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 December 31, 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
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6EXECUTIVE PLAZA, YONKERS, NEW YORK 10701
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(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, December 31, 1999
- ----------------------- -----------------------------------------------
$0.01 Par Value 2,238,739
<PAGE>
YONKERS FINANCIAL CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED DECEMBER 31, 1999
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at December 31, 1999 and
September 30, 1999 2
Consolidated Statements of Income for the Three Months
Ended December 31, 1999 and 1998 3
Consolidated Statement of Changes in Stockholders' Equity
for the Three Months Ended December 31, 1999 4
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 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 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature Page 20
<PAGE>
<TABLE>
<CAPTION>
YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
December 31, September 30,
1999 1999
--------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 5,666 $ 4,651
Short-term investments -- --
---------- ----------
Total cash and cash equivalents 5,666 4,651
---------- ----------
Securities:
Available for sale, at fair value (amortized cost of $ 119,093 at
December 31, 1999 and $120,996 at September 30, 1999) 112,920 116,712
Held to maturity, at amortized cost (fair value of $ 20,470 at
December 31, 1999 and $21,959 at September 30, 1999) 20,573 21,936
---------- ----------
Total securities 133,493 138,648
---------- ----------
Real estate mortgage loans held for sale, at lower of cost or
market value 2,108 1,226
---------- ----------
Loans receivable, net:
Real estate mortgage loans 339,393 291,199
Consumer and commercial business loans 8,770 8,254
Allowance for loan losses (1,557) (1,503)
---------- ----------
Total loans receivable, net 346,606 297,950
---------- ----------
Accrued interest receivable 3,007 2,750
Federal Home Loan Bank stock 9,298 7,397
Office properties and equipment, net 2,083 1,984
Other assets 3,912 3,089
---------- ----------
Total assets $ 506,173 $ 457,695
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 285,700 $ 272,974
Securities repurchase agreements 108,771 99,987
FHLB advances 77,194 47,948
Other liabilities 2,894 4,769
---------- ----------
Total liabilities 474,559 425,678
---------- ----------
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 35,320 35,225
Unallocated common stock held by employee stock
ownership plan (1,785) (1,857)
Unamortized awards of common stock under management
recognition plan (548) (621)
Treasury stock, at cost ( 1,332,011) shares (21,866) (21,866)
Retained income, substantially restricted 24,161 23,652
Accumulated other comprehensive (loss) income (3,704) (2,552)
---------- ----------
Total stockholders' equity 31,614 32,017
---------- ----------
$ 506,173 $ 457,695
========== ==========
</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
Ended December 31,
---------------------------
1999 1998
--------- ----------
<S> <C> <C>
Interest and dividend income:
Loans $ 6,042 $ 3,759
Securities 2,387 2,679
Other earning assets 159 183
--------- ----------
Total interest and dividend income 8,588 6,621
--------- ----------
Interest expense:
Deposits 2,675 2,381
Securities repurchase agreements 1,614 1,248
FHLB advances 847 136
--------- ----------
Total interest expense 5,136 3,765
--------- ----------
Net interest income 3,452 2,856
Provision for loan losses 35 75
--------- ----------
Net interest income after provision for loan losses 3,417 2,781
--------- ----------
Non-interest income:
Service charges and fees 269 141
Net gain on sales of real estate mortgage
loans held for sale 23 137
Net gain (loss) on sales of securities 4 3
Other 14 9
--------- ----------
Total non-interest income 310 290
--------- ----------
Non-interest expense:
Compensation and benefits 1,467 1,156
Occupancy and equipment 338 228
Data processing service fees 179 150
Federal deposit insurance costs 38 33
Other 581 374
--------- ----------
Total non-interest expense 2,603 1,941
--------- ----------
Income before income tax expense 1,124 1,130
Income tax expense 420 463
--------- ----------
Net income $ 704 $ 667
========= ==========
Earnings per common share (note 3):
Basic $ 0.35 $ 0.27
Diluted 0.34 0.27
========= ==========
</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 Loss Equity
-------- ---------- ------------- ------------ --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1999 $ 36 $ 35,225 $ (1,857) $ (621) $(21,866) $23,652 $ (2,552) $ 32,017
Net income -- -- -- -- -- 704 -- 704
Dividends paid ($0.09 per share) -- -- -- -- -- (195) -- (195)
Amortization of MRP awards -- -- -- 73 -- -- -- 73
Tax benefits from vested
MRP awards -- 40 -- -- -- -- -- 40
ESOP shares released for
allocation (7,142 shares) -- 55 72 -- -- -- -- 127
Increase in net unrealized loss on
available-for-sale securities,
net of tax -- -- -- -- -- -- (1,152) (1,152)
------- -------- ---------- ------- -------- -------- --------- ------------
Balance at December 31, 1999 $ 36 $ 35,320 $ (1,785) $ (548) $(21,866) $ 24,161 $ (3,704) $ 31,614
======= ======== ========== ======= ======== ======== ========= ============
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YONKERS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Three Months
Ended December 31,
-------------------------------
1999 1998
--------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 704 $ 667
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 35 75
ESOP and MRP expense 200 169
Depreciation and amortization expense 116 80
Amortization of deferred fees, discounts and premiums, net 35 80
Net gain on sales of real estate mortgage loans held for sale (23) (137)
Net gain on sales of securities (4) (3)
Other adjustments, net (2,155) 747
--------- --------
Net cash (used in) provided by operating activities (1,092) 1,678
--------- --------
Cash flows from investing activities:
Purchases of available-for-sale securities (111) (17,167)
Proceeds from principal payments, maturities and calls of securities:
Available-for-sale 1,974 15,880
Held-to-maturity 1,379 8,918
Proceeds from sales of available-for-sale securities 19 102
Disbursements for loan originations (57,846) (32,545)
Principal collections on loans 5,226 11,871
Proceeds from sales of loans 3,021 20,088
Purchase of FHLB stock (1,901) --
Other investing cash flows (215) (198)
--------- --------
Net cash (used in) provided by investing activities (48,454) 6,949
--------- --------
Cash flows from financing activities:
Net increase in deposits 12,726 17,396
Net increase (decrease) in borrowings with
original terms of three months or less:
Securities repurchase agreements 3,784 (32,178)
FHLB advances 14,246 15,000
Proceeds from longer-term securities repurchase agreements 20,000 --
Dividends paid (195) (201)
--------- --------
Net cash provided by financing activities 50,561 17
--------- --------
Net increase in cash and cash equivalents 1,015 8,644
Cash and cash equivalents at beginning of period 4,195 4,195
--------- --------
Cash and cash equivalents at end of period $ 5,210 $ 12,839
========= ========
Supplemental information:
Interest paid $ 4,678 $ 3,659
Income taxes paid -- --
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<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 December 31, 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 three months ended
December 31, 1999 are not necessarily indicative of the results of operations
which may be expected for the fiscal year ending September 30, 2000.
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, 1999, included in the Form 10-K.
(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 loss for the quarter ended December 31, 1999 was $448,000
6
<PAGE>
consisting of $704,000 in net income less a net increase of $1.2 million in the
after-tax net unrealized loss on available-for-sale securities. For the quarter
ended December 31, 1998, total comprehensive income of $146,000 consisted of net
income of $667,000 less a net decrease of $521,000 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.
The following is a summary of the number of shares utilized in the
Company's EPS calculations for the three months ended December 31, 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 Months
Ended December 31,
--------------------
1999 1998
--------- ---------
(In Thousands)
Weighted average common shares outstanding
for computation of basic EPS (1) 2,006 2,447
Common-equivalent shares due to the dilutive effect of
Stock options and MRP awards (2) 66 18
------ ------
Weighted average common shares for
computation of diluted EPS 2,072 2,465
====== ======
(1) Excludes unvested MRP awards and unallocated ESOP shares that have not
been committed to be released.
(2) Computed using the treasury stock method.
7
<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 DECEMBER 31, 1999 AND SEPTEMBER 30, 1999
Total assets at December 31, 1999 amounted to $506.2 million,
representing an increase of $48.5 million from $457.7 at September 30, 1999.
Asset growth during the period related primarily to increased loan volume funded
by borrowings and deposits reflecting the continued growth of the Company's
retail franchise.
Overall, total loans (loans receivable and mortgage loans held for
sale) increased $49.5 million to $348.7 million at December 31, 1999 from $299.2
million at September 30, 1999. The loan growth during the quarter ended December
31, 1999 primarily reflects loan originations net of repayments of $52.6 million
less loans sold of $3.0 million. Total Securities at December 31, 1999 decreased
$5.1 million to $133.5 million from $138.6 million at September 30, 1999.
Total borrowings increased by $38.1 million to $186.0 million at
December 31, 1999 from $147.9 million at September 30, 1999. Deposit liabilities
increased $12.7 million to $285.7 million at December 31, 1999 from $273.0
million at September 30, 1999. The increase in deposit liabilities primarily
reflects growth in the Company's in-store branch network of $11.2 million as
well as aggressive cross-selling programs. Funds from increased borrowings and
deposit growth were primarily used to fund new loans.
8
<PAGE>
Stockholders' equity decreased by $403,000 to $31.6 million at December
31, 1999 from $32.0 million at September 30, 1999. The decrease is primarily
attributable to a $1.2 million increase in the after-tax net unrealized loss on
available-for-sale securities, partially offset by net income retained after
dividends of $509,000, and a combined increase of $240,000 relating to the
employee stock ownership plan and the management recognition plan. The ratio of
stockholders' equity to total assets decreased to 6.2% at December 31, 1999 from
7.0 % at September 30, 1999 reflecting the substantial growth in assets coupled
with the net decrease in stockholders' equity. Book value per share (computed
based on total shares issued less treasury shares) was $14.12 at December 31,
1999, compared to $14.30 at September 30, 1999. See "Liquidity and Capital
Resources" for information regarding the Association's regulatory capital
amounts and ratios.
ANALYSIS OF NET INTEREST INCOME
The following table sets forth the Company's average balance sheets,
average yields and costs (on an annualized basis), and certain other information
for the three months ended December 31, 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.
9
<PAGE>
<TABLE>
<CAPTION>
For the Quarter Ended December 31,
---------------------------------------------------------------------
1999 1998
------------------------------------ --------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
---------- ----------- ------------ --------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Loans (1) $ 328,672 $ 6,042 7.35% $ 196,071 $ 3,759 7.67%
Mortgage-backed securities (2) 95,964 1,628 6.79 117,877 1,863 6.32
Other securities (2) 41,271 759 7.36 46,894 816 6.96
Other earning assets 13,045 159 4.88 14,647 183 5.00
--------- --------- --------- --------
Total interest-earning assets 478,952 $ 8,588 7.17 375,489 $ 6,621 7.05
========= ========
Allowance for loan losses (1,531) (1,329)
Non-interest-earning assets 12,401 8,057
-------- ---------
Total assets $489,822 $ 382,217
======== =========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
NOW, club and money market accounts $ 60,073 $ 327 2.18% $ 53,081 $ 309 2.33%
Regular savings accounts (3) 53,275 239 1.79 46,410 247 2.13
Savings certificate accounts 168,854 2,109 5.00 134,118 1,825 5.44
--------- --------- --------- --------
Total interest-bearing deposits 282,202 2,675 3.79 233,609 2,381 4.08
Borrowings 172,092 2,461 5.72 97,902 1,384 5.65
--------- --------- --------- --------
Total interest-bearing liabilities 454,294 $ 5,136 4.52 331,511 $ 3,765 4.54
========= ========
Non-interest-bearing liabilities 3,495 8,864
--------- ---------
Total liabilities 457,789 340,375
Stockholders' equity 32,033 41,842
--------- ---------
Total liabilities and stockholders' equity $ 489,822 $ 382,217
========= =========
Net interest income $ 3,452 $ 2,856
========= ========
Average interest rate spread (4) 2.65% 2.51%
Net interest margin (5) 2.88% 3.04%
Net interest-earning assets (6) $ 24,658 $ 43,978
========= =========
Ratio of average interest-earning assets to average
interest-bearing liabilities 105.43% 113.27%
</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.
10
<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 months ended December 31, 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.
For the Quarter Ended December 31,
1999 Compared to 1998
---------------------------------
Increase (Decrease)
Due to
-------------------- Net
Volume Rate Change
--------- ---------- -----------
(In thousands)
Interest-earning assets:
Loans $2,446 $(163) $ 2,283
Mortgage-backed securities (366) 131 (235)
Other securities (109) 52 (57)
Other earning assets (20) (4) (24)
------ ----- -------
Total 1,951 16 1,967
------ ----- -------
Interest-bearing liabilities:
NOW, club and money market accounts 39 (21) 18
Regular savings accounts 34 (42) (8)
Savings certificate accounts 441 (157) 284
Borrowings 1,060 17 1,077
------ ----- -------
Total 1,574 (203) 1,371
------ ----- -------
Net change in net interest income $ 377 $ 219 $ 596
====== ===== =======
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND
1998
GENERAL. Net income for the three months ended December 31, 1999 was
$704,000 or diluted EPS of $0.34 compared to net income of $667,000 or diluted
EPS of $0.27 for the quarter ended December 31, 1998. Basic earnings per common
share were $0.35 for the quarter ended December 31, 1999 compared to $0.27 for
the same period in 1998. The increase in net income of $37,000 reflects an
increase of $596,000 in net interest income, a $43,000 decrease in income tax
expense, a $40,000 decrease in the provision for loan losses, and a $20,000
increase in non-interest income, substantially offset by an increase of $662,000
in non-interest expense.
11
<PAGE>
NET INTEREST. Income Net interest income for the quarter ended December
31, 1999 was $3.5 million, an increase of $596,000 from $2.9 million for the
prior year's period. The increase primarily reflects a rise in the average
interest rate spread, 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
higher yield on the securities portfolio, as well as a slight decrease in the
cost of funds. The Company's average interest rate spread increased to 2.65% for
the quarter ended December 31, 1999 from 2.51% for the same quarter last year,
while the net interest margin decreased to 2.88% for the 1999 three month period
from 3.04% a year earlier.
INTEREST INCOME. Interest and dividend income totaled $8.6 million for
the three months ended December 31, 1999, an increase of $2.0 million compared
to $6.6 million for the three months ended December 31, 1998. This increase
reflects the effect of a $103.5 million increase in total average
interest-earning assets coupled with a 12 basis point increase in the average
yield on such assets to 7.17% for the three months ended December 31, 1999 from
7.05% for the same period in the prior year.
Interest income on loans increased $2.3 million for the three months
ended December 31, 1999 compared to the same period in the prior year,
reflecting the effect of a $132.6 million increase in the average balance
partially offset by a 32 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 decline in the average yield
was primarily attributable to the origination of lower-yielding one- to
four-family adjustable rate mortgage loans with initial fixed-rate periods of
five, seven, or ten years, with annual adjustments thereafter.
On a combined basis, interest and dividend income on mortgage-backed
and other securities decreased $292,000 to $2.4 million for the three months
ended December 31, 1999 from $2.7 million for the three months ended December
31, 1998. Interest on mortgage-backed securities decreased by $235,000
attributable to the effects of a $21.9 million decrease in the average balance
partially offset by a 47 basis point increase in the average yield. Interest on
other securities declined by $57,000, primarily attributable to a $5.6 million
decrease in the average balance offset by a 40 basis point increase in the
average yield.
Interest and dividend income on other earning assets decreased $24,000,
primarily attributable to a $1.6 million decrease in the average balance and a
12 basis point decrease in the average yield.
INTEREST EXPENSE. Interest expense totaled $5.1 million for the three
months ended December 31, 1999, an increase of $1.3 million from the prior
year's quarter. Interest expense on deposits increased $294,000 compared to the
same period in the prior year, reflecting the effect of an $48.6 million
increase in the average balance partially offset by a 29 basis point decrease in
the average rate on interest-bearing deposits to 3.79% for the three months
ended December 31, 1999 from 4.08% for the three months ended December 31, 1998.
12
<PAGE>
The decrease in the average rate paid on deposits primarily reflects a 44 basis
point decrease in the average rate paid on savings certificate accounts, coupled
with a 34 basis point decrease in the average rate paid on regular savings
accounts and a 15 basis point decrease in the average rate paid on NOW, club,
and money market accounts. The increase in average interest-bearing deposits
consisted of a $34.7 million increase in average savings certificate accounts
(to $168.8 million from $134.1 million), a $7.0 million increase in average NOW,
club and money market accounts (to $60.1 million from $53.1 million) and a $6.9
million increase in average regular savings accounts (to $53.3 million from
$46.4 million).
Interest expense on borrowings increased $1.1 million to $2.5 million
for the three months ended December 31, 1999 from $1.4 million for the three
months ended December 31, 1998, as the Company continued to increase borrowings,
primarily Federal Home Loan Bank (FHLB) advances, to leverage available capital
and support further loan growth. Total borrowings averaged $172.1 million for
the three months ended December 31, 1999 at an average rate of 5.72% compared to
$97.9 million and 5.65%, respectively, for the prior-year quarter. See
"Liquidity and Capital Resources" for further discussion of the Company's
securities repurchase agreements.
PROVISION FOR LOAN LOSSES. The Company records provisions for loan
losses, which are charged to earnings, in order to maintain the allowance for
loan losses at a level which is considered appropriate to absorb probable losses
inherent in the existing loan portfolio. 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 $35,000 and $75,000 for the three
months ended December 31, 1999 and 1998, respectively. The lower provision in
the quarter ended December 31, 1999 reflects net recoveries of $19,000 for the
period, compared to net charge-offs of $1,000 for the quarter ended December 31,
1998. Non-performing loans totaled $766,000 at December 31, 1999, compared to
$755,000 at September 30, 1999 and $720,000 million at December 31, 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
December 31, 1999 increased $20,000 to $310,000, from $290,000 for the
comparable period in 1998. The increase is primarily attributable to a $128,000
increase in service charges and fee income, substantially offset by a $114,000
decrease in the net gain on sales of real estate mortgage loans held for sale.
The increase in service charges and fee income primarily results from increases
in transaction volume, in addition to $15,000 in income from Yonkers Financial
Services, Inc, a wholly-owned subsidiary of the Association that began its
operations to sell annuities and mutual funds in the quarter ended December 31,
1999. In the three months ended December 31, 1999, mortgage loan sales totaled
$3.0 million resulting in net gains of $23,000 (including the recognition of
mortgage servicing assets), as compared to loan sales of $20.1 million in the
1998 quarter, which resulted in gains of $137,000.
13
<PAGE>
NON-INTEREST EXPENSE. Non-interest expense increased $662,000 to $2.6
million for the three months ended December 31, 1999, compared to $1.9 million
for the three months ended December 31, 1998. Compensation and benefits expense
increased $311,000 from the prior-year primarily due to increased costs relating
to additional staffing in three new in-store branches and the loan department,
coupled with performance-based increases for certain staff members. The
increases of $110,000 in occupancy and equipment expense and $29,000 in data
processing service fees primarily reflects increased costs associated with the
establishment of in-store branches in May 1999, September 1999, and October
1999. The $207,000 increase in other non-interest expense is primarily
attributable to increased costs relating to: the three additional in-store
branches; increased production in the loan department and the establishment of a
real estate investment trust, Yonkers REIT, Inc. (the "REIT"), a wholly-owned
subsidiary of the Association, in March 1999.
INCOME TAX EXPENSE. Income tax expense was $420,000 for the three
months ended December 31, 1999 and $463,000 for the comparable 1998 period,
reflecting effective tax rates of 37.4% and 41.0 %, 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
distributed to the Association in the form of a dividend has the effect of
reducing the Company's New York State Income tax expense.
ASSET QUALITY
Non-performing loans totaled $766,000 at December 31, 1999, compared to
$755,000 at September 30, 1999 and $720,000 December 31, 1998. The ratio of
non-performing loans to total loans receivable was 0.22% at December 31, 1999,
compared to 0.25% at September 30, 1999 and 0.37% at December 31, 1998. The
allowance for loan losses was $1.6 million or 0.44% of total loans receivable at
December 31, 1999, compared to $1.5 million or 0.50% of total loans receivable
at September 30, 1999 and $1.4 million or 0.70% at December 31, 1998. The ratio
of the allowance for loan losses to non-performing loans was 203.26% at December
31, 1999, compared to 199.07% at September 30, 1999 and 191.11% at December 31,
1998.
14
<PAGE>
The following table sets forth certain asset quality ratios and other data at
the dates indicated:
<TABLE>
<CAPTION>
December 31, 1999 September 30, 1999 December 31, 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 $ 342 $ 347 $ 505
Commercial 303 305 201
Consumer loans 121 103 14
---------- ---------- ----------
Total 766 755 720
Real estate owned, net -- -- 183
---------- ---------- ----------
Total non-performing assets $ 766 $ 755 $ 903
========== ========== ==========
Allowance for loan losses $ 1,557 $ 1,503 $ 1,376
========== ========== ==========
Ratios:
Non-performing loans to total loans receivable (2) 0.22% 0.25% 0.37%
Non-performing assets to total assets 0.15 0.16 0.24
Allowance for loan losses to:
Non-performing loans 203.26 199.07 191.11
Total loans receivable 0.44 0.50 0.70
</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.
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 December 31, 1999 was 4.0%,
and the Company's actual liquidity ratio was 6.5%.
15
<PAGE>
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 December 31, 1999, the Company had outstanding loan
origination commitments of $25.0 million, unadvanced home equity lines of credit
of $4.5 million and undisbursed construction loans in process of $3.7 million.
The Company anticipates that it will have sufficient funds available to meet its
current loan origination and other commitments. At December 31, 1999, the
Company had the ability to obtain additional FHLB advances of approximately
$48.7 million. Certificates of deposit scheduled to mature in one year or less
from December 31, 1999 totaled $93.9 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 December 31, 1999 consisted of $108.8
million in borrowings under securities repurchase agreements and FHLB advances
of $77.2 million. FHLB advances at December 31, 1999 had a weighted average
interest rate of 5.42% and a weighted average term to maturity of 1.8 years with
a call date in 0.2 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 three months ended December 31, 1999, the average borrowings under these
agreements amounted to $111.3 million and the maximum month-end balance
outstanding was $114.0 million.
16
<PAGE>
Additional information concerning outstanding repurchase agreements with the
FHLB of New York as of December 31, 1999 is summarized as follows:
Accrued Weighted Fair Value
Interest Average of Collateral
Remaining Term to Final Maturity (1) Amount Payable (2) Rate Securities (3)
- ------------------------------------ ------ ----------- ---- --------------
(Dollars in Thousands)
Within 30 days $ -- $ -- --% $ --
After 30 days but within one year 37,759 25 5.88 39,669
After one but within three years 17,500 158 6.07 17,525
After three but within five years 8,100 1 5.97 8,386
After five years 45,412 342 5.68 46,150
-------- ----------- -----------
Total $108,771 $ 526 5.83% $ 111,730
======== =========== ===========
(1) The weighted average remaining term to final maturity was approximately
4.6 years at December 31, 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 1.6 years at December 31, 1999.
(2) Included in other liabilities in the consolidated balance sheet.
(3) Represents the fair value of the mortgage-backed securities ($81.8
million) and other debt securities ($29.9 million) which were
transferred to the counterparty, including accrued interest receivable
of $1.1 million. These securities consist of available-for-sale
securities and held-to-maturity securities with fair values of $97.1
million and $14.6 million, respectively.
At December 31, 1998, the Company's "amount at risk" under securities
repurchase agreements was approximately $2.4 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 December 31, 1999, the Association exceeded all of its regulatory
capital requirements with a tangible capital level of 6.34% of total adjusted
assets, which is above the required level of 1.5%; core capital of 6.34% of
total adjusted assets, which is above the required level of 4.0%; and total
risk-based capital of 14.92%, 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.
YEAR 2000 CONSIDERATIONS
As of the time of this filing, the Company's core systems are
functioning well with no known interruptions associated with the Y2K issues. The
17
<PAGE>
Company is also not aware of any significant events that have happened with any
of its vendors in connection with the Y2K issue, however there may have been
negative effects that we are not aware of. We plan to continue to monitor our
systems as well as those of our vendors. Costs incurred through December 31,
1999 were approximately $150,000. This includes Y2K remediation efforts and
planned system upgrades related to business expansion. Approximately $115,000 of
this cost was recognized in fiscal 1999. Management estimates that remaining
costs will be nominal.
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.
The Company's interest rate risk may have increased during the quarter
as the Company utilized short-term borrowings to fund its lending operations.
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
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
18
<PAGE>
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
During the quarter ended December 31, 1999, the Company filed one
report on form 8-K. On October 28, 1999, under Item 5, the Company issued a
press release announcing the Company's earnings for the quarter and fiscal year
ended September 30, 1999.
19
<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: February 12, 1999 /s/ Richard F. Komosinski
--------------------------
Richard F. Komosinski,
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 12, 1999 /s/ Joseph D. Roberto
----------------------
Joseph D. Roberto
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
20
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly report on Form 10-Q for the fiscal quarter ended December 31, 1999 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> DEC-31-1999
<CASH> $5,666
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 112,920
<INVESTMENTS-CARRYING> 20,573
<INVESTMENTS-MARKET> 20,470
<LOANS> 348,714
<ALLOWANCE> 1,557
<TOTAL-ASSETS> 506,173
<DEPOSITS> 285,700
<SHORT-TERM> 185,965
<LIABILITIES-OTHER> 2,894
<LONG-TERM> 0
0
0
<COMMON> 36
<OTHER-SE> 31,578
<TOTAL-LIABILITIES-AND-EQUITY> 506,173
<INTEREST-LOAN> 6,042
<INTEREST-INVEST> 2,387
<INTEREST-OTHER> 159
<INTEREST-TOTAL> 8,588
<INTEREST-DEPOSIT> 2,675
<INTEREST-EXPENSE> 5,136
<INTEREST-INCOME-NET> 3,452
<LOAN-LOSSES> 35
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 2,603
<INCOME-PRETAX> 1,124
<INCOME-PRE-EXTRAORDINARY> 1,124
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 704
<EPS-BASIC> 0.35
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 2.88
<LOANS-NON> 766
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 447
<ALLOWANCE-OPEN> 1,503
<CHARGE-OFFS> 1
<RECOVERIES> 20
<ALLOWANCE-CLOSE> 1,557
<ALLOWANCE-DOMESTIC> 1,557
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
