<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 March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________________
Commission File Number 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 shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 5,899,467 shares of
common stock, par value $.01 per share, were outstanding as of April 28, 2000.
<PAGE>
GA FINANCIAL, INC.
FORM 10-Q
March 31, 2000
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition -
March 31, 2000 and December 31, 1999........................ 1
Consolidated Statements of Income and Comprehensive Income -
For the Three Months Ended March 31, 2000 and 1999.......... 2
Consolidated Statements of Cash Flows - For the Three
Months Ended March 31, 2000 and 1999........................ 3
Notes to unaudited Consolidated Financial Statements........ 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 8-14
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 14
PART II. OTHER INFORMATION and EXHIBITS.............................. 15
SIGNATURES ................................................ 16
<PAGE>
Part I
- ------------------------------------------------------------------------------
GA Financial, Inc.
Consolidated Statements of Financial Condition
As of March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
March 31, 2000 Dec. 31, 1999
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS (Dollars in thousands)
<S> <C> <C>
Cash (including interest-bearing demand deposits of $15,809
in 2000 and $12,457 in 1999) $ 24,053 $ 26,632
Held for trading investment securities, at fair value 732 -
Available for sale securities, at fair value:
Investment securities 149,292 150,960
Mortgage-related securities 294,985 306,724
Held to maturity investment securities, at cost 3,857 -
Loans receivable, net of allowance for loan losses of 1,858 and 1,731, respectively 341,225 334,351
Education loans held for sale 20,557 19,158
Accrued interest receivable 6,296 6,094
Federal Home Loan Bank stock 15,458 15,458
Office, property and equipment, net 5,736 5,670
Foreclosed assets 348 345
Prepaid expenses and other assets 17,779 17,588
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $880,318 $882,980
===========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits $ 33,282 $ 29,418
Savings accounts 470,756 465,706
Borrowed funds 286,018 297,160
Advances from borrowers for taxes and insurance 1,592 1,444
Accrued interest payable 4,050 2,569
Securities purchased, not settled - 29
Other liabilities 1,870 2,083
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $797,568 $798,409
===========================================================================================================================
Shareholder's 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 86,722 86,722
Treasury stock, at cost (2,904,941 shares at March 31, 2000 and 2,676,561 shares
at December 31, 1999) (47,996) (45,036)
Unearned employee stock ownership plan (ESOP) shares (4,488) (4,488)
Unearned recognition and retention plan (RRP) shares (1,079) (1,317)
Accumulated other comprehensive income (loss) (14,011) (14,332)
Retained earnings 63,513 62,933
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 82,750 84,571
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $880,318 $882,980
===========================================================================================================================
</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 Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C>
Interest income:
Loans $ 6,688 $ 6,219
Mortgage-related securities 5,314 4,519
Investment securities 2,488 2,405
Bank deposits 100 200
- ---------------------------------------------------------------------------------------------------------------------
Total interest income $14,590 $13,343
- ---------------------------------------------------------------------------------------------------------------------
Interest expense:
Savings deposits 4,827 4,435
Borrowed funds 4,026 3,385
Other 9 9
- ---------------------------------------------------------------------------------------------------------------------
Total interest expense 8,862 7,829
- ---------------------------------------------------------------------------------------------------------------------
Net interest income before provision for losses on loans $ 5,728 $ 5,514
Provision for losses on loans 180 60
- ---------------------------------------------------------------------------------------------------------------------
Net interest income after provision for losses on loans $ 5,548 $ 5,454
- ---------------------------------------------------------------------------------------------------------------------
Non-interest income:
Service fees 663 427
Net gain on sales of securities 106 64
Net gain on sales of education loans 20 0
Data processing service fees 16 193
Other 211 135
- ---------------------------------------------------------------------------------------------------------------------
Total non-interest income 1,016 819
- ---------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Compensation and employee benefits 2,464 2,223
Occupancy and equipment 602 657
Deposit insurance premiums 26 71
Other 1,344 1,090
- ---------------------------------------------------------------------------------------------------------------------
Total non-interest expense 4,436 4,041
- ---------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes $ 2,128 $ 2,232
Provision for income taxes 510 550
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 1,618 $ 1,682
=====================================================================================================================
Other comprehensive results:
Unrealized holding gains (losses) on available for sale securities, net of taxes 402 (1,484)
Reclassification adjustment for net gains included in net income, net of taxes (81) (48)
- ---------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) 321 (1,532)
- ---------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 1,939 $ 150
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<CAPTION>
<S> <C> <C>
Basic earnings per share $ .29 $ .27
======= =======
Diluted earnings per share $ .29 $ .27
======= =======
Dividends per share $ .18 $ .16
======= =======
Average shares outstanding - basic 5,560,680 6,193,054
Average shares outstanding - diluted 5,563,794 6,315,824
</TABLE>
2
<PAGE>
GA Financial, Inc.
Consolidated Statements of Cash Flows
For the Three months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
For the Three months
Ended March 31,
2000 1999
(unaudited)
- --------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,618 $ 1,682
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for losses on loans 180 60
Depreciation on office, property and equipment 87 173
Amortization (accretion) of net deferred loan fees 45 (148)
Allocation of RRP shares 98 207
Net unrealized gain on sales of securities (106) (64)
Net increase in trading securities (732) -
Net realized gain on sale of student loans (20) -
Net realized loss on sale of REO 33 10
Increase in accrued interest receivable (202) (207)
Increase in prepaid expenses and other assets (236) (544)
Increase in accrued interest payable 1,481 1,606
Other 56 152
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,302 $ 2,927
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of available for sale securities 5,193 10,236
Repayments and maturities of available for sale securities 6,906 28,289
Purchases of available for sale securities (964) (74,396)
Purchase of Held To Maturity securities (3,857) -
Proceeds from sale of student loans 1,557 -
Net (increase) decrease in short term investments 2,994 (412)
Purchases of loans (10,889) (24,518)
Net decrease in loans 817 15,452
Purchases of office, property and equipment, net (153) (197)
Purchases of Federal Home Loan Bank stock - (2,381)
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities 1,604 (47,927)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in demand and savings deposits 23,544 2,295
Net (decrease) in certificates of deposit (14,630) (4,044)
Net increase in advances from borrowers for taxes and insurance 148 230
Net (decrease) increase in other liabilities (547) 87
Purchase of treasury stock (2,820) (2,950)
Net (decrease) increase in borrowed funds (11,142) 58,325
Cash dividends paid (1,038) (947)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities (6,485) 52,996
- --------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents ($2,579) $ 7,996
Cash and cash equivalents at beginning of period 26,632 23,487
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 24,053 $ 31,483
====================================================================================================================
</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 March 31, 2000, 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.
4
<PAGE>
<TABLE>
<CAPTION>
Tier I Tier I Total
Leverage Risk-Based Risk-based
Capital Capital Capital
-----------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
March 31, 2000:
Equity capital (1) $ 60,864 $ 60,864 $ 60,864
General valuation allowance (2) - - 1,858
Plus unrealized losses on certain available
for sale securities 12,367 12,367 12,779
Less core deposit intangible (679) (679) (679)
-----------------------------------------------------------
Total regulatory capital $ 72,552 $ 72,552 $ 74,822
Minimum regulatory capital 35,061 13,065 26,130
-----------------------------------------------------------
Excess regulatory capital $ 37,491 $ 59,487 $ 48,692
===========================================================
Regulatory capital as a percentage 8.28% 22.21% 22.91%
Minimum regulatory capital as a percentage 4.00% 4.00% 8.00%
-----------------------------------------------------------
Excess regulatory capital as a percentage 4.28% 18.21% 14.91%
===========================================================
Well capitalized requirement under
prompt corrective action provisions 5.00% 6.00% 10.00%
===========================================================
Adjusted assets as reported to the OTS $876,538 $326,625 $326,625
</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, 1999:
Equity capital (1) $ 58,871 $ 58,871 $ 58,871
General valuation allowance (2) - - 1,731
Less unrealized gains on certain available
for sale securities 13,018 13,018 13,456
Less core deposit intangible (725) (725) (725)
-----------------------------------------------------------
Total regulatory capital $ 71,164 $ 71,164 $ 73,333
Minimum regulatory capital 35,089 12,687 25,374
-----------------------------------------------------------
Excess regulatory capital $ 36,075 $ 58,477 $ 47,959
===========================================================
Regulatory capital as a percentage 8.11% 22.44% 23.12%
Minimum regulatory capital as a percentage 4.00% 4.00% 8.00%
-----------------------------------------------------------
Excess regulatory capital as a percentage 4.11% 18.44% 15.12%
===========================================================
Well capitalized requirement under
prompt corrective action provisions 5.00% 6.00% 10.00%
===========================================================
Adjusted assets as reported to the OTS $877,230 $317,174 $317,174
</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
SFAS No. 133; "Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133," requires
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, as amended, will be adopted by the Company for
its quarterly and annual reporting beginning January 1, 2001. 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.
During March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44; "Accounting for Certain Transactions involving Stock
Compensation-an interpretation of APB Opinion No. 25". This Interpretation
clarifies the application of APB Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) for only certain issues. The issues addressed by this
Interpretation were resolved within the framework of the intrinsic value method
prescribed by APB 25, and do not amend APB 25. Among the issues this
Interpretation clarifies are (a) the definition of employee for purposes of
applying APB 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination.
This Interpretation is effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occur after either December 15, 1998,
or January 12, 2000. To the extent that this Interpretation cover events
occurring during the period after December 15, 1998, or January 12, 2000, but
before the effective date of July 1, 2000, the effects of applying this
Interpretation are recognized on a prospective basis from July 1, 2000. The
Company has not determined the impact of the adoption of the Interpretation at
this time.
4. Earnings per Share:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 2000 March 31, 1999
----------------------------------------
(Dollars in Thousands, except per share amounts)
<S> <C> <C>
Basic:
Net income $ 1,618 $ 1,682
Average common shares - outstanding basic 5,560,680 6,193,054
Basic earnings per share $ .29 $ .27
Diluted:
Net income $ 1,618 $ 1,682
Average common shares - outstanding basic 5,560,680 6,193,054
Effect of dilutive securities:
Shares issuable upon exercise of
outstanding stock options and stock awards 3,114 127,770
Average common shares outstanding - diluted 5,563,794 6,315,824
Diluted earnings per share $ .29 $ .27
=====================================
</TABLE>
6
<PAGE>
5. Changes in Shareholders' Equity:
The consolidated statement of shareholders' equity for the three month period
ending March 31, 2000 is as follows:
<TABLE>
<CAPTION>
Accumulated
Other
Additional Unearned Unearned Comprehensive Total
(Dollars in Thousands) Common Paid in Treasury ESOP RRP Income (Loss), Retained Shareholders'
Stock Capital Stock Shares Shares Net Earnings Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 12/31/99 $89 $86,722 $(45,036) $(4,488) $(1,317) $(14,332) $62,933 $84,571
Net income - - - - - - 1,618 1,618
Other comprehensive - - - - - 321 - 321
income (loss), net
of tax
Treasury stock
purchased - - (2,820) - - - - (2,820)
Cash dividends - - - - - - (1,038) (1,038)
(.18 per share)
Shares allocated to - - - - - - - -
ESOP
Shares allocated to - - (140) - 238 - - 98
stock based
compensation
----------------------------------------------------------------------------------------------------------
Balance at 03/31/00 $89 $86,722 $(47,996) $(4,488) $(1,079) $(14,011) $63,513 $82,750
-----------------------------------------------------------------------------------------------------------
</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, trading accounts profits, data-
processing fees from its data-processing division, and other income such as the
increase in surrender values in Bank owned Life Insurance. The Company
previously announced that it will no longer continue to provide data processing
services for other companies. The information services department will
concentrate on providing data processing services to the Company only. The
Company's operating expenses consist 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 as of March 31, 2000 and December 31, 1999
- ----------------------------------------------------------------------------
The Company's total assets decreased $2.7 million or 0.3% to $880.3 million as
of March 31, 2000.
Cash decreased $2.6 million or 9.7% to $24.1 million as of March 31, 2000.
These funds were primarily used to originate mortgage loans and purchase
investment securities.
Investment securities classified as available for sale decreased $1.7 million or
1.1% to $149.3 million as of March 31, 2000 due to maturities and sales.
Mortgage-related securities classified as available for sale decreased $11.7
million or 3.8% to $295.0 million as of March 31, 2000.
As of March 31, 2000, the Company had $3.9 million in "Held to Maturity"
investment securities and $732,000 in "Held for Trading" securities. There were
no securities in either classification for December 31, 1999. All of the "Held
for Trading" securities are equity securities and have trading account profits
of $84,000 as of March 31, 2000.
The following table presents details of the Company's investment securities and
mortgage-related securities as of
March 31, 2000 (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 $237,891 $ 161 $(10,279) $227,773
Collateralized mortgage obligations 71,443 24 (4,255) 67,212
Marketable equity securities 40,082 1,838 (2,688) 39,232
US government agency debt 40,235 - (2,623) 37,612
Corporate obligations 12,102 - (649) 11,453
Municipal obligations 64,644 3 (3,652) 60,995
- ----------------------------------------------------------------------------------------------------------------------------
Total $466,397 $2,026 $(24,146) $444,277
============================================================================================================================
</TABLE>
8
<PAGE>
The following table presents details of the Company's investment securities and
mortgage-related securities as of December 31, 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 $248,193 $ 323 $(10,525) $237,991
Collateralized mortgage obligations 72,581 14 (3,862) 68,733
Marketable equity securities 42,839 1,850 (2,237) 42,452
US government agency debt 40,070 - (2,922) 37,148
Corporate obligations 12,109 - (633) 11,476
Municipal obligations 64,640 1 (4,757) 59,884
- ----------------------------------------------------------------------------------------------------------------------------
Total $480,432 $2,188 $(24,936) $457,684
============================================================================================================================
</TABLE>
Loans receivable increased $6.9 million or 2.1% to $341.2 million as of March
31, 2000, primarily due to the Company's origination of mortgage and consumer
loans.
As of March 31, 2000, education loans held for sale increased $1.4 million or
7.3% to $20.6 million due to originations of such loans. The Company will sell
education loans when the loan begins repayment status.
The following table presents details of the Company's loan portfolio (Dollars in
Thousands):
<TABLE>
<CAPTION>
As of March 31, As of December 31,
2000 1999
-------------------------------------------
<S> <C> <C>
Mortgages:
One to four family residential $260,561 $256,172
Multi-family residential 4,389 4,405
Commercial 17,536 17,592
Construction and development 5,299 3,658
Consumer loans:
Home equity 52,771 52,819
Education loans held for sale 20,557 19,158
Other:
Loans on savings accounts 1,603 1,725
Unsecured personal loans and other 4,178 3,317
- -----------------------------------------------------------------------------------------------
Total $366,894 $358,846
Less:
Undisbursed mortgage loans (3,000) (2,905)
Deferred loan fees (254) (701)
Allowance for losses (1,858) (1,731)
- -----------------------------------------------------------------------------------------------
Net loans $361,782 $353,509
===============================================================================================
</TABLE>
Accrued interest receivable increased $202,000 or 3.3% to $6.3 million as of
March 31, 2000.
FHLB stock remained the same for both periods. 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 are substantially the same for both periods. The Company is
in the process of selling all foreclosed assets.
Prepaid expenses and other assets increased $191,000 or 1.1% to $17.8 million
as of March 31, 2000.
Total deposits increased $8.9 million or 1.8% to $504.0 million as of March 31,
2000.
9
<PAGE>
Borrowed funds decreased $11.1 million or 3.7% to $286.0 million as of March 31,
2000. This is a result of management reducing the FHLB borrowings to targeted
levels. Management continues to utilize 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 results of operations.
Accrued interest payable increased $1.5 million or 57.6% to 4.1 million as of
March 31, 2000. This was a result of the timing of accrued interest payable
being credited to deposit accounts and borrowings.
Other liabilities decreased $213,000 or 10.2% to $1.9 million as of March 31,
2000. The change is primarily the result of the tax payments of accrued income
taxes.
Total shareholders' equity decreased $1.8 million or 2.2% to $82.8 million as of
March 31, 2000. This was primarily due to the purchase of $2.8 million of
treasury stock, payment of $1.0 million in cash dividends offset by $1.6 million
in net income, $98,000 in stock based compensation, and a $321,000 increase in
accumulated other comprehensive income (loss).
Comparison of the Consolidated Results of Operation for the Period of Three
- ---------------------------------------------------------------------------
Months Ended March 31, 2000 and 1999
- ------------------------------------
Net Income. Net income was $1.6 million for the three month period ended March
31, 2000, a decrease of $64,000 or 3.8% for the same period in 1999.
Interest Income. Interest income totaled $14.6 million for the three month
period ended March 31, 2000, an increase of $1.2 million or 9.3% compared to the
$13.4 million recorded for the three month period ended March 31, 1999. 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 three month period ended March 31, 2000 increased to $833.8 million, an
increase of $30.7 million or 3.8%, compared to the average balance of interest-
earning assets of $803.1 million for the same period in 1999. Weighted average
yield on interest-earning assets for the three month period ended March 31, 2000
was 7.21% compared to 6.85% for the comparable period in 1999. Interest on
loans receivable increased $469,000. The average balance of loans increased
$20.8 million while the average yield increased from 7.37% to 7.47%. Interest
on mortgage related securities increased $795,000 or 17.6% to $5.3 million at
March 31, 2000. Average balances on mortgage-related securities increased $7.8
million or 2.8% to $289.5 million while the yield increased from 6.42% to 7.34%.
This is due to higher yields on new purchases. Interest on investment
securities increased $83,000 or 3.5% for the period due to purchases. Interest
on bank deposits decreased $100,000 due to lower balances.
Interest Expense. Total interest expense for the three month period ended March
31, 2000 was $8.9 million, an increase of $1.0 million or 13.2% compared to $7.8
million for the same period in 1999. Average balances of interest-bearing
liabilities for the three month period ended March 31, 2000 increased $64.9
million compared to the period of three months ended March 31, 1999. Average
interest-bearing deposits increased $19.5 million or 4.3% to $470.3 million.
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.
Net Interest Income. Net interest income before provision for loan losses for
the three month period ended March 31, 2000 was $5.7 million, an increase of
$214,000 or 3.9% , compared to $5.5 million recorded for the same period in
1999.
Provision for Loan Losses. The provision for loan losses during the period of
three months ended March 31, 2000 was $180,000 compared to $60,000 for the three
month period ending March 31, 1999. The allowance for loan losses to gross
loans receivable and total non-performing assets was 0.51% and 155%,
respectively, as of March 31, 2000 as compared to 0.46% and 76%, respectively
as of March 31, 1999. 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.
10
<PAGE>
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 three month period ended March 31,
2000 non-interest income was $1.0 million, compared to $819,000 recorded for the
same period in 1999. The increase is primarily due to increases of $42,000 in
net gain on sales of investment securities, an increase in trading account
profits of $84,000, an increase of $236,000 on service fees on products,
partially offset by a reduction in data processing fees of $177,000. The
Company previously announced that it will no longer continue to provide data
processing services for other companies. The information services department
will concentrate on providing data processing services to the Company only.
Non-interest Expense. Total non-interest expense was $4.4 million for the three
month period ending March 31, 2000 and $4.0 million for the same period in 1999.
The increase of $395,000 was primarily due to a $180,000 termination expense
from the closing of a former in-store branch.
Income Tax Expense. Income tax expense of $510,000 for the three months ended
March 31, 2000 resulted in an effective tax rate of 24.0%. The income tax
expense recorded for the period of three months ended March 31, 1999 of $550,000
is an effective tax rate of 24.6%.
11
<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 three month
period ended March 31, 2000 and 1999. 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 March
31, 2000 and March 31, 1999 (Dollars in Thousands).
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000 Three Months Ended March 31, 1999
Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-earning deposits and
short-term investments $ 9,596 $ 100 4.17% $ 15,073 $ 200 5.31%
Investment securities, net (1) (2) 161,127 2,672 6.63% 156,221 2,628 6.73%
Loans receivable, net (1) (3) 358,089 6,688 7.47% 337,306 6,219 7.37%
Mortgage-related securities, net (1) 289,490 5,314 7.34% 281,683 4,519 6.42%
FHLB stock 15,458 259 6.70% 12,778 196 6.14%
-------------------------------------------------------------------------
Total interest-earning assets 833,760 $15,033 7.21% 803,061 $13,762 6.85%
Non-interest earning assets 42,235 39,227
----------- --------
Total assets $875,995 $842,288
=========== ========
Liabilities and equity:
Interest-bearing liabilities:
Money market savings accounts $48,193 $674 5.59% $14,160 $104 2.94%
Passbook accounts 144,974 864 2.38% 160,189 952 2.38%
NOW accounts 37,240 149 1.60% 33,546 150 1.79%
Certificate accounts 239,918 3,140 5.24% 242,975 3,229 5.32%
-------------------------------------------------------------------------
Total 470,325 4,827 4.11% 450,870 $ 4,435 3.93%
Borrowed Funds 290,882 4,026 5.54% 245,377 3,385 5.52%
Other 1,642 9 2.19% 1,694 9 2.13%
-------------------------------------------------------------------------
Total interest-bearing liabilities $762,849 $8,862 4.65% $697,941 $7,829 4.49%
Non-interest bearing liabilities 33,067 39,197
Shareholders' equity 80,079 105,150
---------- ---------
Total liabilities and shareholders' equity $875,995 $842,288
========== =========
Net interest rate spread (4) $6,171 2.56% $5,933 2.36%
Net interest margin (5) 2.96% 2.96%
Ratio of interest-earning assets to
interest-bearing liabilities 109.30% 115.06%
</TABLE>
(1) Includes related assets available for sale and unamortized discounts and
premiums.
(2) Includes municipal obligations and interest 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.
12
<PAGE>
Allowance for Loan Losses
- -------------------------
The following table sets forth the changes in the allowance for loan losses for
the three month period ended March 31, 2000 (dollars in thousands):
Balance, December 31, 1999 $1,731
Provision for loan losses 180
Net charge-offs (53)
---------
Balance, March 31, 2000 $1,858
=========
Non-Performing Assets
- ---------------------
The following table presents information regarding the Association's non-
performing assets as of the dates indicated:
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
------------- -------------
(Dollars in Thousands)
<S> <C> <C>
Non-performing loans:
Non-accrual loans $ 848 $1,324
Accruing loans which are contractually
past due 90 days or more - -
Restructured loans - -
- ------------------------------------------------------------------------------------------
Total non-performing loans $ 848 $1,324
Real estate owned 348 798
- ------------------------------------------------------------------------------------------
Total non-performing assets $1,196 $2,122
==========================================================================================
Non-performing assets as a % of gross loans receivable .33% .61%
Non-performing assets to total assets .14% .24%
Allowance for loan loss as a % of gross loans receivable .51% .46%
Allowance for loan loss to non-performing assets 155% 76%
</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 OTS regulations. The minimum required liquidity is
currently 4%. The Association's liquidity for the month of March 31, 2000 was
35.08% . The high level of liquidity was 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.
As of March 31, 2000, the Association had commitments to originate loans of
$12.5 million and purchase loans of $10.7 million. The Association anticipates
that it will have sufficient funds available to meet these commitments.
As of March 31, 2000, 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 8.28%. Tier I capital to risk-based assets requirement
is 4.00% and the Association had 22.21%. The total capital to risk-based assets
requirement is 8.00% and the Association had 22.91%.
13
<PAGE>
Year 2000 Compliance
In 1996, the Company's data processing division began to address the risks
associated with the coming millennium. The Company completed the preparations
related to this event in 1999. These preparations involved examining all
computer hardware and software as well as third-party systems and equipment to
identify and remediate date recognition problems. In addition, the Company
developed contingency plans to address potential risks in the event of Year 2000
failures. To date, the Company has experienced no known disruptions as a result
of the Year 2000 date change.
Although considered unlikely, unanticipated problems could still occur,
including problems associated with non-compliant third-parties and disruptions
to the economy in general, despite efforts to date to remediate affected systems
and develop contingency plans. Management will continue to monitor all business
processes throughout 2000 to address any issues and ensure all processes
continue to function properly.
Through 1999, the Year 2000 project totaled approximately $250,000 in costs
primarily related to internal and external personnel who worked on the project.
No additional material costs are estimated to be incurred in future periods
related to this event.
Private Securities 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 Litigation 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 1999 Form 10-K filing.
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 $.18 per share to stockholders of
record on May 12, 2000, payable on May 23, 2000.
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. 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, 1999 SEC Form 10-K filing.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- ------ -----------------
The Company is not involved in any pending legal
proceedings other that routine legal proceedings
occurring in the ordinary course of business. Such
routine legal proceedings, in the aggregate, are
believed by management to be immaterial to the
Company's financial condition, results of operations
or cash flows.
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 $.18
per share to stockholders of record on May 12, 2000,
payable on May 23, 2000.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
Exhibit 11- Computation of Earnings per Share. This is
incorporated by reference to footnote number 4 of the
financial statements on page number 6.
Exhibit 27 - Financial Data Schedule
15
<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 May 10, 2000 By /s/ John M. Kish
------------------------ -------------------------
John M. Kish
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Date May 10, 2000 By /s/ Raymond G. Suchta
------------------------ --------------------------
Raymond G. Suchta
Chief Financial Officer and Treasurer
(Principal Accounting and Financial Officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 2000
FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,244
<INT-BEARING-DEPOSITS> 15,809
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 732
<INVESTMENTS-HELD-FOR-SALE> 444,277
<INVESTMENTS-CARRYING> 3,857
<INVESTMENTS-MARKET> 3,853
<LOANS> 363,640
<ALLOWANCE> 1,858
<TOTAL-ASSETS> 880,318
<DEPOSITS> 504,038
<SHORT-TERM> 104,018
<LIABILITIES-OTHER> 7,512
<LONG-TERM> 182,000
0
0
<COMMON> 89
<OTHER-SE> 82,661
<TOTAL-LIABILITIES-AND-EQUITY> 880,318
<INTEREST-LOAN> 6,688
<INTEREST-INVEST> 7,902
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 14,590
<INTEREST-DEPOSIT> 4,827
<INTEREST-EXPENSE> 8,862
<INTEREST-INCOME-NET> 5,728
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 106
<EXPENSE-OTHER> 4,436
<INCOME-PRETAX> 2,128
<INCOME-PRE-EXTRAORDINARY> 2,128
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,618
<EPS-BASIC> .29
<EPS-DILUTED> .29
<YIELD-ACTUAL> 7.21
<LOANS-NON> 848
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,731
<CHARGE-OFFS> 60
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 1,858
<ALLOWANCE-DOMESTIC> 1,858
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
