UNITED STATES
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, 1999
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
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6 EXECUTIVE PLAZA, YONKERS, NEW YORK 10701
- --------------------------------------------------------------------------------
(Address of principal executive offices)
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, 1999
$0.01 Par Value 2,587,739
<PAGE>
YONKERS FINANCIAL CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 1999
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at June 30, 1999
and September 30, 1998................................... 2
Consolidated Statements of Income for the
Three and Nine Months
Ended June 30, 1999 and 1998............................. 3
Consolidated Statement of Changes in Stockholders'
Equity for the Nine Months Ended June 30, 1999........... 4
Consolidated Statements of Cash Flows for the Nine
Months Ended June 30, 1999 and 1998...................... 5
Notes to Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.............................................. 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................... 24
Item 2. Changes in Securities..................................... 24
Item 3. Defaults Upon Senior Securities........................... 24
Item 4. Submission of Matters to a Vote of Security Holders....... 25
Item 5. Other Information......................................... 25
Item 6. Exhibits and Reports on Form 8-K.......................... 25
Signature Page............................................ 26
<PAGE>
<TABLE>
<CAPTION>
PART I - ITEM 1
YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, September 30,
1999 1998
-------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 5,481 $ 3,195
Short-term investments -- 1,000
-------- ---------
Total cash and cash equivalents 5,481 4,195
-------- ---------
Securities:
Available for sale, at fair value
(amortized cost of $118,400 at
June 30, 1999 and $123,317 at
September 30, 1998) 114,931 125,225
Held to maturity, at amortized cost
(fair value of $24,367 at
June 30, 1999 and $43,948 at 24,291 43,303
September 30, 1998) -------- --------
Total securities 139,222 168,528
-------- --------
Real estate mortgage loans held for 12,052 13,334
sale at lower of cost or market value -------- --------
Loans receivable, net:
Real estate mortgage loans 215,632 177,783
Consumer and commercial business 7,964 7,544
loans
Allowance for loan losses (1,489) (1,302)
-------- --------
Total loans receivable, net 222,107 184,025
-------- --------
Accrued interest receivable 2,475 2,791
Federal Home Loan Bank ("FHLB") stock 6,426 6,426
Office properties and equipment, net 1,847 1,258
Other assets 2,990 2,467
-------- --------
Total assets $392,600 $383,024
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $262,451 $231,181
Securities repurchase agreements 71,012 107,790
FHLB advances 19,000 --
Other liabilities 1,998 2,251
-------- --------
Total liabilities 354,461 341,222
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock (par value $0.01 per
share; 100,000 shares authorized;
none issued or outstanding) -- --
Common stock (par value $0.01 per
share: 4,500,000 shares authorized;
3,570,750 shares issued) 36 36
Additional paid-in capital 35,166 35,044
Unallocated common stock held by
employee stock ownership plan ("ESOP") (1,928) (2,142)
Unamortized awards of common stock
under management recognition plan
("MRP") (694) (846)
Treasury stock, at cost (983,011
shares at June 30, 1999 and
844,511 shares at September
30, 1998) (15,510) (13,189)
Retained income, substantially 23,151 21,754
restricted
Accumulated other comprehensive (2,082) 1,145
(loss) income (note 2) -------- --------
Total stockholders' equity 38,139 41,802
-------- --------
$392,600 $383,024
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<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,
-------------------- -------------------
1999 1998 1999 1998
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans $ 4,190 $ 3,362 $ 11,734 $ 9,580
Securities 2,306 2,942 7,488 8,814
Other earning assets 153 125 520 335
-------- ------- -------- -------
Total interest and dividend
income 6,649 6,429 19,742 18,729
-------- ------- -------- -------
Interest expense:
Deposits 2,392 2,298 7,113 6,698
Securities repurchase
agreements 1,048 1,321 3,364 3,158
FHLB advances 145 99 452 186
-------- ------- -------- -------
Total interest expense 3,585 3,718 10,929 10,042
-------- ------- -------- -------
Net interest income 3,064 2,711 8,813 8,687
Provision for loan losses 50 75 200 325
-------- ------- -------- -------
Net interest income after
provision for loan losses 3,014 2,636 8,613 8,362
Non-interest income:
Service charges and fees 298 242 824 675
Net (loss) gain on sales of
real estate mortgage
loans held for sale (65) 79 181 273
Net gain on sales of
securities 25 195 98 143
Other 16 18 107 48
-------- ------- -------- -------
Total non-interest income 274 534 1,210 1,139
-------- ------- -------- -------
Non-interest expense:
Compensation and benefits 1,194 1,011 3,465 2,978
Occupancy and equipment 323 256 874 691
Data processing service fees 154 156 473 415
Federal deposit insurance
costs 36 33 104 97
Other 555 496 1,690 1,579
-------- ------- -------- -------
Total non-interest expense 2,262 1,952 6,606 5,760
-------- ------- -------- -------
Income before income tax
expense 1,026 1,218 3,217 3,741
Income tax expense 369 491 1,226 1,518
Net income $ 657 $ 727 $ 1,991 $ 2,223
======== ======= ======== =======
Earnings per common share(note3):
Basic $ 0.28 $ 0.28 $ 0.82 $ 0.84
Diluted 0.27 0.27 0.81 0.82
======== ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share data)
Unallocated Unamortized
Common Awards of Accumulated
Additional Stock Common Other Total
Common Paid-in Held Stock Treasury Retained Comprehensive Stockholders'
Stock Capital by ESOP Under MRP Stock Income Income(loss) Equity
----- ------- ------- --------- ----- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1998 $ 36 $35,044 $(2,142) $ (846) $(13,189) $21,754 $ 1,145 $ 41,802
Net income -- -- -- -- -- 1,991 -- 1,991
Dividends paid ($0.24 per share) -- -- -- -- -- (594) -- (594)
Treasury stock purchased -- -- -- -- (2,385) -- -- (2,385)
Repurchased stock awarded under MRP -- -- -- (64) 64 -- -- --
(5,000 shares)
Amortization of MRP awards -- -- -- 216 -- -- -- 216
Tax benefits from vested
MRP awards -- 12 -- -- -- -- -- 12
ESOP shares released for
allocation (21,428 shares) -- 110 214 -- -- -- -- 324
Decrease in net unrealized gain on
available-for-sale securities, -- -- -- -- -- -- (3,227) (3,227)
net of tax ----- ------- ------- -------- -------- ------ ----------- -------
Balance at June 30, 1999 $ 36 $35,166 $(1,928) $ (694) $(15,510) $23,151 $ (2,082) $38,139
===== ======= ======= ======== ======== ======= =========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,991 $ 2,223
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 200 325
ESOP and MRP expense 540 624
Depreciation and amortization expense 262 192
Amortization of deferred fees, discounts
and premiums, net 225 57
Net gain on sales of real estate mortgage
loans held for sale (181) (273)
Net (gain) loss on sales of securities (98) (143)
Other adjustments, net 1,887 (227)
-------- --------
Net cash provided by operating activities 4,826 2,778
-------- --------
Cash flows from investing activities:
Purchases of available-for-sale securities (49,302) (80,231)
Proceeds from principal payments, maturities
and calls of securities:
Available-for-sale 36,379 19,858
Held-to-maturity 19,004 21,513
Proceeds from sales of securities:
Available-for-sale 17,647 22,863
Held-to-maturity -- 630
Disbursements for loan originations (100,005) (126,557)
Principal collections on loans 28,731 16,839
Proceeds from sales of loans 34,201 42,599
Purchases of FHLB stock -- (3,390)
Other investing cash flows (708) (168)
-------- --------
Net cash used in investing activities (14,053) (86,044)
-------- --------
Cash flows from financing activities:
Net increase in deposits 31,270 24,341
Net(decrease) increase in borrowings
with original terms of three months or less:
Securities repurchase agreements (32,178) 9,333
FHLB advances 4,000 1,000
Proceeds from longer-term borrowings 10,400 56,461
Common stock repurchased (2,385) (4,787)
Dividends paid (594) (556)
-------- --------
Net cash provided by financing
activities 10,513 85,792
-------- --------
Net increase in cash and cash equivalents 1,286 2,526
Cash and cash equivalents at beginning of period 4,195 3,593
-------- --------
Cash and cash equivalents at end of period $ 5,481 $ 6,119
======== ========
Supplemental information:
Interest paid $ 10,701 $ 9,843
Income taxes paid 741 1,461
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(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 (the "Conversion"). Concurrent with the Conversion,
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 net proceeds of
$34.6 million. The assets of the Holding Company consist of the stock of the
Association, certain short-term and other investments, and a loan to its
Employee Stock Ownership Plan (the "ESOP"). Collectively, the Holding Company
and the Association are referred to herein as the "Company".
On March 31, 1999 the Association established a real estate investment trust,
Yonkers REIT, Inc. (the "REIT"), a wholly-owned subsidiary. On such date, $119.3
million in real estate loans was transferred from the Association to the REIT.
On June 30, 1999, $114.5 million in real estate loans were held by the REIT. The
assets transferred to the REIT are viewed by regulators as part of the
Association's assets in consolidation.
The unaudited consolidated financial statements included herein have been
prepared in conformity with generally accepted accounting principles. In the
opinion of management, the unaudited consolidated 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 nine months ended June 30,
1999 are not necessarily indicative of the results of operations which may be
expected for the fiscal year ending September 30, 1999.
Certain financial information and footnote disclosures normally included in
annual financial statements prepared in conformity with generally accepted
accounting principles have been omitted pursuant to the rules and regulations of
the Securities and Exchange Commission. The unaudited interim consolidated
financial statements presented herein should be read in conjunction with the
annual consolidated financial statements of the Company as of and for the fiscal
year ended September 30, 1998, included in the Form 10-K.
<PAGE>
(2) COMPREHENSIVE INCOME
During the quarter ended December 31, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income (and its components) in financial statements. The standard does not,
however, specify when to recognize or how to measure items that make up
comprehensive income. Comprehensive income represents net income and certain
amounts reported directly in stockholders' equity, such as the net unrealized
gain or loss on securities available for sale. While SFAS No. 130 does not
require a specific reporting format, it does require that an enterprise report
an amount representing total comprehensive income for the period. Total
comprehensive income (loss) for the nine months ended June 30, 1999 was ($1.2)
million, consisting of $2.0 million in net income less a net decrease of $3.2
million in the after-tax net unrealized gain on available-for-sale securities.
For the nine months ended June 30, 1998, total comprehensive income of $2.1
million consisted of net income of $2.2 million less a net decrease of $101,000
in the after-tax net unrealized gain on available-for-sale securities.
(3) EARNINGS PER SHARE
The Company reports both basic and diluted earnings per share ("EPS") in
accordance with SFAS No. 128, "Earnings per Share". Basic EPS excludes dilution
and is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock (such as stock options) were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Diluted EPS is computed by dividing
net income by the weighted average number of common shares outstanding for the
period plus common-equivalent shares computed using the treasury stock method.
Unallocated ESOP shares that have not been committed to be released to
participants are excluded from outstanding shares in computing both basic and
diluted EPS.
<PAGE>
The following is a summary of the number of shares utilized in the Company's
EPS calculations for the three and nine months ended June 30, 1999 and 1998. For
purposes of computing basic EPS, net income applicable to common stock equaled
net income for both periods presented.
For The Three For the Nine
Months Months
Ended June 30, Ended June 30,
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
(in thousands)
Weighted average common shares
outstanding for computation of
basic EPS (1) 2,383 2,578 2,429 2,656
Common-equivalent shares due to
the dilutive effect of stock
options and MRP awards (2) 53 86 35 57
------- ------- ------- -------
Weighted average common shares for
computation of diluted EPS 2,436 2,664 2,463 2,713
======= ======= ======= =======
(1) Excludes unvested MRP awards and unallocated ESOP shares that have not been
committed to be released.
(2) Computed using the treasury stock method.
<PAGE>
PART I. ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"project", "believe" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any forward-looking statements, which speak only as of
the date made, and to advise readers that various factors, including regional
and national economic conditions, changes in levels of market interest rates,
credit risks of lending activities, and competitive and regulatory factors,
could affect the Company's financial performance and could cause actual results
for future periods to differ materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1999 AND SEPTEMBER 30, 1998
Total assets at June 30, 1999 amounted to $392.6 million, an increase of
$9.6 million from $383.0 million at September 30, 1998. Asset growth during the
period related primarily to increased loan volume funded with deposits,
reflecting the continued growth of the Company's retail franchise.
Securities at June 30, 1999 decreased $29.3 million to $139.2 million from
$168.5 million at September 30, 1998, while cash and cash equivalents increased
$1.3 million to $5.5 million at June 30, 1999 from $4.2 million at September 30,
1998. Overall, total loans (loans receivable and mortgage loans held for sale)
increased $36.8 to $234.1 million at June 30, 1999 from $197.3 million at
September 30, 1998. The loan growth during the nine months ended June 30, 1999
represents loan originations of $100.0 million, offset by principal collections
of $28.8 million, loans sold of $34.2 million, an increase in the allowance for
loan losses of $187,000 and a provision for losses on real estate mortgage loans
held for sale of $97,000. The portfolio growth in the nine-month period
primarily reflects increases of $39.1 million in one-to four-family mortgage
loans, $8.5 million in commercial real estate loans, $3.1 million in
multi-family loans, and $503,000 in consumer loans, partially offset by a
decrease of $211,000 in construction loans.
<PAGE>
Deposit liabilities increased $31.3 million to $262.5 million at June 30,
1999 from $231.2 million at September 30, 1998. The increase in deposit
liabilities primarily reflects growth in the Company's in-store branch network
of $17.8 million along with aggressive cross-selling and quality customer
service. Borrowings decreased $17.8 million to $90.0 million at June 30, 1999
from $107.8 million at September 30, 1998.
Stockholders' equity amounted to $38.1 million at June 30, 1999 a $3.7
million decrease from September 30, 1998. The decrease is primarily attributable
to a decrease of $3.2 million in the after-tax net unrealized gain on
available-for-sale securities and treasury stock repurchases of $2.4 million,
offset by net income retained after dividends of $1.4 million and a combined
increase of $552,000 relating to the employee stock ownership plan and the
management recognition plan. The ratio of stockholders' equity to total assets
decreased to 9.71% at June 30, 1999 from 10.91% at September 30, 1998. Book
value per share (computed based on total shares issued less treasury shares) was
$14.74 at June 30, 1999, a decrease from $15.33 at September 30, 1998. See
"Liquidity and Capital Resources" for information regarding the Association's
regulatory capital amounts and ratios.
ANALYSIS OF NET INTEREST INCOME
The following tables set forth the Company's average balance sheets, average
yields and costs (on an annualized basis), and certain other information for the
three and nine months ended June 30, 1999 and 1998. The yields and costs were
derived by dividing interest income or expense by the average balance of assets
or liabilities, respectively, for the periods shown. Substantially all average
balances were computed based on daily balances. Interest income includes the
effect of deferred fees, discounts and premiums which are considered yield
adjustments.
<PAGE>
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED JUNE 30,
-----------------------------------------------------------------------------------
1999 1998
-------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------- --------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Interest-earning assets:
Loans (1) $226,268 $ 4,190 7.41% $183,524 $ 3,362 7.33%
Mortgage-backed securities (2) 105,577 1,675 6.35 111,239 1,862 6.70
Other securities (2) 36,183 631 6.98 62,835 1,080 6.88
Other earning assets 11,844 153 5.17 8,199 125 6.10
-------- --------- -------- -------
Total interest-earning assets 379,872 $ 6,649 7.00 365,797 $ 6,429 7.03
========= =======
Allowance for loan losses (1,467) (1,241)
Non-interest-earning assets 13,061 8,000
-------- --------
Total assets $391,466 $372,556
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing liabilities:
NOW, club and money market $ 57,772 $ 330 2.28% $ 49,639 $ 205 1.65%
accounts
Regular savings accounts (3) 49,369 230 1.86 45,000 271 2.41
Savings certificate accounts 148,168 1,832 4.95 126,008 1,822 5.78
-------- --------- -------- -------
Total interest-bearing 255,309 2,392 3.75 220,647 2,298 4.17
deposits
Borrowings 87,682 1,193 5.44 98,477 1,420 5.77
-------- --------- -------- -------
Total interest-bearing 342,991 $ 3,585 4.18 319,124 $ 3,718 4.66
liabilities ========= =======
Non-interest-bearing liabilities 8,422 10,352
-------- --------
Total liabilities 351,413 329,476
Stockholders' equity 40,053 43,080
-------- --------
Total liabilities and
stockholders' equity $391,466 $372,556
======== ========
Net interest income $ 3,064 $ 2,711
======== =======
Average interest rate spread (4) 2.82% 2.37%
Net interest margin (5) 3.23% 2.96%
Net interest-earning assets (6) $ 36,881 $ 46,673
======== ========
Ratio of average interest-earning
assets to average interest-bearing
liabilities 110.75% 114.63%
</TABLE>
See footnote explanations on the following page.
<PAGE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------
1999 1998
------------------------------- -------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
---------- --------- ---------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS (Dollars in thousands)
Interest-earning assets:
Loans (1) $209,514 $11,734 7.47% $159,514 $ 9,580 8.01%
Mortgage-backed securities (2) 113,007 5,366 6.33 107,317 5,543 6.89
Other securities (2) 40,215 2,122 7.04 62,858 3,271 6.94
Other earning assets 13,713 520 5.06 7,902 335 5.65
-------- ------- -------- -------
Total interest-earning assets 376,449 $19,742 6.99 337,591 $18,729 7.40
======= =======
Allowance for loan losses (1,400) (1,168)
Non-interest-earning assets 9,861 6,963
-------- --------
Total assets $384,910 $343,386
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW, club and money market accounts $ 55,334 $ 952 2.29% $ 46,141 $ 630 1.82%
Regular savings accounts (3) 47,907 709 1.97 45,083 824 2.44
Savings certificate accounts 140,343 5,452 5.18 122,797 5,244 5.69
-------- ------- -------- -------
Total interest-bearing deposits 243,584 7,113 3.89 214,021 6,698 4.17
Borrowings 91,931 3,816 5.53 76,554 3,344 5.82
-------- ------- -------- -------
Total interest-bearing liabilities 335,515 $10,929 4.34 290,575 $10,042 4.61
======= =======
Non-interest-bearing liabilities 8,716 8,811
-------- --------
Total liabilities 344,231 299,386
Stockholders' equity 40,679 44,000
-------- --------
Total liabilities and stockholders' equity $384,910 $343,386
======== ========
Net interest income $ 8,813 $ 8,687
======= ========
Average interest rate spread (4) 2.65% 2.79%
Net interest margin (5) 3.12% 3.43%
Net interest-earning assets (6) $ 40,934 $ 47,016
======== ========
Ratio of average interest-earning assets to average
interest-bearing liabilities 112.20% 116.18%
</TABLE>
(1) Balances are net of deferred loan fees and construction loans in process,
and include loans receivable and loans held for sale. Non-accrual loans are
included in the balances.
(2) Average balances represent amortized cost.
(3) Includes mortgage escrow accounts.
(4) Average interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of average interest-bearing
liabilities.
(5) Net interest margin represents net interest income divided by average total
interest-earning assets.
(6) Net interest-earning assets represents total interest-earning assets less
total interest-bearing liabilities.
<PAGE>
The following table presents the extent to which changes in interest rates
and changes in the volume of interest-earning assets and interest-bearing
liabilities affected the Company's interest income and interest expense during
the three and nine months ended June 30, 1999 compared to the same period in the
prior year. Information is provided in each category with respect to (i) changes
attributable to changes in volume (changes in volume multiplied by prior rate),
(ii) changes attributable to changes in rate (changes in rate multiplied by
prior volume), and (iii) the net change. The changes attributable to the
combined impact of volume and rate have been allocated proportionately to the
changes due to volume and the changes due to rate.
<TABLE>
<CAPTION>
For the Quarter Ended June 30, For the Nine Months Ended June 30,
1999 Compared to 1998 1999 Compared to 1998
-------------------------------- ---------------------------------
Increase (Decrease) Increase (Decrease)
Due To Net Due To Net
-------------------- ---------------------
Volume Rate Change Volume Rate Change
-------- -------- -------- -------- --------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 791 $ 37 $ (187) $ 2,836 $(682) $ 2,154
Mortgage-backed securities (92) (95) (187) 286 (463) (177)
Other securities (465) 16 (449) (1,195) 46 (1,149)
Other earning assets 49 (21) 28 223 (38) 185
------ ------ ------ ------- ----- -------
Total 283 (63) 220 2,150 (1,137) 1,013
------ ------ ------ ------- ----- -------
Interest-bearing liabilities:
NOW, club and money market 38 87 125 140 182 322
accounts
Regular savings accounts 25 (66) (41) 50 (165) (115)
Savings certificate accounts 293 (283) 10 705 (497) 208
Borrowings (149) (78) (227) 645 (173) 472
------ ------ ------ ------- ----- -------
Total 207 (340) (133) 1,540 (653) 887
------ ------ ------ ------- ----- -------
Net change in net interest income $ 76 $ 277 $ 353 $ 610 (484) $ 126
====== ====== ====== ======= ===== =======
</TABLE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
JUNE 30, 1999 AND 1998
GENERAL. Net income for the third fiscal quarter ended June 30, 1999 amounted
to $657,000, or basic earnings per common share of $0.28, compared to net income
of $727,000, or basic earnings per common share of $0.28 for the quarter ended
June 30, 1998. Diluted earnings per common share was $0.27 for both of the
quarters ended June 30, 1999 and 1998.
NET INTEREST INCOME. Net interest income, the primary contributor to
earnings, for the three months ended June 30, 1999 increased $353,000 to $3.1
million, from $2.7 million for the prior year's quarter. The increase reflects a
rise in the average interest rate spread to 2.82% for the three months ended
June 30, 1999, from 2.37% for the prior year's period, partially offset by a
decline in net interest-earning assets (total interest-earning assets less total
interest-bearing liabilities). The increase in the average interest rate spread
is primarily a result of a decrease in the cost of funds due to the current
lower interest rate environment as well as increases in the proportion of assets
consisting of commercial real estate and multi-family loans. The Company's net
interest margin increased to 3.23% for the three months ended June 30, 1999,
from 2.96% a year earlier.
<PAGE>
INTEREST INCOME. Interest and dividend income totaled $6.6 million for the
three months ended June 30, 1999, an increase of $220,000 compared to $6.4
million for the three months ended June 30, 1998. This increase reflects the
effect of a $14.1 million increase in total average interest-earning assets
slightly offset by a 3 basis point decrease in the average yield on such assets
to 7.00% for the three months ended June 30, 1999 from 7.03% for the same period
in the prior year.
Interest income on loans increased $828,000 for the three months ended June
30, 1999 compared to the same period in the prior year, reflecting the effect of
a $42.7 million increase in the average balance coupled with an 8 basis point
increase in the average yield. The increase in the average balance of loans was
primarily attributable to an increase in one-to-four family residential mortgage
loans. The increase in the average yield on loans is primarily attributable to
an increase in the proportion of loans consisting of higher yielding commercial
real estate and multi-family loans.
On a combined basis, interest and dividend income on mortgage-backed and
other securities decreased $636,000 to $2.3 million for the three months ended
June 30, 1999 from $2.9 million for the three months ended June 30, 1998.
Interest on mortgage-backed securities decreased by $186,000, attributable to a
34 basis point decrease in the average yield, in addition to a $5.7 million
decrease in the average balance. Interest on other securities declined by
$450,000, primarily attributable to a $26.7 million decrease in the average
balance.
Interest and dividend income on other earning assets increased by $28,000,
primarily attributable to a $3.6 million increase in the average balance,
partially offset by a 93 basis point decrease in the average yield.
INTEREST EXPENSE. Interest expense totaled $3.6 million for the three months
ended June 30, 1999, a decrease of $133,000 from the prior year's quarter.
Interest expense on deposits increased $94,000 compared to the same period in
the prior year, reflecting the effect of an $34.7 million increase in the
average balance partially offset by a 42 basis point decrease in the average
rate on interest-bearing deposits to 3.75% for the three months ended June 30,
1999 from 4.17% for the three months ended June 30, 1998. The decrease in the
average rate on interest-bearing deposits primarily reflects the current lower
interest rate environment. In particular, the average rate paid on savings
certificate accounts declined during this period by 83 basis points. The
increase in average interest-bearing deposits consisted of a $22.2 million
increase in average savings certificate accounts (to $148.2 million from $126.0
million), a $8.1 million increase in average NOW, club and money market accounts
(to $57.8 million from $49.6 million) and a $4.4 million increase in average
regular savings accounts (to $49.4 million from $45.0 million).
<PAGE>
Interest expense on borrowings decreased $227,000 to $1.2 million for the
three months ended June 30, 1999 from $1.4 million for the three months ended
June 30, 1998. Total borrowings averaged $87.7 million (borrowings under
securities repurchase agreements represented $71.0 million) for the three months
ended June 30, 1999 at an average rate of 5.44% compared to $98.5 million
(borrowings under securities repurchase agreements represented $91.9 million)
and 5.77%, respectively, for the prior-year's quarter. The majority of this
increase was attributable to interest on borrowings under securities repurchase
agreements. See "Liquidity and Capital Resources" for a further discussion of
the Company's securities repurchase agreements.
PROVISION FOR LOAN LOSSES. The provision in each period reflects management's
evaluation of the adequacy of the allowance for loan losses. Factors considered
include the volume and type of lending conducted, the Company'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 economic conditions. The provision for
loan losses was $50,000 and $75,000 for the three months ended June 30, 1999 and
1998, respectively. Net loan charge-offs were $14,000 for the three months ended
June 30, 1999, compared to net loan charge-offs of $56,000 during the same
period in 1998. Non-performing loans totaled $706,000 at June 30, 1999, a
decline from $753,000 at September 30, 1998 and up from $299,000 at June 30,
1998. See "Asset Quality" for a further discussion of the Company's
non-performing assets and allowance for loan losses.
NON-INTEREST INCOME. Non-interest income for the three months ended June 30,
1999 decreased $260,000 to $274,000, from $534,000 for the comparable period in
1998. The decrease is primarily attributable to decreases in the net gain on
sales of loans held for sale and the net gain on sales of securities, partially
offset by increased income from service charges and fees. Mortgage loans sold
during the three months ended June 30, 1999 amounted to $4.9 million resulting
in net gains of $32,000, as compared to loan sales of $7.4 million during the
three months ended June 30, 1998 which resulted in net gains of $79,000. In
addition, a provision for losses on loans held for sale of $97,000 was charged
to net gain on sales of loans for the quarter ended June 30, 1999 in accordance
with SFAS No. 65 "Accounting for Certain Mortgage Banking Activities," which
requires loans held-for-sale to be carried at the lower of cost or market value.
No such provisions were made in the 1998 quarter. Net gain on sales of
securities amounted to $25,000 for the three months ended June 30, 1999 as
compared to $195,000 for the June 30, 1998 quarter. The increase of $56,000 in
service charges and fee income primarily reflects increases in transaction
volume.
NON-INTEREST EXPENSE. Non-interest expense increased $310,000 to $2.3 million
for the three months ended June 30, 1999, compared to $2.0 million for the three
months ended June 30, 1998. Compensation and benefits expense increased $183,000
from the prior-year quarter primarily due to increased costs relating to
additional staffing in the two in-store branches opened in October 1998 and
April 1999 and the loan department expansion, coupled with performance-based
increases for certain staff members. The increases of $67,000 in occupancy and
equipment expense and $59,000 in other non-interest expense primarily reflects
increased costs associated with the establishment of the two in-store branches
and a lending center in November 1998.
INCOME TAX EXPENSE. Income tax expense was approximately $369,000 for the
three months ended June 30, 1999 and $491,000 for the comparable 1998 period,
reflecting lower pre-tax income and effective tax rates of 36.0% and 40.3%,
respectively. The decrease in the effective tax rate reflects the ancillary
benefits from the aforementioned REIT. Under current law, all income earned by
the REIT is distributed to the Association in the form of a dividend and has the
effect of reducing the Company's New York State income tax expense.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
GENERAL. Net income for the nine months ended June 30, 1999 amounted to $2.0
million or basic earnings per common share of $0.82, compared to $2.2 million or
basic earnings per common share of $0.84 for the nine months ended June 30,
1998. Diluted earnings per common share were $0.81 for the nine months ended
June 30, 1999 compared to $0.82 for the same period in 1998. The $232,000
decrease in net income was attributable to an $846,000 increase in non-interest
expense, partially offset by a $126,000 increase in net interest income, a
$71,000 increase in non-interest income, a $292,000 decrease in income tax
expense and a $125,000 decrease in the provision for loan losses.
NET INTEREST INCOME. Net interest income for the nine months ended June 30,
1999 amounted to $8.8 million as compared to $8.7 million for the nine months
ended June 30, 1998. The increase reflects a higher volume of interest-earning
assets, offset by the decline in the average interest rate spread to 2.65% for
the nine months ended June 30, 1999, from 2.79% for the prior year's period. The
decline in the average interest rate spread primarily reflects lower asset
yields from the origination of new mortgage loans (including refinancings) in
the current lower interest rate environment. The Company's net interest margin
decreased to 3.12% for the nine months ended June 30, 1999, from 3.43% a year
earlier.
<PAGE>
INTEREST INCOME. Interest and dividend income totaled $19.7 million for the
nine months ended June 30, 1999, an increase of $1.0 million compared to $18.7
million for the nine months ended June 30, 1998. This increase reflects the
effect of a $38.9 million increase in total average interest-earning assets
partially offset by a 41 basis point decrease in the average yield on such
assets to 6.99% for the nine months ended June 30, 1999 from 7.40% for the same
period in the prior year.
Interest income on loans increased $2.2 million for the nine months ended
June 30, 1999 compared to the same period in the prior year, reflecting the
effect of a $50.0 million increase in the average balance partially offset by a
54 basis point decrease in the average yield. The increase in the average
balance of loans was primarily attributable to an increase in one-to-four family
residential mortgage loans. The lower average yield reflects the repricing of
adjustable rate mortgage loans and the origination of new loans in the current
low interest rate environment.
On a combined basis, interest and dividend income on mortgage-backed and
other securities decreased $1.3 million to $7.5 million for the nine months
ended June 30, 1999 from $8.8 million for the nine months ended June 30, 1998.
Interest on mortgage-backed securities decreased by $178,000, attributable to
the effects of a 56 basis point decrease in the average yield partially offset
by a $5.7 million increase in the average balance, while interest on other
securities declined by $1.1 million, primarily attributable to a $22.6 million
decrease in the average balance.
Interest and dividend income on other earning assets increased $185,000,
primarily attributable to a $5.8 million increase in the average balance
partially offset by a 58 basis point decrease in the average yield.
INTEREST EXPENSE. Interest expense totaled $10.9 million for the nine months
ended June 30, 1999, an increase of $887,000 from the prior year's nine months.
Interest expense on deposits increased $415,000 compared to the same period in
the prior year, reflecting the effect of an $29.6 million increase in the
average balance partially offset by a 28 basis point decrease in the average
rate on interest-bearing deposits to 3.89% for the nine months ended June 30,
1999 from 4.17% for the nine months ended June 30, 1998. The decrease in the
average rate on interest-bearing deposits primarily reflects the current lower
interest rate environment. In particular, the average rate paid on savings
certificate accounts declined during this period by 51 basis points. The
increase in average interest-bearing deposits consisted of a $17.5 million
increase in average savings certificate accounts (to $140.3 million from $122.8
million), a $9.2 million increase in average NOW, club and money market accounts
(to $55.3 million from $46.1 million) and a $2.8 million increase in average
regular savings accounts (to $47.9 million from $45.1 million).
Interest expense on borrowings increased $472,000 to $3.8 million for the
nine months ended June 30, 1999 from $3.3 million for the nine months ended June
30, 1998. Total borrowings averaged $91.9 million for the nine months ended June
30, 1999 at an average rate of 5.53% compared to $76.6 million and 5.82%,
respectively, for the prior-year's period. Substantially all of this increase
was attributable to interest on borrowings under securities repurchase
agreements. See "Liquidity and Capital Resources" for a further discussion of
the Company's securities repurchase agreements.
<PAGE>
PROVISION FOR LOAN LOSSES. The provision in each period reflects management's
evaluation of the adequacy of the allowance for loan losses. Factors considered
include the volume and type of lending conducted, the Company'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 economic conditions. The provision for
loan losses was $200,000 and $325,000 for the nine months ended June 30, 1999
and 1998, respectively. The higher provision in the nine months ended June 30,
1998 reflected the impact of higher net charge-offs which were $156,000 for the
period, compared to of $13,000 for the nine months ended June 30, 1999. See
"Asset Quality" for a further discussion of the Company's non-performing assets
and allowance for loan losses.
NON-INTEREST INCOME. For the nine months ended June 30, 1999, non-interest
income increased $71,000 to $1.2 million compared to $1.1 million for the same
period in the prior year. Mortgage loans sold during the nine months ended June
30, 1999 amounted to $34.2 million resulting in net gains of $278,000, as
compared to loan sales of $42.6 million during the nine months ended June 30,
1998 which resulted in net gains of $273,000. In addition, a provision for
losses on loans held for sale of $97,000 was charged to net gain on sales of
loans for the quarter ended June 30, 1999, no such provisions were made in the
1998 period. Net gain on sales of securities amounted to $98,000 for the nine
months ended June 30, 1999 reflecting sales of $17.5 million in
available-for-sale securities during the period, compared to gains of $143,000
on sales of $6.7 million in the prior year's period. The increase in service
charges and fee income primarily reflects increases in transaction volume.
NON-INTEREST EXPENSE. Non-interest expense increased $846,000 to $6.6 million
for the nine months ended June 30, 1998 compared to $5.8 million for the same
period in the prior year. The current year increases are primarily attributable
to increases in compensation and benefits expense and occupancy and equipment
expense. Compensation and benefits expense for the nine months ended June 30,
1999 increased $487,000 from the prior year primarily due to increased costs
relating to additional staffing in the three in-store branches and the loan
department expansion, coupled with performance-based increases for certain staff
members. The increase of $183,000 in occupancy and equipment expense for the
nine months ended June 30, 1999 primarily reflects increased costs associated
with the establishment of three in-store branches, one in December 1997, one in
October 1998 and one in April 1999, in addition to the establishment of a
lending center in November 1998. Included in other non-interest expense for the
nine months ended June 30, 1999 were expenses of $105,000 relating to the
establishment of the REIT.
INCOME TAX EXPENSE. Income tax expense for the nine months ended June 30,
1999 was approximately $1.2 million and $1.5 million for the comparable 1998
period, reflecting lower pre-tax income and effective tax rates of 38.1% and
40.6%, respectively. The decrease in the effective tax rate reflects the
ancillary benefits from the aforementioned REIT.
ASSET QUALITY
Non-performing loans totaled $706,000 at June 30, 1999, a decline from
$753,000 at September 30, 1998 and up from $299,000 at June 30, 1998. The ratio
of non-performing loans to total loans receivable was 0.32% at June 30, 1999,
compared to 0.41% at September 30, 1998 and 0.16% at June 30, 1998. The
allowance for loan losses was $1.5 million or 0.67% of total loans receivable at
June 30, 1999, compared to $1.3 million or 0.70% of total loans receivable at
September 30, 1998 and $1.3 million or 0.69% at June 30, 1998. The ratio of the
allowance for loan losses to non-performing loans was 210.91% at June 30, 1999,
compared to 172.91% at September 30, 1998 and 422.07% at June 30, 1998.
<PAGE>
The following table sets forth certain asset quality ratios and other data at
the dates indicated:
<TABLE>
<CAPTION>
June 30, September 30, June 30,
1999 1998 1998
-------- ------------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accrual loans past due ninety days or more:
Real estate mortgage loans:
One- to four-family 406 515 74
Commercial 198 203 204
Consumer loans 102 35 21
------ ------ ------
Total 706 753 299
Real estate owned, net 183 305 305
------ ------ ------
Total non-performing assets $ 889 $1,058 $ 604
====== ====== ======
Allowance for loan losses $ $1,489 $1,302 $1,262
====== ====== ======
Ratios:
Non-performing loans to total loans 0.32% 0.41% 0.16%
receivable
Non-performing assets to total assets 0.23 0.28 0.15
Allowance for loan losses to:
Non-performing loans 210.91 172.91 422.07
Total loans receivable 0.67 0.70 0.69
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits and borrowings; principal
and interest payments on loans and securities; and proceeds from sales of loans
and securities. While maturities and scheduled payments on 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 main sources of liquidity for the Holding Company are net proceeds from
the sale of stock and dividends received from the Association, if any. The main
cash flows are payments of dividends to shareholders and repurchases of the
Holding Company's common stock.
<PAGE>
The Association is required to maintain an average daily balance of total
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 ratio at June 30, 1999 was 4.0%, and
the Company's actual liquidity ratio was 8.72%.
The primary investing activities of the Company are the origination of real
estate mortgage and other loans, and the purchase of mortgage-backed and other
securities. At June 30, 1999, the Company had outstanding loan origination
commitments of $38.6 million, unadvanced home equity lines of credit of $2.1
million and undisbursed construction loans in process of $537,000. The Company
anticipates that it will have sufficient funds available to meet its current
loan origination and other commitments. At June 30, 1999, the Company had the
ability to obtain additional FHLB advances of approximately $78.5 million.
Certificates of deposit scheduled to mature in one year or less from June 30,
1999 totaled $109.8 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 Company.
The Company's borrowings at June 30, 1999 consisted of $71.0 million in
borrowings under securities repurchase agreements and FHLB advances of $19.0
million. FHLB advances at June 30, 1999 had a weighted average interest rate of
5.45% and a weighted average term to maturity of 7.4 years with a weighted
average term to call date of 1.1 years. In the securities repurchase agreements,
the Company borrows funds through the transfer of debt securities to the FHLB of
New York, as counterparty, and concurrently agrees to repurchase the identical
securities at a fixed price on a specified date. The Company accounts for these
agreements as secured financing transactions since it maintains effective
control over the transferred securities. Accordingly, the transaction proceeds
are recorded as borrowings and the underlying securities continue to be carried
in the Company's debt securities portfolio. Repurchase agreements are
collateralized by the securities sold and, in certain cases, by additional
margin securities. During the nine months ended June 30, 1999, the average
borrowings under these agreements amounted to $78.7 million and the maximum
month-end balance outstanding was $103.8 million.
<PAGE>
Additional information concerning outstanding repurchase agreements with the
FHLB of New York as of June 30, 1999 is summarized as follows:
<TABLE>
<CAPTION>
REPURCHASE BORROWINGS
- ----------------------------------------------------------------------
Accrued Weighted Fair Value
Interest Average of Collateral
Remaining Term to Final Maturity(1) Amount Payable(2) Rate Securities(3)
- ----------------------------------- -------- ----------- --------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
After 30 days but within one year $ 5,000 $ 258 5.74% $ 5,514
After one but within three years 20,600 97 5.91 25,504
After three but within five years 15,000 98 5.65 15,360
After five years 30,412 203 5.47 28,373
------- ---------- -------
Total $71,012 $ 656 5.66% $74,751
======= ========== =======
</TABLE>
(1) The weighted average remaining term to final maturity was approximately 4.8
years at June 30, 1999. Certain securities repurchase agreements are
callable by the FHLB of New York, prior to the maturity date. The weighted
average remaining term to maturity, giving effect to earlier call dates,
was approximately 1.7 years at June 30, 1999.
(2) Included in other liabilities in the consolidated balance sheet.
(3) Represents the fair value of the mortgage-backed securities ($55.8 million)
and other debt securities ($18.9 million) which were transferred to the
counterparty, including accrued interest receivable of $643,000. These
securities consist of available-for-sale securities and held-to-maturity
securities with fair values of $67.5 million and $7.2 million,
respectively.
At June 30, 1999, the Company's "amount at risk" under securities repurchase
agreements was approximately $3.1 million. This amount represents the excess of
(i) the carrying amount, or market value if higher, of the securities
transferred to the FHLB of New York plus accrued interest receivable over (ii)
the amount of the repurchase liability plus accrued interest payable.
At June 30, 1999, the Association exceeded all of its regulatory capital
requirements with a tangible capital level of 9.51% of total adjusted assets,
which is above the required level of 1.5%; core capital of 9.51% of total
adjusted assets, which is above the required level of 4.0%; and total risk-based
capital of 24.53%, which is above the required level of 8.0%. These regulatory
capital requirements, which are applicable to the Association only, do not
consider additional capital held at the Holding Company level, and require
certain adjustments to stockholder's equity to arrive at the various capital
amounts.
<PAGE>
YEAR 2000 CONSIDERATIONS
The Company, like all companies that utilize computer technology, is facing
significant challenges associated with ensuring that its computer systems will
accurately process time-sensitive data beyond the year 1999 (the "Year 2000
Issue"). Many existing computer programs and systems were originally programmed
with nine digit dates that provided only two digits to identify the calendar
year in the date field, without considering the upcoming change in the century.
With the impending millennium, these programs and computers will recognize "00"
as the year 1900 rather than the year 2000.
Like most financial service providers, the Company and its operations may be
significantly affected by the Year 2000 Issue due to the nature of financial
information. This includes software, hardware and equipment both within and
outside the Company's direct control and with whom the Company electronically or
operationally interfaces (e.g. third-party vendors providing data processing,
information system management, maintenance of computer systems, and credit
bureau information). If computer systems are not adequately changed to identify
the year 2000, many computer applications could fail or create erroneous
results. As a result, calculations that rely on the date field information (such
as interest, payment or due dates and other operating functions) would generate
results which could be significantly misstated, and the Company could experience
a temporary inability to process transactions and engage in similar normal
business activities. In addition, under certain circumstances, failure to
adequately address the Year 2000 Issue could adversely affect the viability of
the Company's suppliers and creditors, and the creditworthiness of its
borrowers. Thus, if not adequately addressed, the Year 2000 Issue could have a
significant adverse impact on the Company's products, services and competitive
condition.
The Company's primary federal regulator agency, the Office of Thrift
Supervision ("OTS"), has published substantive guidance on the Year 2000 Issue,
alone and in conjunction with other federal regulatory agencies. The OTS has
also included Year 2000 compliance as a substantive area of examination during
special and regularly scheduled examinations. These publications also included
requirements for the creation and implementation of a Year 2000 compliance plan
as well as setting forth certain target dates. Should a financial institution
not become Year 2000 compliant, it could then be subject to administrative
remedies similar to those imposed on financial institutions otherwise found not
to be operating in a safe and sound manner.
The Company has established and is implementing a Year 2000 Action Plan
(the "Plan") to address the Year 2000 Issue. The Plan includes the five
components as recommended by the OTS, which address issues involving awareness,
assessment, renovation, validation and implementation. The Company has completed
the awareness and assessment phases of the Plan.
Under the regulatory guidelines previously mentioned, testing of core mission
critical internal systems must have been substantively completed by December 31,
1998 and testing with service providers must have been substantively completed
by June 30, 1999. All renovations must be substantially complete, and testing of
mission critical systems must be completed, by June 30, 1999. As of June 30,
1999, the Company substantially completed testing its internal mission critical
systems and testing with its primary service provider, which provides almost all
of the Company's data processing.
<PAGE>
As part of the Plan, the Company is in communication with all of its
significant suppliers and vendors to determine the extent to which the Company
is vulnerable to those third parties' failure to remediate their own Year 2000
Issue. The Company presently believes that with modifications to existing
software and conversions to new software, the Year 2000 Issue will be mitigated
without causing a material adverse impact on the operations of the Company.
However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have an impact on the operations of
the Company.
The Company is also preparing a Year 2000 business resumption contingency
plan to document pre-determined actions to help the Company resume normal
operations in the event of failure of any mission-critical service and product.
Uncontrollable events, such as loss of the global power grid and telephone
service failures, will affect all companies, government and customers; these
global events cannot be remedied by anyone other than the appropriate
responsible party. The Company has reviewed its customer base to determine
whether they pose significant Year 2000 risks; the customer base is primarily
composed of individuals who utilize the Company's services for personal,
household or consumer uses and thus, individually, not likely to pose
significant Year 2000 risks directly. The Company also reviewed its borrower
base and determined that it is primarily secured by residential and multifamily
residences, which management believes does not carry a high Year 2000 risk. The
Company is assuring the availability of cash to meet potential depositor demand
due to concerns about the availability of funds as we approach the Year 2000.
Contingency plans are being developed for identified mission-critical systems in
anticipation of the possibility of unplanned system difficulties or failure of
third parties to successfully prepare for the century date change. The Company
has substantially completed its contingency planning process.
At this time, the Company does not expect the reasonably foreseeable
consequences of the Year 2000 Issue to have material adverse effects on the
Company's business, operations or financial condition. However, despite its
efforts, the Company cannot be certain that it will not suffer business
interruptions, either due to its own Year 2000 Issue or those of its customers
or vendors or third parties whose Year 2000 problems may make it difficult or
impossible to fulfill their commitments to the Company. In addition, the Year
2000 Issue has many elements and potential consequences, some of which may not
be reasonably foreseeable, and there can be no assurances that every material
Year 2000 issue will be identified and addressed or that unforeseen consequences
will not arise and possibly have a material adverse effect on the Company.
<PAGE>
Monitoring and managing the Year 2000 Issue will result in additional direct
and indirect costs to the Company. Direct costs include potential charges by
third-party software vendors for product enhancements, costs involved in testing
software products for Year 2000 compliance, and any resulting costs for
developing and implementing contingency plans for critical software products
which are not enhanced. Indirect costs will principally consist of the time
devoted by existing employees in monitoring software vendor progress, testing
enhanced software products and implementing any necessary contingency plans.
Based on the current status of the Company's Year 2000 efforts, the costs
associated with identified Year 2000 issues are not expected to have a material
effect on the results of operations or financial condition of the Company. Costs
incurred through June 30, 1999 were approximately $138,000. This includes Y2K
remediation efforts and planned system upgrades related to business expansion.
Approximately $50,000 of this cost was recognized in the nine-month period ended
June 30, 1999. Management currently estimates that remaining costs will range
between $5,000 and $40,000, most of which will be recognized in calendar year
1999.
PART I. ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential loss from adverse changes in market prices and
rates. The Company's market risk arises primarily from interest rate risk
inherent in its lending, investing and deposit taking activities. The Company's
real estate loan portfolio, concentrated primarily in Westchester County, New
York, and portions of Putnam, Rockland and Dutchess Counties, New York, is
subject to risks associated with the local economy.
There have been no material changes in the Company's interest rate risk
position since September 30, 1998. Other types of market risk, such as foreign
exchange rate risk and commodity price risk, do not arise in the normal course
of the Company's business activities.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved as plaintiff or defendant in various 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
<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 on Form 8-K
None
<PAGE>
SIGNATURES
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.
YONKERS FINANCIAL CORPORATION
(Registrant)
Date: August 6, 1999 /s/ RICHARD F. KOMOSINSKI
-------------- --------------------------
Richard F. Komosinski
President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 6, 1999 /s/ JOSEPH D. ROBERTO
-------------- --------------------------
Joseph D. Roberto
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of income, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,481
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 114,931
<INVESTMENTS-CARRYING> 24,291
<INVESTMENTS-MARKET> 24,367
<LOANS> 234,159
<ALLOWANCE> 1,489
<TOTAL-ASSETS> 392,600
<DEPOSITS> 262,451
<SHORT-TERM> 90,012
<LIABILITIES-OTHER> 1,998
<LONG-TERM> 0
0
0
<COMMON> 36
<OTHER-SE> 38,103
<TOTAL-LIABILITIES-AND-EQUITY> 392,600
<INTEREST-LOAN> 11,734
<INTEREST-INVEST> 7,488
<INTEREST-OTHER> 520
<INTEREST-TOTAL> 19,742
<INTEREST-DEPOSIT> 7,113
<INTEREST-EXPENSE> 10,929
<INTEREST-INCOME-NET> 8,813
<LOAN-LOSSES> 200
<SECURITIES-GAINS> 98
<EXPENSE-OTHER> 6,606
<INCOME-PRETAX> 3,217
<INCOME-PRE-EXTRAORDINARY> 3,217
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,991
<EPS-BASIC> 0.82
<EPS-DILUTED> 0.81
<YIELD-ACTUAL> 3.12
<LOANS-NON> 706
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 453
<ALLOWANCE-OPEN> 1,302
<CHARGE-OFFS> 21
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 1,489
<ALLOWANCE-DOMESTIC> 1,489
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
