UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1997 Commission File No. 0-21113
AFSALA BANCORP, INC.
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 14-1793890
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
161 CHURCH STREET, AMSTERDAM, NY 12010
--------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (518) 842-5700
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 of outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of shares outstanding
Class of Common Stock as of August 7, 1997
--------------------- ----------------------------
Common Stock, Par $.10 1,454,750
Transitional Small Business Disclosure Format (Check One): Yes No X
---- ---
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
JUNE 30, 1997
<TABLE>
<CAPTION>
INDEX
Part I CONSOLIDATED FINANCIAL INFORMATION
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Page
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
(unaudited) and September 30, 1996 .............................................1
Consolidated Statements of Income for the three
months ended June 30, 1997 and 1996 (Unaudited) ............................................2
Consolidated Statements of Income for the nine
months ended June 30, 1997 and 1996 (Unaudited) ............................................3
Consolidated Statements of Cash Flows for the nine
months ended June 30, 1997 and 1996 (Unaudited).............................................4
Notes to unaudited consolidated interim financial statements................................5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations............................................8
Part II OTHER INFORMATION
- -------
Item 1. Legal
Proceedings............................................................................................22
Item 2. Changes in
Securities.............................................................................................22
Item 3. Defaults Upon Senior
Securities.............................................................................................22
Item 4. Submission of Matters to a Vote of Security Holders........................................22
Item 5. Other
Information............................................................................................23
Item 6. Exhibits and Reports on Form 8-K. .......................................................23
Signatures.............................................................................................24
</TABLE>
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
Assets 1997 1996
- ------ -------------- -----------
<S> <C> <C>
Cash and due from banks $ 4,224,844 $ 4,816,392
Federal funds sold 9,850,000 19,200,000
Term deposits with the Federal Home Loan Bank -- 3,000,000
------------- -------------
Total cash and cash equivalents 14,074,844 27,016,392
------------- -------------
Securities available for sale, at approximate fair value 26,998,486 17,131,802
Investment securities held to maturity 40,396,756 34,999,930
Federal Home Loan Bank of New York stock, at cost 565,300 565,300
Loans receivable, net 73,857,917 70,677,291
Accrued interest receivable 1,374,548 1,156,466
Premises and equipment, net 1,687,591 1,703,491
Other assets 225,356 426,015
------------- -------------
Total assets $ 159,180,798 $ 153,676,687
============= =============
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Deposits 135,247,121 126,460,081
Federal Home Loan Bank of New York long term
borrowings 1,512,500 1,815,625
Escrow accounts 291,250 365,187
Accrued expenses and other liabilities 685,882 4,444,922
------------- -------------
Total liabilities 137,736,753 133,085,815
------------- -------------
Commitments and contingent liabilities
Stockholders' Equity:
Preferred stock, $0.10 par value; authorized 500,000 shares; none -- --
issued
Common stock, $0.10 par value; authorized 1,454,750 shares
issued and outstanding 145,475 145,475
Additional paid-in capital 14,250,657 13,460,381
Retained earnings, substantially restricted 8,929,367 8,120,864
Common stock acquired by ESOP (1,080,105) (1,107,800)
Unearned Restricted Stock Plan (772,472) --
Net unrealized loss on securities available for sale, net of tax (28,877) (28,048)
------------- -------------
Total stockholders' equity 21,444,045 20,590,872
------------- -------------
Total liabilities and stockholders' equity $ 159,180,798 $ 153,676,687
============= =============
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
-1-
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
For the three months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------------- ------------
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans $ 1,522,309 $ 1,443,523
Interest on Federal funds sold 80,516 88,666
Interest on FHLB term deposits -- 27,607
Interest on securities available for sale 432,366 233,086
Interest on investment securities 674,214 503,940
Dividends on Federal Home Loan Bank of NY stock 8,809 8,799
----- -----
Total interest and dividend income 2,718,214 2,305,621
--------- ---------
Interest expense:
Deposits and escrow accounts 1,372,241 1,280,358
Federal Home Loan Bank of New York long term
borrowings 28,907 34,669
------ ------
Total interest expense 1,401,148 1,315,027
--------- ---------
Net interest income 1,317,066 990,594
Provision for loan losses 60,000 55,000
------ ------
Net interest income after provision for loan losses 1,257,066 935,594
--------- -------
Non-interest income:
Service charges on deposit accounts 83,136 88,810
Other 2,237 2,054
----- -----
Total non-interest income 85,373 90,864
------ ------
Non-interest expenses:
Compensation and benefits 402,668 311,146
Occupancy and equipment 134,255 126,367
FDIC deposit insurance premium 20,519 67,675
Data processing fees 63,889 66,752
Professional services fees 81,967 26,722
Advertising 18,534 14,685
Supplies 35,654 20,723
Other 115,032 118,546
------- -------
Total non-interest expenses 872,518 752,616
------- -------
Income before income tax expense 469,921 273,842
Income tax expense 160,000 91,000
------- ------
Net income $ 309,921 $ 182,842
============ ============
Net income per share $ 0.23 $ N/A
============ ============
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
- 2 -
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
For the nine months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans $ 4,559,434 $ 4,254,711
Interest on Federal funds sold 278,163 251,599
Interest on FHLB term deposits 142,037 72,380
Interest on securities available for sale 936,270 513,734
Interest on investment securities 2,014,125 1,628,718
Dividends on Federal Home Loan Bank of NY stock 27,053 27,726
------ ------
Total interest and dividend income 7,957,082 6,748,868
--------- ---------
Interest expense:
Deposits and escrow accounts 3,968,968 3,854,449
Federal Home Loan Bank of New York long term
borrowings 88,482 110,725
------ -------
Total interest expense 4,057,450 3,965,174
--------- ---------
Net interest income 3,899,632 2,783,694
Provision for loan losses 210,000 135,000
------- -------
Net interest income after provision for loan losses 3,689,632 2,648,694
--------- ---------
Non-interest income:
Service charges on deposit accounts 282,172 269,051
Other 31,657 18,946
------ ------
Total non-interest income 313,829 287,997
------- -------
Non-interest expenses:
Compensation and benefits 1,139,741 938,434
Occupancy and equipment 407,048 358,838
FDIC deposit insurance premium 96,532 196,579
Data processing fees 205,963 199,718
Professional service fees 213,591 85,263
Advertising 43,024 32,657
Supplies 85,295 59,587
Other 485,163 334,801
------- -------
Total non-interest expenses 2,676,357 2,205,877
--------- ---------
Income before income tax expense 1,327,104 730,814
Income tax expense 464,731 229,600
------- -------
Net income $ 862,373 $ 501,214
=========== ===========
Net income per share $ 0.64 $ N/A
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
- 3 -
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the nine months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income $ 862,373 $ 501,214
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation 129,857 122,021
Provision for loan losses 210,000 135,000
Allocation of ESOP stock 32,406 --
RSP compensation expense 13,093 --
Increase in accrued interest receivable (218,082) (38,645)
Decrease (increase) in other assets 232,048 (320,985)
(Decrease) increase in accrued expenses and other liabilities (3,758,615) 137,834
----------- -----------
Total adjustments (3,359,293) 35,225
----------- -----------
Net cash (used in) provided by operating activities (2,496,920) 536,439
----------- -----------
Cash flows from investing activities:
Proceeds from the maturity and call of securities
available for sale 8,132,062 2,534,141
Purchase of securities available for sale (18,000,000) (500,000)
Proceeds from the maturity and call of investment securities 6,088,234 8,775,319
Purchase of investment securities (11,485,060) (11,931,899)
Net loans made to customers (3,422,015) (3,773,507)
Capital expenditures (113,957) (73,223)
------------ -----------
Net cash used in investing activities (18,800,736) (4,969,169)
------------ -----------
Cash flows from financing activities:
Increase in deposits 8,787,040 9,261,257
Repayments on long term borrowings from the
Federal Home Loan Bank (303,125) (353,125)
Decrease in escrow accounts (73,937) (97,801)
Dividends paid (53,870) --
-------- -----------
Net cash provided by financing activities 8,356,108 8,810,331
--------- -----------
Net (decrease) increase in cash and cash equivalents (12,941,548) 4,377,601
Cash and cash equivalents at beginning of period 27,016,392 9,673,328
---------- -----------
Cash and cash equivalents at end of period $14,074,844 $14,050,929
=========== ===========
Additional Disclosures Relative to Cash Flows:
Interest paid $ 4,066,692 $ 3,962,945
=========== ===========
Taxes paid $ 307,738 $ 135,000
=========== ===========
Supplemental schedule of non-cash investing and financing activities:
Investment securities held to maturity transferred to
securities available for sale $ -- $16,602,489
=========== ===========
Transfer of loans to real estate owned $ 31,389 $ --
=========== ============
Change in unrealized gain (loss) on securities available for sale, net of tax $ (829) $ (61,854)
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
-4 -
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOTE 1. Presentation of Financial Information
The accompanying unaudited consolidated interim financial statements include the
accounts of AFSALA Bancorp, Inc. and its subsidiary (the Company) Amsterdam
Federal Bank. The accompanying unaudited consolidated interim financial
statements have been prepared in accordance with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The accounting and reporting policies of the Company conform in all
material respects to generally accepted accounting principles and to general
practice within the savings bank industry. It is the opinion of management that
the accompanying unaudited consolidated interim financial statements reflect all
adjustments which are considered necessary to report fairly the financial
position as of June 30, 1997, the Consolidated Statements of Income for the
three months and nine months ended June 30, 1997 and 1996, and the Consolidated
Statements of Cash Flows for the nine months ended June 30, 1997 and 1996. The
results of operations for the nine months ended June 30, 1997, are not
necessarily indicative of results that may be expected for the entire year
ending September 30, 1997. The accompanying unaudited consolidated interim
financial statements should be read in conjunction with AFSALA Bancorp, Inc.'s
September 30, 1996 consolidated financial statements, including the notes
thereto, which are included in AFSALA Bancorp, Inc's 1996 Annual Report on Form
10-KSB.
NOTE 2. Net Income Per Share
Net income per share for the three months and nine months ended June 30, 1997
has been determined by dividing net income by the weighted average number of
shares of common stock outstanding for the period. Shares of common stock
outstanding are reduced by the Company's Employee Stock Ownership Plan (ESOP)
shares that have not been committed to be released in accordance with SOP 93-6,
"Employers' Accounting for Employee Stock Ownership Plans". The weighted average
number of shares of common stock outstanding for the three months and nine
months ended June 30, 1997 was 1,347,000 and 1,346,000, respectively. The effect
of outstanding stock option awards and shares issued under the Restricted Stock
Plan are not material to the calculation of net income per share. Net income per
share for the the three months and nine months ended June 30, 1996 is not
applicable as there were no shares outstanding during these time periods.
See also Note 4.
-5 -
<PAGE>
NOTE 3. Employee Benefits
AFSALA Bancorp, Inc. 1997 Stock Option Plan
- -------------------------------------------
On May 30, 1997, the stockholders approved the AFSALA Bancorp, Inc. 1997 Stock
Option Plan ("Option Plan"). Under the Option Plan, options to purchase a number
of shares equal to 10% of the Company's shares issued in its initial public
offering, or 145,475 shares, became available for award to officers, directors,
key employees and other persons from time to time. Concurrent with the approval
of the Option Plan, 145,475 stock options were granted to officers, directors
and key employees of the Company at an exercise price of $13.50 per share,
representing the fair market value of the stock on the grant date. The options
vest over a five year period at a rate of 20% annually, commencing on the one
year anniversary of the grant date.
Amsterdam Federal Bank Restricted Stock Plan
- --------------------------------------------
On May 30, 1997, the stockholders approved the Amsterdam Federal Bank Restricted
Stock Plan ("RSP") for the benefit of officers, directors, and key employees of
the Company. Under the RSP, 4% of the Company's common stock, or 58,190 shares,
became available for award in recognition of expected future services to the
Company by its directors, officers, and key employees responsible for
implementation of the policies adopted by the Company's Board of Directors and
as a means of providing a further retention incentive. Concurrent with the
approval of the RSP, 58,190 shares were awarded and vest over a five year period
at a rate of 20% annually, commencing on the one year anniversary of the grant
date. The fair market value of the shares awarded on the grant date of
approximately $786,000 is being amortized to compensation expense as the
participants become vested in those shares. For the three and nine months ended
June 30, 1997, the Company recognized compensation expense related to the RSP of
approximately $13,000. The restricted stock related to the RSP has not yet been
issued by the Company.
NOTE 4. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (Statement 128),
which establishes standards for computing and presenting earnings per share
(EPS). This Statement simplifies the standards for computing EPS making them
comparable to international EPS standards and supersedes Accounting Principals
Board Opinion No. 15, "Earnings per Share," and related interpretations.
Statement 128 replaces the presentation of primary EPS with the presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
-6 -
<PAGE>
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 were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. This Statement is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. Earlier application is not permitted. This Statement requires
restatement of all prior- period EPS data presented. Management does not
anticipate that the adoption of this Statement will have a material effect on
the Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board ('FASB") issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(Statement 130), which establishes standards for reporting and display of
comprehensive income and its compenents in financial statements. Statement 130
states that comprehensive income includes reported net income of a company,
adjusted for items that are currently accounted for as direct entries to equity,
such as the net unrealized gain or loss on securities available for sale,
foreign currency items, and minimum pension liability adjustments. This
statement is effective for both interim and annual periods beginning after
December 15, 1997. As required, the Company will adopt Statement 130 in the
second quarter of fiscal 1998, and will report and display comprehensive income
in accordance with the new statement.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
(Statement 131), which establishes standards for reporting by public companies
about operating segments of their business. Statement 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 does not anticipate that the adoption of this
statement will have a material effect on the Company's consolidated financial
statements.
-7 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
AFSALA Bancorp, Inc. (the Company) is a Delaware corporation organized in June
1996 at the direction of Amsterdam Federal Bank (the Bank) to aquire all of the
capital stock that the Bank issued upon the Bank's conversion from the mutual to
stock form of ownership. On September 30, 1996, the Company completed its
initial public stock offering, issuing 1,454,750 shares of $.10 par value common
stock at $10.00 per share. Net proceeds to the Company were $13.6 million after
conversion costs. Approximately $1.1 million of the proceeds were utilized to
fund a loan by the Company to the Company's Employee Stock Ownership Plan (ESOP)
which purchased 110,780 shares of the Company's common stock during the
offering. The Company is not an operating company and has not engaged in any
significant business to date. As such, references herein to the Bank subsequent
to September 30, 1996 include the Company unless the context otherwise
indicates.
The Bank's results of operations are primarily dependent on its net interest
income, which is the difference between the interest and dividend income earned
on its assets, primarily loans and investments, and the interest expense on its
liabilities, primarily deposits and borrowings. Net interest income may be
affected significantly by general economic and competitive conditions and
policies of regulatory agencies, particularly those with respect to market
interest rates. The results of operations are also significantly influenced by
the level of non-interest expenses, such as employee salaries and benefits,
other income, such as fees on deposit-related services, and the Bank's provision
for loan losses.
The Bank has been, and intends to continue to be, a community-oriented financial
institution offering a variety of financial services. Management's strategy has
been to try to achieve a high loans to assets ratio and a high proportion of
lower-costing, non-time deposit accounts in the deposit portfolio. At June 30,
1997, the Bank's loans receivable, net, to assets ratio was 46.4%, up from 46.0%
at September 30, 1996. At June 30, 1997, $65.9 million, or 48.8%, of total
deposits were in non-time deposits accounts, as compared to $62.6 million, or
49.5%, at September 30, 1996.
- 8 -
<PAGE>
Consolidated Financial Condition
Total assets increased by $5.5 million or 3.6% to $159.2 million at June 30,
1997 from $153.7 million at September 30, 1996, primarily due to increases in
total securities (both securities available for sale and investment securities
held to maturity) of $15.3 million, or 29.3%, and net loans receivable of $3.2
million, or 4.5%. These increases were partially offset by decreases in federal
funds sold and term deposits with the Federal Home Loan Bank of $9.4 million, or
48.7%, and $3.0 million, or 100.0%, respectively. These shifts were primarily
the result of the re- investment of the proceeds from the offering into higher
yielding instruments.
The Company's securities available for sale increased $9.9 million or 57.6% to
$27.0 million at June 30, 1997 from $17.1 million at September 30, 1996.
Likewise, investment securities held to maturity increased by $5.4 million or
15.4% to $40.4 million at June 30, 1997, up from $35.0 million at September 30,
1996.
The Company's net loans receivable increased by $3.2 million or 4.5% to $73.9
million at June 30, 1997 up from $70.7 million at September 30, 1996. The
increase in net loans receivable was due to improved loan activity, primarily in
residential mortgage and home equity loans.
The Company's deposits increased by $8.8 million or 6.9% to $135.2 million at
June 30, 1997 from $126.5 million at September 30, 1996 primarily due to various
marketing promotions offered in the supermarket branches along with the opening
of a new branch in May 1997. Offsetting this increase in deposits was a decrease
in accrued expenses and other liabilities as accrued expenses and other
liabilities decreased $3.7 million or 84.6% to $686 thousand at June 30, 1997
from $4.4 million at September 30, 1996 resulting from the payment of cashier
checks which were issued and outstanding on September 30, 1996 to refund the
over-subscriptions related to the Company's initial public offering.
Stockholders' equity increased by $853 thousand or 4.1% to $21.4 million at June
30, 1997 from $20.6 million at September 30, 1996. The increase was primarily
the result of net income for the nine months ended June 30, 1997. Equity during
the period was also effected by 2,770 shares of common stock committed to be
released by the Company's ESOP as of December 31, 1996. In June 1997, the
Company received the necessary regulatory and Board approval to initiate a stock
repurchase plan covering up to 5% or 72,737 shares of the Company's common stock
to be purchased in the open market.
- 9 -
<PAGE>
Asset /Liability Management
The Bank's net interest income is sensitive to changes in interest rates, as the
rates paid on its interest-bearing liabilities generally change faster than the
rates earned on its interest-earning assets. As a result, net interest income
will frequently decline in periods of rising interest rates and increase in
periods of decreasing interest rates.
To mitigate the impact of changing interest rates on its net interest income,
the Bank manages its interest rate sensitivity and asset/liability products
through its asset/liability management committee. The asset/liability management
committee meets weekly to determine the rates of interest for loans and deposits
and consists of the President and Chief Executive Officer, the Vice President
and Chief Lending Officer, and the Treasurer and Chief Financial Officer. Rates
on deposits are primarily based on the Bank's needs for funds and on a review of
rates offered by other financial institutions in the Bank's market areas.
Interest rates on loans are primarily based on the interest rates offered by
other financial institutions in the Bank's primary market areas as well as the
Bank's cost of funds.
In an effort to reduce interest rate risk and protect itself from the negative
effects of rapid or prolonged changes in interest rates, the Bank has instituted
certain asset and liability management measures, including (i) originating, for
its portfolio, a large base of adjustable-rate residential mortgage loans, and
(ii) maintaining substantial levels of federal funds and securities with one to
five year terms to maturity.
The committee manages the interest rate sensitivity of the Bank through the
determination and adjustment of asset/liability composition and pricing
strategies. The committee then monitors the impact of the interest rate risk and
earnings consequences of such strategies for consistency with the Bank's
liquidity needs, growth, and capital adequacy. The Bank's principal strategy is
to reduce the interest rate sensitivity of its interest-earning assets and to
match, as closely as possible, the maturities of interest-earning assets with
interest-bearing liabilities.
The experience of the Bank has been that net interest income declines with
increases in interest rates and that net interest income increases with
decreases in interest rates. Generally, during periods of increasing interest
rates, the Bank's interest rate sensitive liabilities would reprice faster than
its interest rate sensitive assets causing a decline in the Bank's interest rate
spread and margin. This would result from an increase in the Bank's cost of
funds that would not be immediately offset by an increase in its yield on
earning assets. An increase in the cost of funds without an equivalent increase
in the yield on earning assets would tend to reduce net interest income. The
Bank's interest rate spread increased for the three months ended June 30,1997
and 1996 from 2.77% to 2.89% and for the nine months ended June 30, 1997 and
1996 from 2.63% to 2.90%.
In times of decreasing interest rates, fixed rate assets could increase in value
and the lag in repricing of interest rate sensitive assets could be expected to
have a positive effect on the Bank's net interest income.
- 10-
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
Average Balance Sheet, Interest Rates and Yield
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
1997 1996
------------------------------------ ----------------------------------
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Cost(1) Balance Paid Cost(1)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ 6,105 81 5.32% $ 7,012 89 5.10%
Term deposits with Federal
Home Loan Bank of NY - - - 2,069 28 5.44
Securities available for sale (3) 27,465 432 6.31 17,203 233 5.45
Investment securities held to maturity 41,673 674 6.49 32,485 504 6.24
FHLB of NY stock 565 9 6.39 566 9 6.40
Loans receivable, net(2) 72,462 1,522 8.42 68,535 1,443 8.47
-------- -------- ------- ------- -------- ----
Total interest-earning assets 148,270 2,718 7.35 127,870 2,306 7.25
----- ------- ------- -------- ----
Non-interest earning assets 7,739 6,281
------ ------
Total assets $156,009 $134,151
======== ========
Interest-bearing liabilities:
Savings accounts $36,364 272 3.00 $ 35,608 266 3.00
NOW accounts 11,227 65 2.32 10,247 58 2.28
Money market accounts 9,266 95 4.11 6,981 64 3.69
Time deposit accounts 67,277 939 5.60 62,957 890 5.69
Escrow accounts 204 1 1.97 303 2 2.65
FHLB of NY long term borrowings 1,631 29 7.13 1,986 35 7.09
------- ------- ------- ------- ------- ----
Total interest-bearing liabilities 125,969 1,401 4.46 118,082 1,315 4.48
------- -------- ------- ----
Non-interest bearing deposits 7,970 6,783
Other non-interest bearing liabilities 816 1,000
Equity 21,254 8,286
-------- -------
Total liabilities and equity $156,009 $134,151
======== ========
Net interest income $ 1,317 $ 991
======= =======
Interest rate spread 2.89% 2.77%
======= =======
Net interest margin 3.56% 3.12%
======= =======
Ratio of average interest-earning
assets to average
interest-bearing liabilities 117.70% 108.29%
======== =======
</TABLE>
(1) Annualized
(2) Calculated net of allowance for loan losses. Includes non-accrual loans.
(3) Average securities available for sale are included at approximate fair
value. The adjustment to approximate fair value is not considered
significant.
- 11 -
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
Average Balance Sheet, Interest Rates and Yields
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended June 30,
1997 1996
------------------------------------ ----------------------------------
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Cost(1) Balance Paid Cost(1)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ 7,121 278 5.22% $ 6,509 251 5.15%
Term deposits with Federal
Home Loan Bank of NY 3,480 142 5.46 1,756 72 5.48
Securities available for sale (3) 20,846 936 6.00 12,626 514 5.44
Investment securities held to maturity 41,129 2,014 6.55 36,183 1,629 6.01
FHLB of NY stock 565 27 6.39 566 28 6.61
Loans receivable, net(2) 72,068 4,560 8.46 67,456 4,255 8.43
-------- ------ ------- -------- ------- ------
Total interest-earning assets 145,209 7,957 7.33 125,096 6,749 7.21
------ ------- ------ ------
Non-interest earning assets 7,000 6,181
------ ------
Total assets $152,209 $131,277
======== ========
Interest-bearing liabilities:
Savings accounts $ 35,911 805 3.00 $ 34,666 779 3.00
NOW accounts 10,957 189 2.31 9,617 164 2.28
Money market accounts 8,745 263 4.02 6,334 171 3.61
Time deposit accounts 64,853 2,706 5.58 62,591 2,733 5.83
Escrow accounts 267 6 3.00 417 7 2.24
FHLB of NY long term borrowings 1,677 88 7.02 2,109 111 7.03
-------- ------ ------- -------- ------ -----
Total interest-bearing liabilities 122,410 4,057 4.43 115,734 3,965 4.58
------ ------- ----- -----
Non-interest bearing deposits 7,703 6,424
Other non-interest bearing liabilities 1,099 974
Equity 20,997 8,145
-------- --------
Total liabilities and equity $152,209 $131,277
======== ========
Net interest income $3,900 $ 2,784
====== ========
Interest rate spread 2.90% 2.63%
======= =====
Net interest margin 3.59% 2.97%
======= =====
Ratio of average interest-earning
assets to average
interest-bearing liabilities 118.63% 108.09%
========== ========
</TABLE>
(1) Annualized
(2) Calculated net of allowance for loan losses. Includes non-accrual loans.
(3) Average securities available for sale are included at approximate fair
value. The adjustment to approximate fair value is not considered
significant.
- 12 -
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
RATE/ VOLUME ANALYSIS
(Unaudited)
THREE MONTHS ENDED JUNE 30,1997
COMPARED WITH
THREE MONTHS ENDED JUNE 30, 1996
--------------------------------
<TABLE>
<CAPTION>
INCREASE (DECREASE)
------------------------------------
DUE TO
-------------------------
VOLUME RATE NET
------ ---- ---
<S> <C> <C> <C>
Interest and dividend income:
Federal funds sold $ (12,049) 3,899 (8,150)
Term deposits with FHLB of NY (27,607) -- (27,607)
Securities available for sale 156,930 42,350 199,280
Investment securities held to maturity 147,842 22,432 170,274
FHLB of NY stock (6) 16 10
Loans receivable, net 83,340 (4,554) 78,786
--------- --------- ---------
Total interest and dividend income 348,450 64,143 412,593
--------- --------- ---------
Interest expense:
Savings accounts 5,735 740 6,475
NOW accounts 6,101 1,297 7,398
Money market accounts 22,324 7,970 30,294
Time deposit accounts 59,767 (11,942) 47,825
Escrow accounts (61) (48) (109)
FHLB of NY long term borrowings (6,065) 303 (5,762)
--------- --------- ---------
Total interest expense 87,801 (1,680) 86,121
--------- --------- ---------
Net change in net interest income $ 260,649 $ 65,823 $ 326,472
========= ========= =========
</TABLE>
NINE MONTHS ENDED JUNE 30,1997
COMPARED WITH
NINE MONTHS ENDED JUNE 30, 1996
-------------------------------
<TABLE>
<CAPTION>
INCREASE (DECREASE)
------------------------------------
DUE TO
-------------------------
VOLUME RATE NET
------ ---- ---
<S> <C> <C> <C>
Interest and dividend income:
Federal funds sold $ 23,416 3,148 26,564
Term deposits with FHLB of NY 69,989 (332) 69,657
Securities available for sale 365,340 57,196 422,536
Investment securities held to maturity 233,568 151,839 385,407
FHLB of NY stock (30) (643) (673)
Loans receivable, net 293,412 11,311 304,723
--------- --------- ----------
Total interest and dividend income 985,695 222,519 1,208,214
--------- --------- ----------
Interest expense:
Savings accounts 26,892 (744) 26,148
NOW accounts 22,963 2,015 24,978
Money market accounts 70,918 20,965 91,883
Time deposit accounts 95,684 (123,238) (27,554)
Escrow accounts (2,923) 1,987 (936)
FHLB of NY long term borrowings (21,991) (252) (22,243)
--------- --------- ----------
Total interest expense 191,543 (99,267) 92,276
--------- --------- ----------
Net change in net interest income $ 794,152 $ 321,786 $1,115,938
========= ========= ==========
</TABLE>
- 13 -
<PAGE>
Comparison of Operating Results for the Three Months Ended June 30, 1997 and
1996.
Net Income. Net income increased by $127 thousand or 69.5% for the three months
ended June 30, 1997 to $310 thousand from $183 thousand for the three months
ended June 30, 1996. Net income for the three months ended June 30, 1997
increased primarily as a result of increased net interest income offset in part
by an increase in non-interest expenses. Net interest income increased by $326
thousand or 33.0% to $1.3 million for the three months ended June 30, 1997 as
compared to $991 thousand for the three months ended June 30, 1996. Non-interest
expenses increased $120 thousand or 15.9% to $873 thousand for the three months
ended June 30, 1997 from $753 thousand for the three months ended June 30, 1996.
This increase was primarily due to increased compensation and benefit expenses
as a result of costs related to the Company's new ESOP and RSP, increased
professional fees as a result of being a public company, and additional expenses
associated with the opening of a new Operations Center and a new branch office.
Net Interest Income. Net interest income increased by approximately $326
thousand or 33.0% to $1.3 million for the three months ended June 30, 1997. The
increase was primarily due to an increase of $20.4 million or 16.0% in the
average balance of interest earning assets, in addition to an increase in the
interest rate spread from 2.77% for the three months ended June 30, 1996 to
2.89% for the three months ended June 30, 1997, offset by an increase in the
average balance of total interest bearing liabilities of $7.9 million or 6.7%.
Interest earning assets primarily consist of loans receivable, federal funds
sold, securities (securities available for sale combined with investment
securities held to maturity), and interest bearing deposits with the FHLB of New
York. Interest bearing liabilities primarily consist of interest bearing
deposits and long term borrowings from the FHLB of New York.
The interest rate spread, which is the difference between the yield on average
interest earning assets and the percentage cost of average interest bearing
liabilities, increased to 2.89% for the three months ended June 30, 1997 from
2.77% for the three months ended June 30, 1996. The increase in the interest
rate spread is the result of a 10 basis point increase in the average yield on
interest earning assets combined with a 2 basis point decrease in the average
cost of interest bearing liabilities during this period.
Interest and Dividend Income. Interest and dividend income increased by
approximately $413 thousand or 17.9% to $2.7 million for the three months ended
June 30, 1997 from $2.3 million for the three months ended June 30, 1996. The
increase was largely the result of an increase of $20.4 million or 16.0% in the
average balance of interest earning assets to $148 million for the three months
ended June 30, 1997 as compared to $128 million for the three months ended June
30, 1996. This increase was primarily due to the Company's initial public
offering on September 30, 1996, which generated approximately $13.6 million in
net proceeds which have been redeployed by management into various earning
assets categories. The increase in the average balance of interest earning
assets consisted primarily of an increase in the average balance of total
securities (both securities available for sale and investment securities held to
maturity) of $19.5 million or 39.1%, and an increase in the average balance of
net loans receivable of $3.9 million or 5.7%. Also adding to the increase in
interest and dividend income was a 10 basis point increase in the average yield
on all interest earning assets.
-14 -
<PAGE>
Interest income on securities available for sale increased $199 thousand or
85.5% to $432 thousand for the three months ended June 30, 1997 from $233
thousand for the same period of the previous year. This increase is primarily
the result of an increase in the average balance of securities available for
sale of $10.3 million combined with a 86 basis point increase in the average
yield on these securities. Interest income on investment securities held to
maturity increased $170 thousand or 33.8% to $674 thousand for the three months
ended June 30, 1997 from $504 thousand for three months ended June 30, 1996.
This increase is primarily the result of an increase in the average balance of
investment securities held to maturity of $9.2 million combined with a 25 basis
point increase in the average yield on these securities.
Interest and fees on loans increased $79 thousand or 5.5% to $1.5 million for
the three months ended June 30, 1997 from $1.4 million for the three months
ended June 30, 1996. This increase was primarily the result of an increase in
the average balance of net loans receivable of $3.9 million, offset slightly by
a 5 basis point decrease in the average yield.
The yield on the average balance of interest earning assets was 7.35% and 7.25%
for the three months ended June 30, 1997 and 1996, respectively.
Interest Expense. Interest on deposits and escrow accounts increased by $92
thousand for the three months ended June 30, 1997 compared to the three months
ended June 30, 1996. This increase in interest on deposits and escrow accounts
was due to the increase in interest expense related to savings, NOW, money
market, and time deposit accounts. The interest expense on savings accounts was
$272 thousand for the three months ended June 30, 1997, compared to $266
thousand for the three months June 30, 1996. The interest expense on NOW
accounts was $65 thousand for the three months ended June 30, 1997, compared to
$58 thousand for the three months June 30, 1996. Likewise, interest expense on
money market and time deposit accounts was $95 thousand and $939 thousand,
respectively, for the three months ended June 30, 1997, compared to $64 thousand
and $890 thousand, respectively, for the three months June 30, 1996. These
increases were due primarily to increases in the average balances of the
respective deposit types.
Interest on FHLB of NY long term borrowings, which is a less significant portion
of interest expense, decreased by $6 thousand or 16.6% to $29 thousand for the
three months ended June 30, 1997 when compared to the three months ended June
30, 1996, as the average amount of borrowing outstanding decreased by $355
thousand or 17.9%, partially offset by an increase in the rate paid by the
Company of 4 basis points. The Company uses FHLB advances as a funding source
and generally uses long term borrowings to supplement deposits, which are the
Company's primary source of funds.
Provision for Loan Losses. The Company's management monitors and adjusts its
allowance for loan losses based upon its analysis of the loan portfolio. The
allowance is increased by a charge to the provision for loan losses, the amount
of which depends upon an analysis of the changing risks inherent in the Bank's
loan portfolio. The Bank has historically experienced a limited amount of loan
charge-offs. However, there can be no assurance that additions to the allowance
for loan losses will not be required in future periods or that actual losses
will not exceed estimated amounts. The Company's ratio of non-performing loans
to total assets was 0.45% and
- 15 -
<PAGE>
0.51% at June 30, 1997 and September 30, 1996, respectively. The provision for
loan losses for the three months ended June 30, 1997 increased $5 thousand to
$60 thousand from $55 thousand for the three months ended June 30, 1996. The
increase was primarily due to the growth in the loan portfolio discussed above,
as well as local economic trends.
Non-Interest Income. Non-interest income remained fairly constant for the three
months ended June 30, 1997 and 1996.
Non-Interest Expenses. Non-interest expenses increased $120 thousand or 15.9% to
$873 thousand for the three months ended June 30, 1997 from $753 thousand for
the three months ended June 30, 1996. The increase in compensation and benefits
expense of $92 thousand or 29.4% was primarily the result of costs related to
the Company's new ESOP, and the establishment of the Restricted Stock Plan, as
well as general cost of living and merit raises to employees. Occupancy and
equipment expenses increased by $8 thousand or 6.2% due primarily to the new
operations center opened in July 1996 and the new branch opened in May 1997.
FDIC deposit insurance premiums decreased by $47 thousand or 69.7% due primarily
to reduced deposit insurance premium rates for the quarter ended June 30, 1997.
The reduced rates are the result of the capitalization of the SAIF through a
one-time special assessment during September 1996.
Professional service fees increased by $55 thousand or 206.7% to $82 thousand
from $27 thousand due primarily to increased legal and accounting fees as a
result of being a public company.
Management believes that compensation and benefits expenses will increase in
future periods as a result of the costs related to both the Company's new ESOP
and Restricted Stock Plan. Furthermore, the Company expects that certain
operating expenses will increase as a result of the costs associated with being
a public company, as noted above.
Income Tax Expense. Income tax expense increased by $69 thousand or 75.8% to
$160 thousand for the three months ended June 30, 1997 from $91 thousand for the
three months ended June 30, 1996. The increase was primarily the result of the
increase in income before income tax expense.
- 16-
<PAGE>
Comparison of Operating Results for the Nine Months Ended June 30, 1997 and
1996.
Net Income. Net income increased by $361 thousand or 72.1% for the nine months
ended June 30, 1997 to $862 thousand from $501 thousand for the nine months
ended June 30, 1996. Net income for the nine months ended June 30, 1997
increased primarily as a result of increases in net interest income and
non-interest income of $1.1 million and $26 thousand, respectively, offset by
increases in non-interest expenses and the provision for loan losses of $470
thousand and $75 thousand, respectively.
Net Interest Income. Net interest income increased by approximately $1.1 million
or 40.1% to $3.9 million from $2.8 million for the nine months ended June 30,
1996. The increase in net interest income was primarily the result of the
increase in the amount of average interest earning assets exceeding the increase
in average interest bearing liabilities. Likewise, the interest rate spread
increased to 2.90% for the nine months ended June 30, 1997 from 2.63% for the
same period of the previous year. This increase in the interest rate spread is
due to a 12 basis point increase in the average yield on interest earning assets
combined with a 15 basis point decrease in the average cost of interest bearing
liabilities.
Interest and Dividend Income. Interest and dividend income increased by
approximately $1.2 million or 17.9% to $7.9 million for the nine months ended
June 30, 1997 from $6.7 million for the nine months ended June 30, 1996. The
increase in interest and dividend income was largely the result of an increase
of $20.1 million or 16.1% in the average balance of interest earning assets to
$145 million for the nine months ended June 30, 1997 as compared to $125 million
for the nine months ended June 30, 1996. This increase was primarily due to the
Company's initial public offering on September 30, 1996, which generated
approximately $13.6 million in net proceeds which have been redeployed by
management into various earning asset categories. Also adding to the increase in
interest and dividend income was a 12 basis point increase in the average yield
on all interest earning assets. The increase in the average balance of interest
earning assets consisted primarily of an increase in the average balance of
total securities (both securities available for sale and investment securities
held to maturity) of $13.2 million or 27.0%, an increase in the average balance
of net loans outstanding of approximately $4.6 million or 6.8%, an increase in
the average balance of term deposits with the FHLB of NY of $1.7 million or
98.2%, and an increase in the average balance of federal funds sold of $612
thousand or 9.4%.
Interest income on investment securities held to maturity increased $385
thousand or 23.7% to $2.0 million for the nine months ended June 30, 1997 from
$1.6 million for the nine months ended June 30, 1996. This increase is primarily
the result of an increase in the average balance of $4.9 million combined with a
54 basis point increase in the average yield on these securities. Interest
income on securities available for sale increased $422 thousand or 82.2% to $936
thousand for the nine months ended June 30, 1997 from $514 thousand for the same
period of the previous year. The increase in interest income on securities
available for sale is primarily due to a increase of $8.2 million in the average
balance, as well as a 56 basis point increase in the average yield on these
securities.
-17-
<PAGE>
Interest and fees on loans increased $305 thousand or 7.2% to $4.6 million for
the nine months ended June 30, 1997 from $4.3 million for the nine months ended
June 30, 1996. This increase was primarily the result of an increase in the
average balance of net loans receivable of $4.6 million combined with a 3 basis
point increase in the average yield.
Interest Expense. Interest on deposits and escrow accounts amounted to $4.0
million for the nine months ended June 30, 1997, up from $3.9 million for the
nine months ended June 30, 1996. The increase over the prior year's period of
$115 thousand or 3.0% is a result of increased average balances in savings, NOW,
money market, and time deposit accounts, coupled with increased average costs on
NOW and money market accounts, offset by decreased average cost of time deposit
accounts.
Interest on FHLB of NY long term borrowings, which is a less significant portion
of interest expense, decreased by $22 thousand or 20.1 % to $88 thousand for the
nine months ended June 30, 1997 when compared to the nine months ended June 30,
1996, primarily due to the average amount of borrowing outstanding decreasing by
$432 thousand or 20.5%.
Provision for Loan Losses. The provision for loan losses increased $75 thousand
to $210 thousand for the nine months ended June 30, 1997 from $135 thousand for
the nine months ended June 30, 1996. The Company's ratio of non-performing loans
to total assets was 0.45% and 0.51% at June 30, 1997 and September 30, 1996,
respectively. The increase in the amount of the provision was based on
management's evaluation of the inherent risks associated with the growth in the
loan portfolio, as well as local economic trends.
Non-Interest Income. Non-interest income increased for the nine months ended
June 30, 1997 to $314 thousand compared with $288 thousand for the corresponding
period in the previous year. Increases in service charges on deposit accounts
and other non-interest income comprised the majority of the increase from the
same period last year.
Non-Interest Expenses. Non-interest expenses increased $470 thousand or 21.3% to
$2.7 million for the nine months ended June 30, 1997 from $2.2 million for the
nine months ended June 30, 1996. Compensation and benefits expenses, the largest
component of non-interest expenses, increased by $201 thousand or 21.5% from the
previous period primarily as a result of costs related to the Company's new
ESOP, the establishment of the Restricted Stock Plan, as well as general cost of
living and merit raises to employees. The increase in cccupancy and equipment
expenses of $48 thousand or 13.4% for the nine months ended June 30, 1997 was
due primarily to the new operations center opened in July 1996 and the new
branch opened in May 1997. FDIC deposit insurance premiums decreased by $100
thousand or 50.9% due primarily to reduced deposit insurance premium rates
during the nine month period ended June 30, 1997. Professional service fees and
other non-interest expenses for the nine months ended June 30, 1997, increased
$128 thousand or 150.5% and $150 thousand or 44.9%, respectively, as a result of
additional legal, accounting and other fees related to being a publicly traded
company, Delaware franchise taxes, and the write off of certain items deemed
uncollectible by management.
-18-
<PAGE>
Management believes that compensation and benefits expenses will increase in
future periods as a result of the costs related to both the Company's new ESOP
and Restricted Stock Plan. Furthermore, the Company expects that certain
operating expenses will increase as a result of the costs associated with being
a public company, as noted above.
Income Tax expense. Income tax expense increased to $465 thousand for the nine
months ended June 30, 1997 from $230 thousand for the nine months ended June 30,
1996. The increase was primarily the result of the increase in income before
income tax expense during the period.
Liquidity and Capital Resources
The Bank is required by OTS regulations to maintain, for each calendar month, a
daily average balance of cash and eligible liquid investments of not less than
5% of the average daily balance of its net withdrawable savings and borrowings
(due in one year or less) during the preceding calendar month. This liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4% to 10%. The Bank's average liquidity ratio was 47.73% and 47.02% at
June 30, 1997 and September 30, 1996, respectively.
The Company's sources of liquidity include cash flows from operations, principal
and interest payments on loans, maturities of securities, deposit inflows, and
borrowings from the FHLB of New York. During the nine months ended June 30, 1997
and 1996, the primary source of funds was cash flows from deposit growth. On
September 30, 1996, the Company also had significant cash flows from its initial
public offering on that date which provided investable cash flows for the nine
months ended June 30, 1997.
While maturities and scheduled amortization of loans and securities are, in
general, a predictable source of funds, deposit flows and prepayments on loans
and securities are greatly influenced by general interest rates, economic
conditions and competition. In addition, the Bank invests excess funds in
overnight deposits which provide liquidity to meet lending requirements.
In addition to deposit growth, from time to time the Company borrows funds from
the FHLB of New York to supplement its cash flows. At June 30, 1997 and
September 30, 1996, the Company had outstanding borrowings from the FHLB of $1.5
million and $1.8 million, respectively.
As of June 30, 1997 and September 30, 1996, the Company had $27.0 million and
$17.1 million of securities, respectively, classified as available for sale and
$40.4 million and $35.0 million of investment securities, respectively,
classified as held to maturity. The liquidity of the securities available for
sale portfolio provides the Bank with additional potential cash flows to meet
loan growth and deposit outflows.
Liquidity may be adversely affected by unexpected deposit outflows, excessive
interest rates paid by competitors, adverse publicity relating to the saving and
loan industry, and similar matters. Management monitors projected liquidity
needs and determines the level desirable, based in part on the Company's
commitments to make loans and management's assessment of the Company's ability
to generate funds.
-19-
<PAGE>
The Bank is subject to federal regulations that impose certain minimum capital
requirements. At June 30, 1997, the Bank's capital exceeded each of the
regulatory capital requirements of the OTS. The Bank is "well capitalized" at
June 30, 1997 according to regulatory definition. At June 30, 1997, the
Company's consolidated tangible and core capital levels were both $21.5 million
(13.48% of total adjusted assets) and its total risk-based capital level was
$22.3 million (32.75% of total risk-weighted assets). The minimum regulatory
capital ratio requirements of the Bank are 1.5% for tangible capital, 3.0% for
core capital, and 8.0% for total risk-based capital.
Effect of Inflation and Changing Prices
The Company's consolidated interim financial statements and related data
presented herein have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation. Unlike
industrial companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates have a more
significant impact on a financial institution's performance than the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or with the same magnitude as the prices of goods and services.
- 20 -
<PAGE>
AFSALA BANCORP, INC. AND SUBSIDIARY
Key Operating Ratios
(Unaudited)
The table below sets forth certain performance and financial ratios of the
Company for the periods indicated:
<TABLE>
<CAPTION>
At or for the nine At or for the
months ended year ended
June 30, 1997 September 30, 1996
<S> <C> <C>
Performance Ratios (1):
Net income per share $ 0.64 N/A
Return on average assets (annualized) 0.76% 0.16%
Return on average stockholders' equity (annualized) 5.49% 2.55%
Interest rate spread 2.90% 2.69%
Net interest margin 3.59% 3.02%
Efficiency ratio (2) 63.12% 88.03%
Expense ratio (annualized) (3) 2.34% 2.79%
Asset Quality Ratios:
Non-performing loans to total assets 0.45% 0.51%
Non-performing loans to total loans 0.95% 1.09%
Allowance for loan losses to non-performing loans 150.86% 112.40%
Allowance for loan losses to total loans receivable 1.44% 1.23%
Non-performing assets to total assets 0.47% 0.51%
Capital Ratios (4):
Stockholders' equity to total assets at period end 13.47% 13.40%
Average stockholders' equity to average total assets 13.79% 6.21%
Tangible capital 13.48% 13.41%
Core (Tier I) capital 13.48% 13.41%
Total risk-based capital 32.75% 33.54%
Book value per share (5) $ 15.92 $ 15.32
</TABLE>
(1) Performance ratios for the year ended September 30, 1996 were significantly
effected by the SAIF one-time special assessment which amounted to approximately
$702 thousand before applicable taxes.
(2) Total non-interest expenses, excluding other real estate owned expense, as a
percentage of net interest income and total non-interest income, excluding net
securities transactions.
(3) Total non-interest expenses, excluding other real estate owned expense, as a
percentage average total assets.
(4) Capital ratios are presented for the consolidated Company.
(5) Does not include the effect of 108,010 and 110,780 ESOP shares at June 30,
1997 and September 30,1996, respectively.
- 21 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders held on May 30, 1997, there were 1,369,394
voting shares present in person or by proxy, which represented 94.13% of the
Company's outstanding shares of 1,454,750. Votes were taken on the following
proposals:
Proposal #1 - The election of two directors of the Company.
Votes for Withheld
--------- --------
John M. Lisicki 1,368,009 1,385
Dr. Daniel J. Greco 1,368,609 785
The Board of Directors of the Company currently consists of seven menbers. In
addition to the two directors named above, continuing directors are Dr. Ronald
S. Tecler, John A. Tesiero, Jr., John A. Kosinski, Jr., Joseph G. Opalka, and
Florence B. Opiela.
Proposal #2- The approval of the AFSALA Bancorp, Inc. 1997 Stock Option Plan.
Votes for Votes Against Abstain
--------- ------------- -------
975,584 104,382 17,695
Proposal #3- The approval of the Amsterdam Federal Bank Restricted Stock Plan.
Votes for Votes Against Abstain
--------- ------------- -------
940,128 132,621 23,531
- 22
<PAGE>
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
- 23-
<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.
AFSALA BANCORP, INC.
--------------------
DATE: August 8, 1997 BY: /s/ John M. Lisicki
-------------------
John M. Lisicki
President (principal executive officer)
DATE: August 8, 1997 BY: /s/ James J. Alescio
--------------------
James J Alescio
Treasurer (principal financial officer)
- 24 -
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,225
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,850
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,998
<INVESTMENTS-CARRYING> 40,397
<INVESTMENTS-MARKET> 40,316
<LOANS> 74,933
<ALLOWANCE> 1,075
<TOTAL-ASSETS> 159,181
<DEPOSITS> 135,247
<SHORT-TERM> 0
<LIABILITIES-OTHER> 977
<LONG-TERM> 1,513
0
0
<COMMON> 145
<OTHER-SE> 21,299
<TOTAL-LIABILITIES-AND-EQUITY> 159,181
<INTEREST-LOAN> 4,559
<INTEREST-INVEST> 2,950
<INTEREST-OTHER> 448
<INTEREST-TOTAL> 7,957
<INTEREST-DEPOSIT> 3,969
<INTEREST-EXPENSE> 88
<INTEREST-INCOME-NET> 3,900
<LOAN-LOSSES> 210
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,676
<INCOME-PRETAX> 1,327
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</TABLE>
