<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, 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: 5,717,749 shares of common
stock, par value $.01 per share, were outstanding as of October 25, 2000.
<PAGE>
GA FINANCIAL, INC.
FORM 10-Q
September 30, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
September 30, 2000 and December 31, 1999....................................... 1
Consolidated Statements of Income and Comprehensive Income -
For the Three and Nine Months Ended September 30, 2000 and 1999................ 2
Consolidated Statements of Cash Flows - For the Nine
Months Ended September 30, 2000 and 1999....................................... 3
Notes to Consolidated Financial Statements (unaudited) ........................ 4- 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................................... 8-16
Item 3. Quantitative and Qualitative Disclosures about Market Risk............................... 16
PART II. OTHER INFORMATION ....................................................................... 17
SIGNATURES ................................................................................ 18
</TABLE>
<PAGE>
Part I. Financial Information
---------------------------
Item 1. Financial Statements
GA Financial, Inc.
Consolidated Statements of Financial Condition
As of September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
September 30, 2000 December 31,
(Unaudited) 1999
------------------------------------------------------------------------------------------------------------------------------
ASSETS (Dollars in Thousands)
<S> <C> <C>
Cash (including interest-bearing demand deposits of $18,994
in 2000 and $12,457 in 1999) $ 27,136 $ 26,632
Held for trading securities, at fair value 989 -
Available for sale securities, at fair value:
Investment securities 143,914 150,960
Mortgage-related securities 273,065 306,724
Held to maturity investment securities, at cost (2,916 fair value) 2,870 -
Loans receivable, net of allowance for loan losses of 2,193 and 1,731. 360,248 334,351
Education loans held for sale 17,707 19,158
Accrued interest receivable 6,714 6,094
Federal Home Loan Bank stock 15,458 15,458
Office, property and equipment, net 6,941 5,670
Foreclosed assets 196 345
Prepaid expenses and other assets 15,589 17,588
------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $870,827 $882,980
==============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits $ 31,777 $ 29,418
Savings accounts 476,974 465,706
Borrowed funds 267,597 297,160
Advances from borrowers for taxes and insurance 807 1,444
Accrued interest payable 5,579 2,569
Securities purchased, not settled - 29
Other liabilities 2,047 2,083
------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $784,781 $798,409
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 86,722 86,722
Treasury stock, at cost (3,155,401 shares as of September 30, 2000 and 2,676,561 shares
At December 31, 1999) (51,162) (45,036)
Unearned employee stock ownership plan (ESOP) shares (4,488) (4,488)
Unearned recognition and retention plan (RRP) shares (931) (1,317)
Accumulated other comprehensive loss, net of taxes ( 9,492) (14,332)
Retained earnings 65,308 62,933
------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $ 86,046 $ 84,571
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $870,827 $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 and Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 7,231 $ 6,399 $20,901 $ 18,869
Mortgage-related securities 4,920 5,427 15,369 15,150
Investment securities-taxable 1,756 1,762 5,301 5,168
Investment securities-non taxable 734 820 2,234 2,345
Bank deposits 306 102 512 433
----------------------------------------------------------------------------------------------------------------------------------
Total interest income 14,947 14,510 44,317 41,965
----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Savings accounts 5,190 4,457 14,911 13,307
Borrowed funds 4,074 4,018 12,029 11,231
Other 9 9 26 26
----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 9,273 8,484 26,966 24,564
----------------------------------------------------------------------------------------------------------------------------------
Net interest income before provision for losses on loans 5,674 6,026 17,351 17,401
Provision for losses on loans 180 90 540 240
----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for losses on loans 5,494 5,936 16,811 17,161
----------------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Service fees 687 748 2,036 1,649
Net gain (loss) on sales of securities (33) 82 94 213
Trading gains 161 - 224 -
Net gain on sales of education loans 89 181 113 198
Data processing service fees 6 174 32 548
Other 153 124 386 344
----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 1,063 1,309 2,885 2,952
----------------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Compensation and employee benefits 2,264 2,891 6,906 7,318
Occupancy and equipment 639 609 1,872 1,867
Deposit insurance premiums 25 69 76 210
Other 1,187 1,035 3,780 3,275
----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 4,115 4,604 12,634 12,670
----------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 2,442 2,641 7,062 7,443
Provision for income taxes 615 665 1,735 1,835
----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,827 $ 1,976 $ 5,327 $ 5,608
==================================================================================================================================
Other comprehensive income (loss), net of taxes:
Unrealized holding gains (losses) on available for sale securities, net of taxes 4,222 (3,935) 4,911 (12,576)
Reclassification adjustment for losses (gains) included in net income 25 (62) (71) (160)
----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) 4,247 (3,997) 4,840 (12,736)
----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ 6,074 $(2,021) $10,167 $ (7,128)
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<S> <C> <C> <C> <C>
Basic earnings per share $ .35 $ .36 $ .99 $ .96
========== ========== ========== ==========
Diluted earnings per share $ .35 $ .35 $ .99 $ .94
========== ========== ========== ==========
Dividends per share $ .18 $ .16 $ .54 $ .48
========== ========== ========== ==========
Average shares outstanding - basic 5,247,392 5,512,902 5,376,402 5,854,110
Average shares outstanding - diluted 5,291,077 5,610,321 5,397,895 5,964,248
</TABLE>
2
<PAGE>
GA Financial, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
For the Nine Months
Ended
September 30,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,327 $ 5,608
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for losses on loans and REO expenses 540 240
Depreciation on office, property and equipment 448 526
Amortization of net deferred loan fees 101 (230)
Allocation of RRP shares 386 965
Net realized gain on sales of securities (94) (213)
Increase in accrued interest receivable (620) (350)
Decrease (increase) in prepaid expenses and other assets (1,056) (29)
Increase in accrued interest payable 3,010 4,446
Net (premium amortization) discount accretion on securities available for sale (48) 131
Net premium amortization on HTM securities (8) -
Proceeds from sale of held for trading 1,760 -
Purchase of held for trading (2,525) -
Net gain in trading securities (224) -
Net (decrease) in other liabilities (36) -
Net realized loss on sale of REO 45 155
Net realized gain on sale of student loans (113) (198)
Amortization of intangibles 139 139
--------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 7,032 $ 11,190
--------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of available for sale securities 19,618 46,723
Proceeds from call of HTM securities 1,003 -
Repayments and maturities of available for sale securities 27,956 72,899
Purchases of available for sale securities (2,851) (182,839)
Proceeds from sale of student loans 8,543 8,563
Proceeds from sale of REO 104 -
Net decrease (increase) in short term investments 3,879 -
Purchase of HTM securities (3,865) -
Net decrease (increase) in loans (4,892) 13,184
Purchase of loans (28,653) (35,106)
Purchase of office, property and equipment, net (1,719) (452)
Purchases of Federal Home Loan Bank stock - (4,045)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 19,123 (81,073)
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in demand and savings deposits 20,478 848
Net (decrease) increase in certificates of deposits (6,851) (789)
Net (decrease) increase in advances from borrowers for taxes and insurance (637) (642)
Purchase of treasury stock (6,146) (13,364)
Payments from borrowed funds (453,633) (357,285)
Proceeds on borrowed funds 424,070 441,900
Cash dividends paid (2,985) (2,847)
Other stock transactions 53 (361)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities (25,651) 67,460
--------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents 504 (2,423)
Cash and cash equivalents at beginning of period 26,632 23,487
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 27,136 $ 21,064
====================================================================================================================
</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. For comparative
purposes, reclassifications have been made to certain amounts previously
reported to conform with the current period presentation in the consolidated
financial statements. It is suggested that the accompanying consolidated
financial statements be read in conjunction with the Company's 1999 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 classifications 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 that follows) 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 June 30, 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>
September 30, 2000:
Equity capital (1) $ 67,937 $ 67,937 $ 67,937
General valuation allowance (2) - - 2,193
Plus unrealized losses on certain available
for sale securities 8,468 8,468 8,992
Less core deposit intangible (586) (586) (586)
------------------------------------------------
Total regulatory capital $ 75,819 $ 75,819 $ 78,536
Minimum regulatory capital 34,593 13,667 27,333
------------------------------------------------
Excess regulatory capital $ 41,226 $ 62,152 $ 51,203
================================================
Regulatory capital as a percentage 8.77% 22.19% 22.99%
Minimum regulatory capital as a percentage 4.00% 4.00% 8.00%
------------------------------------------------
Excess regulatory capital as a percentage 4.77% 18.19% 14.99%
================================================
Well capitalized requirement under
prompt corrective action provisions 5.00% 6.00% 10.00%
================================================
Adjusted assets as reported to the OTS $864,824 $341,664 $341,664
</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 cannot be
currently estimated 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 was effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occurred after either December 15,
1998, or January 12, 2000. To the extent that this Interpretation covers 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 determined the impact of the adoption of the Interpretation was
immaterial.
4. Earnings per Share
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------------------------------------------------------------------
(Dollars in Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Basic:
Net income $ 1,827 $ 1,976 $ 5,327 $ 5,608
Average common shares - outstanding basic 5,247,392 5,512,902 5,376,402 5,854,110
Basic earnings per share $ .35 $ .36 $ .99 $ .96
Diluted:
Net income $ 1,827 $ 1,976 $ 5,327 $ 5,608
Average common shares - outstanding basic 5,247,392 5,512,902 5,376,402 5,854,110
Effect of dilutive securities:
Shares issuable upon exercise of
outstanding stock options and stock awards 43,685 97,419 21,493 110,138
Average common shares outstanding - diluted 5,291,077 5,610,321 5,397,895 5,964,248
Diluted earnings per share $ .35 $ .35 $ .99 $ .94
======================================================================
</TABLE>
6
<PAGE>
5. Changes in Shareholders' Equity:
The consolidated statement of shareholders' equity for the nine month
period ended September 30, 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 of tax 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 - - - - - - 5,327 5,327
Other comprehensive - - - - - 4,840 - 4,840
income (loss), net
of tax
Treasury stock
purchased - - (6,146) - - - - (6,146)
Cash dividends - - - - - - (2,985) (2,985)
(.54 per share)
Shares allocated to - - - - - - - -
ESOP
Shares allocated to - - 20 - 386 - 33 439
stock based
compensation
---------------------------------------------------------------------------------------------------
Balance at 9/30/00 $ 89 $86,722 $(51,162) $(4,488) $ (931) $ (9,492) $65,308 $86,046
===================================================================================================
</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 borrowings. The Company and the Association are referred
herein collectively as the "Company". The Company also generates non-interest
income such as service fees, trading account profits, and other income. The
Company previously announced that it will no longer 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 September 30, 2000 and December 31, 1999
--------------------------------------------------------------------------------
Assets:
The Company's total assets decreased $12.2 million or 1.4% to $870.8 million as
of September 30, 2000.
The Company has $2.9 million of investments held to maturity and $989,000 of
investments held for trading. The Company had no investments in either
classification as of December 31, 1999. The held for trading securities as of
September 30, 2000 are all equity securities.
Investment securities classified as available for sale decreased $7.0 million or
4.7% to $143.9 million as of September 30, 2000 due to maturities and sales.
These proceeds were used to fund originations and purchases of loans and repay
FHLB short term borrowings.
Mortgage-related securities classified as available for sale decreased $33.7
million or 11.0% to $273.1 million as of September 30, 2000 due to principal
repayments and sales. These proceeds were used to fund originations and
purchases of loans and repay FHLB short term advances.
The following table presents details of the Company's investment securities and
mortgage-related securities as of September 30, 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 $212,791 $ 220 $ (5,907) $207,104
Collateralized mortgage obligations 69,461 62 (3,562) 65,961
Marketable equity securities 39,294 2,276 (2,247) 39,323
US government agency debt 38,562 - (2,493) 36,069
Corporate obligations 10,090 - (390) 9,700
Municipal obligations 61,774 24 (2,976) 58,822
----------------------------------------------------------------------------------------------------------------------------
Total $431,972 $2,582 $(17,575) $416,979
============================================================================================================================
</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 $25.9 million or 7.7% to $360.2 million as of
September 30, 2000, due primarily to the Company's origination and purchase of
mortgage loans, including commercial real estate.
The following table presents details of the Company's loan portfolio (Dollars in
Thousands):
<TABLE>
<CAPTION>
As of September 30, As of December 31,
2000 1999
----------------------------------------------
<S> <C> <C>
Mortgages:
One to four family residential $266,695 $255,633
Multi-family 5,635 4,405
Commercial 20,575 17,592
Construction and development 20,746 3,658
Consumer loans:
Home equity 50,532 51,194
Loans on savings accounts 1,566 1,725
Unsecured personal loans and other 2,631 2,147
Commercial Loans:
Secured 5,904 2,758
Unsecured 346 37
Total $374,630 $339,149
Less:
Undisbursed mortgage loans (11,926) (2,905)
Deferred loan fees (263) (162)
Allowance for losses (2,193) (1,731)
-------------------------------------------------------------------------------------------
Net loans $360,248 $334,351
===========================================================================================
</TABLE>
As of September 30, 2000, education loans held for sale decreased $1.5 million
or 7.6% to $17.7 million due to amount of sales of education loans exceeding
originations. The Company's policy is to sell education loans when the loan
begins repayment status.
Accrued interest receivable increased $620,000 or 10.2% to $6.7 million as of
September 30, 2000 due to the timing of interest payments of investment
securities and increased loans.
Office, property, and equipment increased $1.3 million or 22.4% due to the
construction of our newest branch location at the Waterfront development in
Homestead. This location opened in September 2000.
Foreclosed assets decreased $149,000 or 43.2% to $196,000 as of September 30,
2000 due to sales of foreclosed assets. The Company is in the process of
selling all foreclosed assets.
Prepaid expenses and other assets decreased $2.0 million or 11.4% to $15.6
million as of September 30, 2000 primarily due to a decrease in the deferred tax
assets in the unrealized loss on available for sale securities.
9
<PAGE>
Liabilities:
------------
Total deposits increased $13.6 million or 2.8% to $508.8 million as of September
30, 2000 due primarily to interest crediting.
Borrowed funds decreased $29.6 million or 9.9% to $267.6 million as of September
30, 2000. This is a result of management reducing the borrowings to targeted
levels. Borrowings repaid were of a short term nature which carried a higher
interest cost than the longer term borrowings. Management continues to utilize
borrowings to fund asset growth, particularly investments in mortgage-related
and investment securities. 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 one of the most significant market risks
that could materially impact the Company's financial position or results of
operations. Borrowed funds as of September 30, 2000 consisted of short term
FHLB borrowings of $95.5 million, long term FHLB borrowings of $131.0 million
and reverse repurchases collateralized by mortgage related securities of $41.1
million.
Accrued interest payable increased $3.0 million or greater than 100% to $5.6
million as of September 30, 2000. This was a result of the timing of accrued
interest payable being credited to deposit accounts and borrowings. As of
September 30, 2000, the Company has $226.5 million of FHLB advances that charge
interest expense monthly and $41.1 of reverse repurchase borrowings
collateralized by mortgage-related securities which have various interest
payment dates. All of the borrowed funds as of December 31, 1999 were FHLB
advances.
Shareholders' Equity:
---------------------
Total shareholders' equity increased $1.5 million or 1.7% to $86.0 million as of
September 30, 2000. This was primarily due to the purchase of $6.1 million of
treasury stock, payment of $3.0 million in cash dividends offset by $5.3 million
in net income, $439,000 in stock based compensation, and a $4.8 million increase
in accumulated other comprehensive income (loss) for the nine months ended
September 30, 2000.
Comparison of the Consolidated Results of Operation for the Three Month Period
------------------------------------------------------------------------------
Ended September 30, 2000 and 1999
---------------------------------
Net Income. Net income was $1.8 million for the three month period ended
September 30, 2000, a decrease of $149,000 or 7.5% from the same period in 1999.
Interest Income. Interest income totaled $14.9 million for the three month
period ended September 30, 2000, an increase of $437,000 or 3.0% compared to the
$14.5 million recorded for the three month period ended September 30, 1999. The
increase was primarily attributable to an increase in the yield of interest
earning assets. The average yield increased from 7.11% to 7.38% for the three
months ended September 30, 2000. Interest on loans receivable increased $832,000
or 13.0%. The average balance of loans increased $28.0 million, or 8.2% while
the average yield increased from 7.52% to 7.85%. Interest on mortgage-related
securities decreased $507,000 or 9.3% to $4.9 million as of September 30, 2000.
The Company has increased its loan portfolio by using the proceeds from the
sales, maturity, and principal and interest payments of the investment and
mortgage related securities. Average balances on mortgage-related securities
decreased $30.9 million or 9.9% to $280.8 million while the yield remained
approximately the same. Interest on investment securities decreased $92,000 or
3.6% for the period. Interest on bank deposits increased $204,000 due to higher
average balances.
Interest Expense. Total interest expense for the three month period ended
September 30, 2000 was $9.3 million, an increase of $789,000 or 9.3% compared to
$8.5 million for the same period in 1999. Average balances of interest-bearing
liabilities for the three month period ended September 30, 2000 increased
$708,000, compared to the three month period ended September 30, 1999. Average
interest-bearing deposits increased $21.8 million or 4.8% to $475.5 million.
Average balances of money market accounts increased $54.0 million or greater
than 100% for the three month period ended September 30, 2000 compared to the
three month period ended September 30, 1999. This increase in savings accounts
was offset by a decrease of $27.1 million or 16.9% in average passbook accounts
and a decrease of $6.6 million or 2.7% in certificate accounts. The average
cost of money market accounts has increased from 3.07% to 5.43% for the three
month
10
<PAGE>
period ended September 30, 2000. The Company restructured its money market
accounts and now offers a tiered account structured with rates that increase as
the balance of the account increases. The minimum rate is 0% and the maximum
rate is 5.78% as of September 30, 2000. This was done to attract new deposits,
keep current deposits, and remain competitive. Interest rates have increased
over the past year as the Federal Reserve Bank has raised the overnight funds
rate. Average balances of borrowings fell $21.1 million or 7.2% from the three
month period ending September 30, 1999. Management currently believes it is
efficient to fund asset growth through borrowings. Management believes that
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 September 30, 2000 was $5.7 million, a decrease of
$352,000 or 5.8% compared to $6.0 million recorded for the same period in 1999.
Provision for Loan Losses. The provision for loan losses during the three month
period ended September 30, 2000 was $180,000 compared to $90,000 for the three
month period ending September 30, 1999. The allowance for loan losses to gross
loans receivable and total non-performing assets was .56% and 176%,
respectively, as of September 30, 2000 as compared to 0.48% and 89%,
respectively as of September 30, 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 based on information
currently known to management. While management believes the Company's allowance
for loan losses is sufficient to cover losses in its loan portfolio at this
time, no assurances can be given that the Company's level of allowance for loan
losses will be sufficient to cover future loan losses incurred by the Company,
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, trading profits and other miscellaneous items. For the three month period
ended September 30, 2000, non-interest income was $1.1 million, compared to $1.3
million recorded for the same period in 1999. The decrease of $246,000 was
primarily due to a decrease of $168,000 in data processing fees, $92,000
decrease in gains on education loan sales, $115,000 decrease in net gains on
sales of securities, $61,000 decrease in service fees which was partially offset
in an increase in trading gains of $161,000. The Company previously announced
that it will no longer 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 decreased $489,000, or 10.6%,
to $4.1 million for the three month period ended September 30, 2000. This was
primarily attributed to a previously announced one time expense of $650,000 in
connection with the retirement of its President, John G. Micenko, effective
September 2, 1999.
Income Tax Expense. Income tax expense of $615,000 for the three month period
ended September 30, 2000 resulted in an effective tax rate of 25.2%. The income
tax expense recorded for the three month period ended September 30, 1999 of
$665,000 is an effective tax rate of 25.2%. The Company utilizes municipal bonds
and real estate tax credits for its tax strategy.
Comparison of the Consolidated Results of Operation for the Nine Month Period
-----------------------------------------------------------------------------
Ended September 30, 2000 and 1999
---------------------------------
Net Income. Net income was $5.3 million for the nine month period ended
September 30, 2000, a decrease of $281,000 or 5.0% from the same period in 1999.
Interest Income. Interest income totaled $44.3 million for the nine month period
ended September 30, 2000, an increase of $2.4 million or 5.6% compared to the
$42.0 million recorded for the nine month period ended September 30, 1999. The
increase was primarily attributable to an increase in the weighted average yield
of interest earning assets. The average balances of interest-earning assets for
the nine month period ended September 30, 2000 was approximately the same as the
same period in 1999. Average yield on interest-earning assets increased 37 basis
points to 7.31% for the nine month period ended September 30, 2000 compared to
6.94% for the comparable period in 1999. Interest on loans receivable increased
$2.0 million, or 10.5%. The average balance of loans increased $24.5 million
while the average yield increased from 7.42% to 7.67%. Interest on mortgage
related securities remained approximately the same for both periods. Average
balances on mortgage-related securities decreased $13.5 million or 4.4% while
the yield increased 41 basis points from 6.65% to 7.06%. Interest on investment
securities remained approximately the same for both periods. Interest on bank
deposits increased $79,000 due to higher rates.
11
<PAGE>
Interest Expense. Total interest expense for the nine month period ended
September 30, 2000 was $27.0 million, an increase of $2.4 million or 9.8%
compared to $24.6 million for the same period in 1999. Average balances of
interest-bearing liabilities for the nine month period ended September 30, 2000
increased $25.0 million, or 3.4%, compared to the nine month period ended
September 30, 1999. Average interest-bearing deposits increased $19.3 million or
4.3% to $472.1 million, while the average cost increased 29 basis points to
4.21%. Average balances of money market accounts has increased $45.8 million
while the average cost has increased from 2.99% to 5.49% for the nine months
ended September 30, 2000. The Company restructured its money market accounts and
now offers a tiered account structured with rates that increase as the balance
increases. The minimum rate is 0% and the maximum rate is 5.78% as of September
30, 2000. This was done to attract new deposits, keep current deposits, and
remain competitive. Interest rates have increased over the past year as the
Federal Reserve Bank has raised the overnight funds rate. Average balances of
passbook accounts and certificate accounts decreased $21.4 million and $7.0
million for the nine month period ending September 30, 2000 compared to 1999.
The average balance of borrowed funds increased $5.6 million or 2.1% compared to
the nine month period ended September 30, 1999 while the average cost increased
27 basis points. 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 nine month period ended September 30, 2000 decreased $50,000 to $17.4
million.
Provision for Loan Losses. The provision for loan losses during the nine month
period ended September 30, 2000 was $540,000 compared to $240,000 for the nine
month period ended September 30, 1999. The allowance for loan losses to gross
loans receivable and total non-performing assets was 0.56% and 176%,
respectively, as of September 30, 2000 as compared to 0.48% and 89%,
respectively as of September 30, 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 based on information
currently known to management. While management believes the Association's
allowance for loan losses is sufficient to cover losses 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, trading profits and other miscellaneous items. For the nine month period
ended September 30, 2000, non-interest income was $2.9 million compared to $3.0
million for the same period in 1999. The decrease of $67,000 or 2.3%, is
primarily due to a reduction in data processing fees of $516,000, a decrease of
$85,000 in education loan sales and a decrease of $119,000 in securities gains
partially offset by an increase of $224,000 in trading gains and an increase of
$387,000 on service fees on products. The Company restructured its fees on
savings accounts last year. The Company previously announced that it will no
longer 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 $12.6 million for the nine
month period ended September 30, 2000 and $12.7 million for the same period
ended in 1999. The decrease of $412,000 in compensation and employee benefits
was partially offset by an increase of $505,000 in other non-interest expense.
The increase in other non-interest expense is partially due to professional
fees. The Company previously announced a one time expense of $650,000 in
connection with the retirement of its President, John G. Micenko, effective
September 2, 1999.
Income Tax Expense. Income tax expense of $1.7 million for the nine months
ended September 30, 2000 resulted in an effective tax rate of 24.6%. The income
tax expense recorded for the nine month period ended September 30, 1999 of $1.8
million is an effective tax rate of 24.7%. The Company utilizes municipal bonds
and real estate tax credits for its tax strategy.
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 three month
period ended September 30, 2000 and 1999. The yields 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 for the three
months ended September 30, 2000 and September 30, 1999 (Dollars in Thousands).
<TABLE>
<CAPTION>
Three Months Ended September 30, Three Months Ended September 30,
2000 1999
Average Average 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 $ 21,392 $ 306 5.72% $ 11,407 $ 102 3.58%
Investment securities, net (1) (2) 147,487 2,639 7.16% 165,522 2,813 6.80%
Loans receivable, net (1) (3) 368,297 7,231 7.85% 340,301 6,399 7.52%
Mortgage-related securities, net (1) 280,843 4,920 7.01% 311,761 5,427 6.96%
FHLB stock 15,458 282 7.30% 14,991 251 6.70%
-----------------------------------------------------------------------------
Total interest-earning assets 833,477 15,378 7.38% 843,982 14,992 7.11%
Non-interest earning assets 38,096 30,570
---------- -----------
Total assets $ 871,573 $ 874,552
========== ===========
Liabilities and equity:
Interest-bearing liabilities:
Money market savings accounts $ 69,793 $ 947 5.43% $ 15,765 $ 121 3.07%
Passbook accounts 133,601 805 2.41% 160,742 972 2.42%
NOW accounts 36,895 150 1.63% 35,383 158 1.79%
Certificate accounts 235,177 3,288 5.59% 241,731 3,206 5.31%
------------------------------------------------------------------------------
Total 475,466 5,190 4.37% 453,621 4,457 3.93%
Borrowed Funds 274,052 4,074 5.95% 295,181 4,018 5.44%
Other 1,331 9 2.70% 1,339 9 2.69%
------------------------------------------------------------------------------
Total interest-bearing liabilities 750,849 9,273 4.94% 750,141 8,484 4.52%
Non-interest bearing liabilities 34,048 36,891
Shareholders' equity 86,676 87,520
----------- -----------
Total liabilities and shareholders' equity $ 871,573 $ 874,552
=========== ===========
Net interest rate spread (4) $6,105 2.44% $ 6,508 2.59%
Net interest margin (5) 2.93% 3.08%
Ratio of interest-earning assets to
interest-bearing liabilities 111.00% 112.51%
</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 on a fully taxable equivalent basis.
(5) Net interest margin represents net interest income on a fully taxable
equivalent basis divided by average 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 for the nine
months ended September 30, 2000 and September 30, 1999 (Dollars in Thousands).
<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000 Nine Months Ended September 30, 1999
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-earning deposits $ 13,501 $ 512 5.06% $ 13,674 $ 433 4.22%
Investment securities, net (1) (2) 149,749 8,037 7.16% 162,789 8,215 6.73%
Loans receivable, net (1) (3) 363,368 20,901 7.67% 338,846 18,869 7.42%
Mortgage-related securities, net (1) 290,315 15,369 7.06% 303,768 15,150 6.65%
FHLB stock & other equity investments 15,458 810 6.99% 14,002 675 6.43%
------------------------------------------------------------------------------------
Total interest-earning assets 832,391 45,629 7.31% 833,079 43,342 6.94%
Non-interest earning assets 39,812 30,735
------------ -------------
Total assets $872,203 863,814
============ =============
Liabilities and equity:
Interest-bearing liabilities:
Money market savings accounts 60,909 $ 2,508 5.49% $ 15,095 $ 339 2.99%
Passbook accounts 139,736 2,507 2.39% 161,133 2,896 2.40%
NOW accounts 36,856 449 1.62% 34,940 463 1.77%
Certificate accounts 234,647 9,447 5.37% 241,656 9,609 5.30%
------------------------------------------------------------------------------------
Total 472,148 $14,911 4.21% 452,824 13,307 3.92%
Borrowed Funds 280,478 12,029 5.72% 274,836 11,231 5.45%
Other 1,595 26 2.17% 1,611 26 2.15%
------------------------------------------------------------------------------------
Total interest-bearing liabilities 754,221 $26,966 4.77% 729,271 24,564 4.49%
Non-interest bearing liabilities 34,358 36,490
Shareholders' equity 83,624 98,053
------------ -------------
Total liabilities and shareholders' equity $872,203 $863,814
============ =============
Net interest rate spread (4) $18,663 2.54% $18,778 2.45%
Net interest margin (5) 2.99% 3.01%
Ratio of interest-earning assets to
interest-bearing liabilities 110.36% 114.23%
</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 on a fully taxable equivalent basis.
(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 month period ended September 30, 2000 (Dollars in Thousands):
Balance, December 31, 1999 $1,731
Provision for loan losses 540
Net charge-offs (78)
----------
Balance, September 30, 2000 $2,193
======
Non-Performing Assets
---------------------
The following table presents information regarding the Company's non-performing
assets as of the dates indicated:
<TABLE>
<CAPTION>
September September
30, 2000 30, 1999
--------------------------
(Dollars in Thousands)
<S> <C> <C>
Non-performing loans:
Non-accrual loans $1,051 $1,507
Accruing loans which are contractually
past due 90 days or more - -
Restructured loans - -
----------------------------------------------------------------------------------------------------
Total non-performing loans $1,051 $1,507
Real estate owned 196 315
----------------------------------------------------------------------------------------------------
Total non-performing assets $1,247 $1,822
====================================================================================================
Non-performing assets as a percent of gross loans receivable .33% .51%
Non-performing assets to total assets .14% .21%
Allowance for loan loss as a percent of gross loans receivable .56% .48%
Allowance for loan loss to non-performing assets 176% 89%
</TABLE>
Liquidity and Capital Resources
-------------------------------
The Company'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 Company 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 Company's liquidity for the month of September 30, 2000 was 23.3%.
As of September 30, 2000, the Company had commitments to originate loans of $1.1
million and purchase loans of $2.4 million. The Company anticipates that it will
have sufficient funds available to meet these commitments.
As of September 30, 2000, the Company's equity capital exceeded each of the OTS
capital requirements. OTS requires Tier I capital to adjusted assets of 4.00%
and the Company had 8.77%. Tier I capital to risk-based assets requirement is
4.00% and the Company had 22.19%. The total capital to risk-based assets
requirement is 8.00% and the Company had 22.99%.
15
<PAGE>
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
------------------
At a Board meeting held September 26, 2000 the Board approved changing the name
of the savings and loan subsidiary to Great American Federal from Great American
Federal Savings and Loan Association. This change is subject to OTS approval.
On April 25, 2000, the Board authorized the repurchase of up to 294,973 of the
Company's shares. Through October 30, 2000, 199,528 shares were repurchased at
an average cost of $13.17 per share. It is anticipated that the remaining 95,445
shares authorized to be repurchased under the current plan will be repurchased
during the final two months of 2000. From November 1996 to October 2000, the
Company has repurchased 3,192,271 shares. Management and the Board believe share
repurchases to be one method of enhancing shareholder value.
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 Annual Report on Form 10-K.
16
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
------ -----------------
The Company is not involved in any pending legal
proceedings other than 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
and 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
------ -----------------
1. The Board of Directors declared on October 25, 2000
a dividend of $.18 per share to stockholders of
record on November 9, 2000, payable on November 21,
2000.
2. On September 26, 2000, the Association's Board of
Directors resolved to change the name of the
Association from Great American Federal Savings and
Loan Association to Great American Federal. (See
page 16.)
Item 6. Exhibits and Reports on Form 8-K
------ --------------------------------
3.1 Certificate of Incorporation of GA Financial, Inc. *
3.2 Amended Bylaws of GA Financial, Inc. **
4.0 Stock Certificates of GA Financial, Inc. *
10.1 Employment Agreement between Great American Federal
Savings and Loan Association and Todd L. Cover.
11.0 Computation of Earnings per Share. This is
incorporated by reference to footnote number 4 of
the financial statements on page number 6.
27.0 Financial Data Schedule No 8-K filed during quarter
ended September 30, 2000.
* Incorporated by reference into this document from the Exhibits to Form S-
1, Registration Statement, filed on December 21, 1995, as amended,
Registration No. 33-80715.
** Incorporated by reference into this document from the Company's Form 10-Q
filed on November 15, 1999.
17
<PAGE>
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 10, 2000 By /s/ John M. Kish
------------------------- -----------------------
John M. Kish
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)
Date November 10, 2000 By /s/ Raymond G. Suchta
------------------------- ----------------------------
Raymond G. Suchta
Chief Financial Officer and Treasurer
(Principal Accounting and Financial
Officer)
18
