<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 0-26744
PATRIOT BANK CORP.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 232820537
--------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
High and Hanover Streets, Pottstown, Pennsylvania 19464-9963
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(610) 323-1500
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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. |X| Yes |_| No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 6,194,707 shares of common
stock were outstanding as of November 13, 2000.
1
<PAGE> 2
PATRIOT BANK CORP. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets at September 30, 2000
and December 31, 1999
Consolidated Statements of Income for the Three-Month and Nine-Month
Periods ended September 30, 2000 and 1999
Consolidated Statements of Stockholders' Equity for the
Periods ended September 30, 2000 and December 31, 1999
Consolidated Statements of Cash Flows for the Nine-Month
Periods ended September 30, 2000 and 1999
Consolidated Statements of Comprehensive (Loss) Income for the
Three-Month and Nine-Month Periods ended September 30, 2000
and 1999
Notes to Consolidated Financial Statements
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II OTHER INFORMATION
Items 1 through 6
SIGNATURES
</TABLE>
2
<PAGE> 3
Patriot Bank Corp. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
---------------------------------------------------------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks $ 2,806 $ 4,919
Interest-earning deposits in other financial institutions 21,122 3,242
----------- -----------
Total cash and cash equivalents 23,928 8,161
Investment and mortgage-backed securities available for sale 87,869 87,334
Investment and mortgage-backed securities held to maturity
(market value of $301,805 and $330,754 at September 30, 2000
and December 31, 1999, respectively) 312,323 348,047
Loans held for sale 17,290 4,972
Loans and leases receivable, net of provision for credit loss of $5,991
and $6,082 at September 30, 2000 and December 31, 1999, respectively 639,219 621,978
Premises and equipment, net 8,775 11,376
Accrued interest receivable 4,913 4,845
Real estate and other property owned 72 193
Cash surrender value life insurance 16,295 15,700
Goodwill 13,616 14,189
Other assets 9,148 12,648
----------- -----------
Total assets $ 1,133,448 $ 1,129,443
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 641,822 $ 502,002
FHLB advances 300,188 412,692
Securities sold under repurchase agreements 115,471 137,103
Trust preferred debt securities 19,000 19,000
Advances from borrowers for taxes and insurance 3,052 4,761
Other liabilities 1,231 4,117
----------- -----------
Total liabilities 1,080,764 1.079,675
----------- -----------
Preferred stock, $.01 par value, 2,000,000 shares authorized, none
Issued at September 30, 2000 and December 31, 1999, respectively -- --
Common stock, no par value, 10,000,000 shares authorized, 6,555,490
issued at September 30, 2000 and December 31, 1999 -- --
Paid in capital 58,150 58,117
Common stock acquired by ESOP, 374,072 and 385,643 shares at amortized
cost at September 30, 2000 and December 31, 1999, respectively (2,087) (2,141)
Common stock acquired by MRP, 72,649 and 108,794 shares at amortized
cost at September 30, 2000 and December 31, 1999, respectively (359) (638)
Retained earnings 7,119 4,737
Treasury stock, 360,783 and 369,991 at cost at September 30, 2000
and December 31, 1999, respectively (4,062) (4,172)
Accumulated other comprehensive loss (6,077) (6,135)
----------- -----------
Total stockholders' equity 52,684 49,768
----------- -----------
Total liabilities and stockholders' equity $ 1,133,448 $ 1,129,443
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
Patriot Bank Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share data)
<TABLE>
<CAPTION>
Three-Month Period Ended Nine-Month Period Ended
September 30,
-----------------------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest-earning deposits $ 64 $ 44 $ 293 $ 200
Investment and mortgage-backed securities 6,992 7,453 21,384 22,137
Loans and leases 14,474 11,607 41,596 33,284
-------- -------- -------- --------
Total interest income 21,530 19,104 63,273 55,621
-------- -------- -------- --------
INTEREST EXPENSE
Deposits 8,578 5,222 22,056 15,221
Short-term borrowings 4,507 3,354 13,028 9,378
Long -term borrowings 3,077 4,424 10,621 13,227
-------- -------- -------- --------
Total interest expense 16,162 13,000 45,705 37,826
-------- -------- -------- --------
Net interest income before provision for
credit losses 5,368 6,104 17,568 17,795
Provision for credit losses (225) (300) (825) (900)
-------- -------- -------- --------
Net interest income after provision for
credit losses 5,143 5,804 16,743 16,895
-------- -------- -------- --------
NON-INTEREST INCOME
Service fees, charges and other operating income 1,318 1,191 3,737 2,693
Loss on sale of real estate acquired through
foreclosure (4) (4) (7) (4)
Gain on sale of investment and mortgage-backed
securities available for sale -- 365 1 933
Mortgage banking gains 962 222 1,832 488
-------- -------- -------- --------
Total non-interest income 2,276 1,774 5,563 4,110
-------- -------- -------- --------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,803 2,796 8,154 7,723
Office occupancy and equipment 1,246 956 3,975 3,012
Professional services 371 378 851 625
Federal deposit insurance premiums 29 56 80 166
Data processing 27 27 156 92
Advertising 158 238 461 538
Deposit processing 174 154 493 437
Goodwill amortization 316 256 866 705
Office supplies & postage 173 171 579 464
MAC expense 165 121 461 315
Other operating expense 442 608 1,134 1,505
-------- -------- -------- --------
Total non-interest expense 5,904 5,761 17,210 15,582
-------- -------- -------- --------
Income before income taxes 1,515 1,817 5,096 5,423
Income taxes 287 410 1,074 1,341
-------- -------- -------- --------
Net income $ 1,228 $ 1,407 $ 4,022 $ 4,082
======== ======== ======== ========
Earnings per share - basic $ 0.21 $ 0.24 $ 0.69 $ 0.71
======== ======== ======== ========
Earnings per share - diluted $ 0.21 $ 0.24 $ 0.68 $ 0.69
======== ======== ======== ========
Dividends per share $ 0.09 $ 0.08 $ 0.26 $ 0.23
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
Patriot Bank Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Number of Paid-in Retained Treasury Comprehensive
Shares Capital ESOP MRP Earnings Stock Income (Loss) Total
------ ------- ---- --- -------- ----- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1999 4,347 $ 60,404 $(2,285) $ (971) $ 4,220 $(22,963) $ 3,855 $ 42,260
Common stock issued 3 26 -- -- 26
Common stock acquired by
MRP (3) -- -- (26) -- -- -- (26)
Treasury stock purchased (377) -- -- -- -- (4,808) -- (4,808)
Treasury stock retired -- (23,531) -- -- -- 23,531 -- --
Common stock issued for
Business combination 1,640 21,047 -- -- -- -- -- 21,047
Release and amortization
of MRP 48 53 -- 359 -- -- -- 412
Release of ESOP shares 26 118 144 -- -- -- -- 262
Purchase ESPP shares 7 -- -- -- -- 68 -- 68
Change in unrealized gains
on securities available
for sale, net of taxes -- -- -- -- -- -- (9,990) (9,990)
Net income -- -- -- -- 2,200 -- -- 2.200
Cash dividends paid -- -- -- -- (1,683) -- -- (1,683)
------- -------- ------- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1999 5,691 $ 58,117 $(2,141) $ (638) $ 4,737 $ (4,172) $ (6,135) $ 49,768
------- -------- ------- ------- ------- -------- -------- --------
Amortization of MRP shares 36 -- -- 279 -- -- -- 279
Amortization of ESOP shares 12 33 54 -- -- -- -- 87
Purchase ESPP shares 9 -- -- -- -- 110 -- 110
Change in unrealized gains
on securities available
for sale, net of taxes -- -- -- -- -- -- 58 58
Net income -- -- -- -- 4,022 -- -- 4,022
Cash dividends paid -- -- -- -- (1,640) -- -- (1,640)
------- -------- ------- ------- ------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 2000 5,748 $ 58,150 $(2,087) $ (359) $ 7,119 $ (4,062) $ (6,077) $ 52,684
======= ======== ======= ======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
Patriot Bank Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Nine-Months Period Ended September 30,
--------------------------------------
2000 1999
---- ----
<S> <C> <C>
Operating activities
Net Income $ 4,022 $ 4,082
Adjustments to reconcile net income to net cash provided by
operating activities
Amortization and accretion of
Deferred loan origination fees (353) 76
Premiums and discounts (2,198) (2,032)
MRP shares 279 323
Goodwill 866 705
Provision for credit losses 825 900
Release of ESOP shares 87 198
Gain on sale of securities available for sale (1) (722)
Loss (gain) on sale of real estate owned 7 3
Charge-off real estate owned 16 118
Depreciation of premises and equipment 1,343 1,280
Mortgage loans originated for sale (109,617) (44,660)
Mortgage loans sold 145,643 43,055
Decrease (increase) in deferred income taxes 715 (1,054)
Increase in cash surrender value of life insurance (595) (465)
(Increase) decrease in accrued interest receivable (68) 245
Decrease in other assets 3,560 7,000
Decrease in other liabilities (2,776) (2,391)
--------- --------
Net Cash (used by) provided by operating activities 41,755 6,661
--------- --------
Investing activities
Loan originations and principal payments on loans, net (66,239) (33,773)
Proceeds from the sale of securities - available for sale -- 7,424
Proceeds from the maturity of securities - available for sale 2,619 40,804
Proceeds from the maturity of securities - held to maturity 35,724 47,080
Purchase of securities - available for sale (1,118) (96,304)
Purchase of bank owned life insurance -- (15,046)
Proceeds from sale of real estate owned 291 7
Purchase of premises and equipment (1,523) --
Proceeds from sale of premises and equipment 2,431 9,729
Cash received in business combination -- (3,473)
--------- --------
Net cash used in by investing activities (27,815) (43,552)
--------- --------
Financing activities
Net increase in deposits 139,312 4,674
(Repayment of) proceeds from short term FHLB Advances (182,500) 54,500
Repayment of short term repurchase agreements (19,734) (29,500)
Repayment of long term FHLB Advances (1,902) (80)
Proceeds from long term borrowings 70,000 --
Decrease in advances from
borrowers for taxes and insurance (1,709) (1,022)
Cash paid for dividends (1,640) (1,390)
Purchase of Treasury Stock -- (4,808)
--------- --------
Net cash provided by financing activities 1,827 22,374
--------- --------
Net increase (decrease) in cash and cash equivalents 15,767 (14,517)
Cash and cash equivalents at beginning of year 8,161 30,487
--------- --------
Cash and cash equivalents at of the six month period $ 23,928 $ 15,970
========= ========
Supplemental Disclosures
Cash paid for interest on deposits $ 21,553 $ 14,946
========= ========
Cash paid for income taxes $ 1,254 $ 1,068
========= ========
Transfers from loans to real estate owned $ 191 $ 492
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
Patriot Bank Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME LOSS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Three-Month Period Ended Nine-Month Period Ended
-----------------------------------------------------------------------------------------------------------------------------
September 30,
-----------------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $1,228 $ 1,407 $ 4,022 $ 4,082
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized holding gains (losses) arising during the period 758 (3,100) 59 (8,436)
Less: Reclassification adjustment for gains included
in net income -- 241 (1) 616
------ ------- ------- -------
Comprehensive income (loss) $1,986 $(1,452) $ 4,081 $(3,738)
====== ======= ======= =======
</TABLE>
7
<PAGE> 8
PATRIOT BANK CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
September 30, 2000
Note 1 - General
The accompanying financial statements of Patriot Bank Corp. and Subsidiaries
("Patriot") include the accounts of the parent company, Patriot Bank Corp. and
its wholly-owned subsidiaries, Patriot Bank and Patriot Investment Company. All
material intercompany balances and transactions have been eliminated in
consolidation. These financial statements have been prepared in accordance with
the instructions for Form 10-Q and therefore do not include certain information
or footnotes necessary for the presentation of financial condition, results of
operations, and cash flows in conformity with generally accepted accounting
principles. However, in the opinion of management, the consolidated financial
statements reflect all adjustments (which consist of normal recurring accruals)
necessary for a fair presentation of the results for the unaudited periods. The
results of operations for the three-month period ended September 30, 2000 are
not necessarily indicative of the results which may be expected for the entire
year. The consolidated financial statements should be read in conjunction with
the annual report on Form 10-K for the year ended December 31, 1999.
8
<PAGE> 9
PATRIOT BANK CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
September 30, 2000
Note 2 - Investment And Mortgage-Backed Securities
The amortized cost and estimated fair value of investment and mortgage-backed
securities are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
September 30, 2000 December 31, 1999
---------------------------------------------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
cost gain loss value cost gain loss Value
---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Investment securities
Corporate debt securities $ 17,084 $ 3 $ 1,918 $ 15,169 $ 17,361 $ 73 $ 771 $ 16,663
FHLMC Preferred Stock 44,971 376 165 45,182 44,966 797 1,151 44,612
FHLB Stock 21,235 -- -- 21,235 20,835 -- -- 20,835
Equity securities 6,297 -- 628 5,669 6,305 -- 1,081 5,224
Mortgage-backed securities
FHLMC 616 -- 2 614 -- -- -- --
------ ------- -------- -------- ------ ------- --------
Total securities available
for sale $ 90,203 $ 379 $ 2,713 $ 87,869 $ 89,467 $ 870 $ 3,003 $ 87,334
======== ====== ======= ======== ======== ====== ======= ========
HELD TO MATURITY:
Investment securities
U.S. Treasury and
government agency
Securities $ 76,538 $4,178 $ 9,796 $ 70,920 $ 74,246 $ -- $ 7,455 $ 66,791
Corporate debt securities 1,000 2 -- 1,002 1,501 -- 1 1,500
Mortgage-backed securities
FHLMC 3,599 22 58 3,563 4,272 32 12 4,292
Fannie Mae 50,057 2,597 2,419 50,235 54,809 26 3,162 51,673
GNMA 3,808 26 88 3,746 4,528 44 3 4,569
Colateralized mortgage
Obligations
FHLMC 95,867 1,268 3,820 93,315 114,178 690 4,059 110,809
Fannie Mae 72,060 973 3,323 69,710 82,489 227 3,501 79,215
Other 7,094 -- 76 7,018 9,732 -- 32 9,700
CMBS 2,300 31 35 2,296 2,292 -- 87 2,205
-------- ------ ------- -------- -------- ------ ------- --------
Total securities held to
maturity $312,323 $9,097 $19,615 $301,805 $348,047 $1,019 $18,312 $330,754
======== ====== ======= ======== ======== ====== ======= ========
</TABLE>
9
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Note 3 - Loans Receivable
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
-----------------------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Mortgage loan portfolio
Secured by real estate $ 249,556 $ 293,852
Construction 12,629 10,481
Consumer loan portfolio
Home equity 66,444 69,785
Consumer 8,596 9,081
Comercial loan portfolio
Commercial 243,037 189,189
Commercial leases 65,764 57,808
--------- ---------
Total loans receivable 646,026 630,196
Less deferred loan origination fees (816) (2,136)
Allowance for credit losses (5,991) (6,082)
--------- ---------
Total loans receivable, net $ 639,219 $ 621,978
========= =========
</TABLE>
Note 4 - Deposits
Deposits are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
----------------------------------------------------------------------------------------
Deposit type 2000 1999
----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
NOW $ 30,857 $ 34,635
Money market 126,956 86,705
Savings accounts 31,400 37,193
Non-interest-bearing demand 34,856 30,760
--------- ---------
Total demand, transaction, money
market and savings deposits 224,069 189,293
Certificates of deposits 417,753 312,709
-------- --------
Total deposits $ 641,822 $ 502,002
========= =========
</TABLE>
10
<PAGE> 11
NOTE 5 - EARNINGS PER SHARE
The dilutive effect of stock options is excluded from basic earnings
per share but included in the computation of diluted earnings per share.
<TABLE>
<CAPTION>
For Three-Months Ended September 30, 2000 For Nine-Months Ended September 30, 2000
----------------------------------------- ----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net Income available to common
Stockholders $1,228 5,825 $0.21 $4,022 5,815 $ 0.69
EFFECT OF DILUTIVE SECURITIES
Dilutive Options -- 24 -- -- 138 (.01)
------ ----- ----- ------ ----- ------
DILUTED EPS
Net income available to common
Stockholders plus assumed conversions $1,228 5,849 $0.21 $4,022 5,953 $ 0.68
====== ===== ===== ====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
For Three-Months Ended September 30, 1999 For Nine-Months Ended September 30, 1999
----------------------------------------- ----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net Income available to common
Stockholders $1,407 5,790 $0.24 $4,082 5,713 $0.71
EFFECT OF DILUTIVE SECURITIES
Dilutive Options -- 185 -- -- 200 (.02)
------ ----- ----- ------ ----- -----
DILUTED EPS
Net income available to common
Stockholders plus assumed conversions $1,407 5,975 $0.24 $4,082 5,913 $0.69
====== ===== ===== ====== ===== =====
</TABLE>
11
<PAGE> 12
Note 6 - Segment Reporting
The Company has three reportable segments: Patriot Bank ("PB"), Patriot
Commercial Leasing Corporation ("PCLC") and BankZip.Com ("ZIP") . PB operates a
community banking network with twenty-six community banking offices providing
deposits and loan services to customers. PCLC is a small ticket leasing company
headquartered in Exton PA. ZIP is a new internet initiative launched in the
third quarter of 1999. In the fourth quarter of 1999 Patriot's ownership of Zip
was reduced to an insignificant percentage that will cause Patriot to only
report results for that segment for the third and fourth quarters of 1999.
Patriot currently holds a $5 million in debenture at the applicable Federal rate
from Zip that will allow Patriot to convert 5 million warrants to shares in the
event of ZIP having an IPO.
The following table highlights income statement and balance sheet
information for each of the segments at or for the three-month and Nine-Month
periods ending September 30, 2000 and 1999 (in thousands).
<TABLE>
<CAPTION>
For the three-month period ended September 30, 2000 For the Nine-Month period ended September 30, 2000
--------------------------------------------------- --------------------------------------------------
PB PCLC ZIP Total PB PCLC ZIP Total
-- ---- --- ----- -- ---- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 4,872 $ 496 $-- $ 5,368 $ 16,484 $ 1,084 $ -- 517,568
Other income 1,981 295 -- 2,276 4,717 846 -- 5,563
Total net income 1,087 141 -- 1,228 3,599 423 -- 4,022
Total assets 1,067,684 65,764 -- 1,133,448 1,067,684 65,764 -- 1,133,448
Total loans and leases 572,200 67,019 -- 639,219 572,200 67,019 -- 639,219
</TABLE>
<TABLE>
<CAPTION>
For the three-month period ended September 30, 1999 For the Nine-Month period ended September 30, 1999
--------------------------------------------------- --------------------------------------------------
PB PCLC ZIP Total PB PCLC ZIP Total
-- ---- --- ----- -- ---- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 5,648 $ 456 $ -- $ 6,104 $ 16,536 $ 1,259 $ -- $ 17,795
Other income 1,519 255 -- 1,774 3,576 534 -- 4,110
Total net income 1,485 132 (210) 1,407 3,919 373 (210) 4,082
Total assets 1,057,416 57,254 -- 1,114,670 1,057,416 57,254 -- 1,114,670
Total loans and leases 532,133 54,325 -- 586,458 532,133 54,325 -- 586,458
</TABLE>
12
<PAGE> 13
Note 7 - Accounting for Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement as amended by SFAS No. 137
in June 1999 and SFAS No. 138 in June 2000 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The accounting for changes in the fair value of
a derivative depends on the intended use of the derivative and the resulting
designation. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of certain exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment; (b) a hedge of
the exposure to variable cash flows of a forecasted transaction; or (c) a hedge
of foreign currency exposure. SFAS No. 133, as amended, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Earlier adoption
is permitted. Patriot has not yet determined the impact, if any, of this
statement, including if applicable, its provisions for the potential
reclassifications of certain investment securities, on earnings, financial
condition or equity.
Note 8 - Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
In September 2000, the FASB issued SFAS No. 140 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
This statement supercedes and replaces the guidance in Statement 125. It revises
the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, although it
carries over most of Statement 125's provisions without reconsideration.
The Statement is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001 and for
recognition and reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. This Statement is to be applied prospectively with certain
exceptions. Other than those exceptions, earlier or retroactive application of
its accounting provisions is not permitted. Patriot has not yet determined the
impact, if any, of this statement on Patriot's earnings, financial condition, or
equity.
Note 8 - Business Combinations
On January 22, 1999, the Company consummated its acquisition of First
Lehigh Corporation (First Lehigh), the holding company of First Lehigh Bank. At
the time of the merger First Lehigh Bank was a commercial bank with $104,475,000
in total assets, $93,905,000 in total deposits, and five branches in Lehigh and
Carbon counties of Pennsylvania. Patriot issued 1,640,000 shares of common stock
for all of the outstanding common and preferred stock of First Lehigh. The
transaction had a total value of $21,047,000. The acquisition was accounted for
as a purchase, and accordingly the results of operations of First Lehigh is have
been included in Patriot;s consolidated statement of income from the date of
acquisition. The transaction added $6,712,000 of goodwill which is being
amortized over 15 years and $4,508,000 of core deposit intangibles to Patriot's
balance sheet which is being amortized on an accelerated basis over a period of
5-20 years.
On June 28, 1999. The company acquired three offices of Ark Mortgage
Inc. The offices acquired are located in Fort Washington, Lancaster, and
Bethlehem. The purchase price was equal to $250,000 in cash less certain profits
on the acquired mortgage pipeline. The acquisition will be accounted for as a
purchase and will add approximately $170,000 of goodwill to Patriot's balance
sheet which will be amortized over a period of 15 years.
Note 9 - Subsequent Events
On November 6, 2000 Patriot appointed Richard A. Elko President and Chief
Executive Officer following the resignation of Joseph W. Major as C.E.O. and
President, and as a director. Mr. Major left Patriot to pursue other business
interests. He will remain as a senior consultant to the Company. Mr. Elko served
as an Executive Vice President since January, 1996 and Patriot's Chief Financial
Officer from January 1996 through December 1999. Patriot estimates an after tax
charge of $785,000 during the fourth quarter of 2000.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In addition to historical information, this discussion and analysis of
Patriot Bank Corp. and Subsidiaries (Patriot) contains forward-looking
statements. The forward-looking statements contained herein are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements. Important
factors that might cause such a difference include, but are not limited to those
discussed in the "Management's Discussion and Analysis of Financial Condition
and Results of Operations". Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof. Patriot undertakes no obligation to publicly revise or update
these forward-looking statements to reflect events or circumstances that arise
after the date hereof.
GENERAL. Patriot reported diluted earnings per share of $.21 and net income
of $1,228,000 for the three-month period ended September 30, 2000 compared to
diluted earnings per share of $.24 and net income of $1,407,000 for the three
month period ended September 30, 1999. Diluted earnings per share for the
nine-month period ending September 30, 2000 was $.68 and net income of
$4,022,000 compared with $.69 and net income of $4,082,000 for the nine-month
period ended September 30, 1999. Return on average equity was 9.48%, for the
three-month period ended September 30, 2000 compared to 10.25%, for the
three-month period ended September 30, 1999.
NET INTEREST INCOME. Net interest income for the three-month and nine-month
periods ended September 30, 2000 was $5,368,000 and $17,568,000 compared to
$6,104,000 and $17,795,000 for the same periods in 1999. Patriot's net interest
margin (net interest income as a percentage of average interest-earning assets)
was 2.28% for the nine-month period ended September 30, 2000 compared to 2.42%
for the same period in 1999. The decrease during the third quarter is primarily
due to the impact of general increases in market rates on Patriot's funding
sources compressing Patriot's net interest margin offset by growth in Patriot's
commercial loan portfolio.
Interest on loans and leases was $14,474,000 and $41,596,000 for the
three-month and nine-month periods ended September 30, 2000 compared to
$11,607,000 and 33,284,000 for the same periods in 1999. The average balance of
loans was $669,394,000 with an average yield of 8.28% for the nine-month period
ended September 30, 2000 compared to an average balance of $560,313,000 with an
average yield of 7.93% for the same period in 1999. The increase in average
balance is due to strong growth in the originations of commercial loans and
leases. The increase in average yield is primarily a result of a greater volume
of higher yielding commerical loans and leases.
Interest on Patriot's investment portfolio (investment and mortgage-backed
securities) was $6,992,000 and $21,384,000 for the three-month and nine-month
periods ended September 30, 2000 compared to $7,453,000 and $22,137,000 for the
same periods in 1999. The average balance of the investment portfolio was
$418,547,000 with an average yield of 7.15% for the nine-month period ended
September 30, 2000 compared to an average balance of $460,387,000 with an
average yield of 6.69% for the same period in 1999. The decrease in average
balance is primarily due to Patriot allowing the investment portfolio to
amortize down so it can be replaced with commercial assets. The increase in
average yield is related to increases in yields in the market.
Interest on total deposits was $8,578,000 and $22,056,000 for the three-month
and nine-month periods ended September 30, 2000 compared to $5,222,000 and
$15,221,000 for the same periods in 1999. The average balance of total deposits
was $586,112,000 with an average cost of 5.01% for the nine-month period ended
September 30, 2000 compared to an average balance of $464,875,000 with an
average cost of 4.38% for the same period in 1999. The increase in average
balance is primarily the result of aggressive marketing of certificates of
deposit, money market and other transaction-based deposit accounts, and an
increase in Patriot's jumbo deposit program. The increase in average yield was
the result of general increases in interest rates and growth in the jumbo
deposit program.
Interest on borrowings was $7,584,000 and $23,649,000 for the three-month
and nine-month periods ended September 30, 2000 compared to $7,778,000 and
$22,605,000 for the same periods in 1999. The average balance of borrowings was
$519,541,000 with an average cost of 5.99% for the nine-month period ended
September 30, 2000 compared to an average balance of $557,200,000 with a cost of
5.40% for the same period in 1999. The decrease in average balance was due to
growth in Patrio's deposit based products. The increase in the cost of
borrowings was the result of a general increase in interest rates.
PROVISION FOR CREDIT LOSSES. The provision for credit losses was $225,000 and
$825,000 for the three-month and nine-month periods ended September 30, 2000
compared to $300,000 and $900,000 for the same periods in 1999. During the third
quarter Patriot sold over $50,000,000 in mortgage loans. In conjunction with the
sale and Patriot's continued strong asset quality ratios, the provision was
reduced accordingly. Patriot continues to have excellent asset quality with low
levels of delinquencies low level of non-performing assets. At September 30,
2000 Patriot's non-performing assets were .33% of total assets and all loans 30
days or more delinquent were 1.16% of total loans.
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NON-INTEREST INCOME. Total non-interest income was $2,276,000 and $5,563,000
for the three-month and nine-month periods ended September 30, 2000 compared to
$1,774,000 and $4,110,000 for the same periods in 1999. The increase other
non-interest income was primarily due to an increased emphasis on recurring
non-interest income including an increase in mortgage banking gains of $962,000
and $1,832,000 for the three-month and nine-month periods ended September 30,
2000 compared to $222,000 and $488,000 for the same periods in 1999 as well as
growth in other areas such as loan and deposit fees, ATM fees, and income from
bank owned life insurance. Non-interest income also includes gains recognized on
the sale of investment securities available for sale.
NON-INTEREST EXPENSE. Total non-interest expense was $5,904,000 and
$17,210,000 for the three-month and nine-month periods ended September 30, 2000
compared to $5,761,000 and $15,582,000 for the same periods in 1999. The
increase in non-interest expense was the result of Patriot's newly opened retail
offices on Tilghman St. in Allentown, Pennsylvania and in Exeter Township,
Pennsylvania, and growth in the mortgage banking operations.
INCOME TAX PROVISION. The income tax provision was $287,000 and $1,074,000
for the three-month and nine-month periods ended September 30, 2000 compared to
$410,000 and $1,341,000 for the same periods in 1999. The effective tax rate was
18.94% and 21.08% for three-month and nine-month periods ended September 30,
2000 compared to 22.56% and 24.73% for the same periods in 1999. The decrease is
a result of certain tax exempt investments representing a larger portion of
total income.
FINANCIAL CONDITION
LOAN AND LEASE PORTFOLIO. Patriot's primary portfolio loan products are
commercial loans, small ticket commercial leases, fixed-rate and adjustable-rate
mortgage loans and home equity loans and lines of credit. Patriot also offers
residential construction loans and other consumer loans. At September 30, 2000
Patriot's total loan portfolio was $639,219,000, compared to a total loan
portfolio of $621,978,000 at December 31, 1999. As part of an interest rate risk
strategy Patriot sold approximately $50,000,000 in mortgage loans during the
third quarter. The increase in the loan portfolio was primarily the result of
aggressive marketing of commercial loans and leases offset by the sale of
mortgages. During the Nine-Month period ended September 30, 2000, Patriot
originated total loans and leases of $306,944,000, compared to total loans and
leases originated of $220,582,000 for the same period in 1999. Commercial loan
and lease originations for the nine-month period ended September 30, 2000 were
$148,390,000 compared to $117,230,000 for the same period in 1999.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents at September 30, 2000
were $23,928,000 compared to $8,161,000 at December 31, 1999. The increase in
cash balances is associated with timing differences in borrowing activity and
investment prepayments.
INVESTMENT AND MORTGAGE-BACKED SECURITIES. Investment securities consist
primarily of U.S. agency securities, mortgage-backed securities which are
generally insured or guaranteed by either FHLMC, FNMA or the GNMA and
collateralized mortgage obligations.
Total investment and mortgage-backed securities at September 30, 2000 were
$400,192,000 compared to $435,381,000 at December 31, 1999. The decrease in
investment and mortgage-backed securities is primarily due to normal investment
amortization.
OTHER ASSETS. Premises and equipment at September 30, 2000 was $8,775,000
compared to $11,376,000 at December 31, 1999. The decrease in premises and
equipment is primarily associated with normal depreciation coupled with the sale
of a closed branch office and the corporate headquarters building acquired from
First Lehigh. Accrued interest receivable at September 30, 2000 was $4,913,000
compared to $4,845,000 at December 31, 1999. Real estate owned at September 30,
2000 was $72,000 compared to $193,000 at December 31, 1999. Bank owned life
insurance policy with a cash surrender value at September 30, 2000 of
$16,295,000 compared to $15,700,000 at December 31, 1999. Goodwill at September
30, 2000 was $13,616,000 compared to $14,189,000 at December 31, 1999. Other
assets at September 30, 2000 were $9,148,000 compared to $12,648,000 at December
31, 1999.
DEPOSITS. Deposits are primarily attracted from within Patriot's market area
through the offering of various deposit instruments, including NOW accounts,
money market accounts, savings accounts, certificates of deposit and retirement
savings plans. Patriot also attracts jumbo certificates of deposit.
Total deposits at September 30, 2000 were $641,822,000 compared to
$502,002,000 at December 31, 1999. The increase in balance is primarily
attributed to growth in Patriot's Jumbo CD program.
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BORROWINGS. Patriot utilizes borrowings as a source of funds for its asset
growth and its asset/liability management. Patriot is eligible to obtain
advances from the FHLB upon the security of the FHLB common stock it owns and
certain of its residential mortgages and mortgage-backed securities, provided
certain standards related to creditworthiness have been met. Patriot may also
utilize repurchase agreements to meet its liquidity needs. FHLB advances are
made pursuant to several different credit programs, each of which has its own
interest rate and range of maturities. The maximum amount that the FHLB will
advance to member institutions fluctuates from time to time in accordance with
the policies of the FHLB. Total borrowings at September 30, 2000 were
$434,659,000 compared to $568,795,000 at December 31, 1999. The decrease is
primarily associated with funding being provided by growth in deposits.
STOCKHOLDERS' EQUITY. Total stockholders' equity was $52,684,000 at September
30, 2000 compared to $49,768,000 at December 31, 1999. The increase in balance
is primarily due to earnings offset by dividends to shareholders' and decreases
in accumulated other comprehensive income.
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LIQUIDITY AND CAPITAL RESOURCES
Liquidity. Patriot's primary sources of funds are deposits, principal and
interest payments on loans, principal and interest payments on investment and
mortgage-backed securities, FHLB advances and repurchase agreements. While
maturities and scheduled amortization of loans and investment and
mortgage-backed securities are predictable sources of funds, deposit inflows and
loan and mortgage-backed security prepayments are greatly influenced by economic
conditions, general interest rates and competition. Therefore, Patriot manages
its balance sheet to provide adequate liquidity based upon various economic,
interest rate and competitive assumptions and in light of profitability
measures.
During the nine-month period ended September 30, 2000, significant liquidity
was provided by growth in deposits and maturities of investment and
mortgage-backed securities. The funds provided by these activities were invested
in new loans and the repayment of borrowings.
At September 30, 2000, Patriot had outstanding loan commitments of
$61,529,000. Patriot anticipates that it will have sufficient funds available to
meet its loan origination commitments. Certificates of deposit which are
scheduled to mature in one year or less from September 30, 2000 totaled
$284,565,000. Based upon historical experience, Patriot expects that
substantially all of the maturing certificates of deposit will be retained at
maturity.
Capital Resources. FDIC regulations currently require companies to
maintain a minimum leverage capital ratio of not less than 3% of tier 1 capital
to total adjusted assets and not less than 4% of risk-adjusted assets, and a
minimum risk-based capital ratio (based upon credit risk) of not less than 8%.
The FDIC requires a minimum leverage capital requirement of 3% for institutions
rated composite 1 under the CAMEL rating system. For all other institutions, the
minimum leverage capital requirement is 3% plus at least an additional 1% to 2%,
(100 to 200) basis points. At December 31, 1999, Patriot Bank's and Patriot Bank
Corp.'s capital ratios exceeded all requirements to be considered well
capitalized. The following table sets forth the capital ratios of Patriot Bank
Corp., Patriot Bank and the current regulatory requirements at September 30,
2000:
<TABLE>
<CAPTION>
To Be To Be
Actual Adequacy Capitalized Well Capitalized
--------------- -------------------- ----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of September 30, 2000
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk weighted assets)
Patriot Bank Corp. $69,860 10.55% $52,989 8% $66,232 10%
Patriot 69,219 10.44 53,025 8% 66,281 10%
Tier I capital (to risk-weighted assets)
Patriot Bank Corp. 64,365 9.72% 26,493 4% 39,739 6%
Patriot 63,225 9.54% 26,512 4% 39,769 6%
Tier I capital (to average assets)
Patriot Bank Corp. 64,365 5.54% 46,441 4% 58,052 5%
Patriot 63,225 5.41% 46,738 4% 58,423 5%
</TABLE>
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MANAGEMENT OF INTEREST RATE RISK
The principal objective of Patriot's interest rate risk management function
is to evaluate the interest rate risk included in certain on and off balance
sheet accounts, determine the level of risk appropriate given Patriot's business
focus, operating environment, capital and liquidity requirements and performance
objectives, and manage the risk consistent with Board approved guidelines.
Through such management, Patriot seeks to reduce the vulnerability of its net
interest income to changes in interest rates. Patriot monitors its interest rate
risk as such risk relates to its operating strategies. Patriot's Board of
Directors has established an Asset/Liability Committee comprised of senior
management, which is responsible for reviewing its asset/liability and interest
rate position and making decisions involving asset/liability considerations. The
Asset/Liability Committee meets regularly and reports trends and Patriot's
interest rate risk position to the Board of Directors.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time period and the amount of
interest-bearing liabilities maturing or repricing within that time period. A
gap is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities. A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of rising interest
rates, therefore, a negative gap theoretically would tend to adversely affect
net interest income, while a positive gap would tend to result in an increase in
net interest income. Conversely, during a period of falling interest rates, a
negative gap position would theoretically tend to result in an increase in net
interest income while a positive gap would tend to affect net interest income
adversely.
Patriot pursues several actions designed to control its level of interest
rate risk. These actions include increasing the percentage of the loan portfolio
consisting of short-term and adjustable-rate loans through increased
originations of these loans, acquiring short-term and adjustable-rate
mortgage-backed securities, and undertaking to lengthen the maturities of
deposits and borrowings. At September 30, 2000, Patriot's total interest-bearing
liabilities maturing or repricing within one year exceeded its total net
interest-earning assets maturing or repricing in the same time period by
$226,761,000 representing a one-year cumulative "gap," as defined above, as a
percentage of total assets of negative 20.01%.
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The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at September 30, 2000, which are
anticipated, based upon certain assumptions, to reprice or mature in each of the
future time periods shown. Except as stated below, the amount of assets and
liabilities shown which reprice or mature during a particular period were
determined in accordance with the earlier of term to repricing or the
contractual maturity of the asset or liability. The table sets forth an
approximation of the projected repricing of assets and liabilities at September
30, 2000, on the basis of contractual maturities, anticipated prepayments, and
scheduled rate adjustments within a Three-Month period and subsequent selected
time intervals. The loan amounts in the table reflect principal balances
expected to be repaid and/or repriced as a result of contractual amortization
and anticipated prepayments of adjustable-rate loans and fixed-rate loans, and
as a result of contractual rate adjustments on adjustable-rate loans.
<TABLE>
<CAPTION>
At September 30, 2000
---------------------
3 Months 3 Months to 6 Months to 1 Year to 3 Years to More than
or Less 6 Months 1 Year 3 Years 5 Years 5 Years Total
--------- -------- --------- --------- --------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS(1):
Interest earning deposits $ 21,122 $ -- $ -- $ -- $ -- $ -- $ 21,122
Investment and mortgage-backed 130,092 9,660 21,088 28,735 69,979 140,638 400,192
securities, net (2)(5)
Loans receivable, net(3)(5) 91,858 52,282 89,601 95,671 225,877 101,220 656,509
-------- -------- --------- --------- --------- -------- ----------
Total interest-earning assets 243,072 61,942 110,689 124,406 295,856 241,858 1,077,823
======== ======== ========= ========= ========= ======== ==========
Non-interest-earning assets -- -- -- -- -- 55,625 55,625
-------- -------- --------- --------- --------- -------- ----------
Total assets 243,072 61,942 110,689 124,406 295,856 297,483 1,133,448
-------- -------- --------- --------- --------- -------- ----------
INTEREST-BEARING LIABILITIES:
Money market and passbook savings 20,596 20,596 41,192 48,538 10,478 16,956 158,356
accounts(6)
Demand and NOW accounts (6) 2,645 2,645 5,290 10,580 21,160 23,393 65,713
Certificates of deposit 54,149 56,574 173,842 117,084 12,635 3,469 417,753
Borrowings 245,471 -- 19,464 43,743 57,932 434,659
-------- -------- --------- --------- --------- -------- ----------
68,049
Total interest-bearing liabilities 322,861 79,815 239,788 244,251 88,016 101,750 1,076,481
Non-interest-bearing liabilities 4,283 4,283
Equity -- -- -- -- -- 52,684 52,684
-------- -------- --------- --------- --------- -------- ----------
Total liabilities and equity 322,861 79,815 239,788 244,251 88,016 158,717 1,133,448
-------- -------- --------- --------- --------- -------- ----------
Interest sensitivity gap(4) $(79,789) $(17,873) $(129,099) $(119,845) $ 207,840 $ 138,766 $ --
======== ======== ========= ========= ========= ========= ==========
Cumulative interest sensitivity gap $(79,789) $(97,662) $(226,761) $(346,606) $(138,766) $ --
======== ======== ========= ========= ========= =========
Cumulative interest sensitivity gap as a (7.04)% (8.62)% (20.01)% (30.58)% (12.24)% --%
percent of total assets
Cumulative interest-earning assets as a 75.29% 75.75% 64.70% 60.91% 85.76% 100.12%
percent of cumulative interest-bearing
liabilities
</TABLE>
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(1) Interest-earning assets are included in the period in which the
balances are expected to be repaid and/or repriced as a result of
anticipated prepayments, scheduled rate adjustments, and contractual
maturities.
(2) Includes investment and mortgage-backed securities available for sale
and held to maturity.
(3) For purposes of the gap analysis, loans receivable includes
non-performing loans and is reduced for the allowance for possible
loan losses, and unamortized discounts and deferred loan fees.
(4) Interest sensitivity gap represents the difference between total
interest-earning assets and total interest-bearing liabilities.
(5) Annual prepayment rates for loans and mortgage-backed securities range
from 6% to 12%.
(6) Money market and savings accounts, and NOW accounts are assumed to
have decay rates between 11% and 50% annually and have been estimated
based upon a historic analysis of core deposit trends.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The disscusion concerning the effects of interest rate changes on the
Company's estimated net interest income for the year ending December 31, 1999
set forth in "Managements Discussion an Analysis of Financial and Results of
Operations -- Management of Interest Rate Risk" in Item 2 herof, is incorporated
herein by reference.
In addition to gap analysis, Patriot utilizes income simulation modeling in
measuring its interest rate risk and managing its interest rate sensitivity.
Income simulation considers not only the impact of changing market interest
rates on forecasted net interest income, but also other factors such as yield
curve relationships, the volume and mix of assets and liabilities, customer
preferences and general market conditions.
Through the use of income simulation modeling Patriot has calculated an
estimate of net interest income for the year through September 30, 2001, based
upon the assets, liabilities and off-balance sheet financial instruments in
existence at September 30, 2000. Patriot has also estimated changes to that
estimated net interest income based upon immediate and sustained changes in
interest rates ("rate shocks"). Rate shocks assume that all interest rates
increase or decrease on the first day of the period modeled and remain at that
level for the entire period. The following table reflects the estimated
percentage change in estimated net interest income for the period ending
September 30, 2000.
Rate shock to interest rates % change
---------------------------------- --------
+2% (6.29%)
+1% (3.65%)
-1% 3.64%
-2% 7.53%
Patriot's management believes that the assumptions utilized in evaluating
Patriot's estimated net interest income are reasonable; however, the interest
rate sensitivity of Patriot's assets, liabilities and off-balance sheet
financial instruments as well as the estimated effect of changes in interest
rates on estimated net interest income could vary substantially if different
assumptions are used or actual experience differs from the experience on which
the assumptions were based.
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PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
There are various claims and lawsuits in which Patriot is
periodically involved incidental to the Patriot's business, which in the
aggregate involve amounts which are believed by management to be immaterial to
the financial condition, equity, and results of operations of the Company.
Item 2 CHANGES IN SECURITIES
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.
(a) The Following exhibits are filed as part of this report.
Exhibit 27 Financial Data Schedule
(filed herewith)
(b) Reports filed on Form 8K
none
-----------------------
* Incorporated herein by reference into this document from the exhibits to
Form S-1, Registration Statement, filed on September 1, 1995 as amended
Registration No. 33-96530.
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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.
PATRIOT BANK CORP.
--------------------------------------
(Registrant)
Date November 13, 2000
-------------------------- --------------------------------------
Richard A. Elko
President and Chief Executive Officer
Date November 13, 2000
-------------------------- -------------------------------------
James G. Blume
Executive Vice President and
Chief Financial Officer
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