UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
-----------------
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 0-27650
CATSKILL FINANCIAL CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 14-1788465
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
341 MAIN STREET, CATSKILL, NY 12414
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(518)943-3600
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(Registrant's telephone number, including area code)
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:
Common Shares, $.01 par value 4,358,334
----------------------------- ---------------
(Title of class) (outstanding at January 31, 1999)
<PAGE>
CATSKILL FINANCIAL CORPORATION
FORM 10-Q
December 31, 1998
INDEX
PART I FINANCIAL INFORMATION
Item 1. Consolidated Interim Financial Statements
Consolidated Statements of Financial Condition as of December
31, 1998 (Unaudited) and September 30, 1998
Consolidated Statements of Income for the three months ended
December 31, 1998 and 1997 (Unaudited)
Consolidated Statements of Changes in Shareholders' Equity for
the three months ended December 31, 1998 and 1997 (Unaudited)
Consolidated Statements of Cash Flows for the three months
ended December 31, 1998 and 1997 (Unaudited)
Notes to Unaudited Consolidated Interim Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Default on Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
(In thousands, except share data)
Assets December 31, 1998 September 30, 1998
------ ----------------- ------------------
(Unaudited)
<S> <C> <C>
Cash and due from banks ........................... $ 4,176 $ 2,795
Securities available for sale, at fair value ...... 157,785 164,983
Investment securities, at amortized cost:
(Estimated fair value of $2,096 at December
31, 1998, and $2,106 at September 30, 1998) .. 2,064 2,060
Stock in Federal Home Loan Bank of NY, at cost .... 1,954 1,954
Loans receivable, net ............................. 142,544 137,785
Corporate owned life insurance .................... 10,002 --
Accrued interest receivable ....................... 2,431 2,398
Premises and equipment, net ....................... 2,561 2,522
Real estate owned ................................. 62 53
Other assets ...................................... 214 202
--------- ---------
Total Assets ............................ $ 323,793 $ 314,752
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing ......................... $ 7,315 $ 6,009
Interest bearing ............................. 207,818 203,968
--------- ---------
Total Deposits .......................... 215,133 209,977
Short-term borrowings .......................... 9,825 6,840
Long-term borrowings ........................... 25,000 25,000
Advance payments by borrowers for taxes and
insurance ................................ 2,020 673
Accrued interest payable ....................... 284 288
Official bank checks ........................... 1,547 1,986
Accrued expenses and other liabilities ......... 1,922 2,157
--------- ---------
Total Liabilities ....................... $ 255,731 $ 246,921
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
(In thousands, except share data)
(continued)
December 31, 1998 September 30, 1998
----------------- ------------------
(Unaudited)
<S> <C> <C>
Shareholders' Equity
Preferred stock, $.01 par value; authorized
5,000,000 shares .............................. -- --
Common stock, $.01 par value; authorized
15,000,000 shares; 5,686,750 shares issued
at December 31, 1998 and September 30, 1998 ... 57 57
Additional paid-in capital ..................... 54,974 54,974
Retained earnings, substantially restricted .... 37,989 37,374
Common stock acquired by ESOP .................. (3,981) (3,981)
Unearned management recognition plan (MRP) ..... (1,317) (1,433)
Treasury stock, at cost (1,328,416 shares at
December 31, 1998 and September 30, 1998) .... (21,223) (21,223)
Accumulated other comprehensive income ......... 1,563 2,063
--------- ---------
Total Shareholders' Equity ............... 68,062 67,831
--------- ---------
Total Liabilities and Shareholders' Equity $ 323,793 $ 314,752
========= =========
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
<PAGE>
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Income
(In thousands, except share and per share data)
THREE MONTHS ENDED
December 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Interest and dividend income:
Loans .............................................. $ 2,757 $ 2,551
Securities available for sale
Taxable ........................................ 2,030 2,499
Non-taxable .................................... 491 60
Investment securities held to maturity ............. 33 121
Federal funds sold and other ....................... 1 1
Stock in Federal Home Loan Bank of NY .............. 34 31
----------- -----------
Total interest and dividend income ............. 5,346 5,263
Interest expense:
Deposits ........................................... 2,226 2,241
Short-term borrowings .............................. 71 184
Long-term borrowings ............................... 329 --
----------- -----------
Total interest expense ......................... 2,626 2,425
----------- -----------
Net interest income ..................................... 2,720 2,838
Provision for loan losses ............................... 45 54
----------- -----------
Net interest income after provision for
loan losses .................................... 2,675 2,784
----------- -----------
Noninterest income:
Service fees on deposit accounts ................... 90 68
Net securities gains ............................... 22 19
Other income ....................................... 52 32
----------- -----------
Total noninterest income ....................... 164 119
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Income
(In thousands, except share and per share data)
(continued)
THREE MONTHS ENDED
December 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Noninterest expense:
Salaries and employee benefits ..................... 871 840
Advertising and business promotion ................. 22 50
Net occupancy on premises .......................... 95 82
Federal deposit insurance premiums ................. 6 7
Postage and supplies ............................... 67 64
Outside data processing fees ....................... 106 95
Equipment .......................................... 40 40
Professional fees .................................. 59 37
Other real estate expenses, net .................... 14 (16)
Other .............................................. 185 149
----------- -----------
Total noninterest expense ...................... 1,465 1,348
----------- -----------
Income before taxes ............................ 1,374 1,555
Income tax expense ...................................... 393 597
----------- -----------
Net income ..................................... $ 981 $ 958
=========== ===========
Basic earnings per common share ......................... $ .26 $ .23
Diluted earnings per common share ....................... $ .25 $ .22
Weighted Average Common Shares-Basic .................... 3,839,278 4,250,413
Weighted Average Common Shares-Diluted .................. 3,879,890 4,377,404
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
<PAGE>
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(In thousands, except share data) (Unaudited)
Retained Common Unearned
Additional Earnings, Stock Management
Common Paid-in Substantially Acquired by Recognition
Stock Capital Restricted ESOP Plan
---- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1998 $ 57 $54,974 $37,374 $(3,981) $(1,433)
Comprehensive income:
Net income 981
Other comprehensive income, net of tax:
Unrealized net losses arising during the
period on AFS securities (Pre-tax $811)
Reclassification adjustment for gains
realized in net income (pre-tax $22)
Other comprehensive income
Comprehensive income
Dividends paid on common stock ($.0925 per share) (366)
Amortization of unearned MRP compensation 116
---- ------- ------- ------- -------
Balance at December 31, 1998 $ 57 $54,974 $37,989 $(3,981) $(1,317)
==== ======= ======= ======= =======
Balance at September 30, 1997 $ 57 $54,811 $34,915 $(4,209) $(1,856)
Comprehensive income:
Net income 958
Other comprehensive income, net of tax:
Unrealized net gains arising during the
period on AFS securities (Pre-tax $506)
Reclassification adjustment for gains
realized in net income (pre-tax $19)
Other comprehensive income
Comprehensive income
Dividends paid on common stock ($.08 per share) (352)
Purchase of common stock (67,175 shares)
Exercise of stock options
(4,401 shares issued, net) (29)
Amortization of unearned MRP compensation 114
---- ------- ------- ------- -------
Balance at December 31, 1997 $ 57 $54,811 $35,492 $(4,209) $(1,742)
==== ======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(In thousands, except share data) (Unaudited)
(continued)
Accumulated
Treasury Other
Stock, Comprehensive Comprehensive
at Cost Income Income Total
------- ------ ------ -----
<S> <C> <C> <C> <C>
Balance at September 30, 1998 $(21,223) $ 2,063 $67,831
Comprehensive income:
Net income $ 981 981
Other comprehensive income, net of tax:
Unrealized net losses arising during the
period on AFS securities (Pre-tax $811) (487)
Reclassification adjustment for gains
realized in net income (pre-tax $22) (13)
----------
Other comprehensive income (500) (500) (500)
----------
Comprehensive income $ 481
==========
Dividends paid on common stock ($.0925 per share) (366)
Amortization of unearned MRP compensation 116
-------- ------- -------
Balance at December 31, 1998 $(21,223) $ 1,563 $68,062
======== ======= =======
Balance at September 30, 1997 $(12,862) $ 921 $71,777
Comprehensive income:
Net income $ 958 958
Other comprehensive income, net of tax:
Unrealized net gains arising during the
period on AFS securities (Pre-tax $506) 303
Reclassification adjustment for gains
realized in net income (pre-tax $19) (11)
----------
Other comprehensive income 292 292 292
----------
Comprehensive income $ 1,250
==========
Dividends paid on common stock ($.08 per share) (352)
Purchase of common stock (67,175 shares) (1,162) (1,162)
Exercise of stock options
(4,401 shares issued, net) 67 38
Amortization of unearned MRP compensation 114
-------- ---------- -------
Balance at December 31, 1997 $(13,957) $ 1,213 $71,665
======== ========== =======
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
<PAGE>
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended
December 31,
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
Net Income .......................................................... $ 981 $ 958
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ...................................................... 49 51
Net accretion on securities ....................................... (23) (9)
Provision for loan losses ......................................... 45 54
MRP compensation expense .......................................... 116 114
ESOP compensation expense ......................................... 77 100
Losses (gains) on sale of other real estate owned ................. 13 (24)
Gains on sales and calls of securities ............................ (22) (19)
Net increase in other assets ...................................... (45) (204)
Net decrease in accrued expense and other liabilities ............. (424) (3,185)
-------- --------
Net cash provided (used) by operating activities ................... 767 (2,164)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity/calls/paydown of investment securities ....... 9 3,010
Net increase in loans ............................................... (4,836) (895)
Capital expenditures, net ........................................... (88) (79)
Purchase of company owned life insurance ............................ (10,000) --
Purchase of AFS securities .......................................... (12,699) (16,637)
Proceeds from sale of securities available for sale ................. 5,394 2,019
Proceeds from maturity/calls/paydown of AFS securities .............. 13,702 9,689
Proceeds from sale of other real estate owned ....................... 10 116
-------- --------
Net cash used by investing activities ............................... (8,508) (2,777)
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In Thousands)
(continued)
Three Months Ended
December 31,
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the exercise of stock options ..................... -- 38
Net increase in deposits ............................................ 5,156 1,231
Net increase in advances from borrowers for
taxes and insurance ................................................ 1,347 1,593
Net increase in short-term borrowings ............................... 2,985 5,215
Cash dividends on common stock ...................................... (366) (352)
Purchase of common stock for treasury ............................... -- (1,162)
-------- --------
Net cash provided by financing activities ........................... 9,122 6,563
-------- --------
Net increase in cash and cash equivalents ........................... 1,381 1,622
Cash and cash equivalents at beginning of period .................... 2,795 2,274
-------- --------
Cash and cash equivalents at end of period .......................... $ 4,176 $ 3,896
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ......................................................... $ 2,630 $ 2,423
Taxes ............................................................ 370 521
Transfer of loans to other real estate owned ........................ 32 83
Change in net unrealized gain (loss) on AFS securities, net of change
in deferred tax liability (benefit) of $(333) and $195, respectively (500) 292
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements
<PAGE>
CATSKILL FINANCIAL CORPORATION
Notes to Unaudited Consolidated
Interim Financial Statements
Note 1. Basis of Presentation
The unaudited consolidated interim financial statements include the accounts of
Catskill Financial Corporation ("Company") and its wholly owned subsidiary,
Catskill Savings Bank ("Bank"). All intercompany accounts and transactions have
been eliminated in consolidation. Amounts in prior periods' unaudited
consolidated interim financial statements are reclassified whenever necessary to
conform to the current period's presentation. In management's opinion, the
unaudited consolidated interim financial statements reflect all adjustments of a
normal recurring nature, and disclosures which are necessary for a fair
presentation of the results for the interim periods presented and should be read
in conjunction with the consolidated financial statements and related notes
included in the Company's 1998 Annual Report to Stockholders. The results of
operations for the interim periods are not necessarily indicative of the results
of operations to be expected for the full fiscal year ended September 30, 1999.
Note 2. Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Unvested restricted stock is not considered
outstanding and only included in the computation of basic earnings per share on
the date they are fully vested. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity, such as
the Company's stock options and unvested restricted stock. Unallocated ESOP
shares are not included in the weighted average number of common shares
outstanding for either the basic or diluted earnings per share calculations.
The following sets forth certain information regarding the calculation of basic
and diluted earnings per share for the three month periods ended December 31:
<TABLE>
<CAPTION>
(in thousands, except share and per share data)
1998 1997
---------- ----------
<S> <C> <C>
Net income ..................................... $ 981 $ 958
========== ==========
Weighted average common shares ................. 3,839,278 4,250,413
Dilutive effect of potential common shares
related to stock compensation plans ... 40,612 126,991
---------- ----------
Weighted average common shares including
potential dilution .................... 3,879,890 4,377,404
========== ==========
Basic earnings per share ....................... $ .26 $ .23
Diluted earnings per share ..................... $ .25 $ .22
</TABLE>
<PAGE>
Note 3. Comprehensive Income
On October 1, 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." This
Statement establishes standards for reporting and display of comprehensive
income and its components. Comprehensive income includes the reported net income
of the Company adjusted for items that are currently accounted for as direct
entries to equity, such as the mark to market adjustment on securities available
for sale, foreign currency items and minimum pension liability adjustments. At
the Company, comprehensive income represents net income plus other comprehensive
income, which consists of the net change in unrealized gains or losses on
securities available for sale for the period. Accumulated other comprehensive
income represents the net unrealized gains or losses on securities available for
sale as of the balance sheet dates. Comprehensive income for the three month
period ended December 31, 1998 and 1997 was $481,000 and $1,250,000,
respectively.
Note 4. Impact of New Accounting Standards
In June 1997, the FASB issued Statement of Financial Accounting Standard No.
131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS
No. 131"). SFAS No. 131 establishes standards for reporting by public companies
about operating segments of their business. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas
and major customers. This Statement is effective for periods beginning after
December 15, 1997. Management anticipates developing the required information
for inclusion in the 1999 annual consolidated financial statements. This
Statement imposes disclosure requirements only and is not expected to have a
material effect on the financial condition or results of operations of the
Company.
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," which amends the disclosure requirements of SFAS No. 87, "Employers'
Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,"
and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." SFAS No. 132 standardizes the disclosure requirements of SFAS No. 87
and No. 106 to the extent practicable and recommends a parallel format for
presenting information about pensions and other postretirements benefits. The
Statement does not change any of the measurement or recognition provisions
provided for in SFAS No. 87, No. 88, or No. 106. The Statement is effective for
fiscal years beginning after December 15, 1997. Management anticipates providing
the required disclosures in the September 30, 1999, consolidated financial
statements. This Statement imposes disclosure requirements only and is not
expected to have a material effect on the financial condition or results of
operations of the Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. This Statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management is currently evaluating the impact of this Statement on the Company's
consolidated financial statements.
<PAGE>
CATSKILL FINANCIAL CORPORATION
FORM 10-Q
December 31, 1998
PART I - FINANCIAL INFORMATION (continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
Catskill Financial Corporation (the "Company" or "Catskill Financial") was
formed in December 1995 to acquire all of the common stock of Catskill Savings
Bank (the "Bank") upon its conversion from a mutual savings bank to a stock
savings bank. On April 18, 1996, the Company completed its initial public stock
offering, issuing 5,686,750 shares of $.01 par value common stock at $10.00 per
share. Net proceeds to the Company were $54.9 million after conversion costs,
and $50.4 million excluding the shares acquired by the Company's Employee Stock
Ownership Plan (the "ESOP"), which were purchased with the proceeds of a loan
from the Company.
The consolidated financial condition and operating results of the Company are
primarily dependent upon its wholly owned subsidiary, the Bank, and all
references to the Company prior to April 18, 1996, except where otherwise
indicated, are to the Bank.
The Bank has been and continues to be a community oriented financial institution
offering a variety of financial services. The Bank attracts deposits from the
general public and uses such deposits, together with other funds, to originate
one to four family residential mortgages, and, to a lesser extent, consumer
(including home equity lines of credit), commercial, and multi-family real
estate and other loans in its primary market area. The Bank's primary market
area is comprised of Greene County and southern Albany County in New York, which
are serviced through five banking offices, the most recent having opened in
April 1998. The Bank's deposit accounts are insured by the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation ("FDIC"), and, as a federal
savings bank, the Bank is subject to regulation by the Office of Thrift
Supervision ("OTS").
The Bank's profitability, like many financial institutions, is dependent to a
large extent upon its net interest income, which is the difference between the
interest it receives on interest earning assets, such as loans and investments,
and the interest it pays on interest bearing liabilities, principally deposits.
Results of operations are also affected by the Bank's provision for loan losses,
non-interest expenses such as salaries and employee benefits, occupancy and
other operating expenses and to a lesser extent, non-interest income such as
service charges on deposit accounts.
Financial institutions in general, including the Company, are significantly
affected by economic conditions, competition and the monetary and fiscal
policies of the federal government. Lending activities are influenced by the
demand for and supply of housing, competition among lenders, interest rate
conditions and funds availability. Deposit balances and cost of funds are
influenced by prevailing market rates on competing investments, customer
preference and the levels of personal income and savings in the Bank's primary
market area.
<PAGE>
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
Litigations Reform Act of 1995. In addition, certain disclosures and information
customarily provided by financial institutions, such as analysis of the adequacy
of the allowance for loan losses or an analysis of the interest rate sensitivity
of the Company's assets and liabilities, are inherently based upon predictions
of future events and circumstances. Furthermore, from time to time, the Company
may publish other forward-looking statements relating to such matters as
anticipated financial performance, business prospects, and similar matters.
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of the
safe harbor, the Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements. Some of the risks and uncertainties that may affect
the operations, performance, development and results of the Company's business,
the interest rate sensitivity of its assets and liabilities, and the adequacy of
its allowance for loan losses, include but are not limited to the following:
o Deterioration in local, regional, national or global economic
conditions which could result, among other things, in an increase in
loan delinquencies, a decrease in property values, or a change in the
housing turnover rate;
o the effect of certain customers and vendors of critical systems or
services failing to adequately address issues relating to becoming Year
2000 compliant;
o changes in market interest rates or changes in the speed at which
market interest rates change;
o changes in laws and regulations affecting the financial service
industry;
o changes in competition; and
o changes in consumer preferences.
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 those described above, could
affect the Company's financial performance and could cause the Company's actual
results or circumstances for future periods to differ materially from those
anticipated or projected.
The Company does not undertake, and specifically disclaims any
obligation, to publicly release any revisions to any forward-looking statements
to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
<PAGE>
FINANCIAL CONDITION
Total assets were $323.8 million at December 31, 1998, an increase of $9.0
million, or 2.9% from the $314.8 million at September 30, 1998. The increase in
assets was primarily in corporate owned life insurance, and to a lesser extent,
loans and was funded principally by increases in deposits and short-term
borrowings.
Cash and cash equivalents were $4.2 million, an increase of $1.4 million, or
50.0% from the $2.8 million at September 30, 1998. The change was principally
due to a temporary increase in checks in process of collection, as well as
funding, in advance, of a pending order for vault cash.
Total securities, which include securities held to maturity ("HTM") and
securities available for sale ("AFS"), excluding Federal Home Loan Bank stock,
were $159.8 million, a decrease of $7.2 million, or 4.3% from the $167.0 million
as of September 30, 1998. The decrease in securities was principally in the
Company's mortgage-backed securities ("MBS") portfolio, as the lower interest
rate environment accelerated the rate of prepayments on the Company's existing
MBS portfolio. The Company used most of the proceeds to fund a $10 million
purchase of corporate owned life insurance ("COLI") as a financing vehicle for
pre- and post retirement employee benefits. The COLI's investment returns and
death benefits are not taxable to the Company, and the insurance premiums are
non-deductible. The insurance policy provides that the initial lump sum premium,
after certain deductions, is maintained in a separate account, which minimizes
the Company's exposure to the insurance carrier and allows the Company to select
both the investment manager and the portfolio strategy.
Loans receivable were $144.5 million as of December 31, 1998, an increase of
$4.8 million or 3.4% over the $139.7 million as of September 30, 1998. The
following table shows the loan portfolio composition as of the respective
balance sheet dates:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
----------------------------- ------------------------------
(In thousands) % of Loans (In thousands) % of Loans
<S> <C> <C> <C> <C>
Real Estate Loans
One-to-four family ............ $ 117,073 80.9% $ 113,423 81.0%
Multi-family and commercial ... 7,241 5.0 6,389 4.6
Construction .................. 1,453 1.0 1,182 .8
--------- ------ --------- -----
Total real estate loans ... 125,767 86.9 120,994 86.4
Consumer Loans .................... 18,301 12.6 18,399 13.2
Commercial Loans .................. 661 .5 602 .4
--------- ------ --------- -----
Gross Loans ............... 144,729 100.0% 139,995 100.0%
====== =====
Less: Net deferred loan fees ..... (201) (260)
--------- ----------
Total loans receivable .... $ 144,528 $ 139,735
========= ==========
</TABLE>
<PAGE>
One-to-four family real estate loans increased $3.7 million, or 3.3%, as the
Company has continued to promote a 15 year fixed rate mortgage product with a
preferred rate for borrowers who have their monthly payments automatically
deducted from a checking account with the Bank. The increase in multi-family and
commercial real estate loans was principally represented by a loan to finance a
mobile home park in the Company's primary market area.
Non-performing assets at December 31, 1998 were $568,000, or .18% of total
assets, compared to the $644,000, or .20% of total assets at September 30, 1998.
The table below sets forth the amounts and categories of the Company's
non-performing assets.
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
---- ----
(In thousands)
<S> <C> <C>
Non-performing loans:
One-to-four family ........................... $408 $520
Multi-family and commercial .................. -- --
Consumer ..................................... 98 71
---- ----
Total non-performing loans ............... 506 591
---- ----
Foreclosed assets, net:
One-to-four family ........................... 62 53
Multi-family and commercial .................. -- --
---- ----
Total foreclosed assets, net ............. 62 53
---- ----
Total non-performing assets .............. $568 $644
==== ====
Total non-performing loans
as a % of total loans ................. .35% .42%
</TABLE>
The decrease in non-performing loans at December 31, 1998 as compared to
September 30, 1998 was attributable principally to loan repayments and the
foreclosure of one loan which resulted in the Company acquiring title to the
mortgaged property. The net realizable value of the property, totaling $32,000,
was transferred to other real estate, and since the net realizable value
approximated the Company's carrying value, the Company recorded no loss. In
addition, during the three months ended December 31, 1998, the Company sold one
parcel of other real estate which reduced real estate owned by $23,000. The
following table summarizes the activity in other real estate for the periods
presented:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1998 1997
----- -----
(In thousands)
<S> <C> <C>
Other real estate beginning of
period ........................... $ 53 $ 248
Transfer of loans to other real
estate owned ..................... 32 83
Sales of other real estate, net ...... (23) (92)
----- -----
Other real estate end of period ...... $ 62 $ 239
===== =====
</TABLE>
The allowance for loan losses was $2.0 million, or 1.37% of period end loans at
December 31, 1998, and provided coverage of non-performing loans of 392.1%,
compared to coverage of 330.0% as of September 30, 1998. The following
summarizes the activity in the allowance for loan losses:
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1998 1997
------- -------
(In thousands)
<S> <C> <C>
Allowance at beginning of the period ......... $ 1,950 $ 1,889
Charge-offs .............................. (13) (57)
Recoveries ............................... 2 4
------- -------
Net charge-offs ...................... (11) (53)
Provision for loan losses ................ 45 54
------- -------
Allowance at end of the period ............... $ 1,984 $ 1,890
======= =======
</TABLE>
Total deposits were $215.1 million at December 31, 1998, an increase of $5.1
million, or 2.4% from the $210.0 million at September 30, 1998. The following
table shows the deposit composition as of the respective balance sheet dates:
<TABLE>
<CAPTION>
December 31, 1998 September 30, 1998
--------------------------------- ----------------------------------
(In thousands) % of Deposits (In thousands) % of Deposits
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Savings ...................... $ 78,864 36.7% $ 78,075 37.2%
Money market ................. 6,096 2.8 5,949 2.8
NOW .......................... 14,722 6.8 12,396 5.9
Non-interest demand .......... 7,315 3.4 6,009 2.9
Certificates of deposits ..... 108,136 50.3 107,548 51.2
-------- ----- -------- -----
$215,133 100.0% $209,977 100.0%
======== ===== ======== =====
</TABLE>
<PAGE>
The growth in deposits was principally generated by the Company's two newest
offices. In addition, the Company received approximately $1.6 million of direct
deposits in December 1998, instead of January 1999, because January 1st and
January 3rd were not business days.
The Company increased its borrowings, which are principally with the Federal
Home Loan Bank of New York ("FHLB"), to $34.8 million at December 31, 1998, an
increase of $3.0 million from the $31.8 million at September 30, 1998. The
additional borrowings were used to partially fund the Company's purchase of
company owned life insurance, and the temporary increase in cash and due from
banks. As of December 31, 1998, the Company still has additional available
credit of $4.5 million under its overnight line and $14.3 million under its one
month advance program with the FHLB.
Shareholders' equity at December 31, 1998 was $68.1 million, an increase of $.3
million or .4% from the $67.8 million at September 30, 1998. The increase was
principally caused by the Company's $.6 million of net income retained after
cash dividends offset by a $.5 million decline in the Company's net unrealized
gain (loss) on securities available for sale, net of taxes. The Company also
recorded a $.1 million increase in shareholders' equity due to the amortization
of restricted stock awards.
Shareholders' equity as a percentage of total assets was 21.0% at December 31,
1998 compared to 21.6% at September 30, 1998. Book value per common share was
$15.62, or $16.03 excluding unvested shares of the Company's restricted stock
plan ("MRP"), and was $17.68 excluding unallocated ESOP shares and unvested MRP
shares.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER
31, 1998 AND 1997
General
For the three months ended December 31, 1998, the Company recorded net income of
$981,000, an increase of $23,000, or 2.4%, compared to the three month period
ended December 31, 1997. Diluted earnings per share were $.25, an increase of
13.6% compared to diluted earnings per share of $.22 for the three months ended
December 31, 1997. Basic earnings per share were $.26 for the three month
period, an increase of 13.0% compared to $.23 for the comparable quarter. For
the three months ended December 31, 1998, weighted average common shares - basic
were 3,839,278, down 411,135, or 9.7%, due to the Company's share repurchase
programs.
Annualized return on average assets for the three months ended December 31, 1998
and 1997, was 1.24% and 1.31%, respectively, and return on average equity was
5.79% and 5.32%, respectively.
Net Interest Income
Net interest income on a full tax equivalent basis for the three months ended
December 31, 1998, was $3.0 million, an increase of $98,000, or 3.4%, when
compared to the three months ended December 31, 1997. The increase was
principally volume related as the Company increased its average earning assets
$24.1 million, more than offsetting the increase in interest expense from the
Company's funding of its stock repurchase program. The Company funded the share
repurchases, along with its growth in earning assets, principally with
borrowings and, to a lesser extent, deposit growth.
<PAGE>
Interest income for the three months ended December 31, 1998 was $5.6 million on
a tax equivalent basis, an increase of $299,000, or 5.7%, over the comparable
period last year. The $24.1 million increase in the average volume of earning
assets had a direct positive effect on interest income as the Company sought to
leverage its excess capital, offset somewhat by a twenty basis point drop in the
yield on its average earning assets.
Average earning assets increased principally in the loan and securities
portfolios, which on average grew 11.9% and 5.8%, respectively. Loan growth was
principally due to the promotion of a 15 year fixed rate mortgage product, which
increased volume, but had an adverse impact on the loan portfolio yield since
the loans were originated at rates below the average portfolio yield. In
addition, the Company, due to lower market interest rates, experienced higher
loan prepayments, and refinancing of its existing portfolio, which together with
the loan promotion caused the yield on the loan portfolio to decrease 28 basis
points to 7.79%.
Average MBS were $85.3 million for the three months ended December 31, 1998,
down only 1% from the comparable period. The average yield on MBS was 6.32%,
down 71 basis points from the comparable period, as the Company has been
purchasing one year Treasury indexed teaser rate adjustable rate mortgages
("ARM's"). Consequently, 29.9% of the average MBS portfolio represented teaser
rate ARM's compared to only 4.2% in the comparable period. The teaser ARM's were
purchased during the initial teaser rate period, therefore the initial average
interest rate and yield will be less than the fully indexed rate and yield.
Management expects the average yield of these ARM's to increase as they adjust
to their fully indexed rate; however, the actual increase will depend upon the
level of the one-year constant maturity treasury index when the rates adjust.
Average other securities increased $9.8 million, or 14.1%, as the Company
purchased longer call protected bank qualified municipal securities to increase
yields and reduce reinvestment risk if rates decline. The average yield on the
other securities portfolio for the three months ended December 31, 1998, was
7.43%, an increase of 44 basis points from the comparable period, as the Company
replaced securities called and/or matured with higher yielding municipals.
Municipal securities now represent 45.0% of average other securities, compared
to less than 8% in the comparable period.
Interest expense for the three months ended December 31, 1998, was $2.6 million,
an increase of $201,000, or 8.3%. The change was principally due to an increase
in the average volume of interest bearing liabilities offset somewhat by a
decrease in the Company's cost of funds. Average interest bearing liabilities
were $237.3 million, an increase of $26.9 million, or 12.8%, as the Company
borrowed in order to fund the Company's stock repurchase program and earning
asset growth. Average long-term borrowings were up $25.0 million, as the Company
converted a portion of its short-term borrowings to long-term borrowings,
principally through convertible (callable) advances. There were no long-term
borrowings in the comparable period in fiscal 1998. Average short-term
borrowings were $5.4 million for the three months ended December 31, 1998, down
$7.3 million from the comparable three month period due to the change to
long-term borrowings. In addition, the Company's average certificates of deposit
("CD's") increased $8.0 million, or 8.0%, as the Company in fiscal 1998 promoted
a special 15 month CD program at a premium rate due to competitive pressures.
The cost of funds decreased 18 basis points to 4.39% as the Company has
generally lowered its deposit rates.
<PAGE>
The Company's net yield on average earning assets was 3.83% for the three months
ended December 31, 1998, down 19 basis points compared to 4.02% for the
comparable period of the prior year. The decrease was principally caused by the
Company's stock repurchase program, which reduced the level of no-cost funding
sources, and consequently increased the amount of average earning assets funded
by interest bearing liabilities. For the three months ended December 31, 1998,
the Company had $69.1 million of average earning assets with no funding costs, a
decrease of $2.8 million, or 3.9%, from the $71.9 million for the three months
ended December 31, 1997.
For more information on average balances, interest, yield and rate, please refer
to Table #1, included in this report.
Provision for Loan Losses
The Company establishes an allowance for loan losses based on an analysis of
risk factors in its loan portfolio. This analysis includes concentrations of
credit, past loan loss experience, current economic conditions, amount and
composition of loan portfolio, estimated fair market value of underlying
collateral, delinquencies and other factors. Accordingly, the calculation of the
adequacy of the allowance for loan losses is not based solely on the level of
non-performing loans.
The provision for loan losses was $45,000, or .13% of average loans for the
three months ended December 31, 1998, down from $54,000, or .17% of average
loans in the comparable period of the prior year. The decrease is principally
attributable to a reduction in net charge-offs to $11,000, or .03% of average
loans for the three months ended December 31, 1998, as compared to $53,000, or
.17% of average loans in the comparable period. Non-performing loans were
$506,000 as of December 31, 1998, or .35% of total loans, a decrease of $278,000
from December 31, 1997, when they were .62% of total loans. At December 31,
1998, the allowance for loan losses was $1,984,000, or 1.37% of period end
loans, and provided coverage of non-performing loans of 392.1% compared to 1.49%
and 241.1%, respectively, as of December 31, 1997.
Non-Interest Income
Non-interest income was $164,000 for the three months ended December 31, 1998,
an increase of $45,000 or 37.8% from the three months ended December 31, 1997.
The increase was principally service fees on deposit accounts as the Company
continues to promote checking accounts to increase its core deposits and
diversify its revenue.
Non-Interest Expense
Non-interest expense for the three months ended December 31, 1998 was
$1,465,000, an increase of $117,000, or 8.7%, over the comparable period last
year. The increase was principally the cost attributable to our new supermarket
branch, which opened in April 1998, as well as higher other real estate
expenses, and other professional fees.
Salaries and employee benefits for the three months ended December 31, 1998,
were $871,000, an increase of $31,000, or 3.7%, principally from staffing our
new branch which opened in April 1998. Other real estate expenses, net increased
$30,000, principally from sales, as the Company incurred a $13,000 loss in the
three months ended December 31, 1998, compared to gains of $16,000 in the
comparable period. Other professional fees were $59,000, an increase of $22,000
as the Company incurred higher costs due to higher tax, actuarial and investment
advisory services.
<PAGE>
Income Tax Expense
Income tax expense for the three months ended December 31, 1998, was $393,000, a
decrease of $204,000, or 34.2%, from the comparable period last year. The
Company's effective tax rates for the three months ended December 31, 1998 and
1997, were 28.60% and 38.39%, respectively. The decrease in both the effective
tax rate and income tax expense is principally the impact of the Company's
purchase of tax-exempt securities, primarily bank qualified municipals.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability to generate cash flows to meet present and expected
future funding needs. Management monitors the Company's liquidity position on a
daily basis to evaluate its ability to meet expected and unexpected depositor
withdrawals and to make new loans and or investments. The Company is seeking to
reduce its high level of liquidity, but continues to manage its balance sheet so
there has been no need for unanticipated sales of assets.
The Company's primary sources of funds for operations are deposits, borrowings,
principal and interest payments on loans, mortgage backed securities and other
securities available for sale.
Net cash provided by operating activities was $.8 million for the three months
ended December 31, 1998, an increase of $2.9 million from the comparable three
month period. The increase was principally the change in accrued expenses and
other liabilities caused by a decrease in official bank checks outstanding in
the prior year. Official bank checks decreased principally as a result of the
Company's payment of real estate taxes for mortgage borrowers using escrowed
funds earlier in September 1998 than in September 1997.
Investing activities used $8.5 million in the three months ended December 31,
1998, as the Company increased its assets principally from the $10.0 million
purchase of COLI, and $4.8 million in loans, offset somewhat by a $6.4 million
reduction in securities. Financing activities provided $9.1 million, as the
Company experienced increases in deposits, short-term borrowings and advances by
borrowers for taxes, somewhat offset by the payment of cash dividends on its
common stock. For more details concerning the Company's cash flows, see
"Consolidated Statements of Cash Flows."
An important source of the Company's funds is the Bank's core deposits.
Management believes that a substantial portion of the Bank's $215.1 million of
deposits are a dependable source of funds due to long-term customer
relationships. The Company does not currently use brokered deposits as a source
of funds, and as of December 31, 1998, deposit accounts having balances in
excess of $100,000 totaled $19.0 million, or less than 8.8%, of total deposits.
The Bank is required to maintain minimum levels of liquid assets as defined by
the OTS regulations. The requirement, which may be varied by the OTS depending
upon economic conditions and deposit flows, is based upon a percentage of
deposits and short-term borrowings. The OTS required minimum liquidity ratio is
currently 4% and for the month of December 1998, the Bank exceeded that,
maintaining an average liquidity ratio of 46.34%.
The Company anticipates that it will have sufficient funds to meet its current
commitments. At December 31, 1998, the Company had commitments to originate
loans of $4.3 million. In addition, the Company had undrawn commitments of $2.6
million on home equity and other lines of credit. Certificates of deposits which
are scheduled to mature in one year or less at December 31, 1998, totaled $71.9
million, and management believes that a significant portion of such deposits
will remain with the Company.
<PAGE>
Although there are no minimum capital ratio requirements for the Company, the
Bank is required to maintain minimum regulatory capital ratios. The following is
a summary of the Bank's actual capital amounts and ratios at December 31, 1998,
compared to the OTS minimum capital requirements:
<TABLE>
<CAPTION>
Actual Minimum
------ -------
Amount % Amount %
------- ----- ------- ---
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Tangible Capital $56,229 17.65% $ 4,779 1.5%
Core Capital 56,229 17.65 12,743 4.0
Risk Based Capital 57,923 42.83 10,819 8.0
</TABLE>
On April 18, 1999, it will have been three years since the Bank converted to a
public company, consequently, the Company will no longer be subject to stock
repurchase restrictions of the OTS. The Company expects, subject to market
conditions, to continue to use stock repurchase programs as part of its capital
management strategies. At December 31, 1998, the Holding Company had
approximately $6.0 million in available resources to pursue stock repurchases.
Furthermore, the Bank could pay $21.7 million of dividends to the Holding
Company after notifying the OTS in writing.
Year 2000 Readiness Disclosure
The Year 2000 ("Y2K") issue confronting the Company and its suppliers,
customers, customers' suppliers and competitors centers on the inability of
computer systems to recognize the year 2000. Many existing computer programs and
systems originally were programmed with six digit dates that provided only two
digits to identify the calendar year in the date field. With the impending new
millennium, these programs and computers will recognize "00" as the year 1900
rather than the year 2000.
Substantially, all of the Company's mission critical systems are outsourced or
are purchased software packages. As a result, much of the remediation and
testing process is dependent on the accuracy of work performed by, and the Year
2000 compliance of software, hardware and equipment provided by, vendors.
The Company's total Y2K project cost is estimated to be $100,000, of which
$50,000 is expected to be hardware and software upgrades. So far, the Company
has expensed $25,000 of the project cost, and expects to amortize the hardware
and software upgrades over their estimated useful lives of three to five years.
The Company's progress on its Year 2000 readiness is continuing as scheduled.
During the quarter, the Company tested all of its mission critical systems, and
processed transactions with dates up through and including March 1, 2000. The
results of the Company's tests, as well as other customers of the Company's data
processing service provider, disclosed no Year 2000 issues. Dates remaining to
be tested are year-end 2000, as well as three dates within year 2001.
The Company expects its mission critical systems to be compliant by June 1999,
and all others by September 1999.
<PAGE>
The Company expects that when the century changes, disruption in service will
come not from a failure of its systems or the systems of the providers with whom
it interfaces, but rather from outside agencies (i.e. electric and telephone
companies) beyond its control. Therefore, contingency planning and business
resumption planning will be based on the Company's formal Disaster Recovery
Program, which includes using such things as spreadsheet software or reverting
to manual systems until problems can be corrected.
The Company has written a Disaster Recovery and Year 2000 Contingency Plan, and
management expects to test the plan before June 30, 1999. The Company is also
undertaking various customer awareness programs, such as posted statements,
mailing of FDIC brochures and publishing information on its website.
PART I - FINANCIAL INFORMATION (continued)
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company believes 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.
TABLE #1 AVERAGE BALANCES, INTEREST, YIELD AND RATE
The following table presents, for the periods indicated, the total dollar amount
of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. Tax equivalent adjustments reflected
principally on municipal securities totaled $235,000 and $19,000 for the three
month periods ended December 31, 1998 and 1997, respectively. All average
balances are daily average balances. Non-accruing loans have been included in
the table as loans receivable with interest earned recognized on a cash basis
only. Securities include both the securities available for sale portfolio and
the held to maturity portfolio, other than mortgage backed securities which are
shown separately. Mortgage backed securities are primarily classified as
available for sale. Securities available for sale are shown at amortized cost.
<PAGE>
<TABLE>
<CAPTION>
THREE MONTH PERIODS ENDED
--------------------------------------------------------------------------------------------
December 31, 1998 December 31, 1997
------------------------------------------ ------------------------------------------
Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
------- -------- ---------- ------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets
Loans receivable, net $141,515 $ 2,757 7.79% $126,421 $ 2,551 8.07%
Mortgage-backed securities 85,331 1,348 6.32% 86,192 1,514 7.03%
Securities 79,410 1,475 7.43% 69,574 1,216 6.99%
Federal funds sold and other 62 1 6.40% 43 1 9.23%
-------- ------- -------- -------
Total interest-earning assets 306,318 5,581 7.29% 282,230 5,282 7.49%
Allowance for loan losses (1,965) (1,876)
Other assets, net 10,185 8,766
-------- --------
Total Assets $314,538 $289,120
======== ========
Interest-Bearing Liabilities
Savings deposits $ 77,797 $607 3.10% $ 78,235 $682 3.46%
Money market 6,106 45 2.92% 6,925 56 3.21%
Now deposits 13,109 64 1.94% 10,986 68 2.46%
Certificates of deposit 107,921 1,499 5.51% 99,942 1,425 5.66%
Short-term borrowings 5,436 71 5.18% 12,702 184 5.75%
Long-term borrowings 25,000 329 5.22% ---
Escrow and other 1,897 11 2.30% 1,571 10 2.53%
-------- ------- -------- -------
Total interest-bearing
liabilities 237,266 2,626 4.39% 210,361 2,425 4.57%
Non-interest bearing 6,541 4,574
Other liabilities 3,558 2,751
Shareholders' equity 67,173 71,434
-------- --------
Total Equity and Liabilities $314,538 $289,120
======== ========
Net interest income $2,955 $2,857
====== ======
Net interest rate spread 2.90% 2.92%
==== ====
Net yield on average
interest-earning assets 3.83% 4.02%
==== ====
Average interest earning
assets to average interest
bearing liabilities 129.10% 134.16%
====== ======
Earning Assets/Total Assets 97.39% 97.62%
====== ======
</TABLE>
<PAGE>
CATSKILL FINANCIAL CORPORATION
FORM 10-Q
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In the ordinary course of business, the Company and the Bank are subject to
legal actions which involve claims for monetary relief. Management, based on
advice of counsel, does not believe that any currently known legal actions,
individually or in the aggregate will have a material effect on its consolidated
financial condition or results of operation.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults on Senior Securities
-----------------------------
Not Applicable
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
(11) Computation of Net Income per Common Share
(27) Financial Data Schedule (included only in EDGAR filing)
<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.
CATSKILL FINANCIAL CORPORATION
Date: February 12, 1999 /s/ Wilbur J. Cross
--------------------
Wilbur J. Cross
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
Date: February 12, 1999 /s/ David J. DeLuca
--------------------
David J. DeLuca
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Exhibit 11
<TABLE>
<CAPTION>
CATSKILL FINANCIAL CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
(In thousands, except share and per share data)
Three Months Ended December 31,
-------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net income per common share - basic
Net income applicable to common shares ........ $ 981 $ 958
Weighted average common shares outstanding .... 3,839,278 4,250,413
Net income per common share - basic ........... $ .26 $ .23
========== ==========
Net income per common share - diluted
Net income applicable to common shares ........ $ 981 $ 958
Weighted average common shares outstanding .... 3,839,278 4,250,413
Dilutive common stock options (1) ............. 40,612 126,991
---------- ----------
Weighted average common shares and
common share equivalents outstanding .... 3,879,890 4,377,404
========== ==========
Net income per common share - diluted ......... $ .25 $ .22
========== ==========
</TABLE>
(1) Dilutive common stock options (includes granted, but unvested, restricted
stock under the Company's MRP plan and options granted, but unexercised, under
its stock option plan) are based on the treasury stock method using average
market price. The treasury stock method recognizes the use of assumed proceeds
upon the exercise of options, and the amount of unearned compensation attributed
to future services under the Company's restricted stock plan, including any tax
benefits, to purchase the Company's common stock at the average market price
during the period.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 4,176
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157,785
<INVESTMENTS-CARRYING> 2,064
<INVESTMENTS-MARKET> 2,096
<LOANS> 144,528
<ALLOWANCE> 1,984
<TOTAL-ASSETS> 323,793
<DEPOSITS> 215,133
<SHORT-TERM> 9,825
<LIABILITIES-OTHER> 5,773
<LONG-TERM> 25,000
0
0
<COMMON> 57
<OTHER-SE> 68,005
<TOTAL-LIABILITIES-AND-EQUITY> 323,793
<INTEREST-LOAN> 2,757
<INTEREST-INVEST> 2,554
<INTEREST-OTHER> 35
<INTEREST-TOTAL> 5,346
<INTEREST-DEPOSIT> 2,226
<INTEREST-EXPENSE> 2,626
<INTEREST-INCOME-NET> 2,720
<LOAN-LOSSES> 45
<SECURITIES-GAINS> 22
<EXPENSE-OTHER> 1,465
<INCOME-PRETAX> 1,374
<INCOME-PRE-EXTRAORDINARY> 1,374
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 981
<EPS-PRIMARY> .26
<EPS-DILUTED> .25
<YIELD-ACTUAL> 3.83
<LOANS-NON> 506
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 300
<ALLOWANCE-OPEN> 1,950
<CHARGE-OFFS> 13
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 1,984
<ALLOWANCE-DOMESTIC> 1,542
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 442
</TABLE>
