United States Securities and Exchange Commission
Washington, D.C. 20552
FORM 10QSB
{x} QUARTERLY REPORT UNDER SECTION 13 OF 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
{ } TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCAHANGE
ACT
For the transition period from ________________to__________________
Commission file Number 0-21885
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Advance Financial Bancorp
-------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-0753533
- ------------- ----------
(State or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1015 Commerce Street, Wellsburg, WV 26070
-----------------------------------------
(Address of principal executive offices)
(304) 737-3531
--------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subjected to such filing requirements for the past 90 days. Yes x No
--- ---
State the number of shares outstanding for each of the issuer's classes of
common equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at May 12, 2000: 932,285
<PAGE>
Advance Financial Bancorp
Index
<TABLE>
<CAPTION>
Page
Number
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<S> <C> <C>
Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet ( Unaudited) as of
March 31, 2000 and June 30, 1999 3
Consolidated Statement of Income (Unaudited)
For the Three Months ended March 31, 2000 and 1999 4
Consolidated Statement of Income (Unaudited)
For the Nine Months ended March 31, 2000 and 1999 5
Consolidated Statement of Cash Flows (Unaudited)
For the Nine Months ended March 31, 2000 and 1999 6
Notes to the Unaudited Consolidated Financial Statements 7- 8
Item 2 - Management's Discussion and Analysis 9-14
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings 15
Item 2 - Changes in Securities 15
Item 3 - Default Upon Senior Securities 15
Item 4 - Submissions of Matters to a vote of Security Holders 15
Item 5 - Other Information 15
Item 6 - Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE>
ADVANCE FINANCIAL BANCORP
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
---------------- ----------------
<S> <C> <C>
Assets
Cash and cash equivalents:
Cash and amounts due from banks $1,039,454 $1,395,704
Interest bearing deposits with other institutions 5,489,049 2,964,166
---------------- ----------------
Total cash and cash equivalents 6,528,503 4,359,870
---------------- ----------------
Investment securities:
Securities held to maturity (fair value of $1,186,527 and $970,914) 1,249,519 999,896
Securities available for sale 8,233,301 4,481,475
---------------- ----------------
Total investment securities 9,482,820 5,481,371
---------------- ----------------
Mortgaged-backed securities:
Securities held to maturity (fair value of $2,128,276 and $2,456,645) 2,179,688 2,472,681
Securities available for sale 1,580,413 1,832,845
---------------- ----------------
Total mortgage-backed securities 3,760,101 4,305,526
---------------- ----------------
Loans held for sale 147,892 -
Loans receivable, (net of allowance for loan losses
of $658,714 and $582,280 ) 120,288,394 109,899,551
Office properties and equipment, net 4,112,006 4,084,793
Federal Home Loan Bank Stock, at cost 800,000 629,500
Accrued interest receivable 823,644 664,058
Other assets 857,239 501,967
---------------- ----------------
TOTAL ASSETS $146,800,599 $129,926,636
================ ================
Liabilities:
Deposits $117,883,575 $105,338,770
Advances from Federal Home Loan Bank 13,500,000 9,000,000
Advance payments by borrowers for taxes and insurance 152,455 196,993
Accrued interest payable and other liabilities 440,786 397,421
---------------- ----------------
TOTAL LIABILITIES 131,976,816 114,933,184
---------------- ----------------
Stockholders' Equity:
Preferred stock, $.10 par value; 500,000 shares
authorized, none issued - -
Common stock, $.10 par value; 2,000,000 shares
authorized 1,084,450 shares issued 108,445 108,445
Additional paid in capital 10,329,658 10,316,719
Retained earnings - substantially restricted 8,000,223 7,623,733
Unallocated shares held by Employee Stock Ownership Plan (ESOP) (532,604) (597,767)
Unallocated shares held by Restricted Stock Plan (RSP) (540,534) (682,357)
Treasury Stock (152,165 and 103,165 shares at cost) (2,233,265) (1,626,890)
Accumulated other comprehensive loss (308,140) (148,431)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 14,823,783 14,993,452
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $146,800,599 $129,926,636
================ ================
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
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<PAGE>
ADVANCE FINANCIAL BANCORP
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
------------------- -------------------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $2,434,748 $2,139,788
Investment securities 172,683 56,170
Interest-bearing deposits with other institutions 42,812 50,190
Mortgage-backed securities 63,615 38,846
Dividends on Federal Home Loan Bank Stock 13,426 9,972
------------------- -------------------
Total interest and dividend income 2,727,284 2,294,966
------------------- -------------------
INTEREST EXPENSE
Deposits 1,263,373 1,049,053
Advances from Federal Home Loan Bank 208,344 119,145
------------------- -------------------
Total interest expense 1,471,717 1,168,198
------------------- -------------------
NET INTEREST INCOME 1,255,567 1,126,768
Provision for loan losses 51,000 37,500
------------------- -------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,204,567 1,089,268
------------------- -------------------
NONINTEREST INCOME
Service charges on deposit accounts 105,844 91,106
Gain on sale of loans 1,994 16,332
Gain on sale of investments - 13,745
Other income 62,766 67,906
------------------- -------------------
Total noninterest income 170,604 189,089
------------------- -------------------
NONINTEREST EXPENSE
Compensation and employee benefits 502,256 447,863
Occupancy and equipment 178,320 148,419
Professional fees 23,212 22,635
Advertising 28,253 34,664
Data processing charges 71,951 84,884
Other expenses 215,231 203,054
------------------- -------------------
Total noninterest expenses 1,019,223 941,519
------------------- -------------------
Income before income taxes 355,948 336,838
Income taxes 140,100 128,140
------------------- -------------------
NET INCOME $ 215,848 $ 208,698
=================== ===================
EARNINGS PER SHARE
Basic $ .24 $ .23
Diluted $ .24 $ .23
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-4-
<PAGE>
ADVANCE FINANCIAL BANCORP
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
2000 1999
--------------- ---------------
INTEREST AND DIVIDEND INCOME
<S> <C> <C>
Loans $7,067,649 $6,335,060
Investment securities 482,007 119,705
Interest-bearing deposits with other institutions 124,881 259,931
Mortgage-backed securities 193,195 55,565
Dividends on Federal Home Loan Bank Stock 37,857 30,360
--------------- ---------------
Total interest and dividend income 7,905,589 6,800,621
--------------- ---------------
INTEREST EXPENSE
Deposits 3,650,718 3,215,903
Advances from Federal Home Loan Bank 559,720 365,672
--------------- ---------------
Total interest expense 4,210,438 3,581,575
--------------- ---------------
NET INTEREST INCOME 3,695,151 3,219,046
Provision for loan losses 126,000 112,500
--------------- ---------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,569,151 3,106,546
--------------- ---------------
NONINTEREST INCOME
Service charges on deposit accounts 323,739 277,191
Gain on sale of loans 6,133 86,567
Gain on sale of investments - 13,745
Other income 184,748 205,219
--------------- ---------------
Total noninterest income 514,620 582,722
--------------- ---------------
NONINTEREST EXPENSE
Compensation and employee benefits 1,442,155 1,306,900
Occupancy and equipment 505,617 441,627
Professional fees 81,234 107,998
Advertising 91,361 98,663
Data processing charges 247,256 257,060
Other expenses 679,957 612,422
--------------- ---------------
Total noninterest expenses 3,047,580 2,824,670
--------------- ---------------
Income before income taxes 1,036,191 864,598
Income taxes 406,482 335,592
--------------- ---------------
NET INCOME $ 629,709 $ 529,006
=============== ===============
EARNINGS PER SHARE
Basic $ .70 $ .56
Diluted $ .70 $ .56
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-5-
<PAGE>
ADVANCE FINANCIAL BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
2000 1999
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 629,709 $ 529,006
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion, net 414,673 427,030
Provision for loan losses 126,000 112,500
Gain on sale of investments - (13,745)
Gain on sale of loans (6,133) (86,567)
Origination of loans held for sale (1,758,832) (8,302,946)
Proceeds from the sale of loans 1,617,073 8,849,713
Increase in other assets and liabilities 46,198 (87,186)
---------------- ----------------
Net cash provided by operating activities 1,068,688 1,427,805
---------------- ----------------
INVESTING ACTIVITIES
Investment securities held to maturity:
Purchases (249,453) (2,987,988)
Maturities and repayments - 3,737,988
Investment securities available for sale:
Purchases (4,467,656) (2,000,000)
Maturities and repayments 504,545 146,512
Mortgage-backed securities held to maturity:
Purchases - (1,006,296)
Maturities and repayments 291,248 225,855
Mortgage-backed securities available for sale:
Purchases - (2,034,336)
Maturities and repayments 221,657 73,959
Purchases of Federal Home Loan Bank Stock (170,500) -
Net increase in loans (10,872,341) (10,167,452)
Purchases of premises and equipment (298,227) (168,715)
---------------- ----------------
Net cash used in investing activities (15,040,727) (14,180,473)
---------------- ----------------
FINANCING ACTIVITIES
Net increase in deposits 12,544,805 11,699,954
Net Proceeds (Repayments) from advances from Federal Home Loan Bank 4,500,000 (1,000,000)
Net change in advances for taxes and insurance (44,538) (52,027)
Purchase of treasury stock (606,375) (626,027)
Cash dividends paid (253,220) (224,138)
---------------- ----------------
Net cash provided by financing activities 16,140,672 9,797,762
---------------- ----------------
Increase (decrease) in cash and cash equivalents 2,168,633 (2,954,906)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,359,870 9,084,193
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,528,503 $6,129,287
================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposits and borrowings $4,202,908 $3,578,452
Income taxes $ 267,672 $ 250,476
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-6-
<PAGE>
ADVANCE FINANCIAL BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Advance Financial Bancorp (the
"Company"), includes its wholly-owned subsidiary, Advance Financial Savings Bank
(the "Bank"), and its wholly-owned subsidiary, Advance Financial Service
Corporation of West Virginia. All significant intercompany balances and
transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and, therefore, do not
necessarily include all information that would be included in audited financial
statements. The information furnished reflects all adjustments, which are, in
the opinion of management, necessary for a fair statement of results of
operations. All such adjustments are of a normal recurring nature. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for the fiscal year ended June 30, 2000 or any other
interim period.
These statements should be read in conjunction with the consolidated statements
of and for the year ended June 30, 1999 and related notes which are included on
the Form 10-KSB (file no. 0-21885)
NOTE 2 - EARNINGS PER SHARE
The following table sets forth a reconciliation of the denominator of the basic
and dilutive earnings per share computation in accordance with SFAS No. 128.
<TABLE>
<CAPTION>
Nine Months Ended March 31
2000 1999
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<S> <C> <C>
Denominator:
Denominator for basic earnings per share
Weighted-average shares 894,643 951,949
Effect of dilutive securities:
Employee stock options - -
------------ -------------
Dilutive potential common shares 894,643 951,949
Denominator;
Denominator for dilutive earnings per share adjusted
Weighted-average shares 894,643 951,949
============ =============
</TABLE>
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<PAGE>
NOTE 2 - EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999
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<S> <C> <C>
Denominator:
Denominator for basic earnings per share
Weighted-average shares 871,950 921,500
Effect of dilutive securities:
Employee stock options - -
---------- ----------
Dilutive potential common shares 871,950 921,500
Denominator;
Denominator for dilutive earnings per share adjusted
Weighted-average shares 871,950 921,500
========== ==========
</TABLE>
NOTE 3 - COMPREHENSIVE INCOME
Other accumulated comprehensive loss consists solely of net unrealized gains and
losses on available for sale securities. For the three and nine months ended
March 31, 2000, comprehensive income totaled $237,007 and $470,000,
respectively. For the three and nine months ended March 31, 1999, comprehensive
income totaled $175,932 and $485,779, respectively.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Private Securities Litigation Reform Act of 1995 contains safe harbor
provisions regarding forward-looking statements. When used in this discussion,
the words "believes", "anticipates", "contemplates", "expects", and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in interest rates, risks associated with the ability to control costs
and expenses, Year 2000 issues, and general economic conditions. Advance
Financial Bancorp (the "Company") undertakes no obligation to publicly release
the results of any revisions to those forward-looking statements which may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
The Company conducts no significant business or operations of its own other
than holding all of the outstanding stock of the Advance Financial Savings Bank
(the "Bank"). As a result, references to the Company generally refer to the Bank
unless the context indicates otherwise.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31,2000 AND JUNE 30, 1999
- --------------------------------------------------------------------
Total assets increased $16,874,000 to $146,800,000 at March 31, 2000, from
$129,926,000 at June 30, 1999. At March 31, 2000, deposits and Federal Home Loan
Bank ("FHLB") advances increased $12,545,000 and $4,500,000, respectively. These
increases were used to fund loan demand and to purchase investment securities.
Interest-bearing deposits with other financial institutions increased by
$2,525,000 to $5,489,000 at March 31, 2000, from $2,964,000 at June 30, 1999.
This additional liquidity enables the Company's management to properly manage
interest rate risk in the current interest rate environment by being less
dependent on outside funding to meet loan demand.
Investment securities available for sale increased by $3,752,000 to $8,233,000
at March 31, 2000, from $4,481,000 at June 30, 1999. This increase includes
approximately $1,470,000 in three FHLB bonds with callable options ranging from
3 months to 18 months and an effective weighted average interest rate of 7.11%.
The funding for these bonds came from the strong deposit growth. The increase
also includes the purchase of a $2,500,000 15-year FHLB bond in August 1999 with
a callable option of 1-year and an effective interest yield of 8.10%. The
funding for this bond came from a FHLB advance that matures in August 2000 and
has an effective cost of funds of 5.94%. Management placed these investments
into this category for liquidity purposes while maximizing interest yields in
excess of the federal overnight rates paid on interest-bearing demand deposits.
Net loans receivable increased by $10,389,000 to $120,288,000 at March 31, 2000,
from $109,900,000 at June 30, 1999. The loan increase was spread over the entire
portfolio. Loans secured by 1-4 family residences increased by $2,980,000 due to
demand for ARMs and the bank's "no fee" Equity Line of Credit program. The
company's "no fee" program ended during November 1999. Multi-family residential
loans and Non-residential real estate loans increased by $2,839,000 and
$1,655,000, respectively, due to strong loan demand for the Company's
competitively priced ARM products. Automobile loans increased $1,686,000 due
principally to increased loan activity written by automobile dealership
customers of the Company. Commercial loans increased by $1,308,000 due
principally to the addition of a new automobile dealership to the Company's
customer base. See "Risk Elements".
-9-
<PAGE>
Deposits increased by $12,545,000 to $117,884,000 at March 31, 2000 from
$105,339,000 at June 30, 1999. Within the deposit line item, certificates of
deposit increased by $10,736,000 to $74,452,000 at March 31, 2000 from
$63,716,000 at June 30, 1999. This increase is primarily the result of three
certificate of deposit specials. The first was called "Advantage 2000", this
certificate offered above market rates on certificates of deposit at 5.25% for
12 months and 5.50% for 18 months. The "advantage" of this product was that the
customers had a 10-day option at the end of 1999 to redeem the certificate with
no penalty. This successful special was offered from June 20, 1999 to September
30, 1999. During the ten day option period of 1999, the Company had
approximately $2,350,000 of the "Advantage 2000" certificates redeemed without
penalty which was approximately 35% of the total amount deposited in the
certificate product. The Company was able to retain all but approximately
$330,000 of the redeemed certificates with customers generally transferring the
funds into another of the certificate products called "Fives Are Wild". The
second certificate of deposit special was called "Fives Are Wild", this
certificate offered above market interest rates on certificates of deposit of
5.55% for five months, 5.75% for ten months, 6.0% for 15 or 18 months, and 6.07%
for 21 months. The "Fives Are Wild" program began in mid October and ended on
March 29, 2000. In mid January of 2000, the Company offered a third certificate
of deposit special that paid above market interest rates of 6% for 6 months,
6.25% for 12 months, 6.35% for 24 months and 6.89% for 36 months. As with the
previous specials, this special was well received by the area consumers. This
special ended on March 29, 2000, as well.
Savings deposits increased $1,406,000 while demand deposits increased $403,000
for the nine-month period ended March 31, 2000. The demand deposit increase was
primarily the net result of an increase in non-interest bearing deposits of
$1,189,000, NOW accounts of $182,000, and a decrease in large money market
demand accounts of $968,000. The majority of the money withdrawn from the money
market demand account was generally deposited in the certificate of deposit
specials.
Advances from the FHLB increased by $4,500,000 to $13,500,000 at March 31, 2000
from $9,000,000 at June 30, 1999. This increase involves two separate advances.
The first advance was for $2,500,000 with a weighted average rate of 5.94% that
has a one-year maturity of August of 2000. The proceeds of this advance were
used to purchase a FHLB bond described above under investment securities. The
second advance was to increase an existing $3,000,000 callable advance to
$5,000,000 with a weighted average rate of 5.52% that has an initial call date
in October 2001. The additional $2,000,000 in proceeds from this advance were
used to fund a three year adjustable rate mortgage loan originated in October
1999.
A third advance for $2,500,000 with a weighted average rate of 5.76% that
matured in January 2000 was taken in November 1999. The proceeds of this advance
were held to fund Y2K liquidity. At maturity in January 2000, the Company repaid
$1,000,000 of the outstanding amount by utilizing excess cash on hand. The
remaining $1,500,000 was put onto the RepoPlus line of credit and subsequently
repaid in mid February 2000.
In addition to the increases and changes to advances from the FHLB discussed
above, during the quarter ended December 31, 1999, the FHLB called all three
outstanding advances at June 30, 1999, amounting to $9,000,000. The Company
elected to renew these advances at the proposed higher rates offered by the
FHLB. The new weighted average rate of the renewed $9,000,000 in advances
increased to 5.63% from 5.37% prior to the calls.
Equity capital decreased by approximately, $170,000 to $14,824,000 at March 31,
2000 from $14,993,000 at June 30, 1999. Net income of $630,000 and the
recognition of shares in the Employee Stock Ownership Plan and Restricted Stock
Plan of $220,000, were offset by the payment of cash dividends of $253,000, an
increase in net unrealized loss on securities of $160,000 and the purchase of
49,000 shares of treasury stock for $607,000, at an average cost of
approximately $12.38 per share.
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<PAGE>
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
- --------------------------------------------------------------------------------
MARCH 31, 2000 AND 1999
- -----------------------
Net interest income increased $129,000 or 11.43%, to $1,256,000 for the three
months ended March 31, 2000 from $1,127,000 for the comparable period ended
1999. The increase in net interest income resulted primarily from an increase in
the average volume of the underlying principle balances in interest earning
assets and liabilities. The net interest spread for the three months ended March
31, 2000 decreased to 3.25% from 3.35% for the comparable period ended 1999. The
average yield on interest earning assets increased by 19 basis points to 8.02%
for the three months ended March 31, 2000, from 7.83% for the comparable period
ended 1999. The average cost of funds increased by 29 basis points to 4.77% for
the three months ended March 31, 2000 from 4.48% for the comparable period ended
1999.
Net interest income increased $476,000 or 14.79%, to $3,695,000 for the nine
months ended March 31, 2000 from $3,219,000 for the comparable period ended
1999. The increase in net interest income resulted primarily from an increase in
the average volume of the underlying principle balances in interest earning
assets and liabilities. The net interest spread for the nine months ended March
31, 2000 decreased to 3.26% from 3.27% for the comparable period ended 1999. The
average yield on interest earning assets decreased by 6 basis points to 7.94%
for the nine months ended March 31, 2000, from 8.00% for the comparable period
ended 1999. The average cost of funds decreased by 5 basis points to 4.68% for
the nine months ended March 31, 2000 from 4.73% for the comparable period ended
1999.
Interest and dividend income increased $432,000 or 18.84% for the three months
ended March 31, 2000 compared to the same period ended 1999. This increase was
primarily due to an increase in earnings on loans of $295,000 as the average
principle balance increased $13,440,000 to $119,039,000 for the period ended
March 31, 2000, from $105,599,000 for the comparable 1999 period. Interest and
dividend income on investments and interest-bearing deposits with other
financial institutions increased approximately $137,000 as average principal
balances increased $5,378,000 to $16,976,000 for the period ended March 31,
2000, from $11,598,000 for the comparable 1999 period.
Interest and dividend income increased $1,105,000 or 16.25% for the nine months
ended March 31, 2000 compared to the same period ended 1999. This increase was
primarily due to an increase in earnings on loans of $733,000 as the average
principle balance increased $13,210,000 to $115,731,000 for the period ended
March 31, 2000, from $102,521,000 for the comparable 1999 period. Interest and
dividend income on investments and interest-bearing deposits with other
financial institutions increased approximately $372,000 as average principal
balances increased $6,236,000 to $17,070,000 for the period ended March 31,
2000, from $10,834,000 for the comparable 1999 period.
Interest expense increased $304,000 or 25.98%, for the three months ended March
31, 2000 compared to the same period ended 1999. This increase was primarily due
to an increase in interest on deposits of $214,000 as the average balance
increased $13,667,000 to $108,980,000 for the period ended March 31, 2000, from
$95,313,000 for the comparable 1999 period. Interest expense on advances
increased $89,000 as the average balance increased $5,417,000 to $14,417,000 for
the period ended March 31, 2000, from $9,000,000 for the comparable 1999 period.
Interest expense increased $629,000 or 17.56%, for the nine months ended March
31, 2000 compared to the same period ended 1999. This increase was primarily due
to an increase in interest on deposits of $435,000 as the average balance
increased $15,117,000 to $107,013,000 for the period ended March 31, 2000, from
$91,897,000 for the comparable 1999 period. Interest expense on advances
increased $194,000 as the average balance increased $4,083,000 to $13,139,000
for the period ended March 31, 2000, from $9,056,000 for the comparable 1999
period.
-11-
<PAGE>
Noninterest income decreased $18,000 or 9.78%, to $171,000 for the three months
ended March 31, 2000 from $189,000 for the comparable period ended 1999.
Noninterest income decreased $68,000 or 11.69%, to $515,000 for the nine months
ended March 31, 2000 from $583,000 for the comparable period ended 1999. For the
three and nine month periods of 2000, gains on sales of fixed rate mortgage
loans and related servicing rights decreased by a combined $37,000 and $159,000,
respectively. These decreases are due to the lack of demand of fixed rate
mortgages as a result of the changing interest rate environment during the nine
months ended March 31, 2000 in comparison to the rate environment during the
same period ended 1999. Offsetting these decreases for the three and nine month
periods of 2000 are increases in service charges on deposit accounts of $ 15,000
and $47,000, respectively, and ATM income of $7,000 and $26,000, respectively.
These increases are due primarily to increased customer activity.
Noninterest expense increased $77,000 or 8.25%, to $1,019,000 for the three
months ended March 31, 2000, from $942,000 for the comparable 1999 period.
Noninterest expense increased $223,000 or 7.89%, to $3,048,000 for the nine
months ended March 31, 2000 from $2,825,000 for the comparable 1999 period. For
the three and nine month periods ended March 31, 2000, compensation and employee
benefits increased $54,000 and $135,000, respectively, due to the hiring of
additional employees for loan collection, accounting and data processing, as
well as, additional costs of living increases for all full time employees.
Occupancy and equipment increased $30,000 and $64,000, respectively, due
primarily to the incurrence of real estate taxes for the Wintersville branch of
$3,000 and $18,000, respectively, and an increase in combined equipment
depreciation and maintenance of $25,000 and $43,000, respectively. Professional
fees decreased $0 and $27,000, respectively, primarily due to the preparation of
regulatory reports internally that were previously out sourced. Data processing
charges decreased $13,000 and $10,000, respectively due to the conversion to in
house item processing in January 2000. The decrease in data processing is offset
by similar increases in "occupancy and equipment" for maintenance and
depreciation and in "other expenses" for supplies and postage, which increased
for the three and nine month periods $12,000 and $14, 0000, respectively.
Anticipated future decreases in data processing will be offset by similar
increases in these line items. Other expenses increased $12,000 and $68,000,
respectively due primarily to, supplies and postage as discussed above, and
additional Ohio franchise tax due to the Wintersville branch of $11,000 and
$27,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of March 31, 2000, the Company had commitments to fund loans of approximately
$734,000. These loan commitments were funded in April 2000.
Management monitors both the Company's and the Bank's total risk-based, Tier I
risk-based and Tier I leveraged capital ratios in order to assess compliance
with regulatory guidelines. At March 31, 2000, both the Company and the Bank
exceeded the minimum risk-based and leveraged capital ratio requirements. The
Company's and the Bank's total risk-based, Tier I risk-based and Tier I leverage
ratios are 15.89%, 15.22%, 9.72% and 14.84%, 14.18%, and 9.57%, respectively, at
March 31, 2000.
-12-
<PAGE>
RISK ELEMENTS
- -------------
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days past due, other real estate
loans and repossessed assets. A loan is classified as nonaccrual when, in the
opinion of management, there are serious doubts about collectibility of interest
and principal. At the time the accrual of interest is discontinued, future
income is recognized only when cash is received. Renegotiated loans are those
loans which terms have been renegotiated to provide a reduction or deferral of
principal or interest as a result of the deterioration of the borrower.
March 31, June 30,
2000 1999
------------ ------------
Loans on a nonaccrual basis $355 $456
Loans past due 90 days or more and still accruing 191 309
------------ ------------
Total nonperforming loans 546 765
------------ ------------
Other real estate 407 50
Repossessed assets 14 9
------------ ------------
Total nonperforming assets $967 $824
------------ ------------
Nonperforming loans as a percentage of total loans 0.45% 0.69%
============ ============
Nonperforming assets as a percentage of total assets 0.66% 0.63%
============ ============
Allowance for loan losses to nonperforming loans 120.70% 76.12%
============ ============
Nonaccrual loans consist of $310,000 in one to four family residential mortgages
and $45,000 in a multi-family real estate mortgage at March 31, 2000. Management
regularly performs an analysis to identify the inherent risks of loss in its
loan portfolio. This evaluation includes evaluations of concentrations of
credit, past loss experience, current economic conditions, amount and
composition of loan portfolio (including loans being specifically monitored by
management), estimated fair value of underlying collateral, loan commitments
outstanding, delinquencies, and other information available at such times.
The Company monitors its allowance for loan losses and makes future adjustments
to the allowance through the provision for loan losses as economic conditions
dictate. Management continues to offer a wide variety of loan products. Although
the Company maintains its allowance for loan losses at a level that it considers
to be adequate to provide for the inherent risk of loss in its portfolio, there
can be no assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods due
to the higher degree of credit risk included in the loan portfolio.
13-
<PAGE>
The following is a breakdown of the loan portfolio mix at March 31, 2000 and
June 30, 1999:
March 31, June 30,
2000 1999
---------------- -----------------
Mortgage loans:
1-4 family $62,146,866 $59,673,803
Multi-family 5,528,621 2,689,531
Non-residential 24,377,631 23,216,018
Construction 2,999,365 2,073,165
---------------- -----------------
95,052,483 87,652,517
---------------- -----------------
Consumer Loans:
Home Improvement 1,268,510 1,195,518
Automobile 10,337,746 8,647,953
Share loans 1,250,658 1,360,054
Other 2,566,385 2,384,401
---------------- -----------------
15,423,299 13,587,926
---------------- -----------------
---------------- -----------------
Commercial Loans 11,694,429 10,387,570
---------------- -----------------
Less:
Loans in process 1,092,432 1,006,813
Net deferred loan fees 130,671 139,369
Allowance for loan losses 658,714 582,280
---------------- -----------------
1,881,817 1,728,462
---------------- -----------------
Total $120,288,394 $109,899,551
================ =================
-14-
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
NONE
Item 2 - Changes in securities
NONE
Item 3 - Defaults upon 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) List of Exhibits:
3(i) Certificate of Incorporation of Advance Financial
Bancorp *
3(ii) Amended Bylaws of Advance Financial Bancorp *****
4(i) Specimen Stock Certificate *
4(ii) Shareholders Rights Plan **
10 Employment Agreement between the Bank and Stephen M.
Gagliardi ***
10.1 1998 Stock Option Plan ****
10.2 Restricted Stock Plan and Trust Agreement ****
27 Financial Data Schedule (electronic filing only)
(b) None
- --------------------------------------------------------------------------------
* Incorporated by reference to the Registration Statement on Form S-1 (File
No. 333-13021) declared effective by the SEC on November 12, 1996
** Incorporated by reference to the Form 8-K ( File No. 0-21885) filed July
17, 1997
*** Incorporated by reference to the June 30, 1997 Form 10K-SB (File No.
0-21885) filed September 23, 1997
**** Incorporated by reference to the proxy statement for the Special Meeting of
the Stockholders on January 20, 1998 and filed with the SEC on December 12,
1997.
*****Incorporated by reference to the June 30, 1999 Form 10KSB (File No.
0-21885) filed on . September 23, 1999.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Advance Financial Bancorp
Date: May 12, 2000 By:/s/Stephen M. Gagliardi
-----------------------------------------
Stephen M. Gagliardi
President and Chief Executive Officer
Date: May 12, 2000 By:/s/Stephen M. Magnone
-----------------------------------------
Stephen M. Magnone
Vice President and CFO
-16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,039
<INT-BEARING-DEPOSITS> 5,489
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,814
<INVESTMENTS-CARRYING> 3,429
<INVESTMENTS-MARKET> 3,315
<LOANS> 120,947
<ALLOWANCE> 659
<TOTAL-ASSETS> 146,801
<DEPOSITS> 117,884
<SHORT-TERM> 2,500
<LIABILITIES-OTHER> 593
<LONG-TERM> 11,000
0
0
<COMMON> 108
<OTHER-SE> 14,715
<TOTAL-LIABILITIES-AND-EQUITY> 146,801
<INTEREST-LOAN> 7,068
<INTEREST-INVEST> 838
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7,906
<INTEREST-DEPOSIT> 3,651
<INTEREST-EXPENSE> 4,210
<INTEREST-INCOME-NET> 3,695
<LOAN-LOSSES> 126
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<EXPENSE-OTHER> 3,048
<INCOME-PRETAX> 1,036
<INCOME-PRE-EXTRAORDINARY> 1,036
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 630
<EPS-BASIC> 0.70
<EPS-DILUTED> 0.70
<YIELD-ACTUAL> 3.71
<LOANS-NON> 355
<LOANS-PAST> 191
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 582
<CHARGE-OFFS> 53
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 659
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</TABLE>
