SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20552
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FORM 10-QSB
(MarkOne)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 2000
[ ] 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 0-23645
LEEDS FEDERAL BANKSHARES, INC
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(Exact name of registrant as specified in its charter)
UNITED STATES 52-2062351
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
1101 Maiden Choice Lane, Baltimore, Maryland 21229
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(Address of principal executive offices)
Registrant's telephone number, including area code: 410-242-1234
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Former name, former address and former fiscal year, if changed since last report
Indicated by a check 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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: There were 4,538,518 shares
of the Registrant's common stock outstanding as of October 1, 2000.
LEEDS FEDERAL BANKSHARES, INC
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
September 30, 2000 (unaudited), and June 30, 2000 1
Consolidated Statements of Income and Comprehensive
Income (unaudited) for the three months ended
September, 2000 and 1999 2
Consolidated Statements of Cash Flows (unaudited)
for the three months ended September 30, 2000 and 1999 3
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LEEDS FEDERAL BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Sept 30 June 30,
2000 2000
------- --------
(unaudited)
Assets
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Cash:
On hand and due from banks $2,020,673 $1,982,152
Interest-bearing deposits 2,021,804 2,059,010
Short Term Investments 10,764,305 9,551,979
Secured short-term loans to commercial
banks 13,213,981 9,562,746
Investment securities held to maturity 66,968,710 67,392,698
Securities available for sale 6,205,137 5,258,493
Mortgage backed securities held to maturity 7,929,408 8,317,018
Loans receivable, net 216,449,417 219,203,607
Investment in Federal Home Loan Bank of
Atlanta stock, at cost 2,187,200 2,187,200
Property and equipment, net 2,204,843 2,242,783
Cash surrender value of life insurance 6,757,626 6,687,537
Accrued interest receivable 2,246,883 2,116,855
Prepaid expenses and other assets 323,874 486,229
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339,293,861 337,048,307
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Liabilities and Stockholders' Equity
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Liabilities:
Savings accounts 283,981,519 281,866,206
Borrowed Funds-Employee Stock Ownership
Plan 360,000 384,000
Advance payments by borrowers for taxes,
insurance and ground rents 3,224,510 5,073,906
Federal and state income taxes:
Currently Payable 712,423 267,283
Deferred 857,941 493,303
Accrued expenses and other liabilities 1,627,083 1,554,136
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Total liabilities 290,763,476 289,638,834
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Stockholders' equity:
Common Stock $1 par value: 20,000,000
shares authorized: and 5,205,597
shares issued 5,205,597 5,205,597
Additional paid in capital 9,611,527 9,606,811
Unearned employee stock ownership plan
shares (270,534) (297,066)
Retained income, substantially restricted 40,201,753 39,573,847
Treasury Stock at cost:667,416 and 656,416
shares respectively (8,336,969) (8,216,719)
Accumulated other comprehensive income 2,119,011 1,537,003
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Total stockholders' equity 48,530,385 47,409,473
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$339,293,861 $337,048,307
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LEEDS FEDERAL BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months
Ended Sept 30,
2000 1999
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Interest Income:
First mortgage and other loans $ 3,892,896 $3,722,728
Mortgage-backed securities 153,202 162,832
Investment securities and short term
investments 1,663,931 1,562,993
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Total interest income 5,710,029 5,448,553
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Interest expense:
Savings accounts 3,773,578 3,412,117
Other 8,907 9,508
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Total interest expense 3,782,485 3,421,625
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Net interest income 1,927,544 2,026,928
Provision for loan losses -0- 12,374
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Net interest income after provision for
loan losses 1,927,544 2,014,554
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Noninterest income:
Service fees and charges 45,621 37,027
Other 81,511 62,475
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127,132 99,502
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Noninterest expense:
Compensation and employee benefits 481,215 378,452
Occupancy 78,173 65,229
SAIF deposit insurance premiums 32,662 59,807
Advertising 46,520 33,902
Other 171,389 146,159
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809,959 683,549
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Income before provision for income taxes 1,244,717 1,430,507
Provision for income taxes 446,640 497,967
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Net Income $ 798,077 $ 932,540
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Other comprehensive income(loss),net of tax
Unrealized gain (loss) on securities
available for sale, net 582,008 (451,257)
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Comprehensive income $ 1,380,085 $ 481,283
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Net income per share of common stock
Basic $ .18 $ .20
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See accompanying notes to consolidated
financial statements
Diluted $ .18 $ .19
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LEEDS FEDERAL BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months
Ended Sept 30,
2000 1999
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Cash flows from operating activities:
Net Income $ 798,077 $ 932,540
Adjustments to reconcile net income to
net cash provided by operating activities:
Accretion of loan fees 20,385 (22,213)
Provision for loan losses -0- 12,374
Accretion of premiums(discounts) on investments
securities and mortgage-backed securities, net (9,381) (12,600)
Depreciation 44,110 32,104
Non-cash compensation under stock based benefit
plans 31,248 39,262
Increase in accrued interest receivable (130,028) (32,016)
Increase in income taxes currently payable 445,140 467,116
Increase in accrued expenses and other
liabilities 72,947 79,947
Increase in unearned loan fees (27,033) 38,047
Increase (decrease) in prepaid expenses
and other assets 162,355 (20,192)
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Net cash provided by operating activities 1,407,820 1,514,369
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Cash flows from investing activities:
Purchase of investment securities held to
maturity -0- (1,700,000)
Maturities of and principal repayments on
investment securities held to maturity
Loan repayments (disbursements), net 431,858 160,522
Purchase of mortgage-backed securities 2,760,838 (11,710,352)
Principal repayments on mortgage-backed
securities held to maturity -0- (400,000)
Purchases of property and equipment 389,123 903,126
Investment in life insurance policies (6,170) (82,745)
(70,089) (62,475)
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Net cash provided by (used in) investing
activities
3,505,560 (12,891,924)
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LEEDS FEDERAL BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Three Months
Ended Sept 30,
2000 1999
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Cash flows from financing activities:
Net increase in savings accounts $2,115,313 $2,459,187
Decrease in advance payments by borrowers
for taxes, insurance and ground rents (1,849,396) (3,907,301)
Payment of dividends (170,171) (199,472)
Purchase of treasury stock (120,250) (744,615)
Repayment of Borrowed Funds (24,000) (14,813)
Net cash used in financing activities (48,504) (2,407,014)
Net increase (decrease) in cash and cash
equivalents 4,864,876 (13,784,569)
Cash and cash equivalents at beginning
of period 23,155,887 33,010,666
Cash and cash equivalents at end of period $28,020,763 $19,226,097
Cash paid during the period for interest
on deposits and other borrowings. 3,783,000 3,422,000
Cash paid during the period for income taxes. 1,500 31,000
See accompanying notes to consolidated financial statements.
LEEDS FEDERAL BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Leeds Federal Bankshares, Inc.(the Company), its wholly owned subsidiary, Leeds
Federal Savings Bank and Leeds Investment Corporation, a wholly owned subsidiary
of Leeds Federal Savings Bank. Adjustments, consisting of normal recurring
adjustments, which, in the opinion of management are necessary for a fair
presentation of financial position and results of operations have been recorded.
The financial statements have been prepared using the accounting policies
described in the June 30,2000 Annual Report. The results of operations for the
three months ended September 30, 2000, are not necessarily indicative of the
results that may be expected for the entire year.
(2) Reclassification of Prior Year's Statements
Certain amounts in the 1999 financial statements have been reclassified to
conform to the 2000 presentation.
(3) Net Income per Share of Common Stock
Basic earnings per share (EPS) is calculated by dividing net income by the
weighted average number of common shares outstanding for the applicable period.
Diluted EPS is calculated after adjusting the numerator and the denominator of
the basic EPS calculation for the effect of all dilutive potential common shares
outstanding during the period. Information related to the calculation of net
income per share of common stock is summarized as follows:
LEEDS FEDERAL BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
September 30, 2000
(unaudited and continued)
Three months Three months
Ended September 30, 2000 Ended September 30, 1999
Basic Diluted Basic Diluted
----- ------- ----- -------
Net income $798,077 $798,077 $932,540 $932,540
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Weighted-average shares
outstanding 4,501,026 4,501,026 4,766,611 4,766,611
Dilutive securities -
options -- 44,543 -- 43,139
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Adjusted weighted-
average shares used in
EPS computation 4,501,026 4,545,569 4,766,611 4,809,750
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(4) Dividends on Common Stock
On September 13, 2000 declared a quarterly cash dividend of $.15 per share.
The dividends were payable to stockholders of record as of October 4, 2000 and
were paid on October 18, 2000. Leeds Federal Bankshares, M.H.C. (the MHC),
which owns 3,300,000 shares of stock in the Company, waived receipt of its
quarterly dividend, thereby reducing the actual dividend payout to approximately
$186,000. The dollar amount of dividends waived by the MHC is considered as a
restriction on the retained earnings of the Company. The amount of any dividend
waived by the MHC shall be available for declaration as a dividend solely to the
MHC. At September 30, 2000, the cumulative amount of such waived dividends was
$10,223,400.
LEEDS FEDERAL BANKSHARES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
In addition to historical information, this Quarterly Report contains
forward-looking statements. The forward-looking statements contained in this
document are subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking
statements. Important factors that might cause such a difference include, but
are not limited to, those discussed in this section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Readers should not place undue reliance on these forward-looking statements, as
they reflect management's analysis as of the date of this report. The Company
has no obligation to update or revise these forward-looking statements to
reflect events or circumstances that occur after the date of this report.
Readers should carefully review the risk factors described in other documents
the Company files from time to time with the Securities and Exchange Commission,
including current reports filed on Form 8-K.
Discussion of Financial Condition Changes from June 30, 2000 to September 30,
2000
Cash on hand and due from banks, interest bearing deposits, other liquid
investments, investment securities, and investment in FHLB stock totaled
approximately $103.4 million, an increase of approximately $5.4 million, or
5.5%, from June 30, 2000. Mortgage-backed securities totaled $7.9 million, a
decrease of $400,000, due to repayments of principal. Loans receivable totaled
$216.4 million, a decrease of $2.8 million, or 1.3%, due to repayments of
principal, partially offset by new lending activity at lower than normal levels.
Deposits increased approximately $2.1 million, to $284.0 million at
September 30, 2000. Such increase was primarily attributable to the general
market interest rate trends. The Company has offered savings rates that are
competitive with other banks. However, it has not relied on brokered funds or
negotiated jumbo certificates to maintain deposit levels.
The Bank is subject to capital standards which generally require the
maintenance of regulatory capital sufficient to meet each of three tests,
hereinafter described as the Tier 1 core capital requirement, the Tier 1 risk
based capital requirement and the total risk based capital requirement. At
September 30, 2000, the Bank had Tier 1 core capital of $46.1 million, or 13.7%
of total adjusted assets, which was $32.6 million in excess of the requirement
of minimum core capital of $13.4 million, or 4% of total adjusted assets; Tier 1
risk based capital of $46.1 million, or 27.8% of risk weighted assets, which was
$39.5 million in
excess of the requirement of minimum Tier 1 risk based capital of $6.6 million,
or 4% of risk weighted assets; and total risk-based capital of $48.4 million, or
29.2% of risk weighted assets, which was $35.2 million in excess of the
requirement of a minimum total risk-based capital of 8% of risk weighted assets.
Comparison of Operating Results for Three Month Periods Ended September 30, 2000
and 1999
General
The Company's net income for the three months ended September 30, 2000,
totaled $798,000, a decrease of $135,000, compared to $933,000 for the three
months ended September 30, 1999. Unrealized gains (losses) on securities
available for sale increased $1.0 million to a gain of $582,000 for the three
months ended September 30, 2000, from a loss of $451,000 for the three months
ended September 30, 1999. The increase was due to an increase in the fair value
of the Company's investment securities available for sale, principally the
Company's Federal Home Loan Mortgage Corporation preferred stock.
Net Interest Income
Interest income on loans increased $170,000, to $3.9 million, for the three
months ended September 30, 2000, from $3.7 million for the three months ended
September 30, 1999. Total average loans increased $8.8 million to $219.0 million
for the current quarter compared to $210.2 for the same quarter last year. The
increase in average loans reflected increased loan demand. Funds principally
from an increase in average saving deposits were used to fund the increase in
average loans. Yield on average loans remained relatively unchanged at 7.1% for
the three months ended September 30, 2000 and 1999, respectively. Interest
income on mortgage-backed securities decreased by $10,000 to $153,000, for the
three months ended September 30, 2000, from $163,000 for the same quarter last
year, due principally to a decrease in average balance of mortgage-backed
securities to $8.2 million from $9.8 million, partially offset by an increase in
average yield on mortgage-backed securities to 7.5%, from 6.7%. The decreases in
average balance of mortgage-backed securities and the increase in the average
yield was attributable to principal repayments of lower yielding mortgage-backed
securities.
Interest income on investment securities and short-term investments
("Investments") increased $101,000 to $1.7 million for the three months ended
September 30, 2000, from $1.6 million for the three months ended September 30,
1999. The average balance of Investments decreased to $100.1 million for the
three months ended September 30, 2000, from $101.3 million for the prior period.
Average yield of Investments increased to 6.7%, from 6.2%, due to changes in
market rates.
Total interest expense increased by approximately $361,000, during the
quarter ended September 30, 2000 to $3.8 million from $3.4 million for the
quarter
ended September 30, 1999. This increase was the result of an increase in average
balance of interest-bearing liabilities to $284.9 million from $276.9 million,
and an increase in the average rate paid on deposits to 5.3% from 4.9%. The
increase in the average balances of interest-bearing liabilities and the
increase in rate paid were a result of general market conditions and increased
marketing in connection with opening of a new branch.
As a result of the foregoing changes, interest expense increased by a
greater amount as compared to interest income resulting in a decrease in net
interest income of $99,000, to $1.9 million during the three months ended
September 30, 2000, as compared to $2.0 million during the three months ended
September 30, 1999.
Provision for Loan Losses
The Company made no provision for loan losses for the three months ended
September 30, 2000, and $12,000 during the three months ended September 30,
1999. The allowance, which was $742,000 at September 30, 2000, is established in
accordance with generally accepted accounting principles and exists to absorb
losses inherent in the Company's overall loan portfolio. In addition to
historical loss experience, the Company considers other factors that are likely
to cause credit losses; including changes in economic and business conditions
and developments, changes in the nature and volume of the portfolio, trends in
the level of past due and classified loans, and the status of nonperforming
loans. Based on management's review and analysis, the allowance for loan losses
as of September 30, 2000, is considered adequate.
Noninterest Income
Noninterest income increased by approximately $28,000 to $127,000 during
the three months ended September 30, 2000, as compared to $100,000 during the
three months ended September 30, 1999. The increase was primarily the result of
increases in service fees and charges, principally income from the Bank's
subsidiary's sale of nondeposit investment products, and income from life
insurance contracts.
Noninterest Expense
Noninterest expense for the three months ended September 30, 2000,
increased by approximately $126,000, to $810,000 compared to $684,000 for the
three months ended September 30, 1999. The increase was due to increases in
compensation and employee benefits, occupancy, advertising, and other expenses,
partially offset by a decrease in Savings Association Insurance Fund deposit
insurance premiums. The increased expenses resulted primarily from the new full
service branch which opened in April, 2000. Compensation and employee benefits
also increased further as a result of the Company's lower deferral of costs of
originating loans because of lower lending levels.
Provision for Income Taxes
Provision for income taxes for the three months ended September 30, 2000,
totaled $447,000, compared to $498,000 for the three months ended September 30,
1999. The effective income tax rates for the three months ended September 30,
2000 and 1999, were 35.9% and 34.8%, respectively.
Classified Loans
Loans which were 90 or more days delinquent but still accruing totaled
$30,000 at September 30, 2000, and $5,000 at June 30, 2000. Loans 90 or more
days delinquent and not accruing totaled $2.6 million at September 30, 2000, and
$2.5 million at June 30, 2000. As of September 30, 2000, the Company had a $2.5
million loan which matured in June 1998, and has not been repaid. Management has
obtained a current appraisal, and based in part on such appraisal, management
believes the Company will not incur a material loss on this loan.
Liquidity
The Company is required to maintain levels of liquid assets as defined by
Office of Thrift Supervision regulations. This requirement, which varies from
time to time (currently set at 4%) depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The Company's liquidity ratio averaged 37.73% during the quarter ended September
30, 2000, and equaled 37.91% at September 30, 2000.
Common Stock Repurchase Plan
As of September 30, 2000, the Company had repurchased a total of 667,416
shares in connection with its repurchase plan. The Board of Directors has
authorized the Company to repurchase up to an additional 356,025 shares as, in
the opinion of management, market conditions warrant.
PART II. OTHER INFORMATION
Legal Proceedings
The Company is not involved in any litigation, nor is it aware of any
pending litigation, other than legal proceedings incidental to the Bank's
business. In the opinion of management, no material loss is expected from any
such claims or lawsuits.
Changes in Securities
None
Defaults Upon Senior Securities
None
Submission of matters to a Vote of Security Holders
None
Other Information
None
Exhibits and Report on Form 8-K
(a) The following exhibits are filed as part of this report: Exhibit 27, EDGAR
Financial Data Schedule
(b) No Form 8-K reports were filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
LEEDS FEDERAL BANKSHARES, INC.
Date: November 10, 2000 By: /s/Gordon E. Clark
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Gordon E. Clark
President and Chief Executive Officer
Date: November 10, 2000 By: /s/Kathleen Trumpler
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Kathleen Trumpler
Treasurer and Chief Financial Officer