-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QoncAuBYnKmTRORNPPOC5DHGpsXa/SdypiqcWKiTr1G9Z35ptdrmddcrJgoQNjLN QgzK5QX0OTeUEnxivWp5AA== 0000950124-02-001830.txt : 20020515 0000950124-02-001830.hdr.sgml : 20020515 20020515134851 ACCESSION NUMBER: 0000950124-02-001830 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE VALLEY BAN CORP CENTRAL INDEX KEY: 0000901842 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 481070996 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15933 FILM NUMBER: 02650482 BUSINESS ADDRESS: STREET 1: 11935 RILEY CITY: OVERLAND PARK STATE: KS ZIP: 66225 BUSINESS PHONE: 9133381000 MAIL ADDRESS: STREET 1: 11935 RILEY CITY: OVERLAND PARK STATE: KS ZIP: 66225 10-Q 1 c69584e10-q.txt QUARTERLY REPORT FOR PERIOD ENDED 03/31/02 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002 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: 001-15933 BLUE VALLEY BAN CORP (Exact name of registrant as specified in its charter) KANSAS 48-1070996 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11935 RILEY OVERLAND PARK, KANSAS 66225-6128 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (913) 338-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Number of shares of Common Stock ($1.00 par value) outstanding at the close of business on March 31, 2002 was 2,176,676 shares. BLUE VALLEY BAN CORP INDEX PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Independent Accountants' Report.....................................................................3 Consolidated Balance Sheets - March 31, 2002 (unaudited) and December 31, 2001.....................4 Consolidated Statements of Income (unaudited) - three months ended March 31, 2002 and 2001........................................................6 Consolidated Statements of Stockholders' Equity (unaudited) - three months ended March 31, 2002 and 2001 .......................................................7 Consolidated Statements of Cash Flows (unaudited) - three months ended March 31, 2002 and 2001........................................................8 Notes to Consolidated Financial Statements (unaudited) - three months ended March 31, 2002 and 2001........................................................9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................................................................14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................21 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS.............................................................................23 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.....................................................23 ITEM 3. DEFAULTS UPON SENIOR SECURITIES...............................................................23 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................23 ITEM 5. OTHER INFORMATION.............................................................................23 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..............................................................23
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INDEPENDENT ACCOUNTANTS' REPORT Board of Directors Blue Valley Ban Corp Overland Park, Kansas 66225 We have reviewed the consolidated balance sheet of Blue Valley Ban Corp as of March 31, 2002, and the related consolidated statements of income, stockholders' equity and cash flows for the three-month periods ended March 31, 2002 and 2001. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2001 and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended (not presented herein), and in our report dated February 1, 2002 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2001 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ BKD, LLP Kansas City, Missouri April 26, 2002 3 BLUE VALLEY BAN CORP CONSOLIDATED BALANCE SHEETS MARCH 31, 2002 AND DECEMBER 31, 2001 (dollars in thousands, except share data) ASSETS
MARCH 31, DECEMBER 31, 2002 2001 -------------------------------------- (Unaudited) Cash and due from banks $ 23,610 $ 20,159 Federal funds sold 31,500 5,000 --------------- --------------- Cash and cash equivalents 55,110 25,159 Available-for-sale securities 66,041 77,676 Mortgage loans held for sale 57,584 41,853 Loans, net of allowance for loan losses of $5,003 and $5,267 in 2002 and 2001, respectively 331,035 328,808 Premises and equipment 8,122 8,079 Foreclosed assets held for sale, net 188 49 Interest receivable 2,409 2,513 Deferred income taxes 1,205 904 Prepaid expenses and other assets 2,482 2,072 Federal Home Loan Bank stock, Federal Reserve Bank stock, and other securities 4,352 3,477 Core deposit intangible asset, at amortized cost 1,395 1,433 ---------------- --------------- Total assets $ 529,923 $ 492,023 =============== ===============
See Accompanying Notes to Consolidated Financial Statements and Independent Accountant's Report 4 BLUE VALLEY BAN CORP CONSOLIDATED BALANCE SHEETS MARCH 31, 2002 AND DECEMBER 31, 2001 (dollars in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY MARCH 31, DECEMBER 31, 2002 2001 ---------------------------------------- (Unaudited) LIABILITIES Deposits Demand $ 74,378 $ 74,229 Savings, NOW and money market 175,203 157,336 Time 183,645 162,680 --------------- --------------- Total deposits 433,226 394,245 Securities sold under agreements to repurchase 12,913 17,173 Long-term debt 36,078 36,118 Guaranteed preferred beneficial interest in Company's subordinated debt 11,500 11,500 Advances from borrowers for taxes and insurance 3,051 383 Accrued interest and other liabilities 3,813 4,079 --------------- --------------- Total liabilities 500,581 463,498 --------------- --------------- STOCKHOLDERS' EQUITY Capital stock Common stock, par value $1 per share; authorized 15,000,000 shares; issued and outstanding 2002 -- 2,176,676 shares; 2001 -- 2,175,176 2,177 2,175 Additional paid-in capital 5,669 5,641 Retained earnings 21,038 19,878 Accumulated other comprehensive income Unrealized appreciation on available-for-sale securities, net of income taxes of $305 in 2002 and $553 in 2001 458 831 --------------- --------------- Total stockholders' equity 29,342 28,525 --------------- --------------- Total liabilities and stockholders' equity $ 529,923 $ 492,023 =============== ===============
See Accompanying Notes to Consolidated Financial Statements and Independent Accountant's Report 5 BLUE VALLEY BAN CORP CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (dollars in thousands, except share data)
THREE MONTHS ENDED MARCH 31, 2002 2001 ---------------------------------------- (Unaudited) (Unaudited) INTEREST INCOME Interest and fees on loans $ 6,586 $ 6,904 Federal funds sold 16 341 Available-for-sale securities 1,016 1,200 Held-to-maturity securities -- 40 --------------- --------------- Total interest income 7,618 8,485 --------------- --------------- INTEREST EXPENSE Interest-bearing demand deposits 95 245 Savings and money market deposit accounts 803 1,507 Other time deposits 2,048 2,419 Securities sold under repurchase agreements 40 112 Long-term debt and advances 788 613 --------------- --------------- Total interest expense 3,774 4,896 --------------- --------------- NET INTEREST INCOME 3,844 3,589 PROVISION FOR LOAN LOSSES 600 540 --------------- --------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,244 3,049 --------------- --------------- NONINTEREST INCOME Loans held for sale fee income 3,008 297 Service fees 435 326 Other income 129 275 --------------- --------------- Total noninterest income 3,572 898 --------------- --------------- NONINTEREST EXPENSE Salaries and employee benefits 3,319 1,913 Net occupancy expense 450 306 Other operating expense 1,271 961 --------------- --------------- Total noninterest expense 5,040 3,180 --------------- --------------- INCOME BEFORE INCOME TAXES 1,776 767 PROVISION FOR INCOME TAXES 616 255 --------------- --------------- NET INCOME $ 1,160 $ 512 =============== =============== BASIC EARNINGS PER SHARE $ 0.53 $ 0.24 ===== ====== DILUTED EARNINGS PER SHARE $ 0.52 $ 0.23 ===== ======
See Accompanying Notes to Consolidated Financial Statements and Independent Accountant's Report 6 BLUE VALLEY BAN CORP CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (dollars in thousands, except share data)
ACCUMULATED ADDITIONAL OTHER COMPREHENSIVE COMMON PAID-IN RETAINED COMPREHENSIVE INCOME STOCK CAPITAL EARNINGS INCOME TOTAL ------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2000 $ 2,142 $ 5,277 $ 15,935 $ 461 $ 23,815 Issuance of 20,556 shares of common stock 20 213 -- -- 233 Net income $ 512 -- -- 512 -- 512 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $209 314 -- -- -- 314 314 ----------- ----------- ----------- ----------- ----------- ----------- $ 826 BALANCE, MARCH 31, 2001 =========== $ 2,162 $ 5,490 $ 16,447 $ 775 $ 24,874 ----------- ----------- ----------- ----------- ----------- Issuance of 12,900 shares of common stock 13 151 -- -- 164 Net income $ 3,431 -- -- 3,431 -- 3,431 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $37 56 -- -- -- 56 56 ----------- ----------- ----------- ----------- ----------- ----------- $ 3,487 BALANCE, DECEMBER 31, 2001 =========== $ 2,175 $ 5,641 $ 19,878 $ 831 $ 28,525 ----------- ----------- ----------- ----------- ----------- Issuance of 1,500 shares of common stock 2 28 -- -- 30 Net income $ 1,160 -- -- 1,160 -- 1,160 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $(248) (373) -- -- -- (373) (373) ----------- ----------- ----------- ----------- ----------- ----------- $ 787 BALANCE, MARCH 31, 2002 =========== $ 2,177 $ 5,669 $ 21,038 $ 458 $ 29,342 =========== =========== =========== =========== =========== RECLASSIFICATION DISCLOSURE: March 31, December 31, March 31, --------- ------------ --------- 2002 2001 2001 ---- ---- ---- Unrealized appreciation (depreciation) on available-for-sale securities, net of income taxes (credit) of $(232), $151, and $296 for the periods ended March 31, 2002, December 31, 2001 and March 31, 2001, respectively $ (349) $ 226 $ 444 Less: reclassification adjustments for appreciation included in net income, net of income taxes of $(16), $(114) and $(87) for the periods ended March 31, 2002, December 31, 2001 and March 31, 2001, respectively 24 170 130 ----------- ----------- ----------- Change in unrealized appreciation on available-for-sale securities, net of income taxes (credit) of $(248), $37, and $209 for the periods ended March 31, 2002, December 31, 2001 and March 31, 2001, respectively $ (373) $ 56 $ 314 ============ =========== ===========
See Accompanying Notes to Consolidated Financial Statements and Independent Accountant's Report 7 BLUE VALLEY BAN CORP CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (dollars in thousands, except share data)
MARCH 31, 2002 MARCH 31, 2001 ---------------------------------------- (Unaudited) (Unaudited) OPERATING ACTIVITIES Net income $ 1,160 $ 512 Items not requiring (providing) cash Depreciation and amortization 224 166 Amortization of premiums and discounts on securities 14 13 Provision for loan losses 600 540 Deferred income taxes (53) (92) Gain on sales of available-for-sale securities (40) (217) Loss on sale of foreclosed assets 19 94 Loss on sale of premises and equipment 10 -- Changes in Accrued interest receivable 104 279 Mortgage loans held for sale (15,731) (6,643) Prepaid expenses and other assets (411) 536 Accrued interest payable and other liabilities (266) 454 --------------- --------------- Net cash used in operating activities (14,370) (4,358) --------------- --------------- INVESTING ACTIVITIES Net originations of loans (4,078) (11,875) Proceeds from sales of loan participations 1,015 107 Purchase of premises and equipment (250) (326) Proceeds from the sale of foreclosed assets 78 276 Proceeds from the sale of premises and equipment 12 -- Proceeds from sales of available-for-sale securities 5,035 5,192 Proceeds from maturities of available-for-sale securities 6,005 13,000 Purchases of available-for-sale securities -- (5,291) Purchases of Federal Home Loan Bank stock (875) -- --------------- --------------- Net cash provided by investing activities 6,942 1,083 --------------- --------------- FINANCING ACTIVITIES Net increase in demand deposits, money market, NOW and savings accounts 18,016 10,726 Net increase in certificates of deposit 20,965 15,297 Repayments of long-term debt (40) (36) Proceeds from sale of common stock 30 233 Net decrease in other borrowings (4,260) (353) Net increase (decrease) in advances from borrowers for taxes and insurance 2,668 (1,035) --------------- --------------- Net cash provided by financing activities 37,379 24,832 --------------- --------------- INCREASE IN CASH AND CASH EQUIVALENTS 29,951 21,557 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 25,159 35,920 --------------- --------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 55,110 $ 57,477 =============== ===============
See Accompanying Notes to Consolidated Financial Statements and Independent Accountant's Report 8 BLUE VALLEY BAN CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (Unaudited) NOTE 1: BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the Company's consolidated financial position as of March 31, 2002, and the consolidated results of its operations, changes in stockholders' equity and cash flows for the periods ended March 31, 2002 and 2001, and are of a normal recurring nature. Certain information and note disclosures normally included in the company's annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's December 31, 2001 Form 10-K filed with the Securities and Exchange Commission. The results of operations for the period are not necessarily indicative of the results to be expected for the full year. The report of BKD, LLP commenting upon their review accompanies the consolidated financial statements included in Item 1 of Part I. NOTE 2: EARNINGS PER SHARE Basic earnings per share is computed based on the weighted average number of shares outstanding during each year. Diluted earnings per share is computed using the weighted average common shares and all potential dilutive common shares outstanding during the period. The computation of per share earnings for the three-months ended March 31, 2002 and 2001 is as follows:
2002 2001 ---------------------------------------- (Unaudited) (Unaudited) (dollars in thousands, except share and per share data) Net income $ 1,160 $ 512 =============== =============== Average common shares outstanding 2,175,243 2,151,460 Average common share stock options outstanding 57,098 43,363 --------------- --------------- Average diluted common shares 2,232,341 2,194,823 =============== =============== Basic earnings per share $0.53 $0.24 ==== ==== Diluted earnings per share $0.52 $0.23 ==== ====
See Independent Accountants' Report 9 BLUE VALLEY BAN CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (Unaudited) NOTE 3: LONG-TERM DEBT Long-term debt at March 31, 2002 and December 31, 2001, consisted of the following components:
MARCH 31, 2002 DECEMBER 31, 2001 ---------------------------------------- (Unaudited) (in thousands) Note payable -- other (A) $ 1,578 $ 1,618 Note payable -- bank (B) 2,000 2,000 Federal Home Loan Bank advances (C) 32,500 32,500 --------------- --------------- Total long-term debt $ 36,078 $ 36,118 =============== ===============
(A) Due in August 2009, payable in monthly installments of $23,175, plus interest at 7.5%; collateralized by land, building and assignment of future rents. (B) Borrowing under $10 million revolving line of credit; interest only at the fed funds rate + 1.68% due quarterly until 2003, when the outstanding principal balance is due; collateralized by common stock of the Company's subsidiary bank. (C) Due in 2008 and 2010 and 2011; collateralized by various assets including mortgage-backed loans and securities, and U.S. Treasury and Agency securities. The interest rates on the advances range from 4.00% to 5.682%. Federal Home Loan Bank advance availability is determined quarterly and at March 31, 2002, approximately $69,926,000 was available. Aggregate annual maturities of long-term debt at March 31, 2002 are as follows:
(in thousands) April 1 to December 31, 2002 $ 122 2003 2,175 2004 188 2005 203 2006 219 Thereafter 33,171 --------------- $ 36,078 ===============
See Independent Accountants' Report 10 BLUE VALLEY BAN CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (Unaudited) NOTE 4: TRUST PREFERRED SECURITIES On July 21, 2000, BVBC Capital Trust I (the "Trust"), a Delaware business trust formed by the Company, completed the sale of $11,500,000 of 10.375% trust preferred securities. The Trust is a 100% owned finance subsidiary of the Company. The Trust also issued $355,672 of common securities to the Company and used the total proceeds of $11,855,672 from the offering to purchase $11,855,672 in principal amount of 10.375% junior subordinated debentures of the Company due September 30, 2030. Payments to the Company on the common securities are subordinated to the trust preferred securities in the event of a default on the junior subordinated debentures. The Company paid all underwriting discounts and other operating expenses related to the offering and received net proceeds of $10,578,000. The junior subordinated debentures are the sole assets of the Trust and are eliminated, along with the related income statement effects, in the Company's consolidated financial statements. The Trust preferred securities are mandatorily redeemable upon the maturity of the junior subordinated debentures or upon earlier redemption as provided in the indenture. The Company has the right to redeem the junior subordinated debentures, in whole or in part, on or after September 30, 2005, at a redemption price specified in the indenture plus any accrued but unpaid interest to the redemption date. The Company has fully and unconditionally guaranteed the Trust's obligations under the trust preferred securities on a subordinated basis to the extent that the funds are held by the Trust. The trust preferred securities meet the criteria to be considered regulatory capital. See Independent Accountants' Report 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of those safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, can generally be identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company is unable to predict the actual results of its future plans or strategies with certainty. Factors which could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to, fluctuations in market rates of interest and loan and deposit pricing; a deterioration of general economic conditions or the demand for housing in the Company's market areas; legislative or regulatory changes; adverse developments in the Company's loan or investment portfolio; any inability to obtain funding on favorable terms; the loss of key personnel; significant increases in competition; and the possible dilutive effect of potential acquisitions or expansions. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. GENERAL RESULTS OF OPERATIONS Three months ended March 31, 2002 and 2001. Net income for the quarter ended March 31, 2002, was $1.2 million, as compared to net income of $512,000 for the quarter ended March 31, 2001, representing an increase of $648,000, or 126.56%. Diluted earnings per share increased 126.09% to $0.52 during the first quarter of 2002 from $0.23 in the same period of 2001. The Company's annualized return on average assets and average stockholders' equity for the three-month period ended March 31, 2002 were 0.92% and 16.11%, compared to 0.49% and 8.57%, respectively, for the same period in 2001, increases of approximately 88%. The principal contributor to our increase in net income from the prior year first quarter to the current year was an increase in non-interest income. The expansion of the Company's internet mortgage capabilities coupled with declines in market interest rates during 2001 resulted in a significant increase in the number of residential mortgage loans originated, a trend which has continued through the first quarter of 2002. The Company's Internet Mortgage Division was expanded considerably during the first quarter of 2001. The division began realizing significant gains in non-interest income during the second quarter of 2001; however, the income generated did not begin to offset our costs of expansion, mainly increased staffing and occupancy costs, until the third quarter of the year. Consequently, the Company has realized a considerably greater impact on net income from mortgage origination and refinancing revenue during the three-month period ended March 31, 2002 as compared to the same period in 2001. Net interest income for the three-month period ended March 31, 2002 was $3.8 million, an increase of $255,000, or 7.11%, from $3.6 million for the three-month period ended March 31, 2001. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest income for the current year first quarter was $7.6 million, a decrease of $867,000, or 10.22%, from $8.5 million in the prior year first quarter. This decrease was primarily a result of an overall decrease in the yield on average earning assets of 214 basis points to 6.58% in the first quarter of 2002, as compared to 8.72% in the prior year first quarter. Average earning asset volume increased from the first quarter of 2001 to the current period by $76.0 million, or 19.06%, which partially offset the decrease in yield on interest-earning assets. The 214 basis point decrease in yield has resulted primarily from decreases in market interest rates during 2001. Interest expense for the current year first quarter was $3.8 million, a decrease of $1.1 million, or 22.92%, from $4.9 million in the prior year first quarter. The decrease is attributable to a decrease in the rates paid on average interest-bearing liabilities during the first quarter of 2002. There have been two primary causes for this decline in interest rates. First is the impact of the overall decline in market interest rates on the rates of our funding sources. Secondly, promotional CD's offered during May, June and July of 2000, which bore interest rates notably higher than current market rates, renewed, repriced or matured during the three-month period ended March 31, 2002 at significantly lower rates. The rate paid on total average interest-bearing liabilities decreased to 3.72% at March 31, 2002 as compared to 5.59% at March 31, 2001, a decrease of 187 basis points. Average interest-bearing deposits increased by $32.4 million, or 10.55% from the prior year and other interest-bearing liabilities increased by $24.3 million or 50.29% from the prior year, mainly in the form of long-term FHLB borrowings. The increase in volume partially offset the decrease in rate. Average Balance Sheets. The following table sets forth, for the periods and as of the dates indicated, information regarding our average balances of assets and liabilities as well as the dollar amounts of interest income from interest-earning assets and interest expense on interest-bearing liabilities and the resultant yields or costs. Ratio, yield and rate information are based on average daily balances where available; otherwise, average monthly balances have been used. Nonaccrual loans are included in the calculation of average balances for loans for the periods indicated. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AVERAGE BALANCES, YIELDS AND RATES
THREE MONTHS ENDED MARCH 31, ------------------------------------------------------------------------ 2002 2001 ---------------------------------- ------------------------------------ AVERAGE AVERAGE AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST RATE BALANCE INTEREST RATE --------- --------- --------- ---------- --------- --------- (Dollars in thousands) ASSETS Federal funds sold........................ $ 5,422 $ 16 1.20% $ 25,152 $ 341 5.50% Investment securities -- taxable.......... 58,239 841 5.86 62,509 1,058 6.86 Investment securities -- non-taxable (1).. 15,224 265 7.06 15,613 275 7.14 Mortgage loans held for sale.............. 60,356 948 6.37 3,215 59 7.44 Loans, net of unearned discount and fees.. 335,520 5,638 6.81 292,277 6,845 9.50 -------- -------- --------- -------- Total earning assets.................... 474,761 7,708 6.58 398,766 8,578 8.72 -------- -------- --------- -------- Cash and due from banks -- non-interest bearing................................. 20,985 13,718 Allowance for possible loan losses........ (4,908) (4,463) Premises and equipment, net............... 8,101 6,671 Other assets.............................. 11,144 8,707 -------- --------- Total assets............................ $ 510,083 $ 423,399 ======== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits-interest bearing: Interest-bearing demand accounts.......... $ 28,083 $ 95 1.37% $ 29,373 $ 245 3.38% Savings and money market deposits......... 139,315 803 2.34 127,774 1,507 4.78 Time deposits............................. 171,708 2,048 4.84 149,592 2,419 6.56 -------- -------- --------- -------- Total interest-bearing deposits......... 339,106 2,946 3.52 306,739 4,171 5.51 -------- -------- --------- -------- Short-term borrowings..................... 24,906 87 1.42 19,996 218 4.42 Long-term debt ........................... 47,592 741 6.31 28,244 507 7.28 -------- -------- --------- -------- Total interest-bearing liabilities ..... 411,604 3,774 3.72 354,979 4,896 5.59 -------- -------- --------- -------- Non-interest bearing deposits............. 65,748 41,354 Other liabilities ........................ 3,532 2,832 Stockholders' equity...................... 29,199 24,234 -------- --------- Total liabilities and stockholders' equity.............................. $ 510,083 $ 423,399 ======== ========== Net interest income/spread ............... $ 3,934 2.86% $ 3,682 3.13% ======== ======== ======== ======== Net interest margin....................... 3.36% 3.74% ======== ========
- --------------- (1) Presented on a fully tax-equivalent basis assuming a tax rate of 34%. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Analysis of Changes in Net Interest Income Due to Changes in Interest Rates and Volumes. The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the increase or decrease related to changes in balances and changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: - changes in volume, reflecting changes in volume multiplied by the current period rate; and - changes in rate, reflecting changes in rate multiplied by the prior period volume. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate. CHANGES IN INTEREST INCOME AND EXPENSE VOLUME AND RATE VARIANCES
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO 2001 --------------------------------- CHANGE CHANGE DUE TO DUE TO TOTAL RATE VOLUME CHANGE ------- ------- ------- (Dollars in thousands) Federal funds sold ............................ $ (267) $ (58) $ (325) Investment securities -- taxable .............. (155) (62) (217) Investment securities -- non-taxable (1) ...... (3) (7) (10) Mortgage loans held for sale .................. (8) 897 889 Loans, net of unearned discount ............... (1,930) 723 (1,207) ------- ------- ------- Total interest income .............. (2,363) 1,493 (870) ------- ------- ------- Interest-bearing demand accounts .............. (140) (10) (150) Savings and money market deposits ............. (855) 151 (704) Time deposits ................................. (851) 480 (371) Short-term borrowings ......................... (205) 74 (131) Long-term debt ................................ (56) 290 234 ------- ------- ------- Total interest expense ............. (2,107) 985 (1,122) ------- ------- ------- Net interest income ........................... $ (256) $ 508 $ 252 ======= ======= =======
--------------- (1) Presented on a fully tax-equivalent basis assuming a tax rate of 34%. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PROVISION FOR LOAN LOSSES The provision for loan losses for the first quarter of 2002 was $600,000, compared to $540,000 for the same period of 2001, a $60,000, or 11.11%, increase. The increase in the provision resulted from growth in the loan portfolio to $336.0 million at March 31, 2002, an increase of $37.2 million, or 12.44%, from $298.9 million at March 31, 2001. We make provisions for loan losses in amounts that management deems necessary to maintain the allowance for loan losses at an appropriate level. The allowance for loan losses is reviewed monthly, considering such factors as current and projected economic conditions, loan growth, the composition of the loan portfolio, loan trends and classifications, and other factors. NON-INTEREST INCOME
THREE MONTHS ENDED MARCH 31, ------------------------- 2002 2001 ----------- ---------- (In thousands) Loans held for sale fee income................. $3,008 $ 297 NSF charges and service fees.................... 252 160 Other service charges........................... 183 166 Realized gain on sales of investment securities. 40 217 Other income ................................... 89 58 -------- --------- Total non-interest income................. $3,572 $ 898 ======== =========
Non-interest income increased to $3.6 million, or 297.77%, during the three-month period ended March 31, 2002, from $898,000 during the three-month period ended March 31, 2001. This increase is attributable to increases in loans held for sale fee income of $2.7 million and NSF charges and service fees of $92,000. We experienced significant growth in our loans held for sale income due to the expansion of our internet mortgage capabilities concurrent with a relatively low-rate environment. Mortgage originations and refinancing, and the resultant revenue, have continued to flourish in the low interest rate environment which has persisted through the first quarter of 2002. This increase was partially offset by a decrease in the realized gain on sales of investment securities of $177,000. Due to the declining interest rate environment during 2001, many of our investment securities had appreciated significantly during the year and we took advantage of opportunities to mitigate the risk of long-term rate volatility in our available-for-sale investment portfolio by selling some of our longer-term bonds. Two investment securities with a total book value of $5.0 million were sold during the first quarter of 2002 resulting in a gain of $40,000 and four investment securities with a total book value of $5.0 million were sold during the first quarter of 2001 resulting in a gain of $217,000. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NON-INTEREST EXPENSE
THREE MONTHS ENDED MARCH 31, ------------------------- 2002 2001 ----------- ---------- (In thousands) Salaries and employee benefits................. $ 3,319 $ 1,913 Occupancy....................................... 450 306 FDIC and other insurance expense................ 69 40 General and administrative ..................... 1,202 921 -------- --------- Total non-interest expense................ $ 5,040 $ 3,180 ======== =========
Non-interest expense increased to $5.0 million, or 58.49%, during the three-month period ended March 31, 2002, from $3.2 million in the prior year period. This increase is attributable to an increase in salaries and employee benefits expense of $1.4 million, occupancy expense of $144,000 and general and administrative expense of $281,000. Our salaries and employee benefits expense increased to $3.3 million during the first quarter of 2002 from $1.9 million during the prior year first quarter, an increase of 73.50%, as we hired additional staff to facilitate our growth. We had 226 full-time employees at March 31, 2002 as compared to 158 at March 31, 2001. Many areas of the Company added employees to manage growth with the expansion of the Internet Mortgage Division necessitating approximately 50% of the net increase in full-time employees. FINANCIAL CONDITION Total assets for the Company at March 31, 2002, were $529.9 million, an increase of $37.9 million, or 7.70%, compared to $492.0 million at December 31, 2001. Deposits and stockholders' equity at March 31, 2002, were $433.2 million and $29.3 million, respectively, compared with $394.2 million and $28.5 million, respectively, at December 31, 2001, increases of $39.0 million, or 9.89%, and $817,000, or 2.86%, respectively. Loans at March 31, 2002 totaled $336.0 million, reflecting a slight increase of $2.0 million, or 0.59%, compared to December 31, 2001. Deposit volume grew $39.0 million, or 9.89%, to $433.2 million at March 31, 2002 as compared to $394.2 million at December 31, 2001. The majority of the increase in volume was due to an increase in interest-bearing deposits. The loan to deposit ratio at March 31, 2002 was 77.57% compared to 84.74% at December 31, 2001. The recent deposit growth provides significant funding availability to facilitate our loan growth. Mortgage loans held for sale at March 31, 2002 totaled $57.6 million, an increase of $15.7 million, or 37.59%, compared to December 31, 2001. The mortgage origination and refinancing boom experienced during 2001 continued into the first quarter of 2002. Deposit growth has provided the funding necessary to facilitate the mortgage loan origination growth during the first quarter of 2002. Also available to fund growth is a line-of-credit with the Federal Home Loan Bank. Advance availability with the Federal Home Loan Bank is determined quarterly and at March 31, 2002, approximately $69,926,000 million was available. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Non-performing assets consist primarily of loans past due 90 days or more and nonaccrual loans and foreclosed real estate. The following table sets forth our non-performing assets as of the dates indicated: NON-PERFORMING ASSETS
AS OF --------------------------------------------------- MARCH 31, MARCH 31, DECEMBER 31, 2002 2001 2001 --------------------------------------------------- (Dollars in thousands) REAL ESTATE LOANS: Past due 90 days or more $ -- $ 205 $ -- Nonaccrual 585 486 824 INSTALLMENT LOANS: Past due 90 days or more 63 23 33 Nonaccrual -- 16 13 CREDIT CARDS AND RELATED PLANS: Past due 90 days or more -- -- -- Nonaccrual -- -- -- COMMERCIAL (TIME AND DEMAND) AND ALL OTHER LOANS: Past due 90 days or more -- 22 76 Nonaccrual 211 960 752 LEASE FINANCING RECEIVABLES: Past due 90 days or more -- -- -- Nonaccrual 280 574 1,365 DEBT SECURITIES AND OTHER ASSETS (EXCLUDE OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS Past due 90 days or more -- -- -- Nonaccrual -- -- -- --------- --------- --------- Total non-performing loans 1,139 2,286 3,063 FORECLOSED ASSETS HELD FOR SALE 188 115 49 --------- --------- --------- Total non-performing assets $ 1,327 $ 2,401 $ 3,112 ========= ========= ========= Total nonperforming loans to total loans 0.34% 0.76% 0.92% Total nonperforming loans to total assets 0.21% 0.52% 0.62% Allowance for loan losses to nonperforming loans 439.24% 198.95% 171.96% Nonperforming assets to loans and foreclosed assets held for sale 0.39% 0.80% 0.93%
As of March 31, 2002, non-performing loans equaled 0.34% of total loans, representing a substantial decline in non-performing loans from December 31, 2001. The level of loans charged-off increased during the first quarter of 2002, as evidenced by the increase in our ratio of net charge-offs to average loans to 1.04% for the period ending March 31, 2002 as compared to 0.51% for the period ending December 31, 2001. We closely monitor non-performing credit relationships and our philosophy has been to value non-performing loans at their estimated collectible value and to aggressively manage these situations. Generally, the Bank maintains its allowance for loan losses in excess of its non-performing loans. As of March 31, 2002, our ratio of allowance for loan losses to non-performing loans was 439.24%. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth information regarding changes in our allowance for loan and valuation losses for the periods indicated. SUMMARY OF LOAN LOSS EXPERIENCE AND RELATED INFORMATION
AS OF AND FOR THE ------------------------------------------------------- THREE MONTHS THREE MONTHS ENDED ENDED YEAR ENDED MARCH 31, MARCH 31, DECEMBER 31, 2002 2001 2001 ---------------- ----------------- ----------------- (Dollars in thousands) BALANCE AT BEGINNING OF PERIOD $ 5,267 $ 4,440 $ 4,440 ----------- ------------ ------------ LOANS CHARGED OFF Commercial real estate 70 -- -- Residential real estate -- -- 5 Commercial 192 362 1,015 Personal 15 9 80 Home Equity -- -- -- Construction -- -- -- Leases 681 111 836 ----------- ------------ ------------ Total loans charged-off 958 482 1,936 ----------- ------------ ------------ RECOVERIES Commercial real estate -- -- -- Residential real estate -- -- 5 Commercial 32 2 119 Personal 10 16 41 Home Equity -- -- -- Construction -- -- -- Leases 52 32 198 ----------- ------------ ------------ Total recoveries 94 50 363 ----------- ------------ ------------ NET LOANS CHARGED OFF 864 432 1,573 PROVISION FOR LOAN LOSSES 600 540 2,400 ----------- ------------ ------------ BALANCE AT END OF PERIOD $ 5,003 $ 4,548 $ 5,267 =========== ============ ============ LOANS OUTSTANDING Average $ 335,520 $ 292,277 $ 310,727 End of period 336,038 298,854 334,075 RATIO OF ALLOWANCE FOR LOAN LOSSES TO LOANS OUTSTANDING Average 1.49% 1.56% 1.70% End of period 1.49% 1.52% 1.58% RATIO OF NET CHARGE-OFFS TO Average loans 1.04% 0.60% 0.51% End of period loans 1.04% 0.59% 0.47%
19 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The allowance for loan losses as a percent of total loans decreased slightly to 1.49% as of March 31, 2002, compared to 1.58% as of December 31, 2001. As of March 31, 2002, net charge-offs equaled 1.04% of average total loans on an annualized basis. This ratio is above historical averages due in part to the charge-off of non-accruing leases during the first quarter of 2002. Liquidity is measured by a financial institution's ability to raise funds through deposits, borrowed funds, capital, or the sale of marketable assets, such as residential mortgage loans, a portfolio of SBA loans, or available-for-sale securities. Other sources of liquidity, including cash flow from the repayment of loans, are also considered in determining whether liquidity is satisfactory. Liquidity is also achieved through growth of core deposits and by prudent management of levels of liquid assets, and accessibility to the money and capital markets. The funds are used to meet deposit withdrawals, maintain reserve requirements, fund loans and operate the organization. Core deposits are defined as demand deposits, interest-bearing transaction accounts, savings deposits and certificates of deposit less than $100,000. Also excluded from core deposits are brokered and internet deposits. Core deposits at March 31, 2002 and December 31, 2001 were 66.88% and 68.70% of our total assets, respectively. Internal guidelines have been established to measure liquid assets as well as relevant ratios concerning asset levels and purchased funds. These indicators are reported to the board of directors monthly, and at March 31, 2002, the Bank was within the established guidelines. At March 31, 2002, our total stockholders' equity was $29.3 million and our equity to asset ratio was 5.54%. At March 31, 2002, our Tier 1 capital ratio was 8.96% compared to 8.87% at December 31, 2001, while our total risk-based capital ratio was 10.62% compared to 10.69% at December 31, 2001. Both exceed the capital minimums established in the risk-based capital requirements. 20 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a continued part of our financial strategy, we attempt to manage the impact of fluctuations in market interest rates on our net interest income. This effort entails providing a reasonable balance between interest rate risk, credit risk, liquidity risk and maintenance of yield. Our funds management policy is established by our Board of Directors and monitored by our Asset/Liability Management Committee. Our funds management policy sets standards within which we are expected to operate. These standards include guidelines for exposure to interest rate fluctuations, liquidity, loan limits as a percentage of funding sources, exposure to correspondent banks and brokers, and reliance on non-core deposits. Our funds management policy also establishes the reporting requirements to the Board of Directors. Our investment policy complements our funds management policy by establishing criteria by which we may purchase securities. These criteria include approved types of securities, brokerage sources, terms of investment, quality standards, and diversification. We use an asset/liability modeling service to analyze the Bank of Blue Valley's current sensitivity to instantaneous and permanent changes in interest rates. The system simulates the Bank's asset and liability base and projects future net interest income results under several interest rate assumptions. This allows management to view how changes in interest rates will affect the spread between the yield received on assets and the cost of deposits and borrowed funds. The asset/liability modeling service is also used to analyze the net economic value of equity at risk under instantaneous shifts in interest rates. The "net economic value of equity at risk" is defined as the market value of assets less the market value of liabilities plus/minus the market value of any off-balance sheet positions. By effectively looking at the present value of all future cash flows on or off the balance sheet, the net economic value of equity modeling takes a longer-term view of interest rate risk. We strive to maintain a position such that current changes in interest rates will not affect net interest income or the economic value of equity by more than 5%, per 50 basis points. The following table sets forth the estimated percentage change in the Bank of Blue Valley's net interest income over the next twelve month period and net economic value of equity at risk at March 31, 2002 based on the indicated instantaneous and permanent changes in interest rates.
NET INTEREST NET ECONOMIC INCOME VALUE OF CHANGES IN INTEREST RATES (NEXT 12 MONTHS) EQUITY AT RISK ------------------------------- --------------------------------------- 300 basis point rise 22.95% (7.37%) 200 basis point rise 16.10% (5.82%) 100 basis point rise 8.75% (3.94%) Base Rate Scenario - - 50 basis point decline (3.92%) (0.85%) 100 basis point decline (8.78%) (1.66%) 150 basis point decline (13.25%) (2.80%)
21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The above table indicates that, at March 31, 2002, in the event of a sudden and sustained increase in prevailing market rates, our net interest income would be expected to increase as our assets would be expected to reprice quicker than our liabilities, while a decrease in rates would indicate just the opposite. The table also indicates that, at March 31, 2002, in the event of a sudden increase or decrease in prevailing market rates, the current net economic value of our equity would decrease. Net economic value of equity at risk is based on the current market values of assets, liabilities, and current off-balance sheet positions, and was in excess of our book value at March 31, 2002. 22 PART II: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable ITEM 5. OTHER INFORMATION Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K EXHIBITS 11. Computation of Earnings Per Share. Please see p. 9. 15. Letter regarding Unaudited Interim Financial Information REPORTS ON FORM 8-K Blue Valley filed no reports on Form 8-K during the quarter ended March 31, 2002. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BLUE VALLEY BAN CORP Date: May 14, 2002 By: /s/ Robert D. Regnier --------------------------------------- Robert D. Regnier, President and Chief Executive Officer Date: May 14, 2002 By: /s/ Mark A. Fortino --------------------------------------- Mark A. Fortino, Treasurer 24 EX-15 3 c69584ex15.txt LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION EXHIBIT 15. Letter regarding Unaudited Interim Financial Information Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D. C. 20549 We are aware that our report dated April 26, 2002 on our review of the interim financial information of Blue Valley Ban Corp for the periods ended March 31, 2002 and 2001 and included in the Company's quarterly report on Form 10-Q for the quarter then ended is incorporated by reference in Registration Statement 333-46022. Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered part of the registration statement prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ BKD, LLP Kansas City, Missouri April 26, 2002 -----END PRIVACY-ENHANCED MESSAGE-----