio of Tier I capital to risk-adjusted assets of 4% or
greater, (iii) had a ratio of Tier I capital to adjusted total assets of 4% or
greater, (iv) was not subject to an order, written agreement, capital directive,
or prompt corrective action directive to meet and maintain a specific capital
level for any capital measure. The following table summarizes Lafayette County
Bank's capital ratios and ratios required by regulation at December 31, 2000:
Lafayette Minimum
County Bank Required
Ratios at Capital
December 31, 2000 Ratios
----------------- ------
Risk-based capital 17.6% 8.0%
Tier 1 capital to net risk-weighted assets 16.3% 4.0%
Tangible equity ratio 8.2% 4.0%
-16-
17
LEXINGTON B & L FINANCIAL CORP.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Registrant nor its banking subsidiaries, B & L Bank or Lafayette
County Bank, are a party to any material legal proceedings at this time. From
time to time the Company's banking subsidiaries are involved in various claims
and legal actions arising in the ordinary course of business.
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
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
-17-
18
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Lexington B & L Financial Corp.
Date: January 29, 2001 By: Erwin Oetting, Jr.
------------------ ------------------
President, Chief Executive Officer
And Director (Principal Executive
Officer)
Date January 29, 2001 By: William J. Huhmann
----------------- ---------------------
Senior Vice President and Chief
Financial Officer, (Principal
Financial and Accounting Officer)
-18-