He must be joking, or mounted it the wrong way
biz.yahoo.com
November 14, 2000
FIRST SHARES BANCORP INC (FRSH.OB)
Quarterly Report (SEC form 10QSB)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements in this section constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of First Shares to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such risks could include: increases in competitive pressure from other financial institutions in our markets, unexpected increases in loan losses, changes in market interest rates, unanticipated changes in our level of growth or our ability to manage the growth, changes in economic conditions in our markets, or legislation or regulatory changes.
RESULTS OF OPERATIONS FOR THE QUARTERS AND NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 2000 AND 1999
Net Income
During the current year, we have focused on growth as outlined in our strategic plan. Banking offices total 6, with the opening of the Bargersville location in January 2000.
Growth and expansion opportunities have had an adverse impact on profits in the short term, with a net loss of $(787,000) or $(1.11) per share reported for the 9 months ended September 30, 2000 compared to a net loss of $(161,000) or $(.26) per share for the same 9 months in 1999. Return on average assets (ROA) for 2000 was (1.20)% compared to (.46)% for 1999 on an annualized basis, while return on average equity (ROE) was (22.81)% compared to (4.35)% for the same period last year, also on an annualized basis.
Net Interest Income
Net interest income is the difference between interest and fees realized on interest earning assets and interest paid on interest bearing liabilities. The net interest margin is this difference expressed as a percentage of average earning assets.
For the 9 months ended September 30, 2000, net interest income totaled $2.3 million, representing a $900,000 or 65.7% increase over the same period for 1999. This increase in net interest margin is the result of our continued growth in earning assets, with our expanded branch network and continued gains in market share in existing markets.
Interest income through September 30, 2000 was $5.4 million, compared to $2.6 million in 1999, an increase of $2.8 million or more than double from last year. While the investment portfolio has maintained a higher average balance through September 30, 2000 than September 30, 1999, most of the improvement in interest income is attributed to growth in the loan
FIRST SHARES BANCORP
portfolio. Average investments, including securities and federal funds sold, were $18.8 million in 2000, up by $5.1 million from 1999's $13.7 million level, an increase of 36.4%. The average loan balance showed even stronger growth, increasing from $29.8 million in 1999 to $61.9 million in 2000, an increase of $32.1 million or 107.6 %. The increased volume of earning assets has been the key contributor to growth in interest income, although average yields, on a fully tax equivalent basis, increased moderately, rising to 8.87% in 2000 from 7.99% in 1999.
Interest expense reflects similar growth trends, with deposits and other borrowings funding asset growth. Interest expense year to date in 2000 increased $1.9 million, or 156.9%, compared to 1999. The increase is volume driven, as average deposits increased by a total of $32.6 million, or 91.4%, compared to 1999. Time deposits comprised most of the increase, with the average balance rising by $26.2 million. Average other liabilities increased from $171,000 for year to date 1999 to $5.8 million for 2000. These borrowings consist primarily of short-term federal funds purchased and bore an average cost of 6.98% in 2000. The average cost of interest bearing liabilities reflects the current increases in interest rates made by the Federal Reserve Bank, and was 5.58% in 2000 compared to 4.48% in 1999
The effect of the cost of liabilities rising faster than the yield on earning assets was a tightening of the net interest margin. Through September 30, 2000, the net interest margin was 3.77%, compared to 4.30% for 1999. A portion of this margin compression can be attributed to growth. Year to date for 2000, the average noninterest bearing liabilities and equity supported 16.6% of average earning assets while that figure was 25.6% for the same period in 1999.
For the quarters ended September 30, 2000 and 1999, interest income increased from $1.0 million to $2.1 million, with the increase in loan interest being the primary contributor due to the growth in the loan portfolio. Interest expense experienced similar increases, with expense reaching $1.2 million for the second quarter of 2000 compared to $463,000 for the same period last year. Net interest income was $833,000 for the third quarter of 2000, compared to $497,000 in 1999, an increase of $336,000 or 67.6%.
Provision for Loan Losses and Asset Quality
The provision for loan losses represents charges made to earnings to maintain an adequate allowance for loan losses. The allowance is maintained at an amount that we believe to be sufficient to absorb losses inherent in the loan portfolio. We conduct, on a quarterly basis, a detailed evaluation of the adequacy of the allowance.
The provision for loan losses was $335,000 for the nine months of 2000 compared to $133,000 in 1999 and the allowance grew to $828,000 at September 30, 2000 from $549,000 at December 31, 1999. The 2000 provision and relative increase in the allowance was in recognition of the strong loan growth, rather than a response to significant charge-off activity. Net charge offs through the first nine months of 2000 were $56,000, representing .09% of the total loan portfolio. The allowance for loan losses at the end of the September 2000 was $828,000, or 1.12% of total loans, compared to $524,000, or 1.37% of total loans at September 30, 1999.
Nonperforming loans have increased $146,000, to $287,000 since year-end. While nonperforming loans have increased since year end, as a percentage of the total loan portfolio,
FIRST SHARES BANCORP, INC.
the amount of nonperforming loans remains modest (.39% at September 30, 2000 compared to .31% at year end 1999). |
