<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-27716
YONKERS FINANCIAL CORPORATION
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(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 Identification Number)
incorporation or organization)
6 EXECUTIVE PLAZA, YONKERS, NEW YORK 10701
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (914) 965-2500
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Classes of Common Stock Number of Shares Outstanding, June 30, 1996
- ------- -- ------ ----- ------ -- ------ ------------ ---- --- ----
$.01 Par Value 3,570,750
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YONKERS FINANCIAL CORPORATION
INDEX
-----
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets at June 30, 1996 and
September 30, 1995.................................... 1
Statements of Income for the Three and Nine
Months Ended June 30, 1996 and 1995................... 2
Statements of Cash Flows for the Three and
Nine Months Ended June 30, 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....................... 16
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.
YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands,except share data)
<TABLE>
<CAPTION>
At June 30, 1996 At September 30, 1995
--------------------- -------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $2,184 $3,161
Federal funds sold 4,000 -
Short-term investments 10,214 100
Securities:
Held to maturity, at amortized cost (fair value of $93,843
at June 30,1996 and $95,100 at September 30, 1995) 95,001 95,464
Available for sale, at fair value (amortized cost of $41,252
at June 30, 1996 and $21,114 at September 30, 1995) 40,998 20,877
------ ------
Total securities 135,999 116,341
------- -------
Loans, net:
Real estate mortgage loans 80,833 79,127
Consumer and commercial business loans 5,468 5,271
Allowance for loan losses (862) (719)
--- ---
Total loans, net 85,439 83,679
------ ------
Accrued interest receivable 2,073 1,801
Federal Home Loan Bank stock 1,112 1,112
Office properties and equipment,net 958 797
Other assets 847 1,292
--- -----
Total assets $242,826 $208,283
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $192,013 $187,277
Federal Home Loan Bank advances 1,000 4,295
Mortgage escrow funds 727 732
Other liabilities 65 214
-- ---
Total liabilities 193,805 192,518
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Stockholders' equity (note 2):
Preferred stock (par value $0.01 per share; 100,000
shares authorized; none issued or outstanding) 0 0
Common stock (par value $0.01 per share: 4,500,000
shares authorized; 3,570,750 shares issued and outstanding) 36 0
Additional paid-in capital 34,591 0
Common stock held by employee stock ownership plan (2,785) 0
Retained income, substantially restricted 17,331 15,907
Net unrealized loss on available-for-sale
securities, net of taxes (152) (142)
--- ---
Total stockholders' equity 49,021 15,765
------ ------
Total liabilities and stockholders' equity $242,826 $208,283
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
1
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<TABLE>
<CAPTION>
YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
-------------------- -------------------
1996 1995 1996 1995
------- ------ ------- -------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans $1,781 $1,726 $5,501 $5,004
Securities 2,067 1,722 5,737 5,031
Other earning assets 385 100 556 217
--- --- --- ---
Total interest and dividend income 4,233 3,548 11,794 10,252
----- ----- ------ ------
Interest expense:
Deposits 1,936 1,830 5,882 4,928
Borrowings and mortgage escrow 18 65 97 107
-- -- ---
Total interest expense 1,954 1,895 5,979 5,035
----- ----- ----- -----
Net interest income 2,279 1,653 5,815 5,217
Provision for loan losses 237 75 387 275
--- --- ---
Net interest income after provision for
loan losses 2,042 1,578 5,428 4,942
----- ----- ----- -----
Non-interest income:
Service charges and fees 208 192 602 546
Net gain on sales of securities 29 - 29
Net loss on sales of loans (5) - (1) (1)
Other 4 3 10 8
- - -- -
Total non-interest income 207 224 611 582
--- --- --- ---
Non-interest expense:
Compensation and benefits 662 527 1,855 1,606
Occupancy and equipment 157 134 468 418
Federal deposit insurance premiums 110 102 324 304
Data processing service fees 102 92 302 267
Other, net 117 245 647 810
--- --- --- ---
Total non-interest expense 1,148 1,100 3,596 3,405
----- ----- ----- -----
Income before income tax expense 1,101 702 2,443 2,119
Income tax expense 469 283 1,019 900
--- --- ----- ---
Net income $632 $419 $1,424 $1,219
==== ---- ====== ------
Earnings per share, from date of conversion (note 3) $0.19
=====
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
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YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended June 30,
-------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $1,424 $1,219
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Provision for loan losses 387 275
Accretion of deferred fees, discounts and premiums, net (349) (357)
Depreciation and amortization expense 139 127
Other adjustments, net (141) (1,324)
------- -------
Net cash provided by (used in) operating activities 1,460 (60)
------- -------
Cash flows from investing activities:
Purchases of securities:
Available for sale (25,687) (2,722)
Held to maturity (20,175) (6,037)
Proceeds from principal payments, maturities and calls of securities:
Available for sale 5,578 1,244
Held to maturity 20,865 3,852
Proceeds from sales of securities:
Available for sale - 438
Held to maturity - 847
Disbursements for loan originations (12,748) (11,182)
Principal collections on loans 9,243 9,261
Proceeds from sales of loans 1,696 90
Other investing cash flows, net (302) (171)
--- ---
Net cash used in investing activities (21,530) (4,380)
------- -------
Cash flows from financing activities:
Net increase in deposits 4,737 7,550
Net proceeds from sale of common stock 34,627 -
Common stock purchased by employees stock ownership plan (2,857) -
Repayments of Federal Home Loan Bank advances (3,295) -
Net decrease in mortgage escrow funds (5) (476)
---
Net cash provided by financing activities 33,207 7,074
------ -----
Net increase in cash and cash equivalents 13,137 2,634
Cash and cash equivalents at beginning of period 3,261 5,818
-----
Cash and cash equivalents at end of period $16,398 $8,452
------- -------
Supplemental cash flow information:
Interest paid $5,979 $5,035
Income taxes paid 706 1,275
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated 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 Holding
Company's principal business, subsequent to the Conversion, is the operation of
its wholly-owned subsidiary, the Association. 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. Collectively, the
Holding Company and the Association are referred to herein as the "Company".
The unaudited consolidated financial statements of the Company 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
interim periods presented. The results of operations for the three and nine
months ended June 30, 1996 are not necessarily indicative of the results of
operations which may be expected for the fiscal year ending 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 interim
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.
4
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(2) Offering
Concurrent with the Conversion, on April 18, 1996 the Holding Company
sold 3,570,750 shares of its common stock in a subscription and community
offering at a price of $10 per share, resulting in gross proceeds of $35.7
million (including $2.9 million attributable to the shares purchased by the
Holding Company's Employee Stock Ownership Plan). After deducting conversion
costs of $1.1 million, the net proceeds were $34.6 million. The Holding Company
used $17.3 million of the net proceeds to acquire all of the common stock issued
by the Association in the Conversion. The remaining proceeds were retained by
the Holding Company. On a consolidated basis, the net offering proceeds were
$31.7 million after deducting shares purchased by the Holding Company's Employee
Stock Ownership plan ("ESOP").
(3) Earnings Per Share
Earnings per share is based on net income for the period following the
Conversion divided by the weighted average number of common shares outstanding
(net income of $632,000 and 3,288,050 shares for the three months ended June 30,
1996). For purposes of determining the weighted average number of common shares
outstanding, ESOP shares committed to be released to participants as of the date
of the financial statements have been considered outstanding. ESOP shares that
have not been committed to be released have not been considered outstanding
in computing earnings per share.
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 June 30, 1996 and September 30, 1995
Total assets at June 30, 1996 increased $34.5 million, from $208.3 million at
September 30, 1995 to $242.8 million at June 30, 1996, due primarily to the net
reinvestment of the proceeds received from the subscription offering of $31.7
million. The Holding Company concluded its stock offering on April 18, 1996, at
which time the Association became a wholly owned subsidiary of the Holding
Company. Deposit liabilities increased $4.7 million to $192.0 million at June
30, 1996 from $187.3 million at September 30, 1995, primarily due to a $6.0
million combined increase in NOW accounts and money market accounts and a $3.8
million increase in certificates of deposit, partially offset by a decrease in
regular savings of $4.7 million.
Funds provided by the Conversion and deposit growth were primarily invested in
securities and short-term investments. Securities increased $19.7 million from
$116.3 million at September 30, 1995 to $136.0 million at June 30, 1996. Short-
term investments increased from $100,000 at September 30, 1995 to 10.2 million
at June 30, 1996, reflecting an investment in a money market mutual fund during
the quarter ending June 30, 1996. Cash and due from banks decreased $1.0 million
from $3.2 million at September 30, 1995 to $2.2 million at June 30, 1996. Net
loans increased $1.7 million from $83.7 million at September 30, 1995 to $85.4
million at June 30, 1996.
Compared to September 30, 1995 the securities portfolio at June 30, 1996
reflects a $20.1 million increase in available-for-sale securities and a
$463,000 decrease in held-to-maturity securities. The decrease in
held-to-maturity securities primarily reflects $20.9 million in principal
payments and maturities, partially offset by purchases of $20.2 million. The
increase in available-for-sale securities reflects purchases of $25.7 million,
partially offset by %5.6 million in principal payments and maturities.
Available-for-sale securities represented 30.1% of the total securities
portfolio at June 30, 1996 compared to 17.9% at September 30, 1995. Management
increased the level of available-for-sale securities to enhance the Company's
overall financial flexibility.
6
<PAGE>
The increase in net loans of $1.7 million was primarily the result of increases
of $2.0 million in commercial real estate loans, $334,000 in construction loans
and $196,000 in consumer and commercial business loans. These increases were
partially offset by decreases of $359,000 in one-to-four- family mortgage loans,
$158,000 in land loans, $117,000 in multi-family loans and an increase of
$143,000 in the allowance for loan losses.
Stockholders' equity increased $33.2 million from $15.8 million at September 30,
1996 to $49.0 million at June 30, 1996. The increase is primarily attributable
to capital of $31.8 million raised in the conversion (net offering proceeds of
$34.6 million less ESOP shares of $2.8 million) and net income of $1.4 million
for the nine-month period. The ratio of stockholders' equity to total assets at
June 30, 1996 was 20.19%, as compared to 7.57% at September 30, 1995.
Total non-performing assets decreased $664,000, from $3.8 million at September
30, 1995 to $3.1 million at June 30, 1996 as a result of a $828,000 reduction in
non-accrual loans past due ninety days or more partially offset by a $164,000
increase in net real estate owned. The reduction in non-accrual loans reflects
the settlement of the Company's participation interest in a loan on a co-op
located in Kew Gardens, New York originated by the Thrift Association Service
Corporation ("TASCO") in 1986, as well as the transfer of three properties to
real estate owned. The net book value of the Association's interest in the
participation loan was $309,000. The ratio of non-performing loans and real
estate owned to total assets decreased to 1.27% at June 30, 1996 from 1.80% at
September 30, 1995. The allowance for loan losses increased from $719,000 at
September 30, 1995 to $862,000 at June 30, 1996 as a result of additional loan
loss provisions of $387,000 less charge-offs (net of recoveries) of $244,000.
The ratio of the allowance for loan losses to non-performing loans increased to
31.90% at June 30, 1996 from 20.37% at September 30, 1995, and the ratio of the
allowance to total loans increased to 1.00% at June 30, 1996 from 0.84% at
September 30, 1995.
Comparison of Operating Results for the Three-Month Periods Ended June 30, 1996
and 1995
Net income for the three months ended June 30, 1996 was $632,000 (or $0.19 per
common share) compared to $419,000 for the same period in 1995. The $213,000
increase in net income was attributable to a $626,000 increase in net interest
income, partially offset by a $162,000 increase in the
7
<PAGE>
provision for loan loss, a $48,000 increase non-interest expense, a $17,000
decrease in non-interest income and a $186,000 increase in tax expense.
Net interest income, or the difference between interest and dividend income and
interest expense, increased $626,000 from $1.7 million for the three months
ended June 30, 1995 to $2.3 million for the three months ended June 30, 1996.
This increase was attributable to the positive effect of an increase in average
interest-earning assets partially offset by a 9 basis point decrease in the
interest rate spread to 2.99% from 3.08% for the same period in 1995.
Interest and dividend income totaled $4.2 million for the three months ended
June 30, 1996; an increase of $685,000 compared to interest and dividend income
of $3.5 million for the three months ended June 30, 1995. This increase
reflects a $43.3 million increase in total average interest-earning assets
partially offset by a 16 basis point decrease in the average yield on such
assets to 7.09% for the three months ended June 30, 1996 from 7.25% for the same
period in the prior year. Average interest-earning assets increased primarily
as a result of investing the net proceeds from the stock offering. The decrease
in the yield on average assets reflects the higher concentration of shorter term
and adjustable rate assets (short-term investments and available-for-sale
securities) which carry a lower yield. Interest income on loans increased by
$55,000 to to $1.8 million for the three months ended June 30, 1996 from $1.7
million for the three months ended June 30, 1995, reflecting a $6.2 million
increase in the average balance of loans, partially offet by a 37 basis point
decrease in the average yield. The increase in the average balance of loans was
primarily attibutable to an increase in commercial real estate and land loans.
The decrease in the average yield on loans was primarily attributable to
downward rate repricings on adjustable-rate loans. On a combined basis,
interest and dividend income on mortgage-backed and other securities increased
$345,000 to $2.1 million for the three months ended June 30, 1996 from $1.7
million for the three months ended June 30, 1995. This increase was due to (1)
a $190,000 increase in interest on other securities, attributable to an $8.5
million increase in the average balance and a 44 basis point increase in the
average yield, and (2) a $155,000 increase in interest on mortgage-backed
securities attributable to a $10.2 million increase in the average balance,
partially offset by a 7 basis point decrease in the average yield. Interest and
dividend income on other earning assets increased $285,000 primarily
attributable to conversion proceeds temporarily invested in federal funds and
other short-term liquid assets.
8
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Interest expense on deposits increased $106,000 to $1.9 million for the three
months ended June 30, 1996 from $1.8 million for the three months ended June 30,
1995. This increase reflects a $9.0 million increase in the average balance of
interest-bearing deposits and a 3 basis point increase in the average rate paid
on such liabilities to 4.09% for the three months ended June 30, 1996 from 4.06%
for the same period in the prior year. The increase in average interest-bearing
deposits was primarily attributable to a $10.1 million increase in the average
balance of savings certificate accounts to $105.9 million from $95.8 million,
partially offset by a $6.0 million decrease in the average balance of regular
savings accounts to $49.7 million from $55.7 million.
The provision for loan losses increased to $237,000 for the three months ended
June 30, 1996 from $75,000 for the three months ended June 30, 1995. This
increase was primarily attributable to $310,000 in charge offs for the three
months ended June 30, 1996, compared to no charge-offs for the same period in
1995, and management's decision to substantially replenish the allowance for
loan losses. The allowance for loan losses was $862,000 or 1.00% of total loans
at June 30, 1996, compared to $928,000 or 1.08% of total loans at March 31, 1996
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 31.90% at June 30, 1996,
compared to 26.77% at March 31, 1996 and 20.37% at September 30, 1995. Included
in the charge-offs for the quarter ended June 30, 1996 is $203,000 relating to
the settlement of the Company's non-performing participation interest in the
previously mentioned TASCO loan, as well as $97,000 for three properties that
were transferred into real estate owned during the period. The Company's
allocation of its allowance for loan losses at March 31, 1996 included $155,000
for the TASCO loan and $91,000 for the three foreclosed properties. Although the
Company 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.
9
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The following table sets forth certain asset quality ratios and other data at
the dates indicated:
<TABLE>
<CAPTION>
June 30, 1996 March 31, 1996 September 30, 1995
------------- -------------- ------------------
<S> <C> <C> <C>
(Dollars in thousands)
Non-performing loans................................ $2,702 $3,466 $3,530
Real estate owned, net.............................. 391 - 227
------ ------ ------
Total non-performing assets......................... $3,093 $3,466 $3,757
====== ====== ======
Non-performing loans to total loans................. 3.13% 4.12% 4.15%
Non-performing assets to total assets............... 1.27% 1.63% 1.80%
Allowance for loan losses to:
Non-performing loans............................ 31.90% 26.77% 20.37%
Total loans..................................... 1.00% 1.08% 0.84%
</TABLE>
Non-interest income for the three months ended June 30, 1996 decreased $17,000
to $207,000 from $224,000 for the three months ended June 30, 1995. This
decrease was primarily attributed to a decrease in net gains on the sale of
securities of $29,000 and an increase in the net loss on the sale of loans of
$5,000, partially offset by an increase in service charges and fee income,
relating to volume, of $16,000.
Non-interest expense for the three months ended June 30, 1996 increased $48,000
compared to the same period in 1995. The Association's ratio of non-interest
expense to average total assets, on an annualized basis, decreased to 1.89% for
the three months ended June 30, 1996 from 2.20% for the same period in 1995. The
increase in non-interest expense primarily reflects increases in compensation
and benefits expense and in occupancy and equipment expense, partially offset by
a decrease in other non-interest expense. Compensation and benefits expense
increased $135,000 to $662,000 for the three months ended June 30, 1996 from
$527,000 for the three months ended June 30, 1995. This increase was primarily
attributable to the recognition of the expense associated with the ESOP, merit
and performance-based increases for management and staff members, and an
increase in the number of employees. Occupancy and equipment expense
10
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increased $23,000 to $157,000 for the three months ended June 30, 1996 from
$134,000 for the three months ended June 30, 1995. This increase was primarily
attributed to the leasing of additional office space for corporate offices.
Other non-interest expenses decreased $128,000 to $117,000 for the three months
ended June 30, 1996 from $245,000 for the three months ended June 30, 1995. This
decrease primarily reflects the collection of $835,000 in settlement of the
Company's Nationar claim which had a net carrying amount of $673,000 after
deducting an allowance for losses of $168,000 established during the three
months ended September 30, 1995. The difference of $162,000 between the carrying
amount and the amount received from Nationar was included as a reduction in
other non-interest expense for the current quarter. See "Legal Proceedings" in
Part II for further information concerning Nationar.
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 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 Associaton'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 0.23% 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 increased $186,00 from $283,000 for the three months ended
June 30, 1995 to $469,000 for the three months ended June 30, 1996, primarily
reflecting higher pre-tax income.
11
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Comparison of Operating Results for the Nine-Month Periods Ended June 30, 1996
and 1995
Net income for the nine months ended June 30, 1996 was $1.4 million compared to
$1.2 million for the nine months ended June 30, 1995. The $205,000 increase in
net income was attributable to a $598,000 increase in net interest income, and a
$29,000 increase in non-interest income, partially offset by a $191,000 increase
in non-interest expense, a $112,000 increase in the provision for loan losses
and a $119,000 increase in income tax expense.
Net interest income increased $598,000 from $5.2 million for the nine months
ended June 30, 1995 to $5.8 million for the nine months ended June 30, 1996.
The positive effect of an increase in average earning assets was partially
offset by a 27 basis point decrease in the interest rate spread to 3.06% for the
nine months ended June 30, 1996 from 3.33% for the same period in 1995.
Interest and dividend income totaled $11.8 million for the nine months ended
June 30, 1996, an increase of $1.5 million compared to interest and dividend
income of $10.3 million for the nine months ended June 30, 1995. This increase
reflects a $23.6 million increase in total average interest-earning assets and
an 18 basis point increase in the average yield on such assets to 7.24% for the
nine months ended June 30, 1996 from 7.06% for the same period in the prior
year. Interest income on loans increased by $497,000 to $5.5 million for the
nine months ended June 30, 1996 from $5.0 million for the nine months June 30,
1995, reflecting a $5.8 million increase in the average balance of loans and a
20 basis point increase in the average yield. The increase in the average
balance of loans was primarily attributable to increases in commercial real
estate loans. On a combined basis, interest and dividend income on mortgage-
backed and other securities increased $706,000 to $5.7 million for the nine
months ended June 30, 1996 from $5.0 million for the nine months ended June 30,
1995. This increase was due to (1) a $466,000 increase in interest on other
securities, attributable to a $6.6 million increase in the average balance and a
42 basis point increase in the average yield and (2) a $240,000 increase in
interest on mortgage-backed securities, attributable to a $4.3 million increase
in the average balance and an 8 basis point increase in the average yield.
Interest and dividend income on other earning assets increased $339,000
primarily attributable to conversion proceeds temporarily invested in federal
funds and other short-term liquid assets.
12
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Interest expense on deposits increased $954,000 to $5.9 million for the nine
months ended June 30, 1996 from $4.9 million for the nine months ended June 30,
1995. This increase reflects an $11.5 million increase in the average
balance of interest-bearing deposits and a 45 basis point increase in the
average rate paid on such liabilities to 4.17% for the nine months ended June
30, 1996 from 3.72% for the same period in the prior year. The increase in
average interest-bearing deposits was primarily attributable to a $17.9 million
increase in the average balance of savings certificate accounts to $104.8
million from $86.9 million and a $2.9 million increase in NOW and money market
accounts, partially offset by a $9.3 million decrease in the average balance of
regular savings accounts to $51.9 million from $61.2 million. The overall
increase in the average rate paid on deposits for the nine months ended June 30,
1996 compared to the same period in the prior year reflects the foregoing shift
from generally lower rate savings accounts to generally higher rate certificate
accounts.
The provision for loan losses was $387,000 for the nine months ended June 30,
1996 compared to $275,000 for the same period in 1995. Net charge-offs were
$244,000 for the nine months ended June 30, 1996 compared to net charge-offs of
$5,000 for the nine months ended June 30, 1995.
Non-interest income for the nine months ended June 30, 1996 increased $29,000 to
$611,000 from $582,000 for the nine months ended June 30, 1995. This increase
was primarily attributed to an increase in service charges and fee income,
relating to volume, of $56,000, partially offset by a decrease in net gains on
sale of securities of $29,000.
Non-interest expense increased $191,000 to $3.6 million for the nine months
ended June 30, 1996 from $3.4 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 2.17% for the nine months ended June 30, 1996
from 2.30% for the same period in 1995. The increase in non-interest expense
primarily reflects increases in compensation and benefits expense and in
occupancy and equipment expense, partially offset by a decrease in other non-
interest expense. Compensation and benefits expense increased $249,000 to $1.9
million for the nine months ended June 30, 1996 from $1.6 million for the nine
months ended June 30, 1995. This increase was primarily attributable to the
recognition of the expense associated with the ESOP, merit and performance-based
increases for management and staff members, and an increase in the number of
employees. Occupancy and equipment expense increased $50,000 to $468,000 for the
nine months ended June
13
<PAGE>
30, 1996 from $418,000 for the nine months ended June 30, 1995. This increase
was primarily attributed to the leasing of additional office space for corporate
offices. Other non-interest expense decreased $163,000 to $647,000 for the nine
months ended June 30, 1996 from $810,000 for the nine months ended June 30,
1995. This decrease primarily reflects the previously-described $162,000 credit
to current year expense for the recovery of the Company's Nationar claim.
Income tax expense increased $119,000 from $900,000 for the nine months ended
June 30, 1995 to $1.0 million for the nine months ended June 30, 1996, primarily
reflecting higher pre-tax income.
Liquidity and Capital Resources
The Company'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 June 30, 1996,
the Associations' liquidity ratio was 13.7% and its short-term liquidity ratio
was 4.8%. 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 Company are the origination of real
estate and other loans, and the purchase of mortgage-backed and other
securities. The Company had $1.0 million in borrowings at June 30, 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 June 30, 1996, the Company had outstanding loan origination commitments of
$596,000, unadvanced home equity lines of credit of $4.7 million and undisbursed
construction loans in process of $353,000. The Company anticipates that
14
<PAGE>
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 June 30, 1996 totaled $68.7 million. Based on the Company's most
recent experience and pricing strategy, management believes that a significant
portion of such deposits will remain with the Association.
At June 30, 1996, the Association exceeded all of its regulatory capital
requirements with a tangible capital level of 14.80% of total adjusted assets,
which is above the required level of 1.5%; core capital of 14.80% of total
adjusted assets, which is above the required level of 1.5%; core capital of
14.80% of total adjusted assets, which is above the required level of 3.0%; and
total risk-based capital of 38.23%, which is above the required level of 8.0%.
15
<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. 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 Association filed a timely claim for
these funds with the Superintendent at such time. The Association had
classified this asset as substandard and 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. In June 1996, the Association
recovered $835,000 from Nationar which represents the full amount of its claim
less a processing fee of approximately $6,000. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Comparison of
Operating Results for the three-month periods ended June 30, 1996 and 1995."
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 Company's financial position, results
of operations or liquidity.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
16
<PAGE>
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
Exhibit No. Name
----------- ----
27 Financial Data Schedule
(b) Reports in 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: /s/ Richard F. Komosinski
---------------------- -------------------------------------------
Richard F. Komosinski,
President and Director
(Duly Authorized Officer)
Date: /s/ Joseph D. Roberto
----------------------- --------------------------------------------
Joseph D. Roberto,
Vice President and Treasurer
(Principal Financial Officer)
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
The schedule contians summary financial information extracted from the quarterly
report on Form 10-Q for the fiscal quarter ended June 30, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,184
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 4,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 95,001
<INVESTMENTS-MARKET> 40,998
<LOANS> 86,301
<ALLOWANCE> 862
<TOTAL-ASSETS> 242,826
<DEPOSITS> 192,013
<SHORT-TERM> 1,000
<LIABILITIES-OTHER> 65
<LONG-TERM> 0
0
0
<COMMON> 36
<OTHER-SE> 48,985
<TOTAL-LIABILITIES-AND-EQUITY> 242,826
<INTEREST-LOAN> 5,501
<INTEREST-INVEST> 5,737
<INTEREST-OTHER> 556
<INTEREST-TOTAL> 11,794
<INTEREST-DEPOSIT> 5,882
<INTEREST-EXPENSE> 5,979
<INTEREST-INCOME-NET> 5,815
<LOAN-LOSSES> 387
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 3,596
<INCOME-PRETAX> 2,443
<INCOME-PRE-EXTRAORDINARY> 2,443
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,424
<EPS-PRIMARY> 19
<EPS-DILUTED> 19
<YIELD-ACTUAL> 7.24
<LOANS-NON> 2,702
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 920
<ALLOWANCE-OPEN> 719
<CHARGE-OFFS> 326
<RECOVERIES> 82
<ALLOWANCE-CLOSE> 862
<ALLOWANCE-DOMESTIC> 862
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
