<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 June 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>
<CAPTION>
<S> <C>
DELAWARE 25-1780835
----------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. 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: 5,803,149 shares of common
stock, par value $.01 per share, were outstanding as of July 17, 2000.
<PAGE>
GA FINANCIAL, INC.
FORM 10-Q
June 30, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition -
June 30, 2000 and December 31, 1999...................................... 1
Consolidated Statements of Income and Comprehensive Income -
For the Three and Six Months Ended June 30, 2000 and 1999................ 2
Consolidated Statements of Cash Flows - For the Six
Months Ended June 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 June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
June 30, 2000 December 31,
(Unaudited) 1999
-------------------------------------------------------------------------------------------------------------------------
ASSETS (Dollars in Thousands)
<S> <C> <C>
Cash (including interest-bearing demand deposits of $11,766
in 2000 and $12,457 in 1999) $ 19,573 $ 26,632
Held for trading investment securities, at fair value 1,093 -
Available for sale securities, at fair value:
Investment securities 142,271 150,960
Mortgage-related securities 287,862 306,724
Held to maturity investment securities, at cost 3,865 -
Loans receivable, net of allowance for loan losses of 2,029 and 1,731. 345,584 334,351
Education loans held for sale 20,669 19,158
Accrued interest receivable 6,546 6,094
Federal Home Loan Bank stock 15,458 15,458
Office, property and equipment, net 6,325 5,670
Foreclosed assets 218 345
Securities sold, not settled 1,656 -
Prepaid expenses and other assets 17,952 17,588
-------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $869,072 $882,980
=========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits $ 31,118 $ 29,418
Savings accounts 471,497 465,706
Borrowed funds 275,977 297,160
Advances from borrowers for taxes and insurance 2,281 1,444
Accrued interest payable 4,757 2,569
Securities purchased, not settled - 29
Other liabilities 1,518 2,083
-------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $787,148 $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 (3,096,901 shares at June 30, 2000 and 2,676,561 shares
at December 31, 1999) (50,271) (45,036)
Unearned employee stock ownership plan (ESOP) shares (4,488) (4,488)
Unearned recognition and retention plan (RRP) shares (836) (1,317)
Accumulated other comprehensive loss (13,739) (14,332)
Retained earnings 64,447 62,933
-------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $ 81,924 $ 84,571
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $869,072 $882,980
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
GA Financial, Inc.
Consolidated Statements of Income and Comprehensive Income
For the Three and Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 6,982 $ 6,251 $13,670 $12,470
Mortgage-related securities 5,135 5,204 10,449 9,723
Investment securities 2,557 2,526 5,045 4,931
Bank deposits 106 131 206 331
-----------------------------------------------------------------------------------------------------------------------------------
Total interest income $14,780 $14,112 $29,370 $27,455
-----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Savings accounts 4,894 4,415 9,721 8,850
Borrowed funds 3,929 3,828 7,955 7,213
Other 8 8 17 17
-----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 8,831 8,251 17,693 16,080
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income before provision for losses on loans $ 5,949 $ 5,861 $11,677 $11,375
Provision for losses on loans 180 90 360 150
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for losses on loans $ 5,769 $ 5,771 $11,317 $11,225
-----------------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Service fees 686 474 1,349 901
Net gain on sales of securities 21 47 127 131
Gain on sales of education loans 4 17 24 17
Trading (losses) gains (21) - 63 -
Data processing service fees 10 181 26 374
Other 106 105 233 220
-----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 806 824 1,822 1,643
-----------------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Compensation and employee benefits 2,178 2,204 4,642 4,427
Occupancy and equipment 631 601 1,233 1,258
Deposit insurance premiums 25 70 51 141
Other 1,249 1,150 2,593 2,240
-----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 4,083 4,025 8,519 8,066
-----------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes $ 2,492 $ 2,570 $ 4,620 $ 4,802
Provision for income taxes 610 620 1,120 1,170
-----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,882 $ 1,950 $ 3,500 $ 3,632
===================================================================================================================================
Other comprehensive income (loss), net of taxes:
Unrealized holding gains (losses) on available for sale securities, net of
taxes $ 330 $(7,171) $ 732 $(8,640)
Reclassification adjustment for net (gains) included in net income (58) (36) (139) (99)
-----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) 272 (7,207) 593 (8,739)
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ 2,154 $(5,257) $ 4,093 $(5,107)
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Basic earnings per share $ .35 $ .33 $ .64 $ .60
========== ========== ========== ==========
Diluted earnings per share $ .35 $ .33 $ .64 $ .59
========== ========== ========== ==========
Dividends per share $ .18 $ .16 $ .36 $ .32
========== ========== ========== ==========
Average shares outstanding - basic 5,322,941 5,835,968 5,441,810 6,015,016
Average shares outstanding - diluted 5,330,652 5,946,260 5,450,653 6,133,881
</TABLE>
<PAGE>
GA Financial, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
2000 1999
(unaudited)
--------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,500 $ 3,632
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for losses 360 150
Depreciation on office, property and equipment 266 354
(Accretion) of net deferred loan fees (57) (203)
Allocation of RRP shares 481 450
Net realized gain on sales of securities (127) (131)
Net gain in trading securities (63) -
Proceeds from sale of held for trading securities 1,143 -
Purchase of held for trading securities (2,173) -
Net realized gain on sale of student loans (24) (17)
Net realized loss on sale of REO 47 -
Net (premium amortization) discount accretion on securities (374) 167
Increase in accrued interest receivable (452) (394)
Increase in prepaid expenses and other assets (919) (364)
Increase in accrued interest payable 2,188 2,992
Net decrease in other liabilities (594) (167)
Amortization of intangibles 93 92
--------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 3,295 $ 6,561
--------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of available for sale securities 9,265 10,277
Repayments and maturities of available for sale securities 17,644 54,147
Purchases of available for sale securities (3,187) (126,186)
Purchase of held to maturity securities (3,865) -
Proceeds from sale of student loans 1,826 1,486
Net decrease in loans 2,246 25,898
Net purchases of loans (17,290) (33,024)
Proceeds from sale on REO 272 -
Purchases of office, property and equipment, net (921) (311)
Securities sold, not settled (1,656) -
Net decrease (increase) in short term investments 5,388 (1,504)
Purchases of Federal Home Loan Bank stock - (3,045)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities $ 9,722 $ (72,262)
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in demand and savings deposits 25,838 4,043
Net decrease in certificates of deposit (18,347) (4,375)
Net increase in advances from borrowers for taxes and insurance 837 483
Purchase of treasury stock (4,971) (11,410)
Payments from borrowed funds (375,778) (225,285)
Proceeds on borrowed funds 354,595 294,900
Dividends paid (2,019) (1,960)
Other stock transactions (231) (72)
--------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (20,076) 56,324
--------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents $ (7,059) $ (9,377)
Cash and cash equivalents at beginning of period 26,632 23,487
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 19,573 $ 14,110
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<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 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 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 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.
<PAGE>
<TABLE>
<CAPTION>
Tier I Tier I Total
Leverage Risk-Based Risk-Based
Capital Capital Capital
----------------------------------------------------
<S> <C> <C> <C>
(Dollars in Thousands)
June 30, 2000:
Equity capital (1) $ 62,820 $ 62,820 $ 62,820
General valuation allowance (2) - - 2,029
Plus unrealized losses on certain available
for sale securities 12,119 12,119 12,355
Less core deposit intangible (633) (633) (633)
---------------------------------------------------
Total regulatory capital $ 74,306 $ 74,306 $ 76,571
Minimum regulatory capital 34,723 13,289 26,578
---------------------------------------------------
Excess regulatory capital $ 39,583 $ 61,017 $ 49,993
==================================================
Regulatory capital as a percentage 8.56% 22.37% 23.05%
Minimum regulatory capital as a percentage 4.00% 4.00% 8.00%
---------------------------------------------------
Excess regulatory capital as a percentage 4.56% 18.37% 15.05%
===================================================
Well capitalized requirement under
prompt corrective action provisions 5.00% 6.00% 10.00%
===========================================================
Adjusted assets as reported to the OTS $868,071 $332,220 $332,220
</TABLE>
<TABLE>
<CAPTION>
Tier I Tier I Total
Leverage Risk-Based Risk-based
Capital Capital Capital
-----------------------------------------------------------
<S> <C> <C> <C>
(Dollars in Thousands)
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.
<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 is 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 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 For the Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
--------------------------------------------------------------------------------
(Dollars in Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Basic:
Net income $ 1,882 $ 1,950 $ 3,500 $ 3,632
Average common shares - outstanding basic 5,322,941 5,835,968 5,441,810 6,015,016
Basic earnings per share $ .35 $ .33 $ .64 $ .60
Diluted:
Net income $ 1,882 $ 1,950 $ 3,500 $ 3,632
Average common shares - outstanding basic 5,322,941 5,835,968 5,441,810 6,015,016
Effect of dilutive securities:
Shares issuable upon exercise of
outstanding stock options and stock awards 7,711 110,292 8,843 118,865
Average common shares outstanding - diluted 5,330,652 5,946,260 5,450,653 6,133,881
Diluted earnings per share $ .35 $ .33 $ .64 $ .59
================================================================================
</TABLE>
<PAGE>
5. Changes in Shareholders' Equity:
The consolidated statement of shareholders' equity for the six month period
ended June 30, 2000 is as follows:
<TABLE>
<CAPTION>
Accumulated
Other
Additional Unearned Unearned Comprehensive Total
(Dollars in Common Paid in Treasury ESOP RRP Income (Loss), Retained Shareholders'
Thousands) 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 - - - - - - 3,500 3,500
Other comprehensive - - - - - 593 - 593
income (loss), net
of tax
Treasury stock
purchased - - (4,971) - - - - (4,971)
Cash dividends - - - - - - (2,019) (2,019)
(.36 per share)
Shares allocated to - - - - - - - -
ESOP
Shares allocated to - - (264) - 481 - 33 250
stock based
compensation
-----------------------------------------------------------------------------------------------------------
Balance at 6/30/00 $89 $86,722 $(50,271) $(4,488) $ (836) $(13,739) $64,447 $81,924
===========================================================================================================
</TABLE>
<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 herein collectively as the "Company". The Company also generates non-
interest income such as service fees, trading account profits, and other income
such as the increase in surrender values in Bank Owned Life Insurance. 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 June 30, 2000 and December 31, 1999
---------------------------------------------------------------------------
Assets:
The Company's total assets decreased $13.9 million or 1.6% to $869.1 million as
of June 30, 2000.
Cash decreased $7.1 million or 26.5% to $19.6 million as of June 30, 2000.
These funds were primarily used to purchase and originate loans.
The Company has $3.9 million of investments held to maturity and $1.1 million of
investments held for trading. The Company had no investments in either
classification as of December 31, 1999. The held for trading securities of $1.1
million as of June 30, 2000 are all equity securities.
Investment securities classified as available for sale decreased $8.7 million or
5.8% to $142.3 million as of June 30, 2000 due to maturities and sales.
Mortgage-related securities classified as available for sale decreased $18.9
million or 6.1% to $287.9 million as of June 30, 2000 due to principal
repayments and sales.
The following table presents details of the Company's investment securities and
mortgage-related securities as of
June 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 $230,714 $ 106 $ (8,971) $221,849
Collateralized mortgage obligations 70,568 54 (4,609) 66,013
Marketable equity securities 37,954 1,599 (2,869) 36,684
US government agency debt 38,408 - (2,817) 35,591
Corporate obligations 12,095 - (591) 11,504
Municipal obligations 62,085 36 (3,629) 58,492
----------------------------------------------------------------------------------------------------------------------------
Total $451,824 $1,795 $(23,486) $430,133
============================================================================================================================
</TABLE>
<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 $11.2 million or 3.4% to $345.6 million as of June
30, 2000, primarily due to the Company's origination of mortgage and consumer
loans.
The following table presents details of the Company's loan portfolio (Dollars in
Thousands):
<TABLE>
<CAPTION>
As of June 30, As of December 31,
2000 1999
------------------------------------------------
<S> <C> <C>
Mortgages:
One to four family residential $261,598 $256,172
Multi-family residential 4,663 4,405
Commercial 19,760 17,592
Construction and development 16,444 3,658
Consumer loans:
Home equity 55,107 52,819
Other:
Loans on savings accounts 1,542 1,725
Unsecured personal loans and other 2,306 3,317
---------------------------------------------------------------------------------------------------
Total $361,420 $339,688
Less:
Undisbursed mortgage loans (13,491) (2,905)
Deferred loan fees (316) (701)
Allowance for losses (2,029) (1,731)
---------------------------------------------------------------------------------------------------
Net loans $345,584 $334,351
===================================================================================================
</TABLE>
As of June 30, 2000, education loans held for sale increased $1.5 million or
7.9% to $20.7 million due to originations. The Company's policy is to sell
education loans when the loan begins repayment status.
Accrued interest receivable increased $452,000 or 7.4% to $6.5 million as of
June 30, 2000.
FHLB stock remained the same for both periods. The Company is required to own
FHLB stock based upon levels of borrowings.
Foreclosed assets decreased $127,000 or 36.8% to $218,000 as of June 30, 2000.
The Company is in the process of selling all foreclosed assets.
Prepaid expenses and other assets increased $364,000 or 2.1% to $18.0 million as
of June 30, 2000 primarily due to $356,000 increase in bank owned life insurance
cash surrender values.
Securities sold, not settled of $1.7 million as of June 30, 2000 settled in
July, 2000.
<PAGE>
Liabilities:
------------
Total deposits increased $7.5 million or 1.5% to $502.6 million as of June 30,
2000.
Borrowed funds decreased $21.2 million or 7.1% to $276.0 million as of June 30,
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 $2.2 million or 85.2% to $4.8 million as of
June 30, 2000. This was a result of the timing of accrued interest payable
being credited to deposit accounts and borrowings. As of June 30, 2000, the
Company has $207.0 million of FHLB advances that charge interest expense at
month end and $69.0 of reverse repurchase borrowings which have various interest
payment dates. All of the borrowed funds as of December 31, 1999 were FHLB
advances.
Other liabilities and securities purchased, not settled decreased $594,000 or
28.1% to $1.5 million as of June 30, 2000. The change is primarily the result
of the tax payments of accrued income taxes.
Shareholders' Equity:
---------------------
Total shareholders' equity decreased $2.6 million or 3.1% to $81.9 million as of
June 30, 2000. This was primarily due to the purchase of $5.0 million of
treasury stock, payment of $2.0 million in cash dividends offset by $3.5 million
in net income, $250,000 in stock based compensation, and a $593,000 change in
comprehensive income for the six months ended June 30, 2000.
Comparison of the Consolidated Results of Operation for the Three Month Period
------------------------------------------------------------------------------
Ended June 30, 2000 and 1999
----------------------------
Net Income. Net income was $1.9 million for the three month period ended June
30, 2000, a decrease of $68,000 or 3.5% from the same period in 1999.
Interest Income. Interest income totaled $14.8 million for the three month
period ended June 30, 2000, an increase of $668,000 or 4.7% compared to the
$14.1 million recorded for the three month period ended June 30, 1999. The
increase was primarily attributable to an increase in the yield of interest
earning assets. The average yield increased from 6.88% to 7.34% for the three
months ended June 30, 2000. Interest on loans receivable increased $731,000 or
11.7%. The average balance of loans increased $24.8 million, or 7.3% while the
average yield increased from 7.38% to 7.68%. Interest on mortgage-related
securities decreased $69,000 or 1.3% to $5.1 million as of June 30, 2000.
Average balances on mortgage-related securities decreased $25.8 million or 8.2%
to $290.4 million while the yield increased from 6.58% to 7.07%. This is due to
higher yields on new purchases. Interest on investment securities increased
$31,000 or 1.2% for the period. Interest on bank deposits decreased $25,000 due
to lower average balances.
Interest Expense. Total interest expense for the three month period ended June
30, 2000 was $8.8 million, an increase of $580,000 or 7.03% compared to $8.3
million for the same period in 1999. Average balances of interest-bearing
liabilities for the three month period ended June 30, 2000 increased $12.0
million, or 1.6%, compared to the three month period ended June 30, 2000.
Average interest-bearing deposits increased $17.3 million or 3.8% to $471.2
million. Average balances of money market accounts increased $49.2 million or
greater than 100% for the three month period ended June 30, 2000 compared to the
three month period ended June 30, 1999. This increase in savings accounts was
offset by a decrease of $21.9 million or 13.5% in average passbook accounts and
a decrease of $11.4 million or 4.7% in certificate accounts. The average cost
of money market accounts has increased from 2.97% to 5.49% for the three month
period ended June 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 June 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 overnight funds. Average
balances of borrowings fell $5.2 million or 1.9% from the three month period
ending June 30, 1999. Management currently believes it is efficient
<PAGE>
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 June 30, 2000 was $5.9 million, an increase of
$88,000 or 1.5% compared to $5.9 million recorded for the same period in 1999.
Provision for Loan Losses. The provision for loan losses during the three month
period ended June 30, 2000 was $180,000 compared to $90,000 for the three month
period ending June 30, 1999. The allowance for loan losses to gross loans
receivable and total non-performing assets was 0.53% and 169%, respectively, as
of June 30, 2000 as compared to 0.47% and 113%, respectively as of June 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 inherent 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, earnings from Bank Owned Life Insurance and other
miscellaneous items. For the three month period ended June 30, 2000, non-
interest income was $806,000, compared to $824,000 recorded for the same period
in 1999. The increase of $212,000 in service fees was offset primarily by a
decrease of $171,000 in data processing fees. 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 increased $58,000, or 1.4%, to
$4.1 million for the three month period ended June 30, 2000. This was primarily
attributed to an increase of $99,000 in other expenses.
Income Tax Expense. Income tax expense of $610,000 for the three month period
ended June 30, 2000 resulted in an effective tax rate of 24.5%. The income tax
expense recorded for the three month period ended June 30, 1999 of $620,000 is
an effective tax rate of 24.1%.
Comparison of the Consolidated Results of Operation for the Six Month Period
----------------------------------------------------------------------------
Ended June 30, 2000 and 1999
----------------------------
Net Income. Net income was $3.5 million for the six month period ended June 30,
2000, a decrease of $132,000 or 3.6% from the same period in 1999.
Interest Income. Interest income totaled $29.4 million for the six month period
ended June 30, 2000, an increase of $1.9 million or 7.0% compared to the $27.5
million recorded for the six month period ended June 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 six
month period ended June 30, 2000 increased to $831.8 million, an increase of
$4.3 million or 0.5%, compared to the average balance of interest-earning assets
of $827.5 million for the same period in 1999. Average yield on interest-
earning assets increased 42 basis points to 7.27% for the six month period ended
June 30, 2000 compared to 6.85% for the comparable period in 1999. Interest on
loans receivable increased $1.2 million, or 9.6%. The average balance of loans
increased $22.7 million while the average yield increased from 7.38% to 7.58%.
Interest on mortgage related securities increased $726,000 or 7.5% to $10.4
million at June 30, 2000. Average balances on mortgage-related securities
decreased $4.6 million or 1.5% while the yield increased 59 basis points from
6.49% to 7.08%. This is due to higher yields on new purchases in the past year.
Interest on investment securities increased $114,000 or 2.3% for the period due
to purchases. Interest on bank deposits decreased $125,000 due to lower average
balances.
Interest Expense. Total interest expense for the six month period ended June
30, 2000 was $17.7 million, an increase of $1.6 million or 10.0% compared to
$16.1 million for the same period in 1999. Average balances of interest-bearing
liabilities for the six month period ended June 30, 2000 increased $37.3
million, or 5.2%, compared to the six month period ended June 30, 1999. Average
interest-bearing deposits increased $18.1 million or 4.0% to $470.5 million,
while the average cost increased 22 basis points to 4.13%. Average balances of
money market accounts increased $41.7 million or greater than 100% for the six
month period ended June 30, 2000 compared to the six month period ended June 30,
1999. This increase was offset by a decrease of $18.5 million or 11.5% in
average passbook accounts and a decrease of $7.2
<PAGE>
million or 3.0% in certificate accounts. The average cost of money market
accounts has increased from 2.96% to 5.53% for the six months ended June 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 June 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 overnight funds. The average balance of borrowed funds increased $19.2
million or 7.3% compared to the six month period ending June 30, 1999 while the
average cost increased 16 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 six month period ended June 30, 2000 was $11.7 million, an increase of
$302,000 or 2.7% , compared to $11.4 million recorded for the same period in
1999.
Provision for Loan Losses. The provision for loan losses during the six month
period ended June 30, 2000 was $360,000 compared to $150,000 for the six month
period ended June 30, 1999. The allowance for loan losses to gross loans
receivable and total non-performing assets was 0.53% and 169%, respectively, as
of June 30, 2000 as compared to 0.47% and 113%, respectively as of June 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 inherent in its loan portfolio at this time, no assurances can be
given that the Association's level of allowance for loan losses will be
sufficient to cover future loan losses incurred by the Association, or that
future adjustments to the allowance for loan losses will not be necessary if
economic and other conditions differ substantially from the economic and other
conditions analyzed by management to determine the current level of the
allowance for loan losses.
Non-interest Income. Non-interest income consists of service fees, gains and
losses on the sale of loans and securities, fees from data processing services
sold, trading profits, earnings from Bank Owned Life Insurance and other
miscellaneous items. For the six month period ended June 30, 2000 non-interest
income was $1.8 million compared to $1.6 million for the same period in 1999.
The increase of $179,000 or 10.9%, is primarily due to an increase of $63,000 in
trading gains and an increase of $448,000 on service fees on products,
partially offset by a reduction in data processing fees of $348,000. 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 was $8.5 million for the six
month period ended June 30, 2000 and $8.1 million for the same period ended in
1999. The increase of $453,000 or 5.6% was primarily due to a $180,000
termination expense for the closing of a former in-store branch and a $215,000
increase in compensation expense.
Income Tax Expense. Income tax expense of $1.1 million for the six months ended
June 30, 2000 resulted in an effective tax rate of 24.2%. The income tax
expense recorded for the six month period ended June 30, 1999 of $1.2 million is
an effective tax rate of 24.4%.
<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 June 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 June 30, 2000 and June 30, 1999 (Dollars in Thousands).
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000 Three Months Ended June 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 and
short-term investments $ 9,376 $ 106 4.52% $ 14,583 $ 131 3.59%
Investment securities, net (1)(2) 150,051 2,726 7.27% 164,268 2,774 6.75%
Loans receivable, net (1)(3) 363,733 6,982 7.68% 338,899 6,251 7.38%
Mortgage-related securities, net (1) 290,381 5,135 7.07% 316,153 5,204 6.58%
FHLB stock 15,458 269 6.96% 14,237 228 6.41%
-----------------------------------------------------------------------
Total interest-earning assets $828,999 $15,218 7.34% $848,140 $14,588 6.88%
Non-interest earning assets 39,127 26,115
------------- ---------
Total assets $868,126 $874,255
============= =========
Liabilities and equity:
Interest-bearing liabilities:
Money market savings accounts $ 64,502 $ 886 5.49% $ 15,341 $ 114 2.97%
Passbook accounts 140,589 838 2.38% 162,463 972 2.39%
NOW accounts 37,247 150 1.61% 35,872 155 1.73%
Certificate accounts 228,884 3,020 5.28% 240,272 3,174 5.28%
-----------------------------------------------------------------------
Total $471,222 $ 4,894 4.15% $453,948 $ 4,415 3.89%
Borrowed Funds 278,162 3,929 5.65% 283,401 3,828 5.40%
Other 1,817 8 1.76% 1,803 8 1.77%
-----------------------------------------------------------------------
Total interest-bearing liabilities $751,201 $ 8,831 4.70% $739,152 $ 8,251 4.47%
Non-interest bearing liabilities 35,205 35,685
Shareholders' equity 81,720 99,418
------------- ---------
Total liabilities and shareholders' equity $868,126 $874,255
============= =========
Net interest rate spread (4) $ 6,387 2.64% $ 6,337 2.41%
Net interest margin (5) 3.08% 2.99%
Ratio of interest-earning assets to
interest-bearing liabilities 110.36%
</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.
<PAGE>
The following table presents average balances yields on interest-earning assets
and average balances and costs of interest-bearing liabilities for the six
months ended June 30, 2000 and June 30, 1999 (Dollars in Thousands).
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 Six Months Ended June 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 $ 9,511 $ 206 4.33% $14,827 $ 331 4.46%
Investment securities, net (1)(2) 150,892 5,398 7.15% 161,393 5,402 6.69%
Loans receivable, net (1)(3) 360,877 13,670 7.58% 338,107 12,470 7.38%
Mortgage-related securities, net (1) 295,103 10,449 7.08% 299,706 9,723 6.49%
FHLB stock & other equity investments 15,458 528 6.83% 13,507 424 6.28%
-----------------------------------------------------------------------------------
Total interest-earning assets $831,841 $30,251 7.27% $827,540 $28,350 6.85%
Non-interest earning assets 40,754 30,820
------------ -------------
Total assets $972,595 $858,360
============ =============
Liabilities and equity:
Interest-bearing liabilities:
Money market savings accounts $56,417 $1,561 5.53% $14,754 $ 218 2.96%
Passbook accounts 142,837 1,701 2.38% 161,332 1,924 2.39%
NOW accounts 36,840 298 1.62% 34,715 305 1.76%
Certificate accounts 234,380 6,161 5.26% 241,616 6,403 5.30%
-----------------------------------------------------------------------------------
Total $470,474 $9,721 4.13% $452,417 $8,850 3.91%
Borrowed Funds 283,727 7,955 5.61% 264,494 7,213 5.45%
Other 1,728 17 1.97% 1,749 17 1.94%
-----------------------------------------------------------------------------------
Total interest-bearing liabilities $755,929 $17,693 4.68% $718,660 $16,080 4.47%
Non-interest bearing liabilities 34,586 36,287
Shareholders equity 82,080 103,413
------------ -------------
Total liabilities and shareholders equity $872,595 $858,360
============ =============
Net interest rate spread (4) $12,558 2.59% $12,270 2.38%
Net interest margin (5) 3.02% 2.97%
Ratio of interest-earning assets to
interest-bearing liabilities 110.04% 115.15%
</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.
<PAGE>
Allowance for Loan Losses
-------------------------
The following table sets forth the changes in the allowance for loan losses for
the six month period ended June 30, 2000 (Dollars in Thousands):
Balance, December 31, 1999 $1,731
Provision for loan losses 360
Net charge-offs (62)
--------
Balance, June 30, 2000 $2,029
Non-Performing Assets
---------------------
The following table presents information regarding the Companys non-performing
assets as of the dates indicated:
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
------------- -------------
(Dollars in Thousands)
<S> <C> <C>
Non-performing loans:
Non-accrual loans $ 981 $ 970
Accruing loans which are contractually
past due 90 days or more - -
Restructured loans - -
------------------------------------------------------------------------------------------------------
Total non-performing loans $ 981 $ 970
Real estate owned 218 448
------------------------------------------------------------------------------------------------------
Total non-performing assets $1,199 $1,418
======================================================================================================
Non-performing assets as a percent of gross loans receivable .31% .41%
Non-performing assets to total assets .14% .16%
Allowance for loan loss as a percent of gross loans receivable .53% .47%
Allowance for loan loss to non-performing assets 169% 113%
</TABLE>
Liquidity and Capital Resources
-------------------------------
The Companys 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 Companys liquidity for the month of June 30, 2000 was 33% . The high level
of liquidity was due to managements 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 June 30, 2000, the Company had commitments to originate loans of $719,000
and purchase loans of $3.7 million. The Company anticipates that it will have
sufficient funds available to meet these commitments.
As of June 30, 2000, the Companys equity capital exceeded each of the OTS
capital requirements. OTS requires Tier I capital to adjusted assets of 4.00%
and the Company had 8.56%. Tier I capital to risk-based assets requirement is
4.00% and the Company had 22.37%. The total capital to risk-based assets
requirement is 8.00% and the Company had 23.05%.
<PAGE>
Year 2000 Compliance
--------------------
In 1996, the Companys 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 Companys
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 Companys 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
Companys financial results, is included in the Companys 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
------- ----------------------------------------------------------
Management is responsible for monitoring and limiting the Companys exposure to
interest rate risk within established guidelines while maximizing net interest
income. The Company will continue to monitor the Companys 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 Companys
December 31, 1999 Annual Report on Form 10-K.
<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
Companys 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
------- ---------------------------------------------------
The annual meeting of shareholders of GA Financial, Inc. was
held on April 26, 2000. Of 6,011,632 shares eligible to vote,
87.1%, or 5,238,917 were voted by proxy.
The shareholders elected the two nominees for directors, as
described in the proxy statement for the annual meeting. The
results for the re-election of John M. Kish as director were
5,069,214 shares or 96.8% in favor and 169,703 shares or 3.2%
withheld. The results for the re-election of Darrell J. Hess as
director were 5,068,426 shares or 96.7% in favor, and 170,494
shares or 3.3% withheld. The other continuing directors are
Thomas E. Bugel, Thomas M. Stanton, Robert J. Ventura and David
R. Wasik.
Also, shareholders ratified KPMG LLP as the independent auditors
for the Company for the fiscal year ending December 31, 2000.
The results were 5,135,634 shares or 98.0% in favor, and 94,718
shares or 1.8% against and 8,565 shares in abstention.
Item 5. Other Information
------- -----------------
The Board of Directors declared on July 25, 2000 a dividend of
$.18 per share to stockholders of record on August 10, 2000,
payable on August 21, 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
<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 August 10, 2000 By /s/ John M. Kish
------------------------ -----------------------------
John M. Kish
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Date August 10, 2000 By /s/ Raymond G. Suchta
------------------------- ------------------------------
Raymond G. Suchta
Chief Financial Officer and Treasurer
(Principal Accounting and Financial Officer)
