<PAGE>
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 Three and Six Months Ended December 31, 1997
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-27178
Peekskill Financial Corporation
----------------------------------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 13-3858258
------------------------ ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
1019 Park Street, Peekskill, New York 10566
(Address of principal executive offices)
----------------------------------------------------------
(914) 737-2777
----------------------------------------------------------
(Registrant's telephone number, including area code)
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 _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class: SHARES OUTSTANDING at February 5, 1998
----- --------------------------------------
Common Stock, $.01 par value 3,021,790
<PAGE>
Peekskill Financial Corporation
Form 10-Q
Three and Six Months Ended December 31, 1997
Part I - Financial Information
ITEM 1 - FINANCIAL STATEMENTS (Unaudited) Page
- ----------------------------- ----------- ----
Condensed Consolidated Balance Sheets at December 31, 1997
and June 30, 1997 3
Condensed Consolidated Statements of Income for the three and six
months ended December 31, 1997 and 1996 4
Condensed Consolidated Statement of Changes in Stockholders'
Equity for the six months ended December 31, 1997 5
Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 1997 and 1996 6
Notes to Condensed Consolidated Interim Financial Statements 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF 10
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 15
Part II - Other Information
Other Information 16
Signatures 18
Explanatory Note: This Quarterly Report on Form 10-Q contains certain
forward-looking statements consisting of estimates with respect to the financial
condition, results of operations and business of the Company that are subject to
various factors which could cause actual results to differ materially from these
estimates. These factors include changes in general, economic and market, and
legislative and regulatory conditions, and the development of an interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments.
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
----------------- -------------
<S> <C> <C>
Assets:
Cash and cash equivalents ............................. $ 3,847 $ 4,158
Securities:
Held-to-maturity, at amortized cost (fair value of
$124,437 at December 31, 1997 and $127,348
at June 30, 1997) ................................ 122,899 126,450
Available-for-sale, at fair value (amortized cost of
$5,600 at December 31, 1997 and $2,999 at
June 30, 1997) ................................... 5,599 2,983
--------- ---------
Total securities .................................. 128,498 129,433
--------- ---------
Loans, net of allowance for loan losses of $652 at
December 31, 1997 and $622 at June 30, 1997 ...... 47,986 45,507
Federal Home Loan Bank stock .......................... 1,463 1,463
Accrued interest receivable ........................... 1,004 1,064
Real estate owned ..................................... -- 220
Deferred income taxes, net ............................ 304 304
Other assets .......................................... 1,113 411
--------- ---------
Total assets ........................................ $ 184,215 $ 182,560
========= =========
Liabilities and Stockholders' Equity:
Liabilities:
Depositor accounts .................................. $ 134,844 $ 132,418
Mortgage escrow deposits ............................ 1,937 1,943
Other liabilities ................................... 946 1,233
--------- ---------
Total liabilities ................................. 137,727 135,594
--------- ---------
Stockholders' equity (Note 2):
Preferred stock (par value $0.01 per share;
100,000 shares authorized; none issued or
outstanding) ........................................ -- --
Common stock (par value $0.01 per share; 4,900,000
shares authorized; 4,099,750 shares issued) ......... 41 41
Additional paid-in capital ............................ 40,087 40,032
Unallocated common stock held by employee stock
ownership plan ("ESOP") ............................. (2,952) (3,034)
Unamortized awards of common stock under recognition
and retention plan ("RRP") .......................... (1,084) (1,188)
Treasury stock, at cost (972,835 shares at December 31,
1997 and 906,629 shares at June 30, 1997) ........... (13,707) (12,543)
Retained earnings, substantially restricted ........... 24,104 23,668
Net unrealized loss on available-for-sale securities,
net of taxes ........................................ (1) (10)
--------- ---------
Total stockholders' equity ......................... 46,488 46,966
--------- ---------
Total liabilities and stockholders' equity ......... $ 184,215 $ 182,560
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements.
3
<PAGE>
Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended December 31, Ended December 31,
1997 1996 1997 1996
------- ------- ------- ------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans ............................... $ 929 $ 874 $1,847 $1,644
Securities .......................... 2,043 2,040 4,130 4,109
Interest-bearing deposits and other . 87 207 177 424
------ ------ ------ ------
Total interest and dividend income . 3,059 3,121 6,154 6,177
Interest expense on depositor accounts
and mortgage escrow deposits ........ 1,430 1,339 2,876 2,661
------ ------ ------ ------
Net interest income ................ 1,629 1,782 3,278 3,516
Provision for loan losses ............ 15 15 30 113
------ ------ ------ ------
Net interest income after
provision for loan losses ......... 1,614 1,767 3,248 3,403
------ ------ ------ ------
Non-interest income .................. 55 64 112 124
------ ------ ------ ------
Non-interest expense:
Compensation and benefits .......... 451 435 901 859
Federal deposit insurance:
Regular premiums ................. 36 75 72 165
Special assessment ............... -- -- -- 884
Occupancy costs .................... 109 80 201 166
Professional fees .................. 50 69 83 112
Computer service fees .............. 45 50 88 92
Safekeeping and custodial expenses . 25 24 49 47
Other .............................. 136 113 284 241
------ ------ ------ ------
Total non-interest expense ....... 852 846 1,678 2,566
------ ------ ------ ------
Income before income tax expense ..... 817 985 1,682 961
Income tax expense ................... 356 419 726 186
------ ------ ------ ------
Net income ......................... $ 461 $ 566 $ 956 $ 775
====== ====== ====== ======
Earnings per share (Note 3):
Basic .............................. $ 0.17 $ 0.17 $ 0.34 $ 0.23
Diluted ............................ 0.16 0.17 0.33 0.23
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements.
4
<PAGE>
Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Unallocated Unamortized
Common Awards of Net
Additional Stock Common Unrealized Total
Common Paid-in Held Stock Treasury Retained Loss on Stockholders'
Stock Capital By ESOP Under RRP Stock Earnings Securities Equity
-------- ---------- ----------- ------------ --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 ...... $ 41 $ 40,032 $ (3,034) $ (1,188) $(12,543) $ 23,668 $ (10) $ 46,966
Net income ................... -- -- -- -- -- 956 -- 956
Dividends paid ($0.18 per
share) ....................... -- -- -- -- -- (520) -- (520)
Amortization of RRP awards.. -- -- -- 104 -- -- -- 104
Purchase of 66,206 treasury
shares ....................... -- -- -- -- (1,164) -- -- (1,164)
ESOP shares committed to be
Released (8,200 shares) ... -- 55 82 -- -- -- -- 137
Decrease in net unrealized
loss on available-for-sale
securities, net of taxes .. -- -- -- -- -- -- 9 9
-------- -------- -------- -------- -------- -------- -------- --------
Balance at December 31, 1997 .. $ 41 $ 40,087 $ (2,952) $ (1,084) $(13,707) $ 24,104 $ (1) $ 46,488
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements.
5
<PAGE>
Peekskill Financial Corporation and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Six Months Ended
December 31,
1997 1996
-------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................................... $ 956 $ 775
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses ......................................... 30 113
Depreciation and amortization expense ............................. 48 33
ESOP and RRP expense .............................................. 241 232
Net amortization and accretion of deferred fees,
discounts and premiums ......................................... (71) (47)
Net decrease (increase) in accrued interest receivable ............ 60 (26)
Net decrease in other assets ...................................... 26 68
Deferred tax benefit .............................................. -- (318)
Net increase in other liabilities ................................. 212 96
-------- --------
Net cash provided by operating activities ....................... 1,502 926
-------- --------
Cash flows from investing activities:
Purchases of securities:
Held-to-maturity .................................................. (15,587) (5,325)
Available-for-sale ................................................ (4,600) (500)
Proceeds from principal payments, maturities and calls of securities:
Held-to-maturity .................................................. 19,203 9,137
Available-for-sale ................................................ 1,500 --
Originations of loans, net of principal collections ................. (2,509) (3,953)
Purchase of Federal Home Loan Bank stock ............................ -- 9
Proceeds from sale of real estate owned ............................. 220 --
Purchases of office properties and equipment ........................ (776) (13)
-------- --------
Net cash used in investing activities ............................ (2,549) (645)
-------- --------
Cash flows from financing activities:
Net increase in depositor accounts .................................. 2,426 2,309
Net decrease in mortgage escrow deposits ............................ (6) (15)
Repayment of Federal Home Loan Bank advance ......................... -- (500)
Treasury stock purchases ............................................ (1,164) (5,712)
Purchase of shares to fund current-year RRP awards .................. -- (1,430)
Dividends paid ...................................................... (520) (605)
-------- --------
Net cash provided by (used in) financing activities .............. 736 (5,953)
-------- --------
Net decrease in cash and cash equivalents ............................. (311) (5,672)
Cash and cash equivalents at beginning of period ...................... 4,158 17,320
-------- --------
Cash and cash equivalents at end of period ............................ $ 3,847 $ 11,648
======== ========
Supplemental information:
Interest paid ....................................................... $ 2,871 $ 2,696
Income taxes paid ................................................... 647 245
Decrease (increase) in liability for securities purchased, not
yet settled........................................................ 499 (1,126)
Treasury stock purchased, not yet settled ........................... -- 4,139
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements.
6
<PAGE>
PEEKSKILL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: Basis of Presentation
Peekskill Financial Corporation (the "Holding Company") was
incorporated in September 1995 and on December 29, 1995 became the holding
company for First Federal Savings Bank (the "Bank") upon the completion of the
Conversion of the Bank from a mutual savings bank to a stock savings bank (the
"Conversion"). The Holding Company and the Bank (collectively, the "Company")
are located in Peekskill, New York and the Holding Company's principal business,
subsequent to the Conversion, is the ownership of its wholly-owned subsidiary,
the Bank. The accompanying unaudited condensed consolidated interim financial
statements include the accounts of the Holding Company and the Bank.
The accompanying unaudited condensed consolidated interim financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The accompanying unaudited
condensed consolidated interim financial statements should be read in
conjunction with the financial statements and related management's discussion
and analysis of financial condition and results of operations of the Company as
of and for the year ended June 30, 1997 included in the Form 10-K filed with the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included herein. The results of operations for the
six months ended December 31, 1997 are not necessarily indicative of results
that may be expected for the entire year ending June 30, 1998.
NOTE 2. Stockholders' Equity
Concurrent with the Conversion, on December 29, 1995 the Holding
Company sold 4,099,750 shares of its common stock in a subscription and
community offering at a price of $10 per share, for gross proceeds of $41.0
million. The Holding Company used $20.5 million of the proceeds to acquire all
of the common stock issued by the Bank in the Conversion. The remaining proceeds
were retained by the Holding Company. In accordance with the Plan of Conversion,
the Holding Company and the Bank shared the costs of the Conversion which
totaled $1.0 million. On a consolidated basis, the net offering proceeds were
$40.0 million which resulted in an increase in stockholders' equity of $36.7
million after deducting shares purchased by the employee stock ownership plan
("ESOP").
On July 16, 1996, the Company purchased 4% (163,990 shares) of its
outstanding common stock for the purpose of funding its recognition and
retention plan ("RRP") for $2.0 million. Of the 163,990 shares, 117,290 have
been awarded to employees and directors, and accordingly,
7
<PAGE>
unearned compensation of $1.4 million was initially recorded (as a deduction
from stockholders' equity) with respect to the shares awarded. In the future,
the remaining 46,700 shares (which are presently included in treasury stock) can
be used for awards of additional RRP shares to employees or directors.
On July 29, 1996, the Company received approval from the Office of
Thrift Supervision ("OTS") to repurchase up to 5% of its outstanding common
stock. The Company completed the repurchase of 204,987 shares between July 31,
1996 and August 15, 1996 for $2.5 million.
On September 4, 1996, the Company received approval from the OTS to
repurchase an additional 5% of its outstanding common stock. The Company
completed the repurchase of 190,429 shares between September 9, 1996 and
November 6, 1996 for $2.7 million.
On December 19, 1996, the Company received approval from the OTS to
repurchase up to 10% of its outstanding common stock. The Company completed the
repurchase of 366,013 shares on January 2, 1997 for $5.4 million.
On February 5, 1997, the Company received approval from the OTS to
repurchase up to 5% of its outstanding common stock prior to December 29, 1997.
The Company completed the repurchase of 164,706 shares on December 2, 1997 for
$2.6 million.
On January 12, 1998, the Company received approval from the OTS to
repurchase up to 5%, 156,346 shares, of its outstanding common stock prior to
December 28, 1998. To date the Company has repurchased 105,125 shares for $1.8
million.
Note 3. Earnings Per Share
During the quarter ended December 31, 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," which requires presentation of both basic EPS and diluted EPS by all
entities with complex capital structures. Basic EPS excludes dilution and is
computed by dividing net income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution which could occur if securities or other
contracts to issue common stock (such as stock options) were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Diluted EPS is computed by dividing
net income by the weighted average number of common shares outstanding for the
period plus common-equivalent shares computed using the treasury stock method.
SFAS No. 128 requires the restatement of all prior period EPS data to conform to
the new requirements.
8
<PAGE>
The table below summarizes the number of shares utilized in the
Company's EPS calculations for the three and six month periods ended December
31, 1997 and 1996. For purposes of computing basic EPS, net income applicable to
common stock equaled net income for each of the periods presented.
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended December 31, Ended December 31,
1997 1996 1997 1996
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Weighted average common shares outstanding
for computation of basic EPS (1) ......... 2,763 3,287 2,777 3,395
Common-equivalent shares due to the dilutive
effect of stock options and RRP awards (2) 112 50 103 35
----- ----- ----- -----
Weighted average common shares for
Computation of diluted EPS ............... 2,875 3,337 2,880 3,430
===== ===== ===== =====
</TABLE>
(1) Excludes unvested RRP awards and unallocated ESOP shares that have not been
committed to be released.
(2) Computed using the treasury stock method.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparison of Financial Condition at December 31, 1997 and June 30, 1997
Total assets at December 31, 1997 were $184.2 million compared to
$182.6 million at June 30, 1997, an increase of $1.6 million. This increase was
due primarily to a $2.4 million increase in depositor accounts, partially offset
by a $478,000 decrease in stockholders' equity. Net loans increased $2.5
million, or 5.4%, during the six months ended December 31, 1997, primarily
reflecting originations of one-to-four family mortgage loans. The increase in
loans was funded by paydowns of securities, which decreased $935,000 during the
six months ended December 31, 1997, and the increase in depositor accounts.
Management intends to continue its current strategy of increasing the loan
portfolio (primarily through the origination of residential mortgage loans), as
market conditions permit, by introducing new products and stimulating loan
demand through advertising.
Total non-performing assets decreased $573,000, or 25.8%, from $2.2
million at June 30, 1997 to $1.7 million at December 31, 1997. At December 31,
1997, the Company held a $950,000 participation interest in certain residential
mortgage loans purchased from Thrift Association Service Corporation (the "TASCO
Loans"). These loans were placed on non-accrual status during the quarter ended
September 30, 1996. As a servicer of these loans, the FDIC is disputing its
obligation to pass-through certain principal and interest payments on the loans
whether or not such amounts are collected from the borrowers. Although the FDIC
resumed making certain principal and interest payments in the quarter ended June
30, 1997, the matter has not been resolved and the TASCO Loans have remained on
non-accrual status. Interest payments on the TASCO Loans totaling $50,000 have
been deferred through December 31, 1997. The Bank had four additional loans,
with principal balances totaling $460,000, on non accrual status at December 31,
1997 (none at June 30, 1997). One-to-four family mortgage loans past due more
than 90 days but still accruing interest totaled $241,000 at December 31, 1997
compared to $930,000 at June 30, 1997. The allowance for loan losses was
$652,000 or 39.5% of non-performing loans at December 31, 1997, compared to
$622,000 or 31.0% of non-performing loans at June 30, 1997. There were no loan
charge-offs or recoveries in the six months ended December 31, 1997.
Stockholders' equity decreased $478,000 from $47.0 million at June 30,
1997 to $46.5 million at December 31, 1997. The decrease primarily reflects
treasury stock purchases of $1.2 million and dividends paid of $520,000,
partially offset by net income of $956,000. Stockholders' equity as a percent of
total assets decreased to 25.2% at December 30, 1997 from 25.7% at June 30,
1997. Book value per share increased from $14.71 at June 30,1997 to $14.87 at
December 31, 1997.
10
<PAGE>
Comparison of Operating Results for the Three Months Ended December 31, 1997 and
1996
Net income for the quarter ended December 31, 1997 was $461,000, or
$0.17 per share, compared to net income of $566,000, or $0.17 per share, for the
comparable period last year. Diluted earnings per share were $0.16 in the
current quarter compared to $0.17 in the quarter ended December 31, 1996. The
$105,000 decrease in net income was primarily caused by a $153,000 decrease in
net interest income, partially offset by a $63,000 decrease in income tax
expense.
The decrease in net interest income was caused by a $9.6 million
decrease in average net earning assets, due primarily to purchases of the
Company's common stock, and an eight basis point decrease in the net interest
rate spread. The lower net interest rate spread primarily reflects an increase
in the average cost of funds rate due to continued shifts in the mix of
interest-bearing deposits from generally lower rate regular savings accounts to
generally higher rate savings certificates.
The provision for loan losses was $15,000 for the quarters ended
December 31, 1997 and 1996. Management continues to evaluate the adequacy of the
allowance for loan losses based on local economic and real estate market
conditions, loan portfolio growth and the level of non-performing loans.
Non-interest expense increased $6,000 to $852,000 for the quarter ended
December 31, 1997 compared to $846,000 for the same period a year ago. The
increase was caused primarily by a $29,000 increase in occupancy costs and a
$23,000 increase in other expenses, both due to the construction of a new
building for the Bank's Mohegan Lake branch, partially offset by a $39,000
decrease in federal deposit insurance premiums.
Income tax expense decreased $63,000, or 15.0%, for the quarter ended
December 31, 1997 as compared to the quarter ended December 31, 1996. The
decrease is due primarily to a decrease of $168,000, or 17.1%, in pre-tax
income.
Comparison of Operating Results for the Six Months Ended December 31, 1997 and
1996
Net income for the six months ended December 31, 1997 was $956,000, or
$0.34 per share, compared to $775,000, or $0.23 per share, for the same period
in the prior year. Diluted earnings per share were $0.33 in the current year
period compare to $0.23 for the six months ended December 31, 1996. Net income
for the six months ended December 31, 1996 was affected by a one-time charge to
earnings for a Federal deposit insurance special assessment of $884,000
($520,000 after taxes) and a credit to earnings for the recognition of a
$238,000 reduction to New York State tax expense, net of Federal taxes, due to a
change in the New York State tax law. Excluding these one-time events recognized
in the quarter ended September 30, 1996, net income for the six months ended
December 31, 1996 would have been $1.1 million.
11
<PAGE>
Net interest income for the six months ended December 31, 1997
decreased $238,000 compared to the six months ended December 31, 1996. The
decrease was primarily caused by a $10.9 million decrease in average net earning
assets, principally due to purchases of the Company's stock. The average rate
paid on interest-bearing liabilities increased 17 basis points to 4.28% from
4.11%. The increase was primarily caused by shifts in the mix of
interest-bearing deposits from generally lower rate regular savings accounts to
generally higher rate savings certificates. Foregone interest income and other
adjustments due to the non-accrual status of the Bank's loans amounted to
$39,000 for the six months ended December 31, 1997, compared to $89,000 for the
six months ended December 31, 1996.
The provision for loan losses was $30,000 and $113,000, respectively,
for the six months ended December 31,1997 and 1996. The higher provision for the
six months ended December 31, 1996 was caused by the establishment of an $83,000
allowance for loan losses on the TASCO Loans.
Non-interest expense decreased $888,000 to $1.7 million for the six
months ended December 31, 1997 compared to $2.6 million for the same period a
year ago. The decrease was primarily the result of a $977,000 decrease in
Federal deposit insurance premiums, principally due to the one-time assessment
of $884,000 in the year-ago period, partially offset by a $35,000 increase in
occupancy expense and a $43,000 increase in other operating expenses, both due
to the construction of a new building for the Bank's Mohegan Lake branch.
Income tax expense was $726,000 and $186,000, respectively, for the six
months ended December 31, 1997 and 1996. The $540,000 increase reflects the
recognition of an income tax benefit of $238,000 in the prior year relating to
an amendment in the New York State tax law which eliminated the need for a
deferred tax liability associated with certain tax bad debt reserves, as well as
a $721,000 increase in pre-tax income.
12
<PAGE>
The following table shows the Company's average consolidated balances,
interest income and expense, and average rates (annualized) for the periods
indicated.
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------------------------------------------------
December 31, 1997 December 31, 1996
----------------------------------- ----------------------------------
Average Average Average Average
Balance(1) Interest Yield/Rate Balance(1) Interest Yield/Rate
---------- -------- ---------- ---------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (2) ................................... $ 46,196 $ 1,847 8.00% $ 42,057 $ 1,644 7.82%
Mortgage-backed securities(3) ............... 116,277 3,740 6.43 116,061 3,677 6.34
Other debt securities(3) .................... 12,059 390 6.47 13,304 432 6.50
Other interest-earning assets ............... 5,581 177 6.32 14,744 424 5.75
-------- -------- -------- --------
Total interest-earning assets ............. 180,113 $ 6,154 6.83% 186,166 $ 6,177 6.64%
======== ========
Non interest-earning assets .................... 2,230 1,789
-------- --------
Total assets .............................. $182,343 $187,955
======== ========
Interest-bearing liabilities:
Regular savings and club accounts ........... $ 53,441 $ 809 3.03% $ 57,172 $ 865 3.03%
Money market and NOW accounts ............... 11,449 163 2.84 11,324 139 2.45
Savings certificates and other .............. 69,380 1,904 5.48 60,911 1,657 5.44
-------- -------- -------- --------
Total interest-bearing liabilities ........ 134,270 $ 2,876 4.28% 129,407 $ 2,661 4.11%
======== ========
Non interest-bearing liabilities ............... 1,051 4,261
-------- --------
Total liabilities ......................... 135,321 133,668
Stockholders' equity ........................... 47,022 54,287
-------- --------
Total liabilities and stockholders' equity $182,343 $187,955
======== ========
Net earning assets ............................. $ 45,843 $ 56,759
======== ========
Net interest income ............................ $ 3,278 $ 3,516
======== ========
Net interest rate spread ....................... 2.55% 2.53%
==== =====
Net yield on average interest-earning assets(4) 3.64% 3.78%
==== =====
Average interest-earning assets to average
interest-bearing liabilities .................. 1.34x 1.44x
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------
December 31, 1997 December 31, 1996
----------------------------------- ----------------------------------
Average Average Average Average
Balance(1) Interest Yield/Rate Balance(1) Interest Yield/Rate
---------- -------- ---------- ---------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (2) ................................... $ 46,549 $ 929 7.98% $ 42,938 $ 874 8.14%
Mortgage-backed securities(3) ............... 116,139 1,858 6.40 114,253 1,824 6.38
Other debt securities(3) .................... 11,752 185 6.29 13,472 216 6.41
Other interest-earning assets ............... 5,289 87 6.55 13,510 207 6.12
-------- -------- -------- --------
Total interest-earning assets ............. 179,729 $ 3,059 6.81% 184,173 $ 3,121 6.78%
========= ========
Non interest-earning assets .................... 2,532 2,265
-------- --------
Total assets .............................. $182,261 $186,438
======== ========
Interest-bearing liabilities:
Regular savings and club accounts ........... $ 52,808 $ 397 3.01% $ 56,466 $ 430 3.05%
Money market and NOW accounts ............... 11,647 83 2.84 11,137 67 2.40
Savings certificates and other .............. 69,708 950 5.45 61,399 842 5.48
-------- -------- -------- --------
Total interest-bearing liabilities ........ 134,163 $ 1,430 4.26% 129,002 $ 1,339 4.15%
======== ========
Non interest-bearing liabilities ............... 1,113 5,147
-------- --------
Total liabilities ......................... 135,276 134,149
Stockholders' equity ........................... 46,985 52,289
-------- --------
Total liabilities and stockholders' equity $182,261 $186,438
======== ========
Net earning assets ............................. $ 45,566 $ 55,171
======== ========
Net interest income ............................ $ 1,629 $ 1,782
======== ========
Net interest rate spread ....................... 2.55% 2.63%
===== =====
Net yield on average interest-earning assets(4) 3.63% 3.87%
===== =====
Average interest-earning assets to average
interest-bearing liabilities .................. 1.34x 1.43x
==== ====
</TABLE>
(1) Average balances are calculated using end-of-month balances, producing
results which are not materially different from average daily balances.
(2) Balances are net of deferred loan fees and loans in process. Non-accrual
loans are included in the balances.
(3) Balances represent amortized cost. Yields are not stated on a
tax-equivalent basis, as the Company does not invest in tax-exempt
securities.
(4) Represents net interest income divided by average total interest-earning
assets.
13
<PAGE>
Liquidity and Capital Resources
The Bank's primary sources of funds are depositor accounts from its
market area; proceeds from principal and interest payments on loans;
mortgage-backed and other debt securities; and borrowings from the Federal Home
Loan Bank of New York ("FHLB") and other sources. While maturities and scheduled
payments on loans and securities are a predictable source of funds, deposit
flows and loan and securities prepayments are greatly influenced by general
interest rates, economic conditions and competition.
The primary investing activities of the Bank are the origination of
mortgage loans and the purchase of securities, and its primary financing
activity is the attraction of depositor accounts.
The Bank may borrow from the FHLB of New York subject to an overall
limitation of 25% of total assets or $45.8 million at December 31, 1997. Funds
may be borrowed through a combination of FHLB advances and overnight borrowing
under a $15.5 million line of credit. The Bank had no borrowings at December 31,
1997 and June 30, 1997. In January 1998, the Company began to utilize securities
repurchase agreements as a funding source, by borrowing $10.0 million and
investing the proceeds in securities. The Company may engage in other repurchase
agreements, from time to time, as conditions warrant.
The Bank is required to maintain a minimum level of liquid assets as
defined by OTS regulations, based upon a percentage of liquid assets to
depositor accounts and short-term borrowings. For the month of December 1997,
the Bank's average daily total liquidity ratio was 40.7%, compared to the
minimum OTS requirement of 4.0%.
The Bank's most liquid assets are cash and cash equivalents, which
consist of short-term highly liquid investments with original maturities of less
than three months that are readily convertible to known amounts of cash and
interest-bearing deposits in other financial institutions. The level of these
assets is dependent on cash flows from the Bank's operating, financing and
investing activities during any given period. Cash and cash equivalents
decreased $311,000, from $4.2 million at June 30, 1997 to $3.8 million at
December 31, 1997.
The Bank anticipates that it will have sufficient funds available to
meet its current commitments and other funding needs. At December 31, 1997, the
Bank had commitments to originate loans of $1.4 million. Savings certificates
which are scheduled to mature in one year or less at December 31, 1997 totaled
$52.4 million. Management believes that a significant portion of such depositor
accounts will remain with the Bank.
At December 31, 1997, the Bank's capital exceeded each of the OTS
minimum capital requirements and the requirements for classification as a
"well-capitalized" institution. The current minimum regulatory capital ratio
requirements are 1.5% for tangible capital, 3.0% for Tier I (core) capital and
8.0% for total risk-based capital. In order to be considered well-capitalized,
an institution must maintain a core capital ratio of at least 5.0%; a Tier I
risk-based capital ratio of at least
14
<PAGE>
6.0%; and a total risk-based capital ratio of at least 10.0%. At December 31,
1997, the Bank had both tangible and core capital of $45.6 million (24.9% of
total adjusted assets); Tier I risk-based capital of $45.6 million (93.8% of
total risk-weighted assets) and total risk-based capital of $46.2 million (95.1%
of total risk-weighted assets).
Year 2000 Compliance
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
Year 2000. The Year 2000 issue affects virtually all companies and
organizations.
The Company, working with its outside service providers, has initiated
a project to ensure that its computer systems are year 2000 compliant. The
Company believes that the costs associated with ensuring year 2000 compliance
will not materially affect the Company's future operating results or financial
condition.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's interest rate risk
position since June 30, 1997. Other types of market risk, such as foreign
currency exchange rate risk and commodity price risk, do not arise in the normal
course of the Company's business activities.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
From time to time, the Company is involved as plaintiff or
defendant in various legal proceedings arising in the normal course of
its business. While the ultimate outcome of these various legal
proceedings cannot be predicted with certainty, it is the opinion of
management that the resolution of these legal actions should not have a
material effect on the Company's financial condition or results of
operations.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. The annual meeting of stockholders was held on October 22, 1997.
b. The matters approved by stockholders at the annual meeting and
the number of votes cast for, against or withheld (as well as
the number of abstentions and borker non-votes) as to each
matter are set forth below:
Election of the following persons to serve a three-year term as
directors of the Company:
FOR WITHHELD
William J. LaCalamito 3,012,123 15,716
Dominick Bertoline 3,014,073 13,766
Broker Non-Vote None
Ratification of the appointment of KPMG Peat Marwick LLP, as auditors
of the Company for the fiscal year ending June 30, 1998:
For 3,013,601
Against 9,217
Abstain 5,021
16
<PAGE>
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
27. Financial Data Schedule
b. Reports on Form 8-K
None
17
<PAGE>
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.
PEEKSKILL FINANCIAL CORPORATION
(Registrant)
DATE: February 13, 1998 BY: /s/ Eldorus Maynard
-------------------
Chairman of the Board and
Chief Executive Officer
DATE: February 13, 1998 BY: /s/ William J. LaCalamito
-------------------------
William J. LaCalamito
President
(principal financial officer)
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
REPORT FILED ON FORM 10-Q FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,382
<INT-BEARING-DEPOSITS> 2,465
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,599
<INVESTMENTS-CARRYING> 122,899
<INVESTMENTS-MARKET> 124,437
<LOANS> 48,638
<ALLOWANCE> 652
<TOTAL-ASSETS> 184,215
<DEPOSITS> 136,781
<SHORT-TERM> 0
<LIABILITIES-OTHER> 946
<LONG-TERM> 0
0
0
<COMMON> 41
<OTHER-SE> 46,447
<TOTAL-LIABILITIES-AND-EQUITY> 184,215
<INTEREST-LOAN> 1,847
<INTEREST-INVEST> 4,130
<INTEREST-OTHER> 177
<INTEREST-TOTAL> 6,154
<INTEREST-DEPOSIT> 2,876
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 3,278
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,678
<INCOME-PRETAX> 1,682
<INCOME-PRE-EXTRAORDINARY> 1,682
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 956
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 3.64
<LOANS-NON> 1,410
<LOANS-PAST> 241
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 622
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 652
<ALLOWANCE-DOMESTIC> 652
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
