BCSB Bankcorp: Getting Operating Cash Right

A couple days ago, it was noted in this space that Vail Resorts (MTN) had some large changes in its cash from operations after putting its cash flows from its real estate operations into the right bucket of the cash flow statement.

Just a couple days later, a similar reclassification shows in the non-reliance 8-K and amended 10-Q of BCSB Bankcorp (BCSB), a tiny bank in my hometown of Baltimore. (Also famous for its record-breaking baseball team.)

It seems that BCSB had classified the proceeds from the sale of loans as an operating item, when in fact they should have been properly classified as an investing inflow. It wasn’t insignificant: taking the $45.2 million of cash inflows dropped the nine-month cash from operations from $50.4 million down to $5.2 million - a 90% decrease.

It’s a good reminder: the cash from operations figure is probably the single most-viewed number on the cash flow statement - and many times analysts and investors look at it as the unvarnished truth, in comparison to net income. Not always the case, and preparer mistakes like these are one reason investors shouldn’t get overly comfortable with just one way of looking at performance in trying to understand what’s going on in a company.