<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-27716
YONKERS FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3870836
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE MANOR HOUSE SQUARE, YONKERS, NEW YORK 10701
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (914) 968-4500
--------------
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 [ ]
As of March 31, 1996, there were no shares of the Registrant's common stock
issued and outstanding.
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YONKERS FINANCIAL CORPORATION
INDEX
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Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets at March 31, 1996 and
September 30, 1995.......................... 1
Statements of Income for the Three and Six
Months Ended March 31, 1996 and 1995........ 2
Statements of Cash Flows for the Three and
Six Months Ended March 31, 1996 and 1995.... 3
Notes to Unaudited Financial Statements..... 4
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................... 15
Item 2. Change in Securities........................ 16
Item 3. Defaults Upon Senior Securities............. 17
Item 4. Submission of Matters to a Vote of
Security Holders............................ 17
Item 5. Other Information........................... 17
Item 6. Exhibits and Reports on Form 8-K............ 17
Signature Page.............................. 18
i
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Part I. Item 1.
THE YONKERS SAVINGS AND LOAN ASSOCIATION, FA
BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
At March 31, 1996 At September 30, 1995
----------------- ---------------------
<S> <C> <C>
ASSETS
Cash and due from banks $2,284 $3,161
Interest-bearing deposits 100 100
Federal funds sold 3,500 -
Securities:
Held to maturity, at amortized cost(fair value of $100,703 100,712 95,464
at March 31,1996 and $95,100 at September 30, 1995)
Available for sale, at fair value(amortized cost of $17,005 16,836 20,877
at March 31, 1996 and $21,114 at September 30, 1995) ------- -------
Total securities 117,548 116,341
------- -------
Loans, net:
Real estate mortgage loans 80,011 79,127
Consumer and commercial business loans 5,099 5,271
Allowance for loan losses (928) (719)
------- -------
Total loans, net 84,182 83,679
------- -------
Accrued interest receivable 1,845 1,801
Federal Home Loan Bank stock 1,112 1,112
Office properties and equipment,net 888 797
Other assets 789 1,292
-------- --------
Total assets $212,248 $208,283
======== ========
LIABILITIES AND EQUITY
Liabilities:
Deposits $194,624 $187,277
Federal Home Loan Bank advances 1,000 4,295
Mortgage escrow funds 7 732
Other liabilities 19 214
------- -------
Total liabilities 195,650 192,518
------- -------
Equity:
Retained income, substantially restricted 16,699 15,907
Net unrealized loss on available-for-sale
securities, net of taxes (101) (142)
------- -------
Total equity 16,598 15,765
------- -------
Total liabilities and equity 212,248 208,283
======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
1
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THE YONKERS SAVINGS AND LOAN ASSOCIATION, FA
STATEMENTS OF INCOME
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31, Ended March 31,
-------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans $1,841 $1,672 $3,720 $3,278
Securities 1,835 1,690 3,670 3,309
Other earning assets 100 68 171 117
------ ------ ------ ------
Total interest and dividend income 3,776 3,430 7,561 6,704
------ ------ ------ ------
Interest expense:
Deposits 1,969 1,602 3,946 3,098
Borrowings and mortgage escrow 32 29 79 42
------ ------ ------ ------
Total interest expense 2,001 1,631 4,025 3,140
------ ------ ------ ------
Net interest income 1,775 1,799 3,536 3,564
Provision for loan losses 50 75 150 200
------ ------ ------ ------
Net interest income after provision for
loan losses 1,725 1,724 3,386 3,364
------ ------ ------ ------
Non-interest income:
Service charges and fees 197 181 394 354
Other 5 1 10 4
------ ------ ------ ------
Total non-interest income 202 182 404 358
------ ------ ------ ------
Non-interest expense:
Compensation and benefits 598 521 1,193 1,079
Occupancy and equipment 164 134 311 284
Federal deposit insurance premiums 107 102 214 202
Data processing service fees 103 93 200 175
Other 277 232 530 565
------ ------ ------ ------
Total non-interest expense 1,249 1,082 2,448 2,305
------ ------ ------ ------
Income before income tax expense 678 824 1,342 1,417
Income tax expense 278 349 550 617
------ ------ ------ ------
Net income $400 $475 $792 $800
====== ====== ====== ======
</TABLE>
See accompanying notes to unaudited financial statements.
2
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THE YONKERS SAVINGS AND LOAN ASSOCIATION, FA
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Six Months
Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $792 $800
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 150 200
Accretion of deferred fees, discounts and premiums, net (216) (237)
Depreciation and amortization expense 89 85
Other adjustments, net (265) (794)
------ ------
Net cash provided by operating activities 550 54
------ ------
Cash flows from investing activities:
Purchases of securities:
Available for sale (1,166) (142)
Held to maturity (20,175) (5,032)
Proceeds from principal payments, maturities and calls
of securities:
Available for sale 5,285 533
Held to maturity 15,075 2,735
Disbursements for loan originations (8,109) (8,329)
Principal collections on loans 6,632 6,972
Proceeds from sales of loans 1,145 90
Other investing cash flows, net 59 (69)
------ ------
Net cash used in investing activities (1,254) (3,242)
------ ------
Cash flows from financing activities:
Net increase in deposits 7,347 485
(Repayments of) proceeds from Federal Home Loan
Bank advances (3,295) 4,000
Net decrease in mortgage escrow funds (725) (375)
Net cash provided by financing activities 3,327 4,110
------ ------
Net increase in cash and cash equivalents 2,623 922
Cash and cash equivalents at beginning of period 3,261 5,818
------ ------
Cash and cash equivalents at end of period $5,884 $6,740
====== ======
Supplemental cash flow information:
Interest paid $4,027 $3,140
Income taxes paid 541 1,030
</TABLE>
See accompanying notes to unaudited financial statements.
3
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THE YONKERS SAVINGS AND LOAN ASSOCIATION, FA
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Basis of Presentation
Yonkers Financial Corporation (the "Holding Company") was incorporated
under the laws of the State of Delaware and on April 18, 1996 became the
savings and loan holding company of The Yonkers Savings and Loan
Association, FA (the "Association") in connection with the Association's
conversion from a federally chartered mutual savings and loan association
to a federally chartered stock savings and loan association, pursuant to
its Plan of Conversion. The Plan of Conversion was approved by the
Association's members at a special meeting held on April 2, 1996. Prior
to the conversion, the Holding Company had no operations other than those
of an organizational nature. Accordingly, all financial and other
information for periods prior to the conversion, as set forth herein,
refers to the Association.
The unaudited financial statements of the Association included herein
have been prepared in conformity with generally accepted accounting
principles. In the opinion of management, the unaudited financial
statements include all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for the periods presented. The results of
operations for the three and six months ended March 31, 1996 are not
necessarily indicative of the results of operations which may be expected
for the fiscal year ended September 30, 1996.
Certain financial information and footnote disclosures normally included
in annual financial statements prepared in conformity with generally
accepted accounting principles have been condensed or omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. The
unaudited financial statements presented herein should be read in
conjunction with the annual financial statements of the Association as of
and for the fiscal year ended September 30, 1995 included in the
prospectus dated February 12, 1996.
(2) Offering
Concurrent with the conversion, on April 18, 1996 the Holding Company
sold 3,570,750 shares of its common stock in
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a subscription and community offering at a price of $10 per share, for
gross proceeds of $35.7 million (including $2.9 million attributable to
the shares purchased by the Holding Company's Employee Stock Ownership
Plan). The Holding Company used $17.9 million of the proceeds to acquire
all of the common stock issued by the Association in the conversion.
The remaining proceeds were retained by the Holding Company.
5
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PART I, ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1996 AND SEPTEMBER 30, 1995
Total assets at March 31, 1996 increased $3.9 million, from $208.3 million at
September 30, 1995, to $212.2 million, reflecting the Association's ongoing
strategy of managed growth. Deposit liabilities increased $7.3 million to
$194.6 million at March 31, 1996 from $187.3 million at September 30, 1995
primarily due to a $6.4 million increase in certificates of deposit and a $3.0
million increase in NOW accounts and money market accounts, partially offset by
a decrease in regular savings of $1.9 million. The $7.3 million increase in
deposits during the six months ended March 31, 1996 was primarily attributable
to the announced closure of a branch office of a competing institution. Deposit
inflows were utilized to fund asset growth and to reduce FHLB borrowings, which
declined $3.3 million to $1.0 million at March 31, 1996 from $4.3 million at
September 30, 1995.
Asset growth during the six months ended March 31, 1996 reflected a $2.6 million
increase in cash and cash equivalents, which totaled $5.9 million at March 31,
1996 compared to $3.3 million at September 30, 1995, and increases in total
securities and in net loans of $1.2 million and $503,000, respectively. The
increase in cash and cash equivalents was due to management's decision to
maintain higher levels of liquidity during this period. Compared to September
30, 1995, the securities portfolio at March 31, 1996 reflects a $5.2 million
increase in held-to-maturity securities and a $4.0 million decrease in
available-for-sale securities. The increase in held-to-maturity securities
reflects purchases of $20.2 million, partially offset by $15.1 million in
principal payments and maturities. The decrease in the available-for-sale
portfolio reflects purchases of $1.2 million, partially offset by $5.3 million
in principal payments and maturities. Available-for-sale securities represented
14.3% of the total securities portfolio at March 31, 1996 compared to 17.9% at
September 30, 1995. The increase in net loans of $503,000 was primarily the
result of increases of $1.5 million and $249,000, respectively, in the multi-
family and commercial real estate loan categories. These increases were
partially offset by decreases of $734,000 in one-to-four-family mortgage loans,
$138,000 in land loans, and $172,000 in consumer and commercial business loans
and an increase of $209,000 in the allowance for loan losses. Total equity
increased $833,000 to $16.6 million or 7.82% of total assets
6
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at March 31, 1996 from $15.8 million, or 7.57% of total assets, at September 30,
1995. This increase was attributable to net income of $792,000 for the six-
month period and a $41,000 decline in the after-tax net unrealized loss on
available-for-sale securities.
Total non-performing assets decreased $291,000, from $3.8 million at September
30, 1995 to $3.5 million at March 31, 1996 as a result of a $64,000 reduction in
non-accrual loans past due ninety days or more and a $227,000 reduction in net
real estate owned. The ratio of non-performing loans and real estate owned to
total assets decreased to 1.63% at March 31, 1996 from 1.80% at September 30,
1995. The allowance for loan losses increased from $719,000 at September 30,
1995 to $928,000 at March 31, 1996 as a result of additional loan loss
provisions of $150,000 and recoveries (net of charge-offs) of $59,000. The
ratio of the allowance for loan losses to non-performing loans increased to
26.77% at March 31, 1996 from 20.37% at September 30, 1995, and the ratio of the
allowance to total loans increased to 1.08% at March 31, 1996 from 0.84% at
September 30, 1995.
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1996
AND 1995
Net income for the three months ended March 31, 1996 was $400,000, compared to
$475,000 for the same period in 1995. The $75,000 decrease in net income was
primarily attributable to a $24,000 decrease in net interest income
(representing a $370,000 increase in interest expense less a $346,000 increase
in interest and dividend income) and a $167,000 increase in non-interest
expense, partially offset by decreases of $25,000 and $71,000 in the provision
for loan losses and income tax expense, respectively.
Net interest income, or the difference between interest and dividend income and
interest expense, was substantially unchanged at $1.8 million for each of the
three-month periods ended March 31, 1996 and 1995. The positive effect of an
increase in average interest-earning assets was offset by a 35 basis point
decrease in the interest rate spread to 3.11% for the three months ended March
31, 1996 from 3.46% for the same period in 1995. The Association's net interest
margin declined by 29 basis points to 3.42% for the three months ended March 31,
1996 from 3.71% for the three months ended March 31, 1995.
Although the Association realized higher average yields on its interest-earning
assets, primarily due to upward rate repricings on adjustable rate assets as a
result of the increasing interest rate environment in fiscal 1995, its interest-
bearing liabilities repriced more quickly in fiscal 1995 due to the liabilities
having a shorter term than the
7
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assets. This had a negative impact on the Association's average interest rate
spread and net interest margin in the three months ended March 31, 1996 compared
to the same period in the prior year.
Interest and dividend income totaled $3.8 million for the three months ended
March 31, 1996, an increase of $346,000 compared to interest and dividend income
of $3.4 million for the three months ended March 31, 1995. This increase
reflects a $13.9 million increase in total average interest-earning assets and a
19 basis point increase in the average yield on such assets to 7.27% for the
three months ended March 31, 1996 from 7.08% for the same period in the prior
year. Interest income on loans increased by $169,000 to $1.9 million for the
three months ended March 31, 1996 from $1.7 million for the three months ended
March 31, 1995, reflecting a $5.7 million increase in the average balance of
loans and a 23 basis point increase in the average yield. The increase in the
average balance of loans was primarily attributable to increases in commercial
real estate, multi-family and land loans. The increase in average yield on
loans was primarily due to the upward repricing of the Association's adjustable
rate mortgage portfolio. On a combined basis, interest and dividend income on
mortgage-backed and other securities increased $145,000 to $1.8 million for the
three months ended March 31, 1996 from $1.7 million for the three months ended
March 31, 1995. This increase was primarily due to a $125,000 increase in
interest on other securities, attributable to a $4.0 million increase in the
average balance and a 50 basis point increase in the average yield, and to a
$20,000 increase in interest on mortgage-related securities attributable to a
$4.0 million increase in the average balance partially offset by a 28 basis
point decrease in the average yield.
Interest expense on deposits increased $367,000 to $2.0 million for the three
months ended March 31, 1996 from $1.6 million for the three months ended March
31, 1995. This increase reflects a $14.0 million increase in the average
balance of interest-bearing deposits and a 50 basis point increase in the
average rate paid on such liabilities to 4.16% for the three months ended March
31, 1996 from 3.66% for the same period in the prior year. The increase in
average interest-bearing deposits was primarily attributable to a $19.6 million
increase in the average balance of savings certificate accounts to $106.0
million from $86.4 million, partially offset by a $9.0 million decrease in the
average balance of regular savings accounts to $52.0 million from $61.0 million.
The combined effect of the higher average balance and the overall increases in
the average rate paid on deposits for the three months ended March 31, 1996
compared to the same period in the prior year reflect the foregoing shift from
generally lower rate savings accounts to generally higher rate certificate
accounts.
8
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The provision for loan losses was $50,000 for the three months ended March 31,
1996 compared to $75,000 for the same period in 1995, reflecting the relatively
stable level of non-performing loans in the current year period and the higher
level of net recoveries in the current three-month period compared to the same
period last year. The provision for each period reflects management's
evaluation of various factors including the Association's previous loan loss
experience, the known and inherent risks in the loan portfolio, adverse
situations that may affect the borrowers' ability to repay, the estimated value
of any underlying collateral, and current and prospective economic conditions.
The allowance for loan losses was $928,000, or 1.08% of total loans at March 31,
1996, compared to $503,000 or 0.63% of total loans at March 31, 1995 and
$719,000 or 0.84% of total loans at September 30, 1995. The ratio of the
allowance for loan losses to non-performing loans was 26.77% at March 31, 1996
compared to 14.13% at March 31, 1995 and 20.37% at September 30, 1995. Loan
charge-offs were $18,000 and recoveries were $77,000 during the three months
ended March 31, 1996, compared to no charge-offs and $5,000 in recoveries during
the same period in 1995. Although the Association maintains its allowance for
loan losses at a level it considers adequate to provide for losses, there can be
no assurance that such losses will not exceed the estimated amounts or that
additional substantial provisions for loan losses will not be required in future
periods.
The following table sets forth certain asset quality ratios and other data at
the dates indicated:
<TABLE>
<CAPTION>
March 31, 1996 September 30, 1995 March 31, 1995
-------------- ------------------ --------------
(Dollars in thousands)
<S> <C> <C> <C>
Non-performing loans $3,466 $3,530 $3,559
Real estate owned, net................. - 227 -
------ ------ ------
Total non-performing assets............ $3,466 $3,757 $3,559
====== ====== ======
Non-performing loans to total loans.... 4.12% 4.15% 4.46%
Non-performing assets to total assets.. 1.63% 1.80% 1.78%
Allowance for loan losses to:
Non-performing loans................. 26.77% 20.37% 14.13%
Total loans.......................... 1.08% 0.84% 0.63%
</TABLE>
9
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Non-interest income for the three months ended March 31, 1996 increased $20,000
to $202,000 from $182,000 for the three months ended March 31, 1995. This
increase was primarily attributed to increases in service charges and fee income
relating to increased loan origination volume.
Non-interest expense increased $167,000 to $1.3 million for the three months
ended March 31, 1996 from $1.1 million for the same period in 1995. The
Association's ratio of non-interest expense to average total assets, on an
annualized basis, increased to 2.36% for the three months ended March 31, 1996
from 2.20% for the same period in 1995. The increase in non-interest expense
primarily reflects an increase in compensation and benefits, and in other non-
interest expenses. Compensation and benefits expense increased $77,000 to
$598,000 for the three months ended March 31, 1996 from $521,000 for the three
months ended March 31, 1995. This increase was primarily attributable to merit
and performance-based increases for management and staff members and an increase
in the number of employees. Other non-interest expenses increased $45,000 to
$277,000 for the three months ended March 31, 1996 from $232,000 for the three
months ended March 31, 1995. The deposits of savings associations such as the
Association are presently insured by the Savings Association Insurance Fund (the
"SAIF"), which, along with the Bank Insurance Fund (the "BIF"), is one of the
two insurance funds administered by the FDIC. Financial institutions which are
members of the BIF are experiencing substantially lower deposit insurance
premiums because the BIF has achieved its required level of reserves while the
SAIF has not yet achieved its required reserves. A recapitalization plan for
the SAIF under consideration by Congress reportedly provides for a special
assessment of 0.80% to 0.90% of deposits to be imposed on all SAIF insured
institutions to enable the SAIF to achieve its required level of reserves. If
the proposed assessment of 0.90% was effected based on deposits as of March 31,
1995 (as proposed), the Association's assessment would amount to approximately
$950,000, after taxes. Accordingly, this special assessment would significantly
increase non-interest expense and adversely effect the Association's results of
operations. Conversely, depending upon the Association's capital level and
supervisory rating, and assuming the insurance premium levels for BIF and SAIF
members are again equalized, future deposit insurance premiums are expected to
decrease significantly, to as low as $2,000 from the .23% of deposits currently
paid by the Association, which would reduce non-interest expense for future
periods. No prediction can be made as to whether or in what form this
legislation will be approved.
Income tax expense was $278,000, or 41% of pre-tax income for the three months
ended March 31, 1996 compared to $349,000, or 42.3% of pre-tax income for the
same period in 1995. The
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decrease in tax expense primarily reflects lower pre-tax income.
COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED MARCH 31, 1996
AND 1995
Net income for the six months ended March 31, 1996 was $792,000 compared to
$800,000 for the six months ended March 31, 1995. The $8,000 decrease was
primarily attributable to a $143,000 increase in non-interest expense, partially
offset by a $50,000 decrease in the provision for loan losses, a $67,000
decrease in income tax expense and a $46,000 increase in non-interest income.
Net interest income was substantially unchanged at $3.6 million for each of the
six-month periods ended March 31, 1996 and 1995. The positive effect of an
increase in average earning assets was offset by a 34 basis point decrease in
the interest rate spread to 3.11% for the six months ended March 31, 1996 from
3.45% for the same period in 1995. The Association's net interest margin
declined by 28 basis points to 3.42% for the six months ended March 31, 1996
from 3.70% for the six months ended March 31, 1995.
Interest and dividend income totaled $7.6 million for the six months ended March
31, 1996, an increase of $857,000 compared to interest and dividend income of
$6.7 million for the six months ended March 31, 1995. This increase reflects a
$13.7 million increase in total average interest-earning assets and a 36 basis
point increase in the average yield on such assets to 7.32% for the six months
ended March 31, 1996 from 6.96% for the same period in the prior year. Interest
income on loans increased by $442,000 to $3.7 million for the six months ended
March 31, 1996 from $3.3 million for the six months ended March 31, 1995,
reflecting a $5.6 million increase in the average balance of loans and a 50
basis point increase in the average yield. The increase in the average balance
of loans was primarily attributable to increases in commercial real estate,
multi-family and land loans. On a combined basis, interest and dividend income
on mortgage-backed and other securities increased $361,000 to $3.7 million for
the six months ended March 31, 1996 from $3.3 million for the six months ended
March 31, 1995. This increase was due to a $276,000 increase in interest on
other securities, attributable to a $5.7 million increase in the average balance
and a 40 basis point increase in the average yield, and an $85,000 increase in
interest on mortgage-backed securities, attributable to a $1.3 million increase
in the average balance and a 14 basis point increase in the average
yield.
Interest expense on deposits increased $849,000 to $4.0 million for the six
months ended March 31, 1996 from $3.1 million for the six months ended March 31,
1995. This
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increase reflects a $12.8 million increase in the average balance of interest-
bearing deposits and a 66 basis point increase in the average rate paid on such
liabilities to 4.20% for the six months ended March 31, 1996 from 3.54% for the
same period in the prior year. The increase in average interest-bearing deposits
was primarily attributable to a $21.8 million in the average balance of savings
certificate accounts to $104.2 million from $82.4 million, partially offset by
an $11.0 million decrease in the average balance of regular savings accounts to
$52.9 million from $63.9 million. The combined effect of the higher average
balance and the overall increase in the average rate paid on deposits for the
six months ended March 31, 1996 compared to the same period in the prior year
reflect the foregoing shift from generally lower rate savings accounts to
generally higher rate certificate accounts.
The provision for loan losses was $150,000 for the six months ended March 31,
1996 compared to $200,000 for the same period in 1995, reflecting the relatively
stable level of non-performing loans in the current year period and more
favorable charge-off and recovery activity in the current year period compared
to the same period last year. Net recoveries were $59,000 for the six months
ended March 31, 1996 compared to net charge-offs of $8,000 for the six months
ended March 31, 1995.
Non-interest income for the six months ended March 31, 1996 increased $46,000 to
$404,000 from $358,000 for the six months ended March 31, 1995. This increase
was primarily attributed to increases in service charges and fee income relating
to volume.
Non-interest expense increased $143,000 to $2.4 million for the six months ended
March 31, 1996 from $2.3 million for the same period in 1995. The Association's
ratio of non-interest expense to average total assets, on an annualized basis,
decreased to 2.32% for the six months ended March 31, 1996 from 2.34% for the
same period in 1995. The increase in non-interest expense primarily reflects an
increase in compensation and benefits. Compensation and benefits expense
increased $114,000 to $1.2 million for the six months ended March 31, 1996 from
$1.1 million for the six months ended March 31, 1995. This increase was
primarily attributable to merit and performance-based increases for management
and staff members and an increase in the number of employees.
Income tax expense was $550,000, or 41.0% of pre-tax income for the six months
ended March 31, 1996 compared to $617,000 or 43.5% of pre-tax income for the
same period in 1995. The decrease in tax expense primarily reflects lower pre-
tax income.
12
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LIQUIDITY AND CAPITAL RESOURCES
The Association's primary sources of funds are deposits, principal and interest
payments on loans and securities and, to a lesser extent, borrowings and
proceeds from the sale of loans and securities. While maturities and scheduled
amortization of loans and securities provide an indication of the timing of the
receipt of funds, other sources of funds such as loan prepayments and deposit
inflows are less predictable due to the effects of changes in interest rates,
economic conditions and competition.
The Association is required to maintain an average daily balance of liquid
assets and short-term liquid assets as a percentage of net withdrawable deposit
accounts plus short-term borrowings, as defined by the regulations of the Office
of Thrift Supervision. The minimum required liquidity and short-term liquidity
ratios are currently 5.0% and 1.0% respectively. At March 31, 1996, the
Association's liquidity ratio was 14.3% and its short-term liquidity ratio was
4.2%. The level of liquid assets is dependent on the Association's operating,
financing and investing activities during any given period.
The primary investing activities of the Association are the origination of real
estate and other loans, and the purchase of mortgage-backed and other
securities. The Association had $1.0 million in borrowings at March 31, 1996
and has other sources of liquidity if a need for additional funds arises,
including the ability to obtain additional Federal Home Loan Bank advances of up
to approximately $50.0 million.
At March 31, 1996, the Association had outstanding loan origination commitments
of $1.9 million, unadvanced home equity lines of credit of $5.0 million,
undisbursed construction loans in process of $463,000 and commitments to
purchase securities of 2.0 million. The Association anticipates that it will
have sufficient funds available to meet its current origination and other
commitments. Certificates of deposit scheduled to mature in one year or less
from March 31, 1996 totaled $74.3 million. Based on the Association's most
recent experience and pricing strategy, management believes that a significant
portion of such deposits will remain with the Association.
At March 31, 1996, the Association exceeded all of its regulatory capital
requirements with a tangible capital level of 7.81% of total adjusted assets,
which is above the required level of 1.5%; core capital of 7.81% of total
adjusted assets, which is above the required level of 3.0%; and total risk based
capital of 19.33%, which is above the required level of 8.0%.
13
<PAGE>
On February 6, 1995, the New York Superintendent of Banks (the "Superintendent")
took possession of Nationar, a check clearing and trust company, freezing all of
Nationar's assets. On that date, the Association had a check clearing balance
of $841,000 due from Nationar. In April 1995, the Superintendent indicated in
an Interim Status Report that a review of potential claims against Nationar had
not yet been completed, and that any estimate of the net deficit of Nationar
(and potential creditor recoveries) may differ materially from the amounts shown
in the "Preliminary Statement of Net Assets and Liabilities in Liquidation for
Nationar" as of February 6, 1995 as a result of, among other things, the
ultimate realization on the assets of the estate, the total amount of claims
presented, the results of the claims reconciliation process, the valuation of
collateral, and the review and classification of priority claims. Under
applicable New York laws, there may be certain preferences that might affect the
percentage recovery of any particular institution. In July 1995, as required by
applicable New York law, the Association submitted a timely proof of claim
related to this balance to the Superintendent. Although at September 30, 1995,
the Superintendent had disposed of substantially all of the assets of Nationar
and received timely proofs of claims from numerous entities, including the
Association, the Superintendent had not completed the reconciliation of claims
or made any determination regarding the acceptance or rejection of such claims.
On such date, no estimate was available as to when this process would be
completed. In addition, certain out-of-state financial institutions have
objected to the acceptance by the Superintendent of all claims filed by
Nationar's former stockholders. The Association was not a stockholder of
Nationar. Based upon the information available, management believes that there
is at least a reasonable likelihood that the Association will not recover its
entire claim against Nationar. As a result, the Association has established a
valuation allowance of $168,000 against its claim, resulting in a net carrying
amount for the claim of $673,000, which is included in other assets on the
Association's balance sheets at September 30, 1995 and March 31, 1996. The
related provision for loss of $168,000 was included in other non-interest
expense in the Association's Statement of Income for the quarter and year ended
September 30, 1995. There can be no assurance, however, that additional
provisions for loss will not be necessary in the future as further developments
occur and additional information becomes available. Such additional provisions
for loss, if any, would have an adverse effect on the Association's results of
operations. Management believes, however, that any increase in the valuation
allowance will not have a material effect on the Association's liquidity.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 6, 1995, the New York Superintendent of Banks (the "Superintendent")
took possession of Nationar, a New York chartered bank that provided
correspondent banking and related services for various banking institutions,
including the Association. The Superintendent, under the supervision of the New
York Supreme Court (the "Court"), is now winding up Nationar's affairs and
completing its liquidation. At the time that Nationar was seized by the
Superintendent, the Association had a total of approximately $841,000 on deposit
with Nationar in an account which was used primarily to fund checks written by
the Association's customers and drafts drawn by the Association. At the time
Nationar was seized, all funds on deposit, together with other assets, were
frozen and ceased accruing interest. The total amount of the Association's
deposits that remain frozen in Nationar's estate is approximately $841,000. The
Association filed a timely claim for these funds with the Superintendent. On
April 26, 1995, the Superintendent submitted an Interim Status report ("Interim
Report") regarding the business and affairs of Nationar to the Court, in
accordance with the relevant provisions of the Banking Law of the State of New
York ("New York Banking Law"). Attached to the interim report was a preliminary
Statement of Net Assets and Liabilities in Liquidation for Nationar as of
February 6, 1995 ("Preliminary Statement"), which showed a net deficit of
liabilities in excess of assets of approximately $29.4 million. The
Superintendent indicated in the Interim Report that the review of potential
claims against Nationar is not yet complete and that any estimate of the net
deficit of Nationar (and potential creditor recoveries) may differ materially
from the amounts shown in the Preliminary Statement as a result of, among other
things, the ultimate realization on the assets of the estate, the total amount
of claims presented, the results of the claims reconciliation process, the
valuation of collateral and the review and classification of priority claims.
On August 3, 1995, the Superintendent submitted a Second Interim Status Report,
which reported a slight increase as of June 30, 1995 in the estimate of the
proceeds that will be realized from the liquidation of Nationar's assets. On
September 5, 1995, the Superintendent submitted a Third Interim Status Report
which reported an aggregate amount of $301 million in timely filed claims.
Subsequently, on February 6, 1996, the Superintendent issued a Fourth Interim
Status Report which reported $452 million in timely filed claims. The New York
Banking Law gives the deposit claims of mutual savings institutions a priority
in the distribution of the assets of a bank in liquidation. The Association
believes that, since it was a New York chartered mutual savings institution when
15
<PAGE>
it made the deposits for which it has filed claims, such claims are entitled to
this priority although the Association has not been advised by the
Superintendent that it is entitled to this priority. The amount available for
distribution to the Association and other creditors of Nationar will depend on
the amount of claims presented, the valuation of collateral, the ultimate
realization on Nationar's assets, and legal, accounting and other costs of the
administration of the Nationar liquidation. Each creditor's recovery also will
depend on the priorities of its respective claims. The Superintendent's
liquidation of Nationar is being supervised by the Court, which must approve the
Superintendent's determination of claim priorities. At this time, whether the
Superintendent and the Court will recognize this priority and, if recognized,
the position of this priority in relation to other asserted priorities, cannot
be determined. In addition, certain out-of-state financial institutions have
objected to the acceptance by the Superintendent of all claims filed by
Nationar's former stockholders. The Association was not a stockholder of
Nationar. Based upon these uncertainties, the Association has classified this
asset as substandard and has established a valuation allowance of $168,000
against any potential loss, representing approximately 20% of the Association's
deposit claim and resulting in a net carrying value of the claim of $673,000
which was included in other assets on the Association's balance sheets at
September 30, 1995 and March 31, 1996. Since the actual amount to be received
by the Association on account of its deposit claim cannot be predicted with any
degree of certainty, there can be no assurance that additional provisions for
loss will not be necessary in the future as further developments occur and
additional information becomes available. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" for a discussion of the impact of this claim on the
Association's financial condition, results of operations and liquidity.
The Association is involved as plaintiff or defendant in various other legal
proceedings arising in the normal course of its business. While the ultimate
outcome of these various legal proceedings cannot be predicted with certainty,
it is the opinion of management that the resolution of these legal actions
should not have a material effect on the Association's financial position,
results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES
None.
16
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Page Where
Located
in
Sequentially
Numbered
Exhibit No Name Document
---------- ---- ------------
27 Financial Data 20
Schedule
(b) Reports on Form 8-K
None
17
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
YONKERS FINANCIAL CORPORATION
Registrant
Date: May 14, 1996 /s/ Richard F. Komosinski
------------------ ----------------------------
Richard F. Komosinski,
President and Director
(Duly Authorized Officer)
Date: May 14, 1996 /s/ Joseph D. Roberto
------------------ ----------------------------
Joseph D. Roberto,
Vice President and Treasurer
(Principle Financial Officer)
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
quarterly report on Form 10-Q for the fiscal quarter ended March 31, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,284
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 3,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 100,712
<INVESTMENTS-MARKET> 16,836
<LOANS> 85,110
<ALLOWANCE> 928
<TOTAL-ASSETS> 212,248
<DEPOSITS> 194,624
<SHORT-TERM> 1,000
<LIABILITIES-OTHER> 19
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 16,598
<TOTAL-LIABILITIES-AND-EQUITY> 212,248
<INTEREST-LOAN> 3,720
<INTEREST-INVEST> 3,670
<INTEREST-OTHER> 171
<INTEREST-TOTAL> 7,561
<INTEREST-DEPOSIT> 3,946
<INTEREST-EXPENSE> 4,025
<INTEREST-INCOME-NET> 3,536
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,448
<INCOME-PRETAX> 1,342
<INCOME-PRE-EXTRAORDINARY> 1,342
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 792
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.32
<LOANS-NON> 3,466
<LOANS-PAST> 0
<LOANS-TROUBLED> 302
<LOANS-PROBLEM> 920
<ALLOWANCE-OPEN> 719
<CHARGE-OFFS> 16
<RECOVERIES> 75
<ALLOWANCE-CLOSE> 928
<ALLOWANCE-DOMESTIC> 928
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
