<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1999
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 1-14154
-----
GA FINANCIAL, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 25-1780835
- ------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
4750 CLAIRTON BOULEVARD, PITTSBURGH, PENNSYLVANIA 15236
- ------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(412) 882-9946
- -------------------------------------------------------------------------------
(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.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 6,147,439 shares of common
stock, par value $.01 per share, were outstanding as of November 2, 1999.
<PAGE>
GA FINANCIAL, INC.
FORM 10-Q
September 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition -
September 30, 1999 and December 31, 1998.................................. 1
Consolidated Statements of Income and Comprehensive Income -
For the Three and Nine Months Ended September 30, 1999 and 1998........... 2
Consolidated Statements of Cash Flows - For the Nine
Months Ended September 30, 1999 and 1998.................................. 3
Notes to unaudited Consolidated Financial Statements...................... 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................... 8-17
Item 3. Quantitative and Qualitative Disclosures about Market Risk........................ 17
PART II. OTHER INFORMATION and EXHIBITS.................................................... 18
SIGNATURES..................................................................................... 19
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
GA Financial, Inc.
Consolidated Statements of Financial Condition
September 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
Sept. 30, 1999 Dec. 31, 1998
(Unaudited)
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
Cash (including interest-bearing demand
deposits of $14,334 in 1999 and $7,705
in 1998) $ 21,064 $ 22,987
Federal funds sold - 500
Available for sale securities, at fair
value:
Investment securities 152,929 163,108
Mortgage-related securities 324,546 273,124
Loans receivable, net 326,305 310,688
Education loans held for sale 18,256 20,040
Accrued interest receivable 6,400 6,050
Federal Home Loan Bank stock 15,458 11,413
Office, property and equipment 5,040 5,114
Foreclosed assets 315 758
Prepaid expenses and other assets 14,908 9,540
- -------------------------------------------------------------------------------
TOTAL ASSETS $885,221 $823,322
===============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits $ 32,297 $ 30,373
Savings accounts 450,310 452,175
Borrowed funds 307,160 222,545
Advances from borrowers for taxes and
insurance 807 1,514
Accrued interest payable 6,052 1,606
Securities purchased, not settled - 1,901
Other liabilities 2,114 3,992
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 798,740 714,106
Shareholders' Equity:
Preferred stock, (.01 par value);
1,000,000 shares authorized; 0 shares
issued - -
Common stock, (.01 par value);
23,000,000 shares authorized;
8,900,000 shares issued 89 89
Additional paid in capital 86,442 86,467
Treasury stock, at cost (2,726,246
shares at September 30, 1999 and
1,858,865 shares at December 31, 1998) (45,955) (32,255)
Unearned employee stock ownership plan
(ESOP) shares (5,520) (5,520)
Unearned recognition and retention plan
(RRP) shares (1,466) (2,431)
Accumulated other comprehensive income
(loss), net (9,430) 3,306
Retained earnings 62,321 59,560
- -------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 86,481 109,216
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $885,221 $823,322
===============================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
GA Financial, Inc.
Consolidated Statements of Income and Comprehensive Income
For the Three and Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Sept. 30, Ended Sept. 30,
1999 1998 1999 1998
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------
(Dollars in Thousands except per share amounts)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 6,399 $ 6,321 $ 18,869 $ 19,213
Mortgage-related securities 5,427 4,420 15,150 13,886
Investment securities 2,582 2,969 7,513 8,226
Bank deposits 102 112 433 447
- --------------------------------------------------------------------------------------------
Total interest income $ 14,510 $ 13,822 $ 41,965 $ 41,772
- --------------------------------------------------------------------------------------------
Interest expense:
Savings accounts 4,457 4,746 13,307 13,996
Borrowed funds 4,018 3,335 11,231 9,720
Other 9 9 26 27
- --------------------------------------------------------------------------------------------
Total interest expense 8,484 8,090 24,564 23,743
- --------------------------------------------------------------------------------------------
Net interest income before provision
for losses on loans $ 6,026 $ 5,732 $ 17,401 $ 18,029
Provision for losses on loans 90 90 240 270
- --------------------------------------------------------------------------------------------
Net interest income after provision for
losses on loans $ 5,936 $ 5,642 $ 17,161 $ 17,759
- --------------------------------------------------------------------------------------------
Non-interest income:
Service fees 748 622 1,649 1,386
Net gain on sales of securities 82 100 213 357
Net gain on sales of education loans 181 - 198 88
Data processing service fees 174 195 548 565
Other 124 847 344 1,063
- --------------------------------------------------------------------------------------------
Total non-interest income 1,309 1,764 2,952 3,459
- --------------------------------------------------------------------------------------------
Non-interest expense:
Compensation and employee benefits 2,665 1,992 6,667 5,975
Occupancy and equipment 516 464 1,525 1,342
Deposit insurance premiums 69 71 210 213
Data processing service expenses 344 428 1,081 1,236
Other 1,010 629 3,187 2,966
- --------------------------------------------------------------------------------------------
Total non-interest expense 4,604 3,584 12,670 11,732
- --------------------------------------------------------------------------------------------
Income before provision for income taxes $ 2,641 $ 3,822 $ 7,443 $ 9,486
Provision for income taxes 665 1,279 1,835 3,211
- --------------------------------------------------------------------------------------------
Net income $ 1,976 $ 2,543 $ 5,608 $ 6,275
============================================================================================
Other comprehensive income (loss), net
of taxes:
Unrealized holding gains (losses) on
available for sale securities, net of
taxes (4,079) 1,848 (12,949) 1,135
Reclassification adjustment for gains
included in net income 82 100 213 357
- --------------------------------------------------------------------------------------------
Other comprehensive income (loss) (3,997) 1,948 (12,736) 1,492
- --------------------------------------------------------------------------------------------
Comprehensive income (loss) ($2,021) $ 4,491 ($7,128) $ 7,767
============================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<S> <C> <C> <C> <C>
Basic earnings per share $.36 $.40 $.96 $.95
==== ==== ==== ====
Diluted earnings per share $.35 $.39 $.94 $.92
==== ==== ==== ====
Dividends per share $.16 $.14 $.48 $.40
==== ==== ==== ====
Average shares outstanding - basic 5,512,902 6,338,184 5,854,110 6,594,635
Average shares outstanding - diluted 5,610,321 6,506,516 5,964,248 6,830,895
</TABLE>
2
<PAGE>
GA Financial, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
For the Nine Months
Ended
- -------------------------------------------------------------------------------
September 30,
1999 1998
- -------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,608 $ 6,275
Adjustments to reconcile net income to
net cash provided by
operating activities:
Provision for losses on loans and REO
expenses 395 270
Depreciation on office, property and
equipment 526 598
Amortization of net deferred loan fees (230) (297)
Allocation of RRP shares 965 466
Net realized gain on sales of securities (213) (357)
Increase in accrued interest receivable (350) (892)
Increase in prepaid expenses and other
assets (29) (1,708)
Increase in accrued interest payable 4,446 3,965
Net Premium amortization on securities 131 166
Net realized gain on sale of student
loans (198) (88)
Amortization of intangibles 139 139
- --------------------------------------------------------------------------------
Net cash provided by operating
activities $ 11,190 $ 8,537
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of available for
sale securities 46,723 82,313
Repayments and maturities of available
for sale securities 72,899 92,491
Purchases of available for sale
securities (182,839) (184,556)
Proceeds from sale of student loans 8,563 3,350
Net decrease in loans 13,184 18,747
Purchase of loans (35,106) (42,902)
Purchases of office, property and
equipment, net (452) (468)
Purchases of Federal Home Loan Bank
stock (4,045) (1,580)
- --------------------------------------------------------------------------------
Net cash used in investing activities (81,073) (32,605)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Compensation expense on unallocated
ESOP shares 265 244
Net increase in demand and savings
deposits 848 705
Net (decrease) increase in certificates
of deposit (789) 6,471
Net increase in advances from
borrowers for taxes and insurance (642) (3)
Purchase of treasury stock (13,364) (11,341)
Net increase in borrowed funds 84,615 28,719
Cash dividends paid (3,112) (3,008)
Other stock transactions (361) 129
Payments made under capital lease
obligations - (44)
- --------------------------------------------------------------------------------
Net cash provided by financing
activities 67,460 21,872
- --------------------------------------------------------------------------------
Net decrease in cash and cash
equivalents (2,423) (2,196)
Cash and cash equivalents at beginning
of period 23,487 12,742
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of
period $ 21,064 $ 10,546
================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of GA Financial, Inc. (the "Company") and its subsidiaries, Great
American Federal Savings and Loan Association (the "Association") and New Eagle
Capital, Inc.
In the opinion of the management of the Company, the accompanying consolidated
financial statements include all normal recurring adjustments necessary for a
fair presentation of the financial position and results of operations for the
periods presented. All significant intercompany transactions have been
eliminated in consolidation. Certain information and footnote disclosures
normally included in financial statements presented in accordance with generally
accepted accounting principles have been condensed or omitted. It is suggested
that the accompanying consolidated financial statements be read in conjunction
with the Company's Annual Report on Form 10-K. Currently, other than investing
in various securities, the Company does not directly transact any material
business other than through the Association. Accordingly, the discussion herein
addresses the operations of the Company as they are conducted through the
Association.
2. Capital Requirements and Regulatory Restrictions
As a savings and loan holding company, the Company is not required to maintain
any minimum level of capital; however, the Association is subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory -
and possibly additional discretionary - actions by regulators that, if
undertaken, could have a direct material effect on the Association's financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Association must meet specific capital guidelines
that involve quantitative measures of the Association's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Association's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios (set forth in the
table below) of total risk-based, Tier I risk-based, and Tier I leverage
capital. It is management's opinion that the Association meets all capital
adequacy requirements to which it is subject.
As of September 30, 1999, the most recent notification from the Office of Thrift
Supervision (the "OTS") categorized the Association as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized the Association must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the Association's category. In March 1999, the Association paid a $32
million dividend to the Company. This dividend had OTS approval.
4
<PAGE>
<TABLE>
<CAPTION>
Tier I Tier I Total
Leverage Risk-Based Risk-based
Capital Capital Capital
------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
September 30, 1999:
Equity capital (1) $ 62,146 $ 62,146 $ 62,146
General valuation allowance (2) - - 1,627
Plus unrealized losses on certain
available for sale securities 8,504 8,504 9,152
Less core deposit intangible (772) (772) (772)
------------------------------------
Total regulatory capital 69,878 69,878 72,153
Minimum regulatory capital 34,924 12,502 25,002
------------------------------------
Excess regulatory capital $ 34,954 $ 57,376 $ 47,151
====================================
Regulatory capital as a percentage 8.00% 22.36% 23.09%
Minimum regulatory capital as a
percentage 4.00% 4.00% 8.00%
------------------------------------
Excess regulatory capital as a
percentage 4.00% 18.36% 15.09%
===================================
Well capitalized requirement under
prompt corrective actions provisions 5.00% 6.00% 10.00%
===================================
Adjusted assets as reported to the OTS $873,112 $312,530 $312,530
</TABLE>
<TABLE>
<CAPTION>
Tier I Tier I Total
Leverage Risk-Based Risk-based
Capital Capital Capital
------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
December 31, 1998:
Equity capital (1) $101,688 $101,688 $101,688
General valuation allowance (2) - - 1,604
Less unrealized gains on certain
available for sale securities (3,490) (3,490) (2,320)
Less core deposit intangible (910) (910) (910)
------------------------------------
Total regulatory capital 97,288 97,288 100,062
Minimum regulatory capital 32,381 12,594 25,188
------------------------------------
Excess regulatory capital $ 64,907 $ 84,694 $ 74,874
====================================
Regulatory capital as a percentage 12.02% 30.90% 31.78%
Minimum regulatory capital as a
percentage 4.00% 4.00% 8.00%
------------------------------------
Excess regulatory capital as a
percentage 8.02% 26.90% 23.78%
====================================
Well capitalized requirement under
prompt corrective actions provisions 5.00% 6.00% 10.00%
====================================
Adjusted assets as reported to the OTS $809,516 $314,850 $314,850
</TABLE>
(1) Represents equity capital of the Association as reported to the OTS.
(2) Limited to 1.25% of risk-weighted assets.
5
<PAGE>
3. Changes in Accounting Principles
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This statement
requires that all items recognized under accounting standards as components of
comprehensive earnings be reported in a financial statement that is displayed
with the same prominence as other financial statements. This statement also
requires that an entity classify items of other comprehensive earnings by their
nature in a financial statement. For example, other comprehensive earnings may
include foreign currency transaction adjustments, minimum pension liability
adjustments, and unrealized gains and losses on marketable securities classified
as available-for-sale. Adoption had no impact on reported results.
In June 1998, the Financial Accounting Standard Board ("FASB") issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. The
provisions of this statement require that derivative instruments be carried at
fair value on the balance sheet. The statement continues to allow derivative
instruments to be used to hedge various risks and sets forth specific criteria
to be used to determine when hedge accounting can be used. The statement also
provides for offsetting changes in fair value or cash flows of both the
derivative and the hedged asset or liability to be recognized in earnings in the
same period; however, any changes in fair value or cash flow that represent the
ineffective portion of a hedge are required to be recognized in earnings and
cannot be deferred. For derivative instruments not accounted for as hedges,
changes in fair value are required to be recognized in earnings.
The provisions of this statement become effective beginning with the year 2001
interim reporting. Although the statement allows for early adoption on any
quarterly period after June 1998, the Company has no plans to adopt the
provisions of SFAS No. 133 prior to the effective date. The impact of adopting
the provisions of this statement on the Company's financial position, results of
operations and cash flow subsequent to the effective date is not currently
estimable and will depend on the financial position of the Company and the
nature and purpose of the derivative instruments in use by management at that
time.
On January 1, 1999, the Company adopted the provisions of the American Institute
of Certified Public Accountants Statement of Position ("SOP") No. 98-5 on
reporting on the costs of start-up activities. This SOP requires that costs of
start-up activities be expensed as incurred. Initial application of this SOP is
to be reported as a cumulative effect of a change in accounting principle. The
adoption of SOP 98-5 had no impact on the Company's financial position and
results of operations.
On January 1, 1999, the Company adopted the provisions of SOP No. 98-1 on
accounting for the costs of computer software developed or obtained for internal
use. This SOP requires the capitalization of certain costs incurred in
connection with developing or obtaining software for internal use. The adoption
of SOP No. 98-1 was immaterial to the Company's financial position and results
of operations.
4. Financial Instruments with Off-Balance Sheet Risk
A reconciliation of forward and standby commitment activity for the period
follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) Forward Commitments Standby Commitments
-------------------------------------------
<S> <C> <C>
Balance at December 31, 1998 $ 17,000 $ 8,000
Purchase commitments - -
Commitments sold (3,000) -
Commitments settled/purchased (14,000) (8,000)
-------------------------------------------
Balance at September 30, 1999 $0 $0
===========================================
</TABLE>
6
<PAGE>
5. Earnings per Share:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
Sept. 30, 1999 Sept 30, 1998 Sept. 30, 1999 Sept. 30, 1998
------------------------------------------------------------------
(Dollars in Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Basic:
Net income $ 1,976 $ 2,543 $ 5,608 $ 6,275
Net income applicable to common stock 1,976 2,543 5,608 6,275
Average common shares - outstanding basic 5,512,902 6,338,184 5,854,110 6,594,635
Basic earnings per share $ .36 $ .40 $ .96 $ .95
Diluted:
Net income $ 1,976 $ 2,543 $ 5,608 $ 6,275
Average common shares - outstanding basic 5,512,902 6,338,184 5,854,110 6,594,635
Effect of dilutive securities:
Shares issuable upon exercise of
outstanding stock options and stock awards 97,419 168,332 110,138 236,261
Average common shares outstanding - diluted 5,610,321 6,506,516 5,964,248 6,830,895
Diluted earnings per share $ .35 $ .39 $ .94 $ .92
=====================================================================
</TABLE>
6. Consolidated Statements of Shareholders' Equity:
The consolidated statement of shareholders' equity for the nine month period
ending September 30, 1999 is as follows:
<TABLE>
<CAPTION>
Accumulated
Additional Unearned Unearned Other Total
Common Paid in Treasury ESOP RRP Comprehensive Retained Shareholders'
(Dollars in Thousands) Stock Capital Stock Shares Shares Income (Loss), Net Earnings Equity
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 12/31/98 $89 $86,467 $(32,255) $(5,520) $(2,431) $ 3,306 $59,560 $109,216
Net income - - - - - - 5,608 5,608
Other compre-
hensive income
(loss)
net of tax - - - - - (12,736) - (12,736)
Treasury stock
purchased - - (13,364) - - - - (13,364)
Cash dividends - - - - - - (2,881) (2,881)
Stock awards and
options - (25) (336) - 965 - 34 638
---------------------------------------------------------------------------------------------------
Balance at 09/30/99 $89 $86,442 $(45,955) $(5,520) $(1,466) $ (9,430) $62,321 $ 86,481
===================================================================================================
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
-------------
General
- -------
The Company's and the Association's consolidated results of operations are
dependent primarily on net interest income, which is the difference between the
interest income earned on interest-earning assets, such as loans and
investments, and the interest expense incurred on interest-bearing liabilities,
such as deposits and other borrowings. The Company and the Association are
referred hereinto collectively as the "Company". The Company also generates
non-interest income such as service fees and also generated data-processing fees
from its data-processing division. The Company's operating expenses consists
primarily of employee compensation, occupancy expenses, federal deposit
insurance premiums, data processing expenses, and other general and
administrative expenses. The Company's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory agencies.
Comparison of Financial Condition at September 30, 1999 and December 31, 1998
- -----------------------------------------------------------------------------
The Company's total assets increased $61.9 million or 7.5% to $823.3 million at
December 31, 1998. This increase was primarily attributed to an increase in
mortgage-related securities of $51.4 million funded by increased borrowings.
Cash and federal funds decreased $2.4 million or 10.2% to $21.1 million at
September 30, 1999. These funds were used to purchase investment securities.
Investment securities classified as available for sale decreased $10.2 million
or 6.2% to $152.9 million at September 30, 1999 due to maturities.
Mortgage-related securities classified as available for sale increased $51.4
million or 18.8% to $324.5 million at September 30, 1999. This was primarily
due to investment of borrowed funds from the Federal Home Loan Bank (the "FHLB")
of Pittsburgh. This was the result of management's continued emphasis on the
utilization of FHLB borrowings to fund asset growth, particularly investments in
mortgage-related securities. FHLB borrowings can be invested at yields higher
than the cost of borrowed funds, thereby increasing net interest income.
There were no securities held by the Company which were classified as 'held to
maturity' or 'held for trading' for either of the respective periods.
The following table presents details of the Company's investment securities and
mortgage-related securities as of September 30, 1999 (Dollars in Thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Available for sale securities: Cost Gains Losses Fair Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage-backed certificates $258,323 $ 698 $ (7,373) $251,648
Collateralized mortgage obligations 75,546 57 (2,705) 72,898
Marketable equity securities 38,833 2,049 (1,524) 39,358
US government agency debt 39,901 1 (1,752) 38,150
Corporate obligations 15,143 1 (403) 14,741
Municipal obligations 64,636 34 (3,990) 60,680
- --------------------------------------------------------------------------------------
Total $492,382 $2,840 $(17,747) $477,475
======================================================================================
</TABLE>
8
<PAGE>
The following table presents details of the Company's investment securities and
mortgage-related securities as of December 31, 1998 (Dollars in Thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Available for sale securities: Cost Gains Losses Fair Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage-backed certificates $183,312 $2,707 $ (291) $185,728
Collateralized mortgage obligations 87,913 821 (1,338) 87,396
Marketable equity securities 33,750 2,808 (530) 36,028
US government agency debt 58,689 858 (267) 59,280
Corporate obligations 27,457 345 - 27,802
Municipal obligations 39,863 154 (19) 39,998
- --------------------------------------------------------------------------------------
Total $430,984 $7,693 $(2,445) $436,232
======================================================================================
</TABLE>
Loans receivable increased $15.6 million or 5.0% to $326.3 million at September
30, 1999. This was due to the Company's purchase and origination of mortgage and
consumer loans.
Education loans held for sale decreased $1.8 million or 8.9% to $18.3 million
due to loan sales. The Company sells education loans when the loan begins
repayment status.
The following table presents details of the Company's loan portfolio (Dollars in
Thousands):
<TABLE>
<CAPTION>
At September 30, At December 31,
1999 1998
----------------------------------------
<S> <C> <C>
Mortgages:
One to four family residential $248,138 $239,648
Multi-family residential 4,471 5,293
Commercial 14,587 7,329
Construction and development 5,840 2,371
Consumer loans:
Home equity 53,052 54,953
Education loans held for sale 18,256 20,040
Other:
Loans on savings accounts 1,780 2,003
Unsecured personal loans and other 3,118 3,013
- --------------------------------------------------------------------------------------
Total $349,242 334,650
Less:
Undisbursed mortgage loans 2,389 1,350
Deferred loan fees 665 968
Allowance for losses 1,627 1,604
- --------------------------------------------------------------------------------------
Net loans $344,561 $330,728
=====================================================================================
</TABLE>
Accrued interest receivable increased $350,000 or 5.8% to $6.4 million at
September 30, 1999. This was due to an increase in mortgage-related securities
purchased by proceeds from FHLB borrowings.
FHLB stock increased $4.0 million or 35.4% to $15.5 million at September 30,
1999. The Company is required to own FHLB stock based upon levels of borrowings.
As the use of FHLB advances increases, the amount of required stock ownership
also increases.
Foreclosed assets decreased $443,000 or 58.4% from December 31, 1998. The
Company is in the process of selling all foreclosed assets.
Prepaid expenses and other assets increased $5.4 million or 56.3% to $14.9
million at September 30, 1999. This was primarily a result of the increase in
deferred income tax assets on the increase in unrealized losses on available for
sale securities.
9
<PAGE>
Total deposits were substantially the same for both periods.
Borrowed funds increased $84.6 million or 38.0% to $307.2 million at September
30, 1999. This was the result of management's continued utilization of FHLB
borrowings to fund asset growth, particularly investments in mortgage-related
and investment securities. FHLB borrowings can be invested at yields higher
than the cost of the borrowed funds thereby increasing net interest income. The
Company is utilizing both short and long term borrowings to fund asset growth.
The Company continually monitors the interest rate sensitivity of this strategy
with the primary objective to prudently structure the balance sheet so that
movements of interest rates on assets and liabilities are correlated and produce
a reasonable net interest margin even in periods of volatile interest rates.
Interest rate risk is considered to be the Company's most significant market
risk that could materially impact the Company's financial position or result of
operations.
Accrued interest payable increased $4.4 million or greater than 100% at
September 30, 1999. This was a result of the timing of accrued interest payable
being credited to deposit accounts and increased FHLB borrowings.
Other liabilities decreased $1.9 million or 47.0% to $2.1 million at September
30, 1999. The change is primarily the result of the tax effect of the decrease
in value on available for sale securities.
Total shareholders' equity decreased $22.7 million or 20.8% to $86.5 million at
September 30, 1999. This was primarily due to the purchase of $13.4 million of
treasury stock, payment of $2.9 million in cash dividends, $12.7 million
decrease in accumulated other comprehensive income, partially offset by $5.6
million in net income and $638,000 in stock vesting.
Comparison of the Consolidated Results of Operation for the Period of Three
- ---------------------------------------------------------------------------
Months Ended September 30, 1999 and 1998
- ----------------------------------------
Net Income. Net income was $2.0 million for the period of three months ended
September 30, 1999, a decrease of $567,000 or 22.3% for the same period in 1998.
Interest Income. Interest income totaled $14.5 million for the period of three
months ended September 30, 1999, an increase of $688,000 or 5.0% compared to the
$13.8 million recorded for the period of three months ended September 30, 1998.
The increase was primarily attributable to an increase in the average balances
of interest earning assets. The average balances of interest-earning assets for
the period of three months ended September 30, 1999 increased to $844.0 million,
an increase of $59.5 million or 7.6%, compared to the average balance of
interest-earning assets of $784.5 million for the same period in 1998.
Weighted average yield on interest-earning assets for the three month period
ended September 30, 1999 was 7.11% compared to 7.05% for the comparable period
in 1998. Interest on loans receivable increased $78,000. The average balance
of loans increased $13.2 million while the average yield decreased from 7.73% to
7.52% due to prepayments on higher yielding loans. Interest on mortgage related
securities increased $1.0 million or 22.8% to $5.4 million at September 30,
1999. Average balances on mortgage-related securities increased $48.0 million
or 18.2% to $311.8 million while the yield increased from 6.70% to 6.96%. This
is due to higher yields on new purchases. Interest on investment securities
decreased $387,000 or 13.0% for the period due to maturities. Interest on bank
deposits were substantially the same for both periods.
Interest Expense. Total interest expense for the three month period ended
September 30, 1999 was $8.5 million, an increase of $394,000 or 4.9% compared to
$8.1 million for the same period in 1998. Average balances of interest-bearing
liabilities were $750.1 million for the period of three months ended September
30, 1999 at a weighted average cost of 4.52% compared to average balance of
$676.7 million at a weighted average cost of 4.78% for the period of three
months ended September 30, 1998. The increase in interest expense was primarily
due to an increase in the average balance of borrowings. Average interest-
bearing deposits increased $6.1 million or 1.4% to $453.6 million. Average
borrowings increased $67.6 million or 29.7% to $295.2 million for the quarter
ending September 30, 1999. Management currently believes it is efficient to
fund asset growth through FHLB borrowings. Management believes that FHLB
borrowings can be invested at yields higher than the cost of the borrowed funds
thereby increasing net interest income. FHLB borrowings in 1999 have been
reinvested in investment and mortgage related securities.
Net Interest Income. Net interest income before provision for loan losses for
the period of three months ended September 30, 1999 was $6.0 million, an
increase of $294,000 or 5.1% , compared to $5.7 million recorded for the same
period in 1998.
Provision for Loan Losses. The provision for loan losses during the period of
three months ended September 30, 1999 and 1998 was $90,000. The provision
reflects residential, non-residential, and consumer loans originated and also
purchased
10
<PAGE>
loans. The allowance for loan losses to gross loans receivable and
total non-performing assets was 0.47% and 89%, respectively, at September 30,
1999 as compared to 0.46% and 80%, respectively at September 30, 1998. The
allowance for loan losses is maintained at an amount management considers
appropriate to cover estimated losses on loans receivable which are deemed
probable and estimable based on information currently known to management.
While management believes the Association's allowance for loan losses is
sufficient to cover losses inherent in its loan portfolio at this time, no
assurances can be given that the Association's level of allowance for loan
losses will be sufficient to cover future loan losses incurred by the
Association, or that future adjustments to the allowance for loan losses will
not be necessary if economic and other conditions differ substantially from the
economic and other conditions analyzed by management to determine the current
level of the allowance for loan losses.
Non-interest Income. Non-interest income consists of service fees, gains and
losses on the sale of loans and securities, fees from data processing services
sold and other miscellaneous items. For the period of three months ended
September 30, 1999 non-interest income was $1.3 million, compared to $1.8
million recorded for the same period in 1998. The decrease is primarily due to
$717,000 recorded in other income for the three month period ended September 30,
1998 for refund of previously paid state capital stock taxes.
Non-interest Expense. Total non-interest expense was $4.6 million for the three
month period ending September 30, 1999 and $3.6 million for the same period in
1998. The Company previously announced a $650,000 one time expense due to the
retirement of it's president in the third quarter, 1999. The expense resulted
from the satisfaction of the unexpired term of his employment agreement. Also,
a $290,000 reduction in the accrual for state capital stock taxes was recorded
in the three month period ending September 30, 1998.
Income Tax Expense. Income tax expense of $665,000 for the three months ended
September 30, 1999 resulted in an effective tax rate of 25.2%. The income tax
expense recorded for the period of three months ended September 30, 1998 of $1.3
million is an effective tax rate of 33.5%. This decrease in effective rate is
primarily due to the additional purchases of bank qualified municipal bonds.
Comparison of the Consolidated Results of Operation for the Period of Nine
- ---------------------------------------------------------------------------
Months Ended September 30, 1999 and 1998
- ----------------------------------------
Net Income. Net income was $5.6 million for the period of nine months ended
September 30, 1999, a decrease of $667,000 or 10.6% for the same period in 1998.
This was primarily due to a decrease in net interest income due to compression
in net interest rate spread and an increase of non-interest expense of $938,000.
Interest Income. Interest income totaled $42.0 million for the period of nine
months ended September 30, 1999, an increase of $193,000 or less than 1%
compared to the $41.8 million recorded for the period of nine months ended
September 30, 1998. The average balances of interest-earning assets for the
period of nine months ended September 30, 1999 increased to $833.1 million, an
increase of $55.9 million or 7.2%, compared to the average balance of interest-
earning assets of $777.1 million for the same period in 1998. Weighted average
yield on interest-earning assets for the nine month period ended September 30,
1999 was 6.94% compared to 7.17% for the comparable period in 1998. Interest on
loans receivable decreased $344,000 or 1.8% to $18.9 million at September 30,
1999. The average balance increased $13.0 million while the average yield
decreased from 7.86% to 7.42% due to prepayments on higher yielding loans.
Interest on mortgage related securities increased $1.3 million or 9.1% to $15.2
million at September 30, 1999. Average balances on mortgage-related securities
increased $36.4 million or 13.6% to $303.8 million while the yield decreased
from 6.92% to 6.65%. This is due to prepayments on higher yielding mortgage
related securities. Interest on investment securities decreased $713,000 or
8.7% for the period due primarily to maturity of investment securities.
Interest on bank deposits was substantially unchanged for the period.
Interest Expense. Total interest expense for the nine month period ended
September 30, 1999 was $24.6 million, an increase of $821,000 or 3.5%, compared
to $23.7 million for the same period in 1998. Average balances of interest-
bearing liabilities was $729.3 million for the period of nine months ended
September 30, 1999 at a weighted average cost of 4.49% compared to average
balance of $668.9 million at a weighted average cost of 4.73% for the period of
nine months ended September 30, 1998. The increase in interest expense was due
to an increase in the average balance of interest-bearing liabilities despite
lower rates. Average interest bearing deposits increased $7.6 million or 1.7%
to $452.8 million. The average rate paid on deposits decreased from 4.19% to
3.92% due to the market environment. Average borrowings increased $53.0 million
or 23.9% to $274.8 million for the nine months ending September 30, 1999.
Management currently believes it is efficient to fund asset growth through FHLB
borrowings. Management believes that FHLB borrowings can be invested at yields
higher than the cost of the borrowed funds thereby increasing net interest
income. FHLB borrowings in 1999 have been reinvested in investment and mortgage
related securities.
11
<PAGE>
Net Interest Income. Net interest income before provision for loan losses for
the period of nine months ended September 30, 1999 was $17.4 million, a decrease
of $628,000 or 3.5%, compared to $18.0 million recorded for the same period in
1998.
Provision for Loan Losses. The provision for loan losses during the period of
nine months ended September 30, 1999 was $240,000 as compared to $270,000 for
the same period in 1998. The provision reflects residential, non-residential,
and consumer loans originated and purchased loans. The allowance for loan
losses to gross loans receivable and total non-performing assets was 0.47% and
89%, respectively at September 30, 1999 as compared to 0.46% and 80%,
respectively at September 30, 1998.
Non-interest Income. Non-interest income consists of service fees, gains and
losses on the sale of loans and securities, fees from data processing services
sold and other miscellaneous items. For the period of nine months ended
September 30, 1999 non-interest income was $3.0 million, compared to $3.5
million recorded for the same period in 1998. The Company recorded a gross
refund of $717,000 in the nine month period ending September 30, 1998 for state
capital stock taxes paid in 1997 and 1996.
Non-interest Expense. Total non-interest expense was $12.7 million for the nine
month period ending September 30, 1999 which was $938,000 or 8.0% over $11.7
million for the same period in 1998. The Company previously announced a
$650,000 one time expense due to the retirement of its President in the three
month period ending September 30, 1999. The expense resulted from the
satisfaction of the unexpired term of his employment agreement. Also, the
Company had a reduction in the accrual of 1998 state capital stock taxes of
$290,000 in the three month period ending September 30, 1998.
Income Tax Expense. Income tax expense of $1.8 million for the nine months
ended September 30, 1999 resulted in an effective tax rate of 24.7%. The income
tax expense recorded for the period of nine months ended September 30, 1998 of
$3.2 million is an effective tax rate of 33.8%. This decrease in effective rate
is primarily due to the additional purchases of bank qualified municipal bonds
and other investments qualifying for favorable tax treatment.
12
<PAGE>
Average Balance Sheets and Analysis of Net Interest Income
- ----------------------------------------------------------
Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing liabilities. Net interest income depends
on the volume of interest-earning assets and interest-bearing liabilities and
the rates earned or paid on them. The following table presents certain
information relating to the Company's average consolidated statements of
financial condition and consolidated statements of income for the period of
three months ended September 30, 1999 and 1998. The yield and costs are derived
by dividing income or expense by the average balance of assets or liabilities,
respectively. Average balances are derived from daily average balances. The
average balance of loans receivable includes loans on which the Company has
discontinued accruing interest. The yields and costs include fees and expenses
which are considered adjustments to yield.
The following table presents average balances, yields on interest-earning
assets and average balances and costs of interest-bearing liabilities at
September 30, 1999 and September 30, 1998 (Dollars in Thousands).
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, 1999 Three Months Ended Sept. 30, 1998
Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-earning deposits
short-term investments $ 11,407 $ 102 3.58% $ 7,309 $ 112 6.13%
Investment securities, net (1) (2) 165,522 2,331 6.80% 174,883 2,783 6.37%
Loans receivable, net (1) (3) 340,301 6,399 7.52% 327,117 6,321 7.73%
Mortgage-related securities, net (1) 311,761 5,427 6.96% 263,772 4,420 6.70%
FHLB stock & other equity investments 14,991 251 6.70% 11,377 186 6.54%
-------------------------------------------------------------------------------------
Total interest-earning assets $843,982 $14,510 7.11% $784,458 $13,822 7.05%
Non-interest earning assets 30,570 37,598
----------- ---------
Total assets $874,552 $822,056
=========== =========
Liabilities and equity:
Interest-bearing liabilities:
Money market savings accounts $ 15,765 $ 121 3.07% $ 14,088 $ 83 2.36%
Passbook accounts 160,742 972 2.42% 159,639 1,106 2.77%
NOW accounts 35,383 158 1.79% 31,903 146 1.83%
Certificate accounts 241,731 3,206 5.31% 241,937 3,411 5.64%
-------------------------------------------------------------------------------------
Total $453,621 $ 4,457 3.93% $447,567 $ 4,746 4.24%
Borrowed Funds 295,181 4,018 5.44% 227,566 3,335 5.86%
Other 1,339 9 2.69% 1,558 9 2.31%
-------------------------------------------------------------------------------------
Total interest-bearing liabilities $750,141 $ 8,484 4.52% $676,691 $ 8,090 4.78%
Non-interest bearing liabilities 36,891 41,564
Shareholders' equity 87,520 103,801
----------- ---------
Total liabilities and shareholders'
equity $874,552 $822,056
=========== =========
Net interest rate spread (4) $ 6,026 2.59% $ 5,732 2.27%
Net interest margin (5) 3.08% 2.92%
Ratio of interest-earning assets to
interest-bearing liabilities 112.51% 115.93%
</TABLE>
(1) Includes related assets available for sale and unamortized discounts and
premiums.
(2) Includes municipal obligations and yield stated is fully taxable equivalent.
(3) Amount is net of deferred loan fees, undisbursed loan funds, discounts and
premiums and estimated loan loss allowances and includes loans held for sale
and non-performing loans.
(4) Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of average interest-bearing
liabilities.
(5) Net interest margin represents net interest income on a fully taxable
equivalent basis divided by averge interest earning assets.
13
<PAGE>
The following table presents average balances, yields on interest-earning assets
and average balances and costs of interest-bearing liabilities at September 30,
1999 and September 30, 1998 (Dollars in Thousands).
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30, 1999 Nine Months Ended Sept. 30, 1998
Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-earning deposits
short-term investments $13,674 $433 4.22% $10,035 $447 5.94%
Investment securities, net (1) (2) 162,789 6,838 6.73% 162,632 7,684 6.30%
Loans receivable, net (1) (3) 338,846 18,869 7.42% 325,810 19,213 7.86%
Mortgage-related securities, net (1) 303,768 15,150 6.65% 267,418 13,886 6.92%
FHLB stock & other equity investments 14,002 675 6.43% 11,251 542 6.42%
------------------------------------------------------------------------------------
Total interest-earning assets $833,079 $41,965 6.94% $777,146 $41,772 7.17%
Non-interest earning assets 30,735 35,967
------------ ----------
Total assets $863,814 $813,113
============ ==========
Liabilities and equity:
Interest-bearing liabilities:
Money market savings accounts $15,095 $339 2.99% $14,569 $252 2.31%
Passbook accounts 161,133 2,896 2.40% 160,253 3,307 2.75%
NOW accounts 34,940 463 1.77% 31,598 425 1.79%
Certificate accounts 241,656 9,609 5.30% 238,838 10,012 5.59%
------------------------------------------------------------------------------------
Total $452,824 $13,307 3.92% $445,258 $13,996 4.19%
Borrowed Funds 274,836 11,231 5.45% 221,823 9,720 5.84%
Other 1,611 26 2.15% 1,793 27 2.01%
------------------------------------------------------------------------------------
Total interest-bearing liabilities $729,271 $24,564 4.49% $668,874 $23,743 4.73%
Non-interest bearing liabilities 36,490 37,201
Shareholders' equity 98,053 107,038
------------ ----------
Total liabilities and shareholders' equity $863,814 $813,113
============ ==========
Net interest rate spread (4) $17,401 2.45% $18,029 2.44%
Net interest margin (5) 3.01% 3.09%
Ratio of interest-earning assets to
interest-bearing liabilities 114.23% 116.19%
</TABLE>
(1) Includes related assets available for sale and unamortized discounts and
premiums.
(2) Includes municipal obligations and yield stated is fully taxable equivalent.
(3) Amount is net of deferred loan fees, undisbursed loan funds, discounts and
premiums and estimated loan loss allowances and includes loans held for
sale and non-performing loans.
(4) Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of average interest-bearing
liabilities.
(5) Net interest margin represents net interest income on a fully taxable
equivalent basis divided by average interest earning assets.
14
<PAGE>
Allowance for Loan Losses
- -------------------------
The following table sets forth the changes in the allowance for loan losses for
the nine months ended September 30, 1999 (dollars in thousands):
Balance, December 31, 1998 $1,604
Provision for loan losses 240
Net charge-offs (217)
---------
Balance, September 30, 1999 $1,627
=========
Non-Performing Assets
- ---------------------
The following table presents information regarding the Association?s non-
performing assets at the dates indicated:
<TABLE>
<CAPTION>
Sept. 30, Sept. 30,
1999 1998
-------------------------
(Dollars in Thousands)
<S> <C> <C>
Non-performing loans:
Non-accrual loans $1,507 $1,312
Accruing loans which are contractually
past due 90 days or more - -
Restructured loans - -
- ------------------------------------------------------------------------------------------------------
Total non-performing loans $1,507 $1,312
Real estate owned 315 602
- ------------------------------------------------------------------------------------------------------
Total non-performing assets $1,822 $1,914
======================================================================================================
Non-performing assets as a % of gross loans receivable .52% .58%
Non-performing assets to total assets .21% .23%
Allowance for loan loss as a % of gross loans receivable .47% .46%
Allowance for loan loss to non-performing assets 89% 80%
</TABLE>
Liquidity and Capital Resources
- -------------------------------
The Association's primary sources of funds are deposits; principal and interest
payments on loans, and mortgage-related securities; proceeds from maturing
investment securities; advances from the FHLB; and other borrowed funds. While
scheduled maturities of investments and amortization of loans are predictable
sources of funds, deposit flows and prepayments on mortgage loans and mortgage-
related securities are greatly influenced by general interest rates, economic
conditions and competition.
The Association is required to maintain an average daily balance of liquid
assets as a percentage of net withdrawable deposit accounts plus short-term
borrowings as defined by the Office of Thrift Supervision regulations. The
minimum required liquidity is currently 4%. The Association's liquidity for the
month of September 30, 1999 was 49.60% . The high levels of liquidity were due
to management?s maintenance of higher than required levels of liquidity in order
to better manage interest rate risk by investing in investments that are
eligible to be included in liquidity calculations.
At September 30, 1999, the Association had commitments to originate loans of
$28.8 million. The Association anticipates that it will have sufficient funds
available to meet these commitments.
At September 30, 1999, the Association's equity capital exceeded each of the OTS
capital requirements. OTS requires Tier I capital to adjusted assets of 4.00%
and the Association had 8.00%. Tier I capital to risk-based assets requirement
is 4.00% and the Association had 22.36%. The total capital to risk-based assets
requirement is 8.00% and the Association had 23.09%.
15
<PAGE>
Year 2000 Compliance
- --------------------
As the millennium (year 2000) approaches, the Company is increasingly aware of
the potential impact of the century date change on the Company's information
systems and the ability to conduct business in an uninterrupted and orderly
manner. The year 2000 presents a significant exposure to any company with date
sensitive data in its computer and environmental systems. An important business
issue has emerged regarding how existing application software programs and
operating systems can accommodate this date value. Many existing application
software products, including the Company's, were designed to accommodate a two
digit year rather than four-digit numbers. These software programs record the
year 1998 as "98". This approach will work until the year 2000 when the "00" may
be recorded as 1900 instead of 2000.
In 1998, the Company's data processing division began to address the risks
associated with the coming millennium. In January 1999, the Company converted
all of its "mission critical systems" (including those related to accounts and
interest-rate calculations) to be year 2000 compliant.
Additionally, the Company is utilizing internal resources to examine all
personal computer hardware and software and all other company environmental
systems that are dependent on embedded microchips to ensure Year 2000
compliance. The Company conducted a Year 2000 compliance review of its third-
party vendors, including utility companies, and service bureaus for its
ancillary computer operations. The Company completed all third party mission
critical vendor testing and validation. In addition, if significant vendors fail
to certify their Year 2000 compliance, the Company intends to engage alternative
vendors and suppliers. While the Company cannot estimate the expenses associated
with hiring new vendors and suppliers, management believes that such expenses
would not have a material impact on the Company's earnings. The Company has
expended approximately $250,000 to date on Year 2000 issues and estimates it
will not incur any additional material costs.
The Company believes it has an effective plan in place to resolve the Year 2000
issue in a timely manner and, thus far, activities have tracked in accordance
with the original timetable. The Company has completed its business resumption
plans and has also developed contingency plans to address potential risks in the
event of Year 2000 failures, including non-compliance by third parties. It
should be noted that the Company completed all third party mission critical
vendor testing and validation, however, despite the Company's efforts to date to
remediate affected systems and develop contingency plans for potential risks,
the Company could be materially adversely affected as a result of not being able
to conduct its core business activities in a timely manner for any reason. In
addition, non-compliance by third parties (including loan customers) and
disruptions to the economy in general resulting from Year 2000 issues could also
have a undetermined negative impact on the Company.
The Company previously announced in 1998 that after a long and comprehensive
study of its data processing division, it has concluded it will no longer
continue to provide data processing services for other financial institutions.
Two of the three external clients were deconverted in 1999 and the other client
is scheduled to be deconverted during the first two months of the year 2000. The
company believes it has previously addressed the Year 2000 issues of its data
processing services and believes there will be no Year 2000 exposure relating to
the retention of this client beyond January 1, 2000.
The Company has made its customers aware of Year 2000 issues through the use of
account statement inserts in May of 1998 and October, 1999 and has made
additional information available at all of its branch locations.
Private Securities and Litigation Reform Act Safe Harbor Statement. This report
contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Reform Act of 1995, and is
including this statement for purposes of these safe harbor provisions. Forward-
looking statements, which are based on certain assumptions and describe future
plans, strategies and expectations of the Company, are generally identified by
use of the words "believe," "expect," "intend," "anticipate," "estimate,"
"project," or similar expressions. The Company's ability to predict results or
the actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse effect on the operations of the Company and
the subsidiaries include, but are not limited to, changes in: interest rates,
general economic conditions, legislative/regulatory changes, monetary and fiscal
policies of the U.S. Government, including policies of the U.S. Treasury and the
Federal Reserve Board, the quality or composition of the loan or investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in the Company's market area and accounting principles and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included in the Company's 1998 Form 10-K filing.
16
<PAGE>
The Company does not undertake--and specifically disclaims any obligation--to
publicly release the result of any revisions which may be made to forward-
looking statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.
Other Developments
- ------------------
The Board of Directors declared a dividend of $.16 per share to stockholders of
record on November 5, 1999, payable on November 19, 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- -------- ----------------------------------------------------------
Management is responsible for monitoring and limiting the Company's exposure to
interest rate risk within established guidelines while maximizing net interest
income. During the first nine month of 1999, the Company's interest rate risk
position grew more liability sensitive. The Company continued to purchase
investment securities during the first nine months of 1999 which are financed by
FHLB borrowings. The Company will continue to monitor the Company's interest
rate sensitivity with the primary objective to prudently structure the balance
sheet so that movements of interest rates on assets and liabilities are highly
correlated and produce a reasonable net interest margin even in periods of
volatile interest rates. Further discussion on market risk is in the Company's
December 31, 1998 SEC Form 10-K filing.
17
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
The Board of Directors declared a dividend of $.16 per share
to stockholders of record on November 5, 1999, payable on
November 19, 1999.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibit 3 - Amended Bylaws of GA Financial, Inc.
Exhibit 11- Computation of Earnings per Share. This is
incorporated by reference to footnote number 5
of the financial statements on page number 7.
Exhibit 27 - Financial Data Schedule
18
<PAGE>
GA FINANCIAL, INC. AND SUBSIDIARIES
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.
GA FINANCIAL, INC.
----------------------------------------------
(Registrant)
Date November 8, 1999 By /s/ John M. Kish
------------------------ -----------------------------------
John M. Kish
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Date November 8, 1999 By /s/ Raymond G. Suchta
--------------------------- -----------------------------------
Raymond G. Suchta
Chief Financial Officer and Treasurer
(Principal Accounting and Financial Officer)
19
<PAGE>
Exhibit 3
GA FINANCIAL, INC.
AMENDED BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
--------- --------------
An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
--------- ----------------
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of Directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board").
Section 3. Notice of Meetings.
--------- ------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
--------- ------
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy (after giving effect to the provisions of Article FOURTH of the
Corporation's Certificate of Incorporation), shall constitute a quorum for
<PAGE>
all purposes, unless or except to the extent that the presence of a larger
number may be required by law. Where a separate vote by a class or classes is
required, a majority of the shares of such class or classes present in person or
represented by proxy (after giving effect to the provisions of Article FOURTH of
the Corporation's Certificate of Incorporation) shall constitute a quorum
entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting or
the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present in person or by proxy constituting a quorum, then except as otherwise
required by law, those present in person or by proxy at such adjourned meeting
shall constitute a quorum, and all matters shall be determined by a majority of
the votes cast at such meeting.
Section 5. Organization.
--------- ------------
Such person as the Board of Directors may have designated or, in the absence
of such a person, the Chairman of the Board of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman appoints.
Section 6. Conduct of Business.
--------- -------------------
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedures at the meeting, including such regulation
of the manner of voting and the conduct of discussion as seem to him or her in
order. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
(b) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting: (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed
to and received at the principal executive offices of the Corporation not less
than ninety (90) days prior to the date of the annual meeting; provided,
however, that in the event that less than one hundred (100) days' notice or
prior public disclosure of the date of the meeting is given or made to
2
<PAGE>
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter such stockholder proposes to bring before the annual meeting: (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting; (ii)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business; (iii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by such stockholder; and
(iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
brought before or conducted at an annual meeting except in accordance with the
provisions of this Section 6(b). The Officer of the Corporation or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 6(b) and, if he should so
determine, he shall so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders at which directors are to be elected
only: (i) by or at the direction of the Board of Directors; or (ii) by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this Section
6(c). Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made by timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered or
mailed to and received at the principal executive offices of the Corporation not
less than ninety (90) days prior to the date of the meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth: (i) as to each person whom such stockholder proposes to
nominate for election or re-election as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (ii) as to the stockholder giving
the notice (x) the name and address, as they appear on the Corporation's books,
of such stockholder and (y) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder. At the request
of the Board of Directors, any person nominated by the Board of Directors for
election as a Director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible
3
<PAGE>
for election as a Director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The Officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she shall so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 7. Proxies and Voting.
--------- ------------------
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be made by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or his or her proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name of
the stockholder or proxy voting and such other information as may be required
under the procedures established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation, all
other matters shall be determined by a majority of the votes cast.
Section 8. Stock List.
--------- ----------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
4
<PAGE>
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
--------- ------------------------------------------
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number, Term of Office and Limitations.
--------- ------------------------------------------------------
The business and affairs of the Corporation shall be under the direction of
its Board of Directors. The number of Directors who shall constitute the Whole
Board shall be such number as the Board of Directors shall from time to time
have designated, except that in the absence of such designation shall be six
(6). The Board of Directors shall annually elect a Chairman of the Board from
among its members who shall, when present, preside at its meetings.
The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at the annual meeting of stockholders two years thereafter, with each
Director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, Directors elected to
succeed those Directors whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election, with each Director to hold office until his or her successor
shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
--------- -----------------------------------------
Subject to the rights of the holders of any class or series of Preferred
Stock, and unless the Board of Directors otherwise determines, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the Directors then in office, though less than a
quorum, and Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such Director's successor shall have
5
<PAGE>
been duly elected and qualified. No decrease in the number of authorized
directors constituting the Board shall shorten the term of any incumbent
Director.
Section 3. Regular Meetings.
--------- ----------------
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
--------- ----------------
Special meetings of the Board of Directors may be called by one-third (1/3)
of the Directors then in office (rounded up to the nearest whole number), by the
Chairman of the Board or the President or, in the event that the Chairman of the
Board or President are incapacitated or otherwise unable to call such meeting,
by the Secretary, and shall be held at such place, on such date, and at such
time as they, or he or she, shall fix. Notice of the place, date, and time of
each such special meeting shall be given each Director by whom it is not waived
by mailing written notice not less than five (5) days before the meeting or by
telegraphing or telexing or by facsimile transmission of the same not less than
twenty-four (24) hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
--------- ------
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend
any meeting, a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
--------- -------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
--------- -------------------
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the Directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
6
<PAGE>
Section 8. Powers.
--------- ------
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any Officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any Officer upon any
other person for the time being;
(5) To confer upon any Officer of the Corporation the power to appoint,
remove and suspend subordinate Officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for Directors, Officers, employees and
agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for Directors, Officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(8) To adopt from time to time regulations, not inconsistent with these
Bylaws, for the management of the Corporation's business and affairs; and
(9) To fix the Compensation of officers and employees of the
Corporation and its subsidiaries as it my determine.
Section 9. Compensation of Directors.
--------- -------------------------
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
7
<PAGE>
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
--------- ------------------------------------
The Board of Directors, by a vote of a majority of the Board of Directors,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for these committees and any others provided for herein,
elect a Director or Directors to serve as the member or members, designating, if
it desires, other Directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business.
--------- -------------------
Each committee may determine the procedural rules for meeting and conducting
its business and shall act in accordance therewith, except as otherwise provided
herein or required by law. Adequate provision shall be made for notice to
members of all meetings. The quorum requirements for each such committee shall
be a majority of the members of such committee unless otherwise determined by
the Board of Directors by a majority vote of the Board of Directors which such
quorum determined by a majority of the Board may be one-third of such members
and all matters considered by such committees shall be determined by a majority
vote of the members present. Action may be taken by any committee without a
meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of such committee.
Section 3. Nominating Committee.
---------- --------------------
The Board of Directors shall appoint a Nominating Committee of the Board,
consisting of not less than three (3) members. The Nominating Committee shall
have authority: (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to Section 6(c)(ii)
of Article I of these Bylaws in order to determine compliance with such Bylaw;
and (b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing.
8
<PAGE>
ARTICLE IV - OFFICERS
Section 1. Generally.
--------- ---------
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a Chairman of the Board, Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The Chairman of the Board shall be chosen from among the Directors.
Any number of offices may be held by the same person.
(b) The term of office of all Officers shall be until the next annual
election of Officers and until their respective successors are chosen but any
Officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of Directors then constituting the Board of
Directors.
(c) All Officers chosen by the Board of Directors shall have such
powers and duties as generally pertain to their respective Offices, subject to
the specific provisions of this ARTICLE IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. Chairman of the Board of Directors.
--------- ----------------------------------
The Chairman of the Board, subject to the provisions of these Bylaws and to
the direction of the Board of Directors, shall be an officer of the Corporation
and shall serve in general executive capacity and unless the Board has
designated another person, when present, shall preside at all meetings of the
stockholders of the Corporation. The Chairman of the Board shall perform all
duties and have all powers which are commonly incident to the office of Chairman
of the Board and which are delegated to him or her by the Board of Directors by
resolution of the Board of Directors. He or she shall have power to sign all
stock certificates, contracts and other instruments of the Corporation which are
authorized.
Section 3. Chief Executive Officer.
--------- -----------------------
The Chief Executive Officer shall have general responsibility for the
management and control of the business and affairs of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of Chief Executive Officer or which are delegated to him or her by the Board of
Directors. Subject to the direction of the Board of Directors, the Chief
Executive Officer shall have power to sign all stock certificates, contracts and
other instruments of the Corporation which are authorized and shall have general
supervision of all of the other Officers (other than the Chairman of the Board),
employees and agents of the Corporation.
9
<PAGE>
Section 4. President.
---------- ---------
The President shall perform the duties of the Chief Executive Officer in his
absence or during his inability to act. In addition, the President shall have
the general responsibilities for the management and control of the business and
affairs of the Corporation which are not the responsibility of the Chief
Executive Officer and shall perform the duties and exercise the powers as may be
properly assigned to him by the Board of Directors, the Chairman of the Board or
the Chief Executive Officer. Subject to the direction of the Board of
Directors, the President shall have power to sign all stock certificates,
contracts and other instruments of the Corporation which are authorized and
shall have general supervision of all of the other Officers (other than the
Chairman of the Board and Chief Executive Officer).
Section 5. Vice President.
---------- --------------
The Vice President or Vice Presidents shall perform the duties of the
President in his absence or during his inability to act. In addition, the Vice
Presidents shall perform the duties and exercise the powers usually incident to
their respective offices and/or such other duties and powers as may be properly
assigned to them by the Board of Directors, the Chairman of the Board or the
President. A Vice President or Vice Presidents may be designated as Executive
Vice President or Senior Vice President.
Section 6. Secretary.
--------- ---------
The Secretary or Assistant Secretary shall issue notices of meetings, shall
keep their minutes, shall have charge of the seal and the corporate books, shall
perform such other duties and exercise such other powers as are usually incident
to such office and/or such other duties and powers as are properly assigned
thereto by the Board of Directors, the Chairman of the Board or the President.
Subject to the direction of the Board of Directors, the Secretary shall have the
power to sign all stock certificates.
Section 7. Treasurer.
---------- ----------
The Treasurer shall be the Comptroller of the Corporation and shall have the
responsibility for maintaining the financial records of the Corporation. He or
she shall make such disbursements of the funds of the Corporation as are
authorized and shall render from time to time an account of all such
transactions and of the financial condition of the Corporation. The Treasurer
shall also perform such other duties as the Board of Directors may from time to
time prescribe. Subject to the direction of the Board of Directors, the
Treasurer shall have the power to sign all stock certificates.
10
<PAGE>
Section 8. Assistant Secretaries and Other Officers.
--------- -----------------------------------------
The Board of Directors may appoint one or more Assistant Secretaries and
such other Officers who shall have such powers and shall perform such duties as
are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 9. Action with Respect to Securities of Other Corporations.
---------- --------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
Officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
--------- ---------------------
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, or any Treasurer or Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
--------- ------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
--------- -----------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting
11
<PAGE>
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the next day preceding the day on which the meeting is held, and, for
determining stockholders entitled to receive payment of any dividend or other
distribution or allotment or rights or to exercise any rights of change,
conversion or exchange of stock or for any other purpose, the record date shall
be at the close of business on the day on which the Board of Directors adopts a
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
--------- --------------------------------------
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
--------- -----------
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
Section 1. Notices.
--------- -------
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, Director, Officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier. Any such notice shall be addressed to such stockholder, Director,
Officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.
Section 2. Waivers.
--------- -------
A written waiver of any notice, signed by a stockholder, Director, Officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, Director, Officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
12
<PAGE>
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
--------- --------------------
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
--------- --------------
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
an assistant to the Treasurer.
Section 3. Reliance Upon Books, Reports and Records.
--------- ----------------------------------------
Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its Officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such Director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
--------- -----------
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
--------- ------------
In applying any provision of these Bylaws which requires that an act be done
or not be done a specified number of days prior to an event or that an act be
done during a period of a specified number of days prior to an event, calendar
days shall be used, the day of the doing of the act shall be excluded, and the
day of the event shall be included.
13
<PAGE>
ARTICLE VIII - AMENDMENTS
The Board of Directors may amend, alter or repeal these Bylaws at any
meeting of the Board, provided notice of the proposed change was given not less
than two (2) days prior to the meeting. The stockholders shall also have power
to amend, alter or repeal these Bylaws at any meeting of stockholders provided
notice of the proposed change was given in the notice of the meeting; provided,
however, that, notwithstanding any other provisions of the Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the voting stock required by law, the Certificate of Incorporation,
any Preferred Stock Designation or these Bylaws, the affirmative votes of the
holders of at least 80% of the voting power of all the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal any provisions of these Bylaws.
The above Amended Bylaws are effective as of September 23, 1999.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999
THIRD QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 6,730
<INT-BEARING-DEPOSITS> 14,334
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 477,475
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 346,188
<ALLOWANCE> 1,627
<TOTAL-ASSETS> 885,221
<DEPOSITS> 482,607
<SHORT-TERM> 147,160
<LIABILITIES-OTHER> 8,973
<LONG-TERM> 160,000
0
0
<COMMON> 89
<OTHER-SE> 86,392
<TOTAL-LIABILITIES-AND-EQUITY> 885,221
<INTEREST-LOAN> 18,869
<INTEREST-INVEST> 23,096
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 41,965
<INTEREST-DEPOSIT> 13,307
<INTEREST-EXPENSE> 24,564
<INTEREST-INCOME-NET> 17,401
<LOAN-LOSSES> 240
<SECURITIES-GAINS> 213
<EXPENSE-OTHER> 12,670
<INCOME-PRETAX> 7,443
<INCOME-PRE-EXTRAORDINARY> 7,443
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,608
<EPS-BASIC> .96
<EPS-DILUTED> .94
<YIELD-ACTUAL> 6.94
<LOANS-NON> 1,823
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,604
<CHARGE-OFFS> 219
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 1,627
<ALLOWANCE-DOMESTIC> 1,627
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
