UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 2000
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-28120
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Lexington B & L Financial Corp.
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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
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(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 April 21, 2000, there were 828,083 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.
Transitional Small Business Disclosure Format
Yes No X
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LEXINGTON B & L FINANCIAL CORP.
FORM 10-QSB
MARCH 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 7-9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10-16
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
LEXINGTON B & L FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
March 31, September 30,
2000 1999
----------- -------------
(Unaudited)
ASSETS
Cash and due from banks...................................................... $ 1,558 $ 1,872
Interest-bearing deposits.................................................... 3,351 4,219
Investment securities
Available-for-sale, at fair value.......................................... 7,225 8,354
Held-to-maturity (fair value of $21,582 and $23,701, respectively,)........ 22,786 24,346
Federal funds sold........................................................... 4,636 518
Stock in Federal Home Loan Bank of Des Moines ("FHLB")....................... 543 535
Loans held for sale.......................................................... 105 467
Loans receivable, less allowance for loan losses of $616 at March 31, 2000
and $599 at September 30, 1999............................................. 61,444 62,126
Accrued interest receivable.................................................. 960 1,025
Premises and equipment....................................................... 1,420 1,180
Foreclosed real estate....................................................... - 32
Cost in excess of net assets acquired........................................ 900 937
Other assets................................................................. 1,153 1,082
---------- -----------
TOTAL ASSETS $ 106,081 $ 106,693
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits................................................................... $ 85,964 $ 85,150
Advances from borrowers for taxes and insurance............................ 79 182
Advances from FHLB......................................................... 5,065 5,162
Notes payable.............................................................. 273 273
Other liabilities.......................................................... 744 816
---------- -----------
TOTAL LIABILITIES 92,125 91,583
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 and outstanding.................................. 13 13
Additional paid-in-capital................................................. 12,290 12,277
Retained earnings - substantially restricted............................... 9,133 8,905
Accumulated other comprehensive income..................................... (250) (133)
Unearned ESOP shares....................................................... (613) (665)
Unearned MRDP shares....................................................... (121) (182)
Treasury stock at cost (436,917 and 332,215 shares, respectively).......... (6,496) (5,105)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY 13,956 15,110
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 106,081 $ 106,693
=========== ===========
See accompanying notes to consolidated financial statements.
-3-
LEXINGTON B & L FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
Interest Income
Mortgage loans.................................................... $ 993 $ 1,010 $ 1,974 $ 1,968
Other loans....................................................... 329 342 667 712
Investment securities and interest-bearing deposits............... 502 504 1,041 897
Federal funds sold................................................ 55 23 65 44
------ ------- ------- -------
TOTAL INTEREST INCOME 1,879 1,879 3,747 3,621
Interest Expense
Deposits.......................................................... 1,028 1,010 2,036 1,978
Advances from FHLB................................................ 66 67 133 90
Notes payable..................................................... 6 9 13 18
------ ------- ------- -------
TOTAL INTEREST EXPENSE 1,100 1,086 2,182 2,086
------ ------- ------- -------
NET INTEREST INCOME 779 793 1,565 1,535
Provision for loan losses........................................... 14 13 26 26
------ ------- ------- -------
Net Interest Income After Provision for loan losses 765 780 1,539 1,509
Noninterest Income
Service charges and other fees.................................... 63 58 138 112
Commission, net................................................... 16 26 25 37
Income (loss) from foreclosed assets.............................. (3) - (3) 1
Gain ( loss) on sale of investments............................... - 1 - 7
Other............................................................. 30 14 66 27
------ ------- ------- -------
TOTAL NONINTEREST INCOME 106 99 226 184
Noninterest Expense
Employee compensation and benefits................................ 370 394 729 761
Occupancy costs................................................... 52 51 101 100
Advertising....................................................... 7 7 19 21
Data processing................................................... 29 32 54 60
Federal insurance premiums........................................ 5 8 13 16
Professional and consulting fees.................................. 45 37 79 63
Amortization of intangible assets arising from acquisitions....... 18 18 37 37
Other............................................................. 101 136 219 220
------ ------- ------- -------
TOTAL NONINTEREST EXPENSE 627 683 1,251 1,278
------ ------- ------- -------
INCOME BEFORE INCOME TAXES 244 196 514 415
Income taxes........................................................ 83 72 167 147
------ ------- ------- -------
NET INCOME $ 161 $ 124 $ 347 $ 268
======= ======= ======= =======
Basic Earnings Per Share............................................ $ 0.22 $ 0.14 $ 0.45 $ 0.30
======= ======= ======= =======
Diluted Earnings Per Share.......................................... $ 0.21 $ 0.14 $ 0.43 $ 0.30
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
-4-
LEXINGTON B & L FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Six Months Ended
March 31,
2000 1999
------- -------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................................ $ 347 $ 268
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization....................................................... 45 39
Amortization of premiums and discounts.............................................. (3) 4
Amortization of deferred loan fees.................................................. 3 -
Provision for salary continuation plan costs........................................ 42 39
Amortization of cost in excess of net assets acquired............................... 37 37
Gain on held-to-maturity securities................................................. - 7
Provision for loan losses........................................................... 26 26
Originations of loans held for sale................................................. (2,185) -
Proceeds from sale of loans held for sale........................................... 2,547 -
ESOP shares released................................................................ 65 59
Amortization of MRDP................................................................ 61 100
Changes to assets and liabilities increasing (decreasing) cash flows................ (62) (238)
-------- --------
NET CASH FLOW PROVIDED BY OPERATING ACTIVIES 923 341
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities/sales of securities available-for-sale...................... 1,062 550
Proceeds from maturities/sales of securities held-for-sale........................... 1,756 8,069
Net (increase) decrease in federal funds sold........................................ (4,118) 325
Net (increase) decrease in loans receivable.......................................... 680 186
Purchase of securities available-for-sale............................................ (100) (1,324)
Purchase of securities held-to-maturity.............................................. (199) (18,668)
Proceeds from sales of foreclosed real estate........................................ 3 -
Purchase of premises and equipment................................................... (285) (128)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,201) (10,990)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits.................................................. 814 8,729
Net increase (decrease) in advances from borrowers for property
taxes and insurance................................................................. (103) (88)
Proceeds from FHLB advances.......................................................... - 5,150
Repayments of FHLB advances.......................................................... (97) (66)
Purchase of FHLB stock............................................................... (8) (15)
Dividends............................................................................ (119) (151)
Purchase of treasury stock........................................................... (1,391) -
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (904) 13,559
-------- --------
NET INCREASE (DECREASE) IN CASH (1,182) 2,910
Cash and due from banks, beginning of year............................................ 6,091 8,985
-------- --------
CASH AND DUE FROM BANKS, END OF PERIOD $ 4,909 $ 11,895
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for Interest.............................................................. $ 1,035 $ 948
======== ========
Cash paid for income taxes.......................................................... $ 180 $ 215
======== ========
Noncash investing and financing-loans to facilitate sale of real estate............. $ 29 $ -
======== ========
See accompanying notes to consolidated financial statements.
-5-
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 (Loss) Shares Shares Stock Equity
------ ---------- -------- ------------- -------- -------- -------- -------------
Balance at September 30, 1998... $ 13 $ 12,261 $ 8,548 $ 23 $ (767) $ (355) $(4,130) $ 15,593
Comprehensive income:
Net income..................... - - 660 - - - - 660
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 $80,........ - - - (156) - - - (156)
---- -------- ------- -------- ------ ------ ------- --------
Total comprehensive income...... - - 660 (156) - - - 504
---- -------- ------- -------- ------ ------ ------- --------
Repurchase of common stock...... - - - - - - (975) (975)
Release of ESOP shares.......... - 16 - - 102 - - 118
Release of MRDP shares.......... - - - - - 173 - 173
Dividends paid ($.30
per share)..................... - - (303) - - - - (303)
---- -------- ------- -------- ------ ------ ------- --------
Balance at September 30, 1999... 13 12,277 8,905 (133) (665) (182) (5,105) 15,110
(Unaudited)
Comprehensive income:
Net income..................... - - 347 - - - - 347
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 $28......... - - - (117) - - - (117)
---- -------- ------- -------- ------ ------ ------- --------
Total comprehensive income...... - - 347 (117) - - - 230
---- -------- ------- -------- ------ ------ ------- --------
Repurchase of common stock...... - - - - - - (1,391) (1,391)
Release of ESOP shares.......... - 13 - - 52 - - 65
Release of MRDP shares.......... - - - - - 61 - 61
Dividends paid ($.15
per share)..................... - - (119) - - - - (119)
---- -------- ------- -------- ------ ------ ------- --------
Balance at March 31, 2000....... $ 13 $ 12,290 $ 9,133 $ (250) $ (613) $ (121) $(6,496) $ 13,956
==== ======== ======= ======== ====== ====== ======= ========
See accompanying notes to consolidated financial statements.
-6-
LEXINGTON B & L FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A--Basis of Presentation
- -----------------------------
The consolidated interim financial statements as of March 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. and a wholly-owned subsidiary of B&L Bank. 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
March 31, 2000, interim financial statements. The results of operations for the
period ended March 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 March 31, 2000, should be read in conjunction with
the Registrant's audited consolidated financial statements as of September 30,
1999 and for the year then ended included in the Registrant's 1999 Annual Report
to Shareholders. The significant accounting policies followed in the preparation
of the quarterly financial statements are the same as disclosed in the 1999
Annual Report to Shareholders to which reference is made.
NOTE B--Allowance for Loan Losses
- ---------------------------------
The following is a summary of the allowance for loan losses (in thousands):
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
-------- -------- -------- --------
Balance, beginning of period.............. $ 611 $ 601 $ 599 $ 599
Provision for loan losses............... 14 13 26 26
Recoveries on loans charged-off......... 1 2 8 4
Charge offs............................. (10) (20) (17) (33)
-------- -------- -------- --------
Balance, ended of period.................. $ 616 $ 596 $ 616 $ 596
======== ======== ======== ========
At March 31, 2000, non-performing assets were $782,000, which was 1.26% of total
loans and .74% of total assets. This balance consisted of $709,000 in loans not
accruing interest, $73,000 in loans past due 90 days or more and still accruing
interest.
NOTE C--Investment Securities
- -----------------------------
Investment securities consist of the following at March 31, 2000 and
September 30, 1999 (in thousands):
March 31, September 30,
2000 1999
---- ----
Available-for-Sale, at fair value:
U.S. Government and federal agency obligations......... $ 7,225 $ 8,354
--------- ---------
Held-to-Maturity, at amortized cost:
U.S. Government and federal agency obligations......... $ 18,681 $ 19,988
State and municipal obligations........................ 4,105 4,358
--------- ---------
Total held-to-maturity............................. $ 22,786 $ 24,346
--------- ---------
Fair market value.......................................... $ 21,582 $ 23,701
========= =========
-7-
LEXINGTON B & L FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE D--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 Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
Basic earnings per share:
Income available to common stockholders................... $ 161 $ 124 $ 347 $ 268
Average common shares outstanding......................... 746 892 782 892
Basic earnings per share.................................. $ 0.22 $ 0.14 $ 0.45 $ 0.30
====== ====== ====== ======
Diluted earnings per share:
Income available to common stockholders................... $ 161 $ 124 $ 347 $ 268
Average common shares outstanding......................... 746 892 782 892
Dilutive potential common shares outstanding due to
common stock options and awards......................... 23 23 22 19
------ ------ ------ ------
Average number of common shares and dilutive potential
shares outstanding...................................... 769 915 804 911
Diluted earnings per share................................ $ 0.21 $ 0.14 $ 0.43 $ 0.30
====== ====== ====== ======
NOTE E--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 March 31, 2000, 20,245 shares were vested. The Company recognized $30,307 and
$60,613, respectively, as MRDP compensation expense for the three and six months
ended March 31, 2000, and $49,651 and $99,302, respectively, for the three and
six months ended March 31, 1999. The amortization method used attributes a
higher percentage of compensation cost to earlier years than to the later years
of the service period.
-8-
LEXINGTON B & L FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE F--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 through 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 allocated shares are recorded as a reduction of the ESOP loan. ESOP expense
was $32,226 and $64,444 for the three and six month periods ended March 31,
2000, respectively, compared to $28,545 and $58,780 for the same periods a
year ago.
A summary of ESOP shares at March 31, 2000 is as follows:
Shares Allocated 34,747
Shares released for allocation 5,112
Unreleased shares 61,341
---------
Total 101,200
---------
Fair value of unreleased shares $ 766,763
=========
NOTE G--Stock Options
- ---------------------
The Company has authorized the adoption of a stock option plan. Under the 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 beeen exercised as of
March 31, 2000.
NOTE H--Contingencies
- ---------------------
On March 28, 2000 the Company entered into a contract in the amount of
$2,561,000 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 take
approximately 12 months.
-9-
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 and six month periods ended March 31,
2000 and 1999 as well as those material changes in liquidity and capital
resources that have occurred since September 30, 1999.
The following should be read in conjunction with the Company's 1999 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 Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
Per share Data
Basic earnings per share.......... $ 0.22 $ 0.14 $ 0.45 $ 0.30
Dulited earnings per share........ $ 0.21 $ 0.14 $ 0.43 $ 0.30
Cash dividends.................... $ - $ - $ 0.15 $ 0.15
Selected Ratios
Return on average assets.......... 0.60% 0.47% 0.66% 0.53%
Return on stockholders' equity.... 4.53% 3.16% 4.78% 3.26%
Efficiency ratio.................. 68.81% 74.55% 67.78% 72.25%
------------At-------------
March 31, September 30,
2000 1999
---- ----
Book value (tangible) per share............................ $ 15.77 $ 15.19
Market price (closing price at end of period).............. $ 12.50 $ 12.50
Selected Ratios
Loans to deposits......................................... 72.19% 74.21%
Allowance for loan losses to loans........................ 0.99% 0.95%
Equity to total assets.................................... 13.16% 14.16%
Summary
Consolidated net income for the six month period ended March 31, 2000 was
$347,000, an increase of $79,000 or 29.5% over the same period last year. Basic
earnings per share of 45 cents increased 15 cents over a year ago and diluted
earnings per share increased 13 cents to 21 cents per share. The increase in net
income for the six month period can be attributed to a $30,000 increased in net
interest income, a $42,000 increase in non-interest income, and a decline in
non-interest expense of $27,000.
-10-
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Summary (con't)
Consolidated net income for the three month period ended March 31, 2000 was
$161,000, a $37,000 or 29.8% increase over the same period last year. Basic
earnings per share of 22 cents increased 8 cents or 57.1% compared to the same
period ended March 31, 1999. Diluted earnings per share of 21 cents, increased
7 cents over the 14 cents per share earned for the three month period ended
March 31, 1999. The increase in net income for the quarter ended March 31, 2000
compared to the same period a year ago was the result of increased non-interest
income and lower non-interest expense.
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):
Analysis of change in net interest income
Three Months Ended Six Months Ended
March 31, 2000 vs 1999 March 31, 2000 vs 1999
---------------------- ----------------------
Change Due To Change Due To
----------------- ------------------
Average Average Average Average
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
Interest income:
Loans................................ $ 11 $ (40) $ (29) $ 31 $ (70) $ (39)
Investment securities & interest
bearing deposits.................... (53) 51 (2) 82 62 144
Federal funds sold................... 31 - 31 5 16 21
------ ------ ------ ------ ------ ------
Total interest income.......... (11) 11 - 118 8 126
Interest expense:
Deposits............................. 12 5 17 94 (36) 58
Advances from FHLB................... (2) 1 (1) 47 (4) 43
Notes payable........................ (2) - (2) (4) (1) (5)
------ ------ ------ ------ ------ ------
Total interest expense......... 8 6 14 137 (41) 96
------ ------ ------ ------ ------ ------
Net interest income................... $ (19) $ 5 $ (14) $ (19) $ 49 $ 30
====== ====== ====== ====== ====== ======
-11-
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Total interest income was unchanged for the three months and increased $126,000
for the six month periods ended March 31, 2000 compared to the same periods a
year ago. Interest expense for the three and six month periods ended March 31,
2000, increased $14,000 and $96,000, respectively, over the same periods 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
March 31, 2000 March 31, 1999
------------------------------- -------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- -------- ------ ------- -------- ------
Interest Earning Assets
Loans................................ $ 62,508 $ 1,322 8.48% $ 62,003 $ 1,352 8.84%
Investment securities & interest
bearing deposits.................... 33,755 502 5.97% 37,553 504 5.44%
Federal funds sold................... 3,739 55 5.90% 1,601 23 5.83%
-------- ------- ----- -------- ------- -----
Total Earning Assets/Average Yield. 100,002 1,879 7.54% 101,157 1,879 7.53%
Interest Bearing Liabilities
Deposits............................. 80,311 1,028 5.13% 79,335 1,010 5.16%
Advances from FHLB................... 5,120 66 5.17% 5,266 67 5.16%
Notes payable........................ 273 6 10.00% 368 9 10.00%
-------- ------- ----- -------- ------- -----
Total Interest Bearing Liabilities/
Average Yield..................... 85,704 1,100 5.15% 84,969 1,086 5.18%
------- -------
Net Interest Income................... $ 779 $ 793
======= =======
Net interest Spread................... 2.39% 2.35%
Net Interest Margin................... 3.12% 3.18%
-12-
LEXINGTON B & L FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Net Interest Income - continued
Six Months Ended Six Months Ended
March 31, 2000 March 31, 1999
------------------------------- -------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- -------- ------ ------- -------- ------
Interest Earning Assets
Loans................................. $ 62,624 $ 2,641 8.41% $ 61,982 $ 2,680 8.67%
Investment securities & interest
bearing deposits..................... 35,152 1,041 5.91% 32,416 897 5.55%
Federal funds sold.................... 2,066 65 6.28% 1,838 44 4.80%
-------- ------- ----- -------- ------- -----
Total Earning Assets/Average Yield.. 99,842 3,747 7.49% 96,236 3,621 7.55%
Interest Bearing Liabilities
Deposits.............................. 79,447 2,036 5.11% 76,088 1,978 5.21%
Advances from FHLB.................... 5,138 133 5.16% 3,336 90 5.41%
Notes payable......................... 273 13 10.00% 368 18 10.00%
-------- ------- ----- -------- ------- -----
Total Interest Bearing Liabilities/
Average Yield...................... 84,858 2,182 5.13% 79,792 2,086 5.25%
------- -------
Net Interest Income.................... $ 1,565 $ 1,535
======= =======
Net interest Spread.................... 2.36% 2.30%
Net Interest Margin.................... 3.13% 3.20%
Net interest income for the three and six month periods ended March 31,
2000 was $779,000 and $1,565,000, respectively. Net interest income decreased
$14,000 for the quarter and increased $30,000 for the six month period over the
same periods last year. The decrease in net interest income for the quarter
ended March 31, 2000 can be attributed to a lower volume of earning assets
resulting partially from the use of funds to repurchase the Company's common
stock. The net interest spread increased 4 and 6 basis points, respectively, in
the quarter and six month period ended March 31, 2000 compared with the
comparable periods a year ago. The increased in the net interest spread can be
partly attributed to a lower cost of funds resulting from a favorable change in
the mix of funding. The cost of funds decreased 3 basis points during the
quarter and 12 basis points during the six months ended March 31, 2000, compared
to the same periods a year ago.
-13-
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):
March 31, September 30,
2000 1999
--------- -------------
Non-accrual loans............................................ $ 709 $ 425
Loans past due 90 days or more and still accruing interest... 73 5
Foreclosed real estate and other repossessed assets.......... - 32
------- -------
Total non-performing assets.................. $ 782 $ 462
======= =======
Non performing assets at March 31, 2000 were .74% of total assets, compared
to .43% of total assets at September 30, 1999. Non-accrual loans at March 31,
2000 consisted primarily of residence real estate loans, commercial and
commercial real estate loans.
Provision for Loan Losses/Allowance for Loan Losses
The provision for loan losses for the three and six months ended March 31,
2000 were $14,000 and $26,000, respectively, and unchanged from amounts recorded
in the same periods a year ago. Loan charge offs totaled $10,000 and $17,000 for
three and six month period ended March 31, 2000 compared to $20,000 and $33,000,
respectively, during the three and six month periods ended March 31, 1999. Loan
recoveries were $8,000 for the six months ended March 31, 2000 compared to
$4,000 for the same period last year. The allowance for loan losses at March 31,
2000 was $616,000 or .99% of outstanding loans compared to $599,000 or .95% at
September 30, 1999.
Non-Interest Income
Non-interest income for the three month period ended March 31, 2000 of
$106,000 increased $7,000 over the three month period ended March 31, 1999. For
the six month period ended March 31, 2000 non-interest income of $226,000
increased $42,000 over the $184,000 reported for the same period last year. The
increase in non-interest income resulted from primarily from increases in
service charges and mortgage banking fees.
Non-Interest Expense
Non-interest expense of $627,000 and $1,251,000, respectively, for the
three and six months ended March 31, 2000, decreased $56,000 and $27,000,
respectively, from the comparable periods a year ago. Salaries and benefit cost
decreased $24,000 and $32,000, respectively, during the three and six months
ended March 31, 2000 from the same periods 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
$30,000 and $61,000, respectively, for the quarter and six months ended
March 31, 2000, decreased $19,000 and $38,000, respectively, from amounts
reported for the same periods last year.
-14-
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 March 31, 2000, total stockholders' equity of $13,956,000 represented
13.2% of total assets compared to $15,110,000 or 14.2% of total assets at
September 30, 1999. 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 18.8% at March 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 March 31,
2000.
Minimum
B & L Bank Required
Ratios at Capital
March 31, 2000 Ratios
-------------- --------
Risk-based capital..................... 23.1% 8.0%
Core capital........................... 12.9% 4.0%
Tangible capital....................... 12.9% 1.5%
-15-
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
The Federal Deposit Insurance Corporation adopted capital-related
regulations under FDICA. Under those 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 summaries Lafayette County Bank's capital ratios
and ratios required by regulation at March 31, 2000.
Lafayette Minimum
County Bank Required
Ratios at Capital
March 31, 2000 Ratios
-------------- --------
Risk-based capital.................... 16.8% 8.0%
Tier 1 capital to net
risk-weighted assets................ 15.6% 4.0%
Tangible equity ratio................. 7.5% 4.0%
Commitments-Stock Repurchase
- ----------------------------
On December 22, 1999 and March 22, 2000 the Company's Board of Directors
authorized Management to purchase up to 10% and 5%, respectively, of the
Company's outstanding common stock or approximatey 131,402 shares. As of
March 31, 2000 approximately 104,702 shares have been purchased for $1,391,000.
-16-
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
The Annual Meeting of Stockholders' of the Company ("Meeting") was held on
January 26, 2000. The results of the vote on the matters presented at the
Meeting is as follows:
1. The following individuals were elected as directors, each for a three-year
term:
Vote For Vote Withheld
-------- -------------
Norman Vialle 693,108 141,076
Charles R. Wilcoxon 691,406 142,778
The terms of Directors Erwin Oetting, Jr., Steve Oliaro, and E Steva Vialle
continued on after the meeting.
2. The firm of Moore, Horton & Carlson P.C was ratified as auditors for the
fiscal year ended September 30, 2000.
Vote For Vote Withheld
-------- -------------
Ratification of Auditors 808,152 26,032
Broker non-votes totaled -0-
===
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
ITEM 27 FINANCIAL DATA SCHEDULE
-17-
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 5/1/00 By: /s/ William J. Huhmann
------------------ --------------------------------
Date 5/2/00 By: /s/ E. Steva Vialle
------------------ --------------------------------
-18-