-----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, CgYQ7l3Vo6qr5rIrO37yYsnIJGGyOD2fmR88oZ1LCmA1UAIaZWKKXUf5WgGgT1L6 InyZEAZO689+imHXQB8WOA== 0000950134-02-014436.txt : 20021114 0000950134-02-014436.hdr.sgml : 20021114 20021114155240 ACCESSION NUMBER: 0000950134-02-014436 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 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: 02825081 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 c72911e10vq.txt FORM 10-Q 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 SEPTEMBER 30, 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 September 30, 2002 was 2,179,176 shares. BLUE VALLEY BAN CORP INDEX PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS Independent Accountants' Report .............................................................. 3 Consolidated Balance Sheets - September 30, 2002 (unaudited) and December 31, 2001 ........... 4 Consolidated Statements of Income (unaudited) - three months and nine months ended September 30, 2002 and 2001 .............................................. 6 Consolidated Statements of Stockholders' Equity (unaudited) - nine months ended September 30, 2002 and 2001 .............................................. 7 Consolidated Statements of Cash Flows (unaudited) - nine months ended September 30, 2002 and 2001 ................................................................ 8 Notes to Consolidated Financial Statements (unaudited) - nine months ended September 30, 2002 and 2001 ................................................................ 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..................................................................... 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............................. 22 ITEM 4. CONTROLS AND PROCEDURES ................................................................. 24 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ....................................................................... 25 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ............................................... 25 ITEM 3. DEFAULTS UPON SENIOR SECURITIES ......................................................... 25 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..................................... 25 ITEM 5. OTHER INFORMATION ....................................................................... 25 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ........................................................ 25
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 accompanying consolidated balance sheet of Blue Valley Ban Corp (the "Company") as of September 30, 2002, and the related consolidated statements of income for the three-month and nine-month periods ended September 30, 2002 and 2001 and the consolidated statements of stockholders' equity and cash flows for the nine-month periods ended September 30, 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 October 25, 2002 3 BLUE VALLEY BAN CORP CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2002 AND DECEMBER 31, 2001 (dollars in thousands, except share data) ASSETS
SEPTEMBER 30, DECEMBER 31, 2002 2001 ------------ ------------ (Unaudited) Cash and due from banks $ 33,062 $ 20,159 Federal funds sold 19,000 5,000 ------------ ------------ Cash and cash equivalents 52,062 25,159 Available-for-sale securities 58,820 77,676 Mortgage loans held for sale 75,508 41,853 Loans, net of allowance for loan losses of $5,795 and $5,267 in 2002 and 2001, respectively 351,943 328,808 Premises and equipment, net 9,912 8,079 Foreclosed assets held for sale, net 644 49 Interest receivable 1,932 2,513 Deferred income taxes 911 904 Prepaid expenses and other assets 2,595 2,072 Federal Home Loan Bank stock, Federal Reserve Bank stock and other securities 3,459 3,477 Core deposit intangible asset, at amortized cost 1,319 1,433 ------------ ------------ Total assets $ 559,105 $ 492,023 ============ ============
See Accompanying Notes to Consolidated Financial Statements and Independent Accountants' Report. 4 BLUE VALLEY BAN CORP CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2002 AND DECEMBER 31, 2001 (dollars in thousands, except share data) LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30, DECEMBER 31, 2002 2001 ------------ ------------ (Unaudited) LIABILITIES Deposits Demand $ 80,526 $ 74,229 Savings, NOW and money market 174,794 157,336 Time 171,399 162,680 ------------ ------------ Total deposits 426,719 394,245 Securities sold under agreements to repurchase 23,395 17,173 Long-term debt 57,992 36,118 Guaranteed preferred beneficial interest in Company's subordinated debt 11,500 11,500 Advances from borrowers for taxes and insurance 2,984 383 Accrued interest and other liabilities 3,852 4,079 ------------ ------------ Total liabilities 526,442 463,498 ------------ ------------ STOCKHOLDERS' EQUITY Capital stock Common stock, par value $1 per share; authorized 15,000,000 shares; issued and outstanding 2002 - 2,179,176 shares; 2001 - 2,175,176 2,179 2,175 Additional paid-in capital 5,711 5,641 Retained earnings 23,875 19,878 Accumulated other comprehensive income Unrealized appreciation on available-for-sale securities, net of income taxes of $599 in 2002 and $553 in 2001 898 831 ------------ ------------ Total stockholders' equity 32,663 28,525 ------------ ------------ Total liabilities and stockholders' equity $ 559,105 $ 492,023 ============ ============
See Accompanying Notes to Consolidated Financial Statements and Independent Accountants' Report. 5 BLUE VALLEY BAN CORP CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (dollars in thousands, except share data)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Interest and fees on loans $ 6,826 $ 7,170 $ 19,722 $ 21,173 Federal funds sold 84 76 284 656 Available-for-sale securities 806 1,046 2,739 3,304 Held-to-maturity securities -- 39 -- 119 ----------- ----------- ----------- ----------- Total interest income 7,716 8,331 22,745 25,252 ----------- ----------- ----------- ----------- INTEREST EXPENSE Interest-bearing demand deposits 110 221 304 692 Savings and money market deposit accounts 661 1,167 2,195 4,008 Other time deposits 1,921 2,470 5,938 7,425 Securities sold under repurchase agreements 51 124 134 350 Long-term debt and advances 761 595 2,326 1,828 ----------- ----------- ----------- ----------- Total interest expense 3,504 4,577 10,897 14,303 ----------- ----------- ----------- ----------- NET INTEREST INCOME 4,212 3,754 11,848 10,949 PROVISION FOR LOAN LOSSES 660 570 1,730 1,665 ----------- ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,552 3,184 10,118 9,284 ----------- ----------- ----------- ----------- NONINTEREST INCOME Loans held for sale fee income 4,771 1,819 11,051 3,272 Service fees 460 432 1,350 1,133 Realized gain on sales of investment securities -- 282 193 499 Other income 81 53 220 165 ----------- ----------- ----------- ----------- Total noninterest income 5,312 2,586 12,814 5,069 ----------- ----------- ----------- ----------- NONINTEREST EXPENSE Salaries and employee benefits 4,302 2,686 11,376 6,850 Net occupancy expense 563 438 1,494 1,088 Other operating expense 1,451 1,060 3,922 2,943 ----------- ----------- ----------- ----------- Total noninterest expense 6,316 4,184 16,792 10,881 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 2,548 1,586 6,140 3,472 PROVISION FOR INCOME TAXES 892 544 2,143 1,155 ----------- ----------- ----------- ----------- NET INCOME $ 1,656 $ 1,042 $ 3,997 $ 2,317 =========== =========== =========== =========== BASIC EARNINGS PER SHARE $ 0.76 $ 0.48 $ 1.84 $ 1.07 =========== =========== =========== =========== DILUTED EARNINGS PER SHARE $ 0.74 $ 0.47 $ 1.79 $ 1.05 =========== =========== =========== ===========
See Accompanying Notes to Consolidated Financial Statements and Independent Accountants' Report. 6 BLUE VALLEY BAN CORP CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 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 30,356 shares of common stock $ -- 30 307 -- -- 337 Net income 2,317 -- -- 2,317 -- 2,317 Change in unrealized depreciation on available-for-sale securities, net of income taxes of $580 871 -- -- -- 871 871 -------- -------- -------- -------- -------- -------- $ 3,188 ======== BALANCE, SEPTEMBER 30, 2001 2,172 5,584 18,252 1,332 27,340 Issuance of 3,500 shares of common stock -- 3 57 -- -- 60 Net income 1,626 -- -- 1,626 -- 1,626 Change in unrealized appreciation on available-for-sale securities, net of income tax credit of $334 (501) -- -- -- (501) (501) -------- -------- -------- -------- -------- -------- $ 1,125 ======== BALANCE, DECEMBER 31, 2001 2,175 5,641 19,878 831 28,525 Issuance of 4,000 shares of common stock -- 4 70 -- -- 74 Net income 3,997 -- -- 3,997 -- 3,997 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $45 67 -- -- -- 67 67 -------- -------- -------- -------- -------- -------- $ 4,064 ======== BALANCE, SEPTEMBER 30, 2002 $ 2,179 $ 5,711 $ 23,875 $ 898 $ 32,663 ======== ======== ======== ======== ========
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 2002 2001 2001 ------------- ------------ ------------- RECLASSIFICATION DISCLOSURE Unrealized appreciation (depreciation) on available-for-sale securities, net of income taxes (credits) of $122, $(334) and $780 for the periods ended September 30, 2002, December 31, 2001 and September 30, 2001, respectively $ 183 $ (501) $ 1,170 ------------- ------------ ------------- Less: reclassification adjustments for appreciation included in net income, net of income taxes of $77, $0 and $200 for the periods ended September 30, 2002, December 31, 2001 and September 30, 2001, respectively (116) -- (299) ------------- ------------ ------------- Change in unrealized appreciation on available-for-sale securities, net of income taxes (credit) of $45, $(334), and $580 for the periods ended September 30, 2002, December 31, 2001 and September 30, 2001, respectively $ 67 $ (501) $ 871 ============= ============ =============
See Accompanying Notes to Consolidated Financial Statements and Independent Accountants' Report. 7 BLUE VALLEY BAN CORP CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (dollars in thousands, except share data)
SEPTEMBER 30, SEPTEMBER 30, 2002 2001 ------------ ------------ (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,997 $ 2,317 Items not requiring (providing) cash Depreciation and amortization 646 553 Amortization of premiums and discounts on securities 39 8 Provision for loan losses 1,730 1,665 Deferred income taxes (52) (91) Gain on sales of available-for-sale securities (193) (499) Loss on sale of foreclosed assets 54 153 (Gain) loss on sale of premises and equipment 10 (5) Changes in Accrued interest receivable 581 821 Mortgage loans held for sale (33,655) (47,008) Prepaid expenses and other assets (555) 303 Accrued interest payable and other liabilities (228) 970 ------------ ------------ Net cash used in operating activities (27,626) (40,813) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Net originations of loans (28,636) (38,692) Proceeds from sales of loan participations 2,187 4,514 Purchase of premises and equipment (2,355) (1,195) Proceeds from the sale of premises and equipment 12 11 Net cash acquired in branch acquisition -- 1,604 Proceeds from the sale of foreclosed assets 937 339 Proceeds from maturities of held-to-maturity securities -- 2,000 Proceeds from sales of available-for-sale securities 13,183 16,400 Proceeds from maturities of available-for-sale securities 34,938 31,675 Purchases of available-for-sale securities (28,999) (46,247) Proceeds from the sale of Federal Home Loan and Federal Reserve Bank stock 893 -- Purchases of Federal Home Loan and Federal Reserve Bank stock (875) (1,927) ------------ ------------ Net cash used in investing activities (8,715) (31,518) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase in demand deposits, money market, NOW and savings accounts 23,753 26,775 Net increase in time deposits 8,719 20,265 Repayments of long-term debt (121) (112) Proceeds from long-term debt 21,995 7,500 Net payments on short-term debt -- (4,000) Proceeds from sale of common stock 74 337 Net increase (decrease) in other borrowings 6,222 5,108 Net increase in advances from borrowers for taxes and insurance 2,602 1,780 ------------ ------------ Net cash provided by financing activities 63,244 57,653 ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 26,903 (14,678) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 25,159 35,920 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 52,062 $ 21,242 ============ ============
See Accompanying Notes to Consolidated Financial Statements and Independent Accountants' Report. 8 BLUE VALLEY BAN CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 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 September 30, 2002, and the consolidated results of its operations, stockholders' equity and cash flows for the periods ended September 30, 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 accounting principles generally accepted 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 its 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 nine-months ended September 30, 2002 and 2001 is as follows:
SEPTEMBER 30, SEPTEMBER 30, 2002 2001 ------------ ------------ (Unaudited) (Unaudited) (amounts in thousands, except share and per share data) Net income $ 3,997 $ 2,317 ============ ============ Average common shares outstanding 2,177,742 2,162,535 Average common share stock options outstanding 80,486 45,154 ------------ ------------ Average diluted common shares 2,258,228 2,207,689 ============ ============ Basic earnings per share $ 1.84 $ 1.07 ============ ============ Diluted earnings per share $ 1.79 $ 1.05 ============ ============
See Independent Accountants' Report. 9 BLUE VALLEY BAN CORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED) NOTE 3: LONG-TERM DEBT Long-term debt at September 30, 2002 and December 31, 2001, consisted of the following components:
SEPTEMBER 30, DECEMBER 31, 2002 2001 ------------ ------------ (Unaudited) (in thousands) Note Payable - other (A) $ 1,497 $ 1,618 Note Payable - bank (B) 3,995 2,000 Federal Home Loan Bank advances (C) 52,500 32,500 ------------ ------------ Total long-term debt $ 57,992 $ 36,118 ============ ============
(A) Due in August 2009, payable in monthly installments of $23,175, including 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 2007, 2008, 2010 and 2011; collateralized by various assets including mortgage-backed loans, and U.S. Treasury and Agency securities. The interest rates on the advances range from 1.55% to 5.682%. Federal Home Loan Bank advance availability is determined quarterly and at September 30, 2002, approximately $75,002,000 was available. Aggregate annual maturities of long-term debt at September 30, 2002 are as follows:
(in thousands) October 1 to December 31, 2002 $ 42 2003 4,170 2004 188 2005 203 2006 219 Thereafter 53,170 ------- $57,992 =======
See Independent Accountants' Report 10 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 September 30, 2002 and 2001. Net income for the quarter ended September 30, 2002, was $1.7 million, as compared to net income of $1.0 million for the quarter ended September 30, 2001, representing an increase of $614,000, or 58.92%. Diluted earnings per share increased 57.44% to $0.74 during the third quarter of 2002 from $0.47 in the same period of 2001. The Company's annualized returns on average assets and average stockholders' equity for the three-month period ended September 30, 2002 were 1.22% and 20.76%, compared to 0.90% and 16.43%, respectively, for the same period in 2001, increases of 35.55% and 26.35%, respectively. The increase in net income from the prior year third quarter to the current year was due to increases in both non-interest and net interest income. The expansion of the Company's residential mortgage origination divisions coupled with declines in market interest rates during 2001 resulted in a significant increase in the number of loans originated, a trend which has persisted through the third quarter of 2002. The Company's internet mortgage capabilities were expanded considerably with the creation of the Internet Mortgage Division and the introduction of its website, internetmortgage.com, during the first quarter of 2001. As a result of continued expansion of this division and additional market interest rate declines during 2002, the Company has realized a considerable increases in net income from mortgage origination and refinancing revenue generated by this division during the three-month period ended September 30, 2002 as compared to the same period in 2001. In addition, the Company's Retail Mortgage Division has also experienced a significant increase in residential mortgage loan originations in the Company's local market during the third quarter of 2002 due to declines in market interest rates and increased marketing efforts. Net interest income of $4.2 million increased $458,000 or 12.20% during the three-month period ended September 30, 2002 as compared to the three-month period ended September 30, 2001, due to reductions in rates paid on interest-bearing liabilities. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest income for the current year third quarter was $7.7 million, a decrease of $615,000, or 7.39%, from $8.3 million in the same quarter in the prior year. This decrease was primarily a result of an overall decrease in the yield on average earning assets of 146 basis points to 6.19% in the third quarter of 2002, as compared to 7.65% in the prior year third quarter. Average earning asset volume increased from the third quarter of 2001 to the current period by $63.4 million, or 14.51%, which partially offset the decrease in yield on interest-earning assets. The 146 basis point decrease in yield has resulted primarily from declines in market interest rates throughout 2001 which have persisted into the current year. Interest expense for the current year third quarter was $3.5 million, a decrease of $1.1 million, or 23.45%, from $4.6 million in the prior year third quarter. The decrease is attributable to a decrease in the rates paid on average interest-bearing liabilities during the current quarter. 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 time deposits offered during May, June and July of 2000, which bore interest rates notably higher than current market rates, renewed, repriced or matured during the first quarter of 2002 at significantly lower rates. The rate paid on total average interest-bearing liabilities decreased to 3.21% during the quarter ended September 30, 2002 compared to 4.74% during the same quarter in 2001, a decrease of 153 basis points. Average interest-bearing deposits increased by $26.2 million, or 7.94% from the prior year and other interest-bearing liabilities increased by $23.4 million or 43.62% from the prior year, mainly in the form of long-term FHLB borrowings. These increases in interest-bearing liability volume partially offset the overall decrease in rate. Nine months ended September 30, 2002 and 2001. Net income for the nine months ended September 30, 2002 was $4.0 million, compared to net income of $2.3 million for the nine-month period ended September 30, 2001, representing an increase of $1.7 million, or 72.46%. Diluted earnings per share increased 70.47% to $1.79 during the nine months ended September 30, 2002 from $1.05 in the same period of 2001. The Company's annualized return on average assets and average stockholders' equity for the nine-month period ended September 30, 2002 were 1.02% and 17.62%, compared to 0.70% and 12.31%, respectively, for the same period in 2001, increases of 45.71% and 43.13%, respectively. The principal contributor to the increase in net income from the nine months ended September 30, 2001 to the current year was an increase in non-interest income. The expansion of the Company's residential mortgage capabilities coupled with declines in market interest rates during 2001 resulted in a significant increase in the number of loans originated, a trend which continued through the nine-months ended September 30, 2002. The Company's internet mortgage capabilities were expanded considerably with the creation of the Internet Mortgage Division and the introduction of its website, internetmortgage.com, during the first quarter of 2001. Consequently, the Company has realized a considerably greater impact on net income from mortgage origination and refinancing revenue during the nine-month period ended September 30, 2002 as compared to the same period in 2001. In addition, the Company's Retail Mortgage Division experienced a significant increase in residential mortgage loan originations in the Company's local market during the nine-month period ended September 30, 2002 due to declines in market interest rates and increased marketing efforts. Net interest income of $11.8 million increased by $899,000 or 8.21% during the nine-month period ended September 30, 2002 as compared to $10.9 million for the nine-month period ended September 30, 2001. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest income for the nine months ended September 30, 2002 was $22.7 million, a decrease of $2.5 million, or 9.93%, from $25.3 million for the same period in the prior year. This decrease was primarily a result of an overall decrease in the yield on average earning assets of 181 basis points to 6.31% during the nine months ended September 30, 2002, compared to 8.12% during that period in the prior year. Average earning asset volume increased from the first three quarters of 2001 to the current period by $69.1 million, or 16.50%, which partially offset the decrease in yield on interest-earning assets. The 181 basis point decrease in yield has resulted primarily from decreases in market interest rates throughout 2001 which have persisted into the current year. Interest expense for the nine-month period ended September 30, 2002 was $10.9 million, a decrease of $3.4 million, or 23.82%, from $14.3 million in the same period of the prior year. The decrease is attributable to a decrease in the rates paid on average interest-bearing liabilities during the current period. 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 time deposits offered during May, June and July of 2000, which bore interest rates notably higher than current market rates, renewed, repriced or matured during the first quarter of 2002 at significantly lower rates. The rate paid on total average interest-bearing liabilities decreased to 3.42% during the nine-month period ended September 30, 2002 compared to 5.17% during the same period in 2001, a decrease of 175 basis points. Average interest-bearing deposits increased by $35.2 million, or 11.03% from the prior year and other interest-bearing liabilities increased by $20.9 million or 41.57% from the prior year, mainly in the form of long-term FHLB borrowings. These increases in interest-bearing liability volume partially offset the overall 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
NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------------------------- 2002 2001 ------------------------------- ------------------------------- AVERAGE AVERAGE AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST RATE BALANCE INTEREST RATE -------- -------- ------- -------- -------- ------- ASSETS Federal funds sold ............................ $ 23,231 $ 284 1.63% $ 18,828 $ 656 4.67% Investment securities - taxable ............... 52,968 2,230 5.63 57,888 2,875 6.64 Investment securities - non-taxable (1) ....... 14,772 770 6.97 15,770 734 6.22 Mortgage loans held for sale .................. 52,987 2,585 6.52 20,457 1,009 6.59 Loans, net of unearned discount and fees ...... 343,785 17,137 6.66 305,685 20,165 8.82 -------- -------- -------- -------- Total earning assets ........................ 487,743 23,007 6.31 418,628 25,439 8.12 -------- -------- ------- -------- Cash and due from banks - non-interest bearing ...................................... 23,737 15,159 Allowance for possible loan losses ............ (5,334) (4,709) Premises and equipment, net ................... 9,146 7,201 Other assets .................................. 10,790 9,040 -------- ------- Total assets ................................ $526,082 $445,319 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits-interest bearing: Interest-bearing demand accounts .............. $ 29,572 $ 304 1.37% $ 31,472 $ 692 2.94% Savings and money market deposits ............. 146,325 2,195 2.01 130,905 4,008 4.09 Time deposits ................................. 178,638 5,938 4.44 156,932 7,425 6.33 -------- -------- -------- -------- Total interest-bearing deposits ............. 354,535 8,437 3.18 319,309 12,125 5.08 -------- -------- -------- -------- Short-term borrowings ......................... 19,916 191 1.28 20,883 578 3.70 Long-term debt ................................ 51,457 2,269 5.90 29,532 1,601 7.25 -------- -------- ------- -------- Total interest-bearing liabilities .......... 425,908 10,897 3.42 369,724 14,304 5.17 -------- -------- ------- -------- Non-interest bearing deposits ................. 66,171 47,217 Other liabilities ............................. 3,671 3,203 Stockholders' equity .......................... 30,332 25,175 -------- -------- Total liabilities and stockholders' equity .................................... $526,082 $445,319 ======== ======== Net interest income/spread .................... $ 12,110 2.89% $ 11,135 2.95% ======== ====== ======== ==== Net interest margin ........................... 3.32% 3.56%
- --------- (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: o changes in volume, reflecting changes in volume multiplied by the prior period rate; and o 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
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO 2001 --------------------------------- CHANGE CHANGE DUE TO DUE TO TOTAL RATE VOLUME CHANGE ------- ------- ------- (DOLLARS IN THOUSANDS) Federal funds sold ................. $ (427) $ 54 $ (373) Investment securities - taxable .... (438) (207) (645) Investment securities - non-taxable (1) 88 (52) 36 Mortgage loans held for sale ....... 136 1,821 1,957 Loans, net of unearned discount .... (5,264) 1,857 (3,407) ------- ------- ------- Total interest income ... (5,905) 3,473 (2,432) ------- ------- ------- Interest-bearing demand accounts ... (368) (20) (388) Savings and money market deposits .. (2,044) 232 (1,812) Time deposits ...................... (2,209) 721 (1,488) Short-term borrowings .............. (378) (9) (387) Long-term debt ..................... (299) 967 668 ------- ------- ------- Total interest expense .. (5,298) 1,891 (3,407) ------- ------- ------- Net interest income ................ $ (607) $ 1,582 $ 975 ======= ======= =======
- --------- (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 third quarter of 2002 was $660,000, compared to $570,000 for the same period of 2001, resulting in a $90,000, or 15.79%, increase. For the nine-months ended September 30, 2002 and 2001, the provision was $1.7 million for both periods. The increase in the provision during the third quarter of 2002 has resulted from increases in the volume of our loan portfolio. We make provisions for loan losses in amounts management deems necessary to maintain the allowance for loan losses at an appropriate level. NON-INTEREST INCOME
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2002 2001 2002 2001 ------- ------- ------- ------- (In thousands) Loans held for sale fee income .......... $ 4,771 $ 1,819 $11,051 $ 3,272 NSF charges and service fees ............ 253 210 752 549 Other service charges ................... 207 222 598 584 Realized gain on sales of investment securities ........................... -- 282 193 499 Other income ............................ 81 53 220 165 ------- ------- ------- ------- Total non-interest income ......... $ 5,312 $ 2,586 $12,814 $ 5,069 ======= ======= ======= =======
Non-interest income increased to $5.3 million, or 105.41%, during the three-month period ended September 30, 2002, from $2.6 million during the three-month period ended September 30, 2001. Non-interest income for the nine-months ended September 30, 2002 was $12.8 million, an increase of $7.7 million, or 152.79%, from $5.1 million for the nine-months ended September 30, 2001. These increases are primarily attributable to an increase in loans held for sale fee income, though increases were also realized in NSF charges and service fees. Loans held for sale fee income increased $3.0 million, or 162.28%, and $7.8 million, or 237.74%, for the three-month and nine-month periods ended September 30, 2002, respectively. We have experienced significant growth in our loans held for sale income due to the expansion of our residential mortgage origination 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 third quarter of 2002. In addition, interest rate volatility experienced in the bond market during 2002 has created opportunities for the Company to realize appreciation on available-for-sale securities. The Company sold investment securities during the current year with a total book value of $13.0 million and realized a gain of $193,000. During 2001, many of our investment securities had appreciated significantly due to the declining interest rate environment. 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. Investment securities with a total book value of $15.9 million were sold during the first nine months of 2001 resulting in a gain of $499,000. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NON-INTEREST EXPENSE
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2002 2001 2002 2001 ------- ------- ------- ------- (IN THOUSANDS) Salaries and employee benefits ...... $ 4,302 $ 2,686 $11,376 $ 6,850 Occupancy ........................... 563 438 1,494 1,088 FDIC and other insurance expense .... 25 47 171 127 General and administrative .......... 1,426 1,013 3,751 2,816 ------- ------- ------- ------- Total non-interest expense .... $ 6,316 $ 4,184 $16,792 $10,881 ======= ======= ======= =======
Non-interest expense increased to $6.3 million, or 50.95%, during the three-month period ended September 30, 2002 and to $16.8 million, or 54.33%, during the nine-month period ended September 30, 2002, from $4.2 million and $10.9 million in the prior year periods, respectively. These increases are primarily attributable to an increase in salaries and employee benefits expense, which increased $1.6 million, or 60.16%, during the third quarter of 2002 and $4.5 million, or 66.07%, during the nine-month period ended September 30, 2002, compared to the prior year periods. Salaries and employee benefits expense increased as we hired additional staff to facilitate our growth. We had 249 full-time equivalent employees at September 30, 2002 as compared to 187 at September 30, 2001. Many areas of the Company added employees to manage growth with the expansion of the Company's mortgage divisions necessitating approximately 50% of the net increase in full-time employees. Also, as our internet and retail mortgage loan originations have grown, commissions paid have also grown, contributing to the increase in salaries and employee benefits expense during 2002. Commissions paid during the three-month and nine-month periods ended September 30, 2002 were $1.3 million and $3.0 million, respectively, compared to $363,000 and $634,000 in the prior year periods, respectively. FINANCIAL CONDITION Total assets for the Company at September 30, 2002, were $559.1 million, an increase of $67.1 million, or 13.63%, compared to $492.0 million at December 31, 2001. Deposits and stockholders' equity at September 30, 2002, were $426.7 million and $32.7 million, respectively, compared with $394.2 million and $28.5 million, respectively, at December 31, 2001, increases of $32.5 million, or 8.23%, and $4.1 million, or 14.50%, respectively. Loans at September 30, 2002 totaled $357.7 million, an increase of $23.7 million, or 7.08%, compared to December 31, 2001. The loan to deposit ratio at September 30, 2002 was 83.83% compared to 84.74% at December 31, 2001. The deposit growth of 8.23% has provided the funding necessary to facilitate our loan growth. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Mortgage loans held for sale at September 30, 2002 totaled $75.5 million, an increase of $33.7 million, from $41.9 million at December 31, 2001. Interest rate changes, seasonal factors, efficiencies in loan processing, etc. can cause periodic fluctuations in the balance of mortgage loans held for sale. As the low interest rate environment has persisted, the average volume of loans has increased during 2002 to an average balance of $53.0 million. Excess cash and due from bank balances, federal funds sold, scheduled calls and maturities of investment securities, and deposit growth have provided the funding necessary to facilitate the mortgage loan origination growth. 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 September 30, 2002, approximately $75,002,135 million was available. 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: 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NON-PERFORMING ASSETS
AS OF ----------------------------------- SEPTEMBER 30, DECEMBER 31, 2002 2001 2001 ------- ------- ------------ (Dollars in thousands) REAL ESTATE LOANS: Past due 90 days or more $ -- $ 447 $ -- Nonaccrual 410 818 824 INSTALLMENT LOANS: Past due 90 days or more -- -- 33 Nonaccrual -- 14 13 CREDIT CARDS AND RELATED PLANS: Past due 90 days or more 1 1 -- Nonaccrual -- -- -- COMMERCIAL (TIME AND DEMAND) AND ALL OTHER LOANS: Past due 90 days or more 1,576 80 76 Nonaccrual 425 1,148 752 LEASE FINANCING RECEIVABLES: Past due 90 days or more -- 6 -- Nonaccrual 310 1,724 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 2,722 4,238 3,063 FORECLOSED ASSETS HELD FOR SALE 644 105 49 ------- ------- ------- Total non-performing assets $ 3,366 $ 4,343 $ 3,112 ======= ======= ======= Total nonperforming loans to total loans 0.76% 1.32% 0.92% Total nonperforming loans to total assets 0.49% 0.88% 0.62% Allowance for loan losses to nonperforming loans 212.92% 112.93% 171.96% Nonperforming assets to loans and foreclosed assets held for sale 0.94% 1.36% 0.93%
As of September 30, 2002, non-performing loans equaled 0.76% of total loans. 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. The percentage of non-performing loans to total loans at September 30, 2002 is in line with historical percentages despite a decline in general economic conditions, as the loan portfolio has been cautiously monitored for possible non-performing loans and these situations have been aggressively managed when they have emerged. Generally, the Bank maintains its allowance for loan losses in excess of its non-performing loans. As of September 30, 2002, our ratio of allowance for loan losses to non-performing loans was 212.92%. 19 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 ---------------------------------------- NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, 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 181 -- -- Residential real estate 142 5 5 Commercial 328 944 1,015 Personal 45 55 80 Home Equity -- -- -- Construction -- -- -- Leases 783 525 836 -------- -------- -------- Total loans charged-off 1,479 1,529 1,936 -------- -------- -------- RECOVERIES: Commercial real estate 1 -- -- Residential real estate -- -- 5 Commercial 105 71 119 Personal 20 33 41 Home Equity -- -- -- Construction -- -- -- Leases 151 106 198 -------- -------- -------- Total recoveries 277 210 363 -------- -------- -------- NET LOANS CHARGED-OFF 1,202 1,319 1,573 PROVISION FOR LOAN LOSSES 1,730 1,665 2,400 -------- -------- -------- BALANCE AT END OF PERIOD $ 5,795 $ 4,786 $ 5,267 ======== ======== ======== LOANS OUTSTANDING: Average $343,784 $305,685 $310,727 End of period 357,738 320,265 334,075 RATIO OF ALLOWANCE FOR LOAN LOSSES TO LOANS OUTSTANDING: Average 1.68% 1.57% 1.70% End of period 1.62% 1.49% 1.58% RATIO OF ANNUALIZED NET CHARGE-OFFS TO LOANS OUTSTANDING: Average 0.47% 0.58% 0.51% End of period 0.44% 0.55% 0.47%
20 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 has remained fairly constant at 1.62% as of September 30, 2002, compared to 1.58% at December 31, 2001. For the nine months ended September 30, 2002, annualized net charge-offs equaled 0.47% of average total loans. This ratio is slightly below historical averages due in part to charge-off recoveries of $277,000 during the period. 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 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 were 62.99% of our total assets at September 30, 2002, and 66.54% of total assets at December 31, 2001. 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 September 30, 2002, the Bank was within the established guidelines. At September 30, 2002, our total stockholders' equity was $32.7 million and our equity to asset ratio was 5.84%. At September 30, 2002, our Tier 1 capital ratio was 9.10% compared to 8.87% at December 31, 2001, while our total risk-based capital ratio was 10.55% compared to 10.69% at December 31, 2001. Both exceed the capital minimums established in the risk-based capital requirements. 21 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 Blue Valley Ban Corp's wholly-owned subsidiary, Bank of Blue Valley's (the "Bank") 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 changes in interest rates will not affect net interest income or the economic value of equity by more than 10%, per 100 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 September 30, 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 35.34% (4.01%) 200 basis point rise 23.89% (3.33%) 100 basis point rise 11.92% (3.01%) Base Rate Scenario -- -- 50 basis point decline (6.92%) (0.71%) 100 basis point decline (13.40%) (3.42%) 150 basis point decline (19.86%) (6.19%)
22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The above table indicates that, at September 30, 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 September 30, 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 September 30, 2002. 23 ITEM 4. CONTROLS AND PROCEDURES In accordance with Item 307 of Regulation S-K promulgated under the Securities Act of 1933, as amended, and within 90 days of the date of this Quarterly Report on Form 10-Q, the Chief Executive Officer and Chief Financial Officer of the Company (the "Certifying Officers") have conducted evaluations of the Company's disclosure controls and procedures. As defined under Sections 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the term "disclosure controls and procedures" means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Certifying Officers have reviewed the Company's disclosure controls and procedures and have concluded that those disclosure controls and procedures are effective as of the date of this Quarterly Report on Form 10-Q. In compliance with Section 302 of the Sarbanes-Oxley Act of 2002, (18 U.S.C. 1350), each of the Certifying Officers executed an Officer's Certification included in this Quarterly Report on 10-Q. As of the date of this Quarterly Report on Form 10-Q, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 24 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 (D) EXHIBITS 11. Computation of Earnings Per Share. Please see p. 9. 15. Letter regarding Unaudited Interim Financial Information 99.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 99.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (E) REPORTS ON FORM 8-K Blue Valley filed no reports on Form 8-K during the quarter ended September 30, 2002. 25 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: November 14, 2002 By: /s/ Robert D. Regnier --------------------- Robert D. Regnier, President and Chief Executive Officer Date: November 14, 2002 By: /s/ Mark A. Fortino ------------------- Mark A. Fortino, Treasurer 26 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert D. Regnier, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Blue Valley Ban Corp (the "Company"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditor any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significant affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. November 14, 2002 /s/ Robert D. Regnier --------------------- Robert D. Regnier, President and Chief Executive Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Mark A. Fortino, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Blue Valley Ban Corp (the "Company"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditor any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significant affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. November 14, 2002 /s/ Mark A. Fortino ------------------- Mark A. Fortino, Treasurer (Chief Financial Officer) EX-15 3 c72911exv15.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 October 25, 2002 on our review of the interim financial information of Blue Valley Ban Corp for the periods ended September 30, 2002 and 2001 and included in the Company's quarterly report on Form 10Q 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 October 25, 2002 EX-99.1 4 c72911exv99w1.txt CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Blue Valley Ban Corp (the "Company") on Form 10-Q for the quarter ended September 30, 2002, as filed with the United States Securities and Exchange Commission on the date hereof (the "Report"), I, Robert D. Regnier, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert D. Regnier ------------------------------------- Robert D. Regnier, President and Chief Executive Officer November 14, 2002 EX-99.2 5 c72911exv99w2.txt CERTIFICATION OF THE CHIEF FINANCIAL OFFICER EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Blue Valley Ban Corp (the "Company") on Form 10-Q for the quarter ended September 30, 2002, as filed with the United States Securities and Exchange Commission on the date hereof (the "Report"), I, Mark A. Fortino, Treasurer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Mark A. Fortino ---------------------------- Mark A. Fortino, Treasurer (Chief Financial Officer) November 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----