SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 2000
-------------
OR
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
------------ ------------
Commission File No. 0-21885
Advance Financial Bancorp
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(Name of Small Business Issuer in Its Charter)
Delaware 55-0753533
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1015 Commerce Street, Wellsburg, West Virginia 26070
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (304) 737-3531
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Securities registered under to Section 12(b) of the Exchange Act: None
------
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock, par value $0.10 per share
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Preferred Share Purchase Rights
-------------------------------
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $11,404,000
The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant, based on the average bid and asked
price of the registrant's Common Stock on the Nasdaq Smallcap Market at August
31, 2000, was $7.7 million.
As of August 31, 2000, there were issued and outstanding 932,285 shares
of the registrant's Common Stock.
Transition Small Business Disclosure Format (check one): YES NO X
--- ---
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year ended
June 30, 2000. (Part II)
2. Portions of the Proxy Statement for the Annual Meeting of Stockholders for
the Fiscal Year ended June 30, 2000. (Part III)
<PAGE>
PART I
Advance Financial Bancorp (the "Company" or "Registrant") may from time
to time make written or oral "forward-looking statements," including statements
contained in the Company's filings with the Securities and Exchange Commission
(including this Annual Report on Form 10-KSB and the exhibits thereto), in its
reports to Stockholders and in other communications by the Company, which are
made in good faith by the Company pursuant to the "Safe Harbor" provisions of
the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements: the strength of the United States economy in general
and the strength of the local economies in which the Company conducts
operations; the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of Governors of the
Federal Reserve System, inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the company and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to
competitors' products and services; the willingness of users to substitute
competitors' products and services for the Company's products and services; the
success of the Company in gaining regulatory approval of its products and
services, when required; the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); technological changes; acquisitions; changes in consumer spending
and savings habits; and the success of the Company at managing the risks
involved in the foregoing.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the company.
Item 1. Business
-----------------
General
The Company is a Delaware corporation organized in September 1996 at
the direction of Advance Financial Savings Bank (the "Bank") to acquire all of
the capital stock that the Bank issued in its conversion from the mutual to
stock form of ownership (the "Conversion"). On December 31, 1996, the Bank
completed the Conversion and became a wholly owned subsidiary of the Company.
The Company is a unitary savings and loan holding company which, under existing
laws, generally is not restricted in the types of business activities in which
it may engage provided that the Bank retains a specified amount of its assets in
housing-related investments. The Company conducts no significant business or
operations of its own other than holding all of the outstanding stock of the
Bank. References to the Company or Registrant generally refers to the
consolidated entity which includes the main operating company, the Bank, unless
the context indicates otherwise.
The Bank is a federally chartered stock savings bank headquartered in
Wellsburg, West Virginia. It is subject to examination and comprehensive
regulation by the Office of Thrift Supervision ("OTS") and its deposits are
federally insured by the Savings Association Insurance Fund ("SAIF"). The Bank
is a
1
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member of and owns capital stock in the FHLB of Pittsburgh, which is one of the
12 regional banks in the FHLB System.
The Bank operates a traditional savings bank business, attracting
deposit accounts from the general public and using those deposits, together with
other funds, primarily to originate and invest in loans secured by one- to
four-family residential real estate, non-residential real estate, and commercial
loans. To a lesser extent, the Bank also originates multi-family real estate
loans and consumer loans.
Competition
The competition for deposit products comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions, and
multi-state regional banks in the Registrant's market area of Brooke and Hancock
counties of West Virginia and portions of Jefferson County, Ohio and Washington
County, Pennsylvania. Deposit competition also includes a number of insurance
products sold by local agents and investment products such as mutual funds and
other securities sold by local and regional brokers. Loan competition varies
depending upon market conditions and comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions,
multi-state regional banks, and mortgage bankers.
2
<PAGE>
Lending Activities
The following table sets forth the composition of the Registrant's loan
portfolio in dollar amounts and in percentages of the respective portfolios at
the dates indicated.
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------
2000 1999
-------------------- --------------------
Amount Percent Amount Percent
------ ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Type of Loans:
-------------
Real Estate Loans:
One- to four-family .......................$ 62,163 50.81% $ 59,674 53.45%
Non-residential............................ 24,544 20.06 23,216 20.80
Multi-family .............................. 5,470 4.47 2,689 2.41
Construction............................... 3,242 2.65 2,073 1.86
------- ------ ------- -------
Total real estate loans 95,419 77.99 87,652 78.52
------ ------ ------- ------
Consumer Loans:
Automobile................................. 10,904 8.91 8,648 7.74
Other...................................... 2,653 2.17 2,344 2.10
Share...................................... 1,406 1.15 1,360 1.22
Home improvement........................... 1,439 1.18 1,195 1.07
Education.................................. 23 0.02 41 .04
-------- ------ --------- -------
Total consumer loans 16,425 13.43 13,588 12.17
------ ------ ------- ------
Commercial business loans.................... 10,500 8.58 10,388 9.31
------ ------ ------- -------
Total loans 122,344 100.00% 111,628 100.00%
====== ======
Less:
Loans in process........................... (1,813) (1,007)
Deferred loan origination fees and costs... (128) (139)
Allowance for loan losses.................. (682) (582)
------- -------
Total loans, net $119,721 $109,900
======= =======
</TABLE>
3
<PAGE>
Loan Maturity Tables
The following table sets forth the estimated maturity of the
Registrant's loan portfolio, including loans held for sale, at June 30, 2000.
The table does not include prepayments or scheduled principal repayments. All
mortgage loans are shown as maturing based on contractual maturities.
<TABLE>
<CAPTION>
Due after
Due within 1 through Due after
1 year 5 years 5 years Total
---------- --------- --------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
One- to four-family real estate..... $ 7,073 $ 2,111 $52,979 $ 62,163
Non-residential real estate......... 35 1,196 23,313 24,544
Multi-family real estate............ 8 267 5,195 5,470
Construction........................ 3,242 - - 3,242
Consumer loans...................... 1,301 11,941 3,183 16,425
Commercial business loans........... 1,295 4,281 4,924 10,500
------- ------- ------- --------
Total............................... $12,954 $19,796 $89,594 $122,344
======= ======= ======= ========
</TABLE>
The following table sets forth as of June 30, 2000 the dollar amount of
all loans due after June 30, 2001, which have fixed interest rates and floating
or adjustable interest rates.
Floating or
Fixed Rates Adjustable Rates Total
----------- ---------------- -------
(In Thousands)
One- to four-family real estate.... $20,997 $34,093 $ 55,090
Non-residential real estate........ 10,539 13,962 24,501
Multi-family real estate........... 2,358 3,112 5,470
Consumer loans..................... 15,124 - 15,124
Commercial business loans.......... 5,220 3,985 9,205
------- ------- --------
Total.......................... $54,238 $55,152 $109,390
======= ======= ========
One- to Four-Family Residential Loans. The Registrant's primary lending
activity consists of the origination of one- to four-family residential mortgage
loans secured by property located in its primary market areas. The Registrant
generally originates owner-occupied one- to four-family residential mortgage
loans in amounts up to 80% of the lesser of the appraised value or selling price
of the mortgaged property without requiring mortgage insurance. The Registrant
will originate a mortgage loan in an amount up to 95% of the lesser of the
appraised value or selling price of a mortgaged property, however, mortgage
insurance is required for the amount in excess of 80% of such value.
Non-owner-occupied residential mortgage loans are originated up to 80% of the
lesser of the appraised value or selling price of the property. Fixed-rate loans
can have maturities of up to 30 years depending on the type of loan.
For all adjustable-rate mortgage loans, the Registrant requires the
borrower to qualify at the initial index interest rate. The adjustable-rate
mortgage loans provide for periodic interest rate adjustments of plus or minus
1% to 2% with a maximum adjustment over the term of the loan as set forth in the
loan agreement and usually ranges from 6% to 7% above the initial interest rate
depending on the terms of the loan. Adjustable-rate mortgage loans reprice every
year, every three years or every five years, and provide for terms of up to 30
years with most loans having terms of between 15 and 30 years.
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<PAGE>
The Registrant offers adjustable-rate mortgage loans indexed to the
weekly average of the one year U.S. Treasury bill. Interest rates charged on
mortgage loans are competitively priced based on market conditions and the
Registrant's cost of funds. Generally, the Registrant's standard underwriting
guidelines for mortgage loans conform to the Federal Home Loan Mortgage
Corporation ("FHLMC") guidelines and most of the Registrant's loans are salable
in the secondary market. It is the current policy of the Registrant to remain a
portfolio lender for its adjustable rate loans. Adjustable rate loans do have
higher credit risks compared to fixed-rate loans due to the possibility of
borrower default when interest rates reset higher and monthly payment amounts
increase.
The Registrant's one-to four-family residential loan portfolio also
includes second mortgage loans and home equity loans. Such loans are generally
secured by second liens on one-to four-family residential real estate. At June
30, 2000, such loans totalled $10,614,000 or 17%, of the Registrant's one-to
four- family residential loan portfolio.
Non-Residential Real Estate Loans. Non-residential real estate loans
consist of loans primarily consist of mixed residential and commercial use
property, professional office buildings, churches and restaurants. Loans secured
by non-residential property may be originated in amounts up to 80% of the
appraised value for a maximum term of 20 years. Non-residential real estate
loans have significantly more risk than one-to four-family mortgage loans due to
the usually higher loan amounts and the credit risk, which arises from
concentration of principal in a smaller number of loans, the effects of general
economic conditions on income producing property and the difficulty of
evaluating and monitoring the loans.
Construction Loans. The Registrant originates construction loans
primarily for the construction of single family dwellings. Loans made to
builders are generally "pure construction" loans which require the payment of
interest at fixed rates during the construction term and the payment of the
principal in full at the end of the construction period, which generally is for
a term of 12 months. At June 30, 2000, construction loans to builders totalled
$460,000. Loans made to individual property owners are either pure construction
loans or "construction-permanent" loans which generally provide for the payment
of interest only during a construction period, after which the loans convert to
a permanent loan at fixed or adjustable interest rates having terms similar to
other one- to four-family residential loans. At June 30, 2000 construction on
loans to individuals totalled $2,782,000. Construction financing generally has a
higher degree of credit risk than one-to four-family residential loans. The risk
is dependent largely on the value of the property when completed as compared to
the estimated cost, including interest, of building the property. If the
estimated value is inaccurate, the Registrant may have a completed project with
a value too low to assure full repayment of the loan.
Construction loans made to builders who are building to resell have a
maximum loan-to-value ratio of 80% of the appraised value of the property.
Construction loans to individuals who intend to occupy the finished premises
generally have a maximum loan-to-value ratio of 80%.
Multi-Family. Multi-family loans are primarily secured by apartment
houses, located in the Registrant's primary market area. Loans secured by
multi-family property may be originated in amounts up to 75% of the appraised
value with either fixed or adjustable rates of interest. Fixed rate interest
loans have maturities generally of up to 20 years, with principal and interest
payments calculated on a 20 year amortization period. Adjustable rate loans
typically have a 15 to 30 year amortization period,with repricing following
every year, three years, or five years. Multi-family loans have credit risks
similar to non-residential real estate loans.
5
<PAGE>
Consumer Loans. Consumer loans primarily consist of direct and indirect
automobile loans. Direct automobile loans are generally originated with terms of
up to 6 years for new automobiles and up to 5 1/2 years for used automobiles.
Indirect automobile loans are purchased from automobile dealers with whom the
Registrant provides floor plan financing. Indirect automobile loans are
underwritten by the Registrant and a fee is remitted to the automobile dealer
upon the successful underwriting and closing of the loan. The fee is rebated to
the Registrant, on a pro rata basis, if the loan is repaid within the first six
months. The Registrant generally does not have recourse against the automobile
dealer in the event of a default by the borrower. Each indirect auto loan is
originated in accordance with the Registrant's underwriting standards and
procedures, which are intended to assess the applicant's ability to repay the
amounts due on the loan and the adequacy of the financed vehicle as collateral.
Direct and indirect automobile loans are secured by the new or used automobile.
At June 30, 2000, automobile loans totalled $10,903,000 or, 66%, of the
Registrant's consumer loan portfolio. Of this amount, indirect automobile loans
totalled $4,954,000. Loans secured by assets that depreciate rapidly, such as
automobiles, are generally considered to entail greater risks than one-to
four-family residential loans.
The Registrant also makes a variety of other loans that totalled
$5,522,000, or 34%, of total consumer loans at June 30, 2000. Included in this
total are home improvement loans, credit card loans, loan secured by deposit
accounts (share loans) and educational loans. Underwriting standards for these
loans vary based on the loan type and the creditworthiness of the borrower.
Commercial Business Loans. Commercial business loans primarily consist
of commercial lines of credit (which include automobile floor plan lines of
credit), commercial vehicle loans, and working capital loans and are typically
secured by residential or commercial property, receivables or inventory,
vehicles comprising the automobile floor plan, or some other form of collateral.
Floor plan financing involves continuing financing for an automobile dealer that
is secured by automobiles physically located on the dealer's lot. The Registrant
holds the title to the automobiles during the pendency of the sale. Floor plan
financing typically involves high loan origination volume and repayment within
90 days of origination. Credit risks involved are similar to commercial real
estate loans (non-residential and multi-family loans) with loan repayment often
dependent upon the business generating sufficient cash flow. However, commercial
business loans carry even more credit risk than commercial real estate loans due
to the nature of the collateral underlying the loan.
Loan Approval Authority and Underwriting. The Registrant has
established various lending limits for its officers and maintains a loan
committee. A report of all mortgage loans originated is presented to the Board
of Directors monthly. The President and Senior Vice President each have the
authority to approve applications for mortgage loans up to $100,000, consumer
loans up to $40,000 for secured loans and up to $10,000 for unsecured loans.
Eight other loan officers have authority to approve secured credit applications
in varying amounts up to $35,000.
The loan committee reviews all applications for commercial loans up to
$250,000, whether secured or unsecured, and all consumer loans in amounts above
the lending limit described above. All loans the loan which committee does not
review require the consideration and approval of the entire Board of Directors.
Upon receipt of a completed loan application from a prospective
borrower, a credit report is generally ordered, income and certain other
information is verified and, if necessary, additional financial information is
requested. An appraisal from a licensed fee appraiser of the real estate
intended to be used as security for the proposed loan is obtained. For
construction/permanent loans, funds advanced during the construction phase are
held in a loan-in-process account and disbursed based upon various stages of
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<PAGE>
completion in accordance with the results of inspection reports that are based
upon physical inspection of the construction by a loan officer. For real estate
loans, each title is reviewed by the attorney for the Registrant to determine
that title is clear. Historically, the Registrant has not required title
insurance except in those instances where the attorney has seen a need for title
insurance. Borrowers must also obtain fire and casualty insurance. Flood
insurance is also required for loans on property that is located in a flood
zone.
Loan Commitments. Written loan commitments are given to prospective
borrowers on all approved mortgage loans which generally expire within 30 days
of the date of issuance. No commitment fees or points to secure commitments are
charged to prospective borrowers. However, a customer may lock in a fixed rate
for 30 days by depositing a nonrefundable fee with the Registrant. In some
instances, after a review of the rate, terms, and circumstances, commitments may
be renewed or extended beyond the 30-day limit. At June 30, 2000, the Registrant
had $283,000 of outstanding commitments to originate loans and $1,245,000 in
undisbursed funds related to construction loans.
Non-Performing and Problem Assets
Loan Delinquencies. The Registrant's collection procedures provide that
when a mortgage loan is 30 days past due, a delinquent notice is sent to the
borrower and a late charge is imposed in accordance with the mortgage or Deed of
Trust agreement. If payment is still delinquent after 90 days, the borrower will
receive a notice of default establishing a date by which the borrower must bring
the account current or foreclosure proceedings will be instituted. Late charges
are also imposed in accordance with the mortgage or Deed of Trust agreement. If
the delinquency continues, similar subsequent efforts are made to eliminate the
delinquency. If the loan continues in a delinquent status for 90 days past due
and no repayment plan is in effect, the account is turned over to an attorney
for foreclosure. Management meets regularly to determine when foreclosure
proceedings should be initiated and the borrower is notified when foreclosure
has been commenced.
Loans are reviewed on a monthly basis and are placed on non-accrual
status when considered doubtful of collection by management. Generally, loans
past due 90 days or more as to principal or interest and, in the opinion of
management, are not adequately secured to insure the collection of the entire
outstanding balance of the loan including accrued interest are placed on
non-accrual status. Interest accrued and unpaid at the time a loan is placed on
non-accrual status is charged against interest income. Subsequent cash payments
are applied to interest income. Loans are returned to accrual status when, in
management's judgment, the borrower has the ability and intent to make periodic
principal and interest payments (this generally requires that the loan be
brought current in accordance with its original terms).
7
<PAGE>
Non-Performing Assets. The following table sets forth information
regarding nonaccrual loans and real estate owned, as of the dates indicated. The
Registrant has no loans categorized as troubled debt restructurings within the
meaning of the Statement of Financial Accounting Standards ("SFAS") 15 and no
impaired loans within the meaning of SFAS 114, as amended by SFAS 118. Interest
income that would have been recorded on loans accounted for on a nonaccrual
basis under the original terms of such loans was not material for the year ended
June 30, 2000.
At June 30,
-------------
2000 1999
---- ----
(Dollars in Thousands)
Loans accounted for on a non-accrual basis:
Mortgage loans:
One- to four-family ............................ $286 $ 90
Non-residential ................................ 16 --
Construction ................................... -- 317
Commercial ..................................... -- 47
Consumer ......................................... 2 2
Commercial ....................................... -- --
---- ----
Total non-accrual loans ...................... 304 456
---- ----
Accruing loans greater than 90 days past due:
Mortgage loans:
One- to four-family .......................... -- --
Non-residential .............................. -- --
Construction ................................. -- --
Multi-family ................................. -- --
Consumer ......................................... 189 220
Commercial ....................................... -- 89
---- ----
Total accruing loans greater than 90 days past due 189 309
---- ----
Total non-performing loans ....................... 493 765
Real estate acquired in settlement of loans ...... 407 50
Other non-performing assets ...................... 21 9
---- ----
Total non-performing assets ...................... $921 $824
==== ====
Total non-performing loans to total loans ........ .41% .69%
==== ====
Total non-performing loans to total assets ....... .34% .59%
==== ====
Total non-performing assets to total assets ...... .63% .63%
==== ====
Classified Assets. OTS regulations provide for a classification system
for problem assets of insured institutions. Under this classification system,
problem assets of insured institutions are classified as "substandard,"
"doubtful," or "loss." An asset is considered substandard if it is inadequately
protected by the current net worth and paying capacity of the obligor or of the
collateral pledged, if any. Substandard assets include those characterized by
the "distinct possibility" that the insured institution will sustain "some loss"
if the deficiencies are not corrected. Assets classified as doubtful have all of
the weaknesses inherent in those classified as substandard, with the added
characteristic that the weaknesses present make "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable." Assets classified as loss are those considered
"uncollectible" and of such little value that their continuance as assets
without the establishment of a specific loss reserve is not
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<PAGE>
warranted. Assets may be designated "special mention" because of potential
weakness that does not currently warrant classification in one of the
aforementioned categories.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. An institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
OTS, which may order the establishment of additional general or specific loss
allowances. A portion of general loss allowances established to cover possible
losses related to assets classified as substandard or doubtful may be included
in determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital.
The following table sets forth the Registrant's classified assets in
accordance with its classification system:
At June 30, 2000
----------------
(In Thousands)
Special Mention.................. $ 475
Substandard...................... 1,122
Doubtful......................... 41
Loss............................. -
------
Total............................ $1,638
-----
Allowances for Loan Losses. A provision for loan losses is charged to
operations based on management's evaluation of the losses that may be incurred
in the Registrant's loan portfolio. Such evaluation, which includes a review of
all loans of which full collectibility of interest and principal may not be
reasonably assured, considers the Registrant's past loan loss experience, known
and inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, estimated value of any underlying collateral, any
existing guarantees, past performance of the loan, available documentation for
the loan, legal impediments to collection, financial condition of the borrower,
and current economic conditions.
Management will continue to review the entire loan portfolio to
determine the extent, if any, to which further additional loss provisions may be
deemed necessary. There can be no assurance that the allowance for losses will
be adequate to cover losses which may in fact be realized in the future and that
additional provisions for losses will not be required.
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<PAGE>
The following table sets forth information with respect to the
Registrant's allowance for loan losses at the dates indicated:
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------
2000 1999
--------- ---------
(Dollars in Thousands)
<S> <C> <C>
Total loans outstanding ......................................... $ 122,344 $ 111,628
========= =========
Average loans outstanding ....................................... 116,825 103,764
========= =========
Allowance balance (at beginning of period) ...................... $ 582 $ 478
Provision:
Real estate ................................................... 57 70
Consumer ...................................................... 64 24
Commercial .................................................... 54 56
Charge-offs:
Real estate ................................................... -- (8)
Consumer ...................................................... (54) (20)
Commercial .................................................... (25) (20)
Recoveries:
Real estate ................................................... -- --
Consumer ...................................................... 4 2
Commercial .................................................... -- --
--------- ---------
Allowance balance (at end of period) ............................ $ 682 $ 582
========= =========
Allowance for loan losses as a percent of total loans outstanding .56% .52%
========= =========
Net loans charged off as a percent of average loans outstanding . .06% .04%
========= =========
</TABLE>
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Analysis of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance by
category, which management believes can be allocated only on an approximate
basis. The allocation of the allowance to each category is not necessarily
indicative of future loss and does not restrict the use of the allowance to
absorb losses in any category.
June 30,
-----------------------------------------
2000 1999
------------------- -------------------
Percent of Percent of
Loans in Loans in
Each Each
Category Category
to Total to Total
Amount Loans Amount Loans
------ -------- ------ ---------
(Dollars in Thousands)
Types of Loans
Real Estate:
One- to four-family...........$ 93 50.81% $ 93 53.45%
Non-residential .............. 270 20.06 230 20.80
Multi-family.................. 33 4.47 16 2.41
Construction.................. -- 2.65 -- 1.86
Consumer........................ 129 13.43 115 12.17
Commercial...................... 157 8.58 128 9.31
------ ------ ---- ------
Total......................$ 682 100.00% $582 100.00%
====== ====== ==== ======
Investment Activities
The Registrant is required under federal regulations to maintain a
minimum amount of liquid assets which may be invested in specified short-term
securities and certain other investments. The level of liquid assets varies
depending upon several factors, including: (i) the yields on investment
alternatives, (ii) management's judgment as to the attractiveness of the yields
then available in relation to other opportunities, (iii) expectation of future
yield levels, and (iv) management's projections as to the short-term demand for
funds to be used in loan origination and other activities. Investment
securities, including mortgage-backed securities, are classified at the time of
purchase, based upon management's intentions and abilities, as securities held
to maturity or securities available for sale. Debt securities acquired with the
intent and ability to hold to maturity are classified as held to maturity and
are stated at cost and adjusted for amortization of premium and accretion of
discount, which are computed using the level yield method and recognized as
adjustments of interest income. All other debt securities are classified as
available for sale to serve principally as a source of liquidity.
Current regulatory and accounting guidelines regarding investment
securities (including mortgage backed securities) require the Registrant to
categorize securities as "held to maturity," "available for sale" or "trading."
As of June 30, 2000, Registrant had securities (including mortgage-backed
securities) classified as "held to maturity" and "available for sale" in the
amount of $8,781,000 and $9,791,000, respectively and had no securities
classified as "trading." Securities classified as "available for sale" are
reported for financial reporting purposes at the fair market value with net
changes in the market value from period to period included as a separate
component of stockholders' equity, net of income taxes. At June 30, 2000, the
Registrant's securities available for sale had an amortized cost of $10,247,000
and market
11
<PAGE>
value of $9,791,000 (unrealized loss of $456,000). Changes in the market value
of securities available for sale do not affect the Company's income. In
addition, changes in the market value of securities available for sale do not
affect the Bank's regulatory capital requirements or its loan-to-one borrower
limit.
At December 31, 1999, the Registrant's investment portfolio policy
allowed investments in instruments such as: (i) U.S. Treasury obligations, (ii)
U.S. federal agency or federally sponsored agency obligations, (iii) local
municipal obligations, (iv) mortgage-backed securities, (v) banker's
acceptances, (vi) certificates of deposit, and (vii) investment grade corporate
bonds, and commercial paper. The board of directors may authorize additional
investments.
As a source of liquidity and to supplement Registrant's lending
activities, the Registrant has invested in residential mortgage-backed
securities. Mortgage-backed securities can serve as collateral for borrowings
and, through repayments, as a source of liquidity. Mortgage-backed securities
represent a participation interest in a pool of single-family or other type of
mortgages. Principal and interest payments are passed from the mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the participation interests in the form of securities, to
investors, like us. The quasi-governmental agencies guarantee the payment of
principal and interest to investors and include the Federal Home Loan Mortgage
Corporation ("FHLMC"), Government National Mortgage Association ("GNMA"), and
Federal National Mortgage Association ("FNMA").
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable rate) and the prepayment risk, are passed on to the certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying mortgages. Expected maturities will differ from contractual
maturities due to scheduled repayments and because borrowers may have the right
to call or prepay obligations with or without prepayment penalties.
Mortgage-backed securities issued by FHLMC, GNMA, and FNMA make up a majority of
the pass- through certificates market.
At June 30, 2000, the Registrant's securities portfolio did not contain
securities of any issuer, other than those issued by U.S. government or its
agencies, with an aggregate book value in excess of 10% of the Registrant's
equity.
12
<PAGE>
Investment Portfolio. The following table sets forth the carrying value
of the Registrant's securities at the dates indicated.
At June 30,
------------------
2000 1999
------- --------
(In Thousands)
Securities held to maturity:
Interest-bearing deposits in other financial institutions $ 4,642 $ 2,964
U.S. government agency securities ....................... 1,250 1,000
FHLB stock .............................................. 800 630
Mortgage-backed securities .............................. 2,089 2,473
------- -------
Total securities held to maturity ..................... 8,781 7,067
------- -------
Securities available for sale:
U.S. government and agency securities ................... 8,129 4,361
Common stock ............................................ 80 89
Money fund securities ................................... 26 31
Mortgage-backed securities .............................. 1,556 1,833
------- -------
Total securities available for sale ................... 9,791 6,314
------- -------
Total investment and mortgage-backed securities ........... $18,572 $13,381
======= =======
13
<PAGE>
The following table sets forth information regarding the scheduled
maturities, carrying values, market value and weighted average yields for the
Bank's investment securities portfolio at June 30, 2000. The following table
does not take into consideration the effects of scheduled repayments or the
effects of possible prepayments.
<TABLE>
<CAPTION>
At June 30, 2000
------------------------------------------------------------------------------------------------------
Less than 1 to Over 5 to Over 10 Total
1 year 5 years 10 years years Securities
------------------ ---------------- ----------------- ---------------- -----------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
held to maturity:
Interest-bearing
deposits in other
financial
institutions.............. $4,642 6.35% $ - -% $ - -% $ - -% $4,642 6.35% $4,642
U.S. government and
agency securities......... - - 750 6.53 - - 500 6.74 1,250 6.63 1,188
FHLB stock.................. 800 7.00 - - - - - - 800 7.00 800
Mortgage-backed
securities................ - - - - - - 2,089 6.65 2,089 6.65 2,027
------ ---- ------ ---- ------ ---- ------ ---- ------- ---- ------
Total securities
held to
maturity.............. 5,442 6.45 750 6.53 - - 2,589 6.67 8,781 6.52 8,657
------ ---- ------ ---- ------ ---- ------ ---- ------- ---- ------
Securities available
for sale:
U.S. government
and agency
securities............... - - 2,900 6.41 1,416 6.92 3,813 7.45 8,129 6.99 8,129
Common stock................ 80 3.00 - - - - - - 80 3.00 80
Money fund
securities................ - - - - 26 4.91 - - 26 4.91 26
Mortgage-backed
securities................ - - - - - 1,556 6.21 1,556 6.21 1,556
------ ---- ------ ---- ------ ---- ------ ---- ------- ---- ------
Total securities
available for sale.... 80 3.00 2,900 6.41 1,442 6.52 5,369 7.09 9,791 6.83 9,791
------ ---- ------ ---- ------ ---- ------ ---- ------- ---- ------
Total investment and
mortgage-backed
securities.................. $5,522 6.40% $3,650 6.43% $1,442 6.52% $7,958 6.95% $18,572 6.68% $18,448
====== ==== ====== ==== ====== ==== ====== ==== ======= ==== =======
</TABLE>
14
<PAGE>
Sources of Funds
General. Deposits are the major external source of the Registrant's
funds for lending and other investment purposes. The Registrant derives funds
from amortization and prepayment of loans and, to a much lesser extent,
maturities of investment securities, borrowings, mortgage-backed securities and
operations. Scheduled loan principal repayments are a relatively stable source
of funds, while deposit inflows and outflows and loan prepayments are
significantly influenced by general interest rates and market conditions.
Deposits. Consumer and commercial deposits are attracted principally
from within the Registrant's primary market area through the offering of a
selection of deposit instruments including regular savings accounts, money
market accounts, and term certificate accounts. Deposit account terms vary
according to the minimum balance required, the time period the funds must remain
on deposit, and the interest rate, among other factors. At June 30, 2000, the
Registrant had no brokered accounts.
Time Deposits. The following table indicates the amount of the
Registrant's time deposits of $100,000 or more by time remaining until maturity
as of June 30, 2000.
Maturity Period Time Deposits
--------------- -------------
(In Thousands)
Within three months............................ $1,462
More than three through six months............. 1,189
More than six through nine months.............. 2,024
Over nine months............................... 2,011
------
Total................................. $6,686
=====
Borrowings
The Registrant may obtain advances from the FHLB of Pittsburgh to
supplement its supply of lendable funds. Advances from the FHLB of Pittsburgh
are typically secured by a pledge of the Registrant's stock in the FHLB of
Pittsburgh and a portion of the Registrant's first mortgage loans and certain
other assets. Each FHLB credit program has its own interest rate, which may be
fixed or variable, and range of maturities. The Registrant, if the need arises,
may also access the Federal Reserve Bank discount window to supplement its
supply of lendable funds and to meet deposit withdrawal requirements. At June
30, 2000, borrowings with the FHLB totalled $10,500,000, of which $2,500,000
were short-term.
Employees
At June 30, 2000, the Registrant had 53 full-time and 4 part-time
employees. None of the Bank's employees are represented by a collective
bargaining group. The Bank believes that its relationship with its employees is
good.
Regulation
Set forth below is a brief description of certain laws which related to
the regulation of the Company and the Bank. The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.
15
<PAGE>
Recent Regulation
The Gramm-Leach-Bliley Act (the "Act") became effective March 11, 2000,
which permits qualifying bank holding companies to become financial holding
companies and thereby affiliate with securities firms and insurance companies
and engage in other activities that are financial in nature. The Act defines
"financial in nature" to include securities underwriting, dealing and market
making; sponsoring mutual funds and investment companies; insurance underwriting
and agency; merchant banking activities; and activities that the Board has
determined to be closely related to banking. A qualifying national bank also may
engage, subject to limitations on investment, in activities that are financial
in nature, other than insurance underwriting, insurance company portfolio
investment, real estate development, and real estate investment, through a
financial subsidiary of the bank.
The Act also prohibits new unitary thrift holding companies from
engaging in nonfinancial activities or from affiliating with an nonfinancial
entity. As a grandfathered unitary thrift holding company, the Company will
retain its authority to engage in nonfinancial activities. However, the Act will
have few direct effects on the operations or powers of federal savings
associations or of savings and loan holding companies.
The Act imposes significant new financial privacy obligations and
reporting requirements on all financial institutions, including federal savings
associations. Specifically, the statute, among other things, will require
financial institutions (a) to establish privacy policies and disclose them to
customers both at the commencement of a customer relationship and on an annual
basis and (b) to permit customers to opt out of a financial institution's
disclosure of financial information to nonaffiliated third parties. The Act
requires the federal financial regulators to promulgate regulations implementing
these provisions within six months of enactment, and the statute's privacy
requirements will take effect one year after enactment.
Regulation of the Company
General. The Company is a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Company is required to
register and file reports with the OTS and is subject to regulation and
examination by the OTS. In addition, the OTS has enforcement authority over the
Company and its non-savings association subsidiaries, should such subsidiaries
be formed, which also permits the OTS to restrict or prohibit activities that
are determined to be a serious risk to the subsidiary savings association. This
regulation and oversight is intended primarily for the protection of the
depositors of the Bank and not for the benefit of stockholders of the Company.
As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions, provided the Bank satisfies the Qualified
Thrift Lender ("QTL") test. The Act terminated the "unitary thrift holding
company exemption" for all companies that applied to acquire savings
associations after May 4, 1999. Since the Company is grandfathered under this
provision of the Act, its unitary holding company powers and authorities were
not affected. However, if the Company were to acquire control of an additional
savings association, its business activities would be subject to restriction
under the Home Owners' Loan Act. Furthermore, if the Company were in the future
to sell control of the Bank to any other company, such company would not succeed
to the Company's grandfathered status under the Act and would be subject to the
same business activity restrictions. See "- Regulation of the Bank - Qualified
Thrift Lender Test."
16
<PAGE>
Regulation of the Bank
General. Set forth below is a brief description of certain laws that
relate to the regulation of the Bank. The description does not purport to be
complete and is qualified in its entirety by reference to applicable laws and
regulations. As a federally chartered, SAIF-insured savings association, the
Bank is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with various federal statutory and
regulatory requirements. The Bank is also subject to certain reserve
requirements promulgated by the Federal Reserve Board.
The OTS, in conjunction with the FDIC, regularly examines the Bank and
prepares reports for the consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's operations. The Bank's relationship
with its depositors and borrowers is also regulated to a great extent by federal
and state law, especially in such matters as the ownership of savings accounts
and the form and content of the Bank's mortgage documents.
The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes.
Insurance of Deposit Accounts. The deposit accounts held by the Bank
are insured by the SAIF to a maximum of $100,000 for each insured member (as
defined by law and regulation). Insurance of deposits may be terminated by the
FDIC upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC or the institution's primary regulator.
The Bank is required to pay insurance premiums based on a percentage of
its insured deposits to the FDIC for insurance of its deposits by the SAIF. The
FDIC also maintains another insurance fund, the Bank Insurance Fund ("BIF"),
which primarily insures commercial bank deposits. The FDIC has set the deposit
insurance assessment rates for SAIF-member institutions for the first six months
of 2000 at 0% to .027% of insured deposits on an annualized basis, with the
assessment rate for most savings institutions set at 0%.
In addition, all FDIC-insured institutions are required to pay
assessments to the FDIC at an annual rate of approximately .0212% of insured
deposits to fund interest payments on bonds issued by the Financing Corporation
("FICO"), an agency of the Federal government established to recapitalize the
predecessor to the SAIF. These assessments will continue until the FICO bonds
mature in 2017.
Loans to One Borrower. A savings association may not make a loan or
extend credit to a single or related group of borrowers in excess of 15% of the
associations's unimpaired capital and surplus. An additional amount may be lent,
equal to 10% of the unimpaired capital and surplus, under certain circumstances.
At June 30, 2000, the Registrant's lending limit for loans to one borrower was
approximately $2,253,000 and had no outstanding commitments that exceeded the
loans to one borrower limit at the time originated or committed.
17
<PAGE>
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) a leverage ratio (core capital) equal to
at least 3% of total adjusted assets, and (3) a risk-based capital requirement
equal to 8.0% of total risk-weighted assets.
Dividend and Other Capital Distribution Limitations. The OTS imposes
various restrictions or requirements on the ability of savings institutions to
make capital distributions, including cash dividends.
A savings association that is a subsidiary of a savings and loan
holding company, such as the Bank must file an application or a notice with the
OTS at least 30 days before making a capital distribution. Savings associations
are not required to file an application for permission to make a capital
distribution and need only file a notice if the following conditions are met:
(1) they are eligible for expedited treatment under OTS regulations, (2) they
would remain adequately capitalized after the distribution, (3) the annual
amount of capital distribution does not exceed net income for that year to date
added to retained net income for the two preceding years, and (4) the capital
distribution would not violate any agreements between the OTS and the savings
association or any OTS regulations. Any other situation would require an
application to the OTS.
The OTS may disapprove an application or notice if the proposed capital
distribution would: (i) make the savings association undercapitalized,
significantly undercapitalized, or critically undercapitalized; (ii) raise
safety or soundness concerns; or (iii) violate a statue, regulation, or
agreement with the OTS (or with the FDIC), or a condition imposed in an
OTS-approved application or notice. Further, a federal savings association, like
the Bank, cannot distribute regulatory capital that is needed for its
liquidation account.
Qualified Thrift Lender Test. Federal savings institutions must meet
one of two Qualified Thrift Lender ("QTL") tests. To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal Revenue Code by maintaining at least 60% of its total assets
in specified types of assets, including cash, certain government securities,
loans secured by and other assets related to residential real property,
educational loans and investments in premises of the institution or (ii) satisfy
the statutory QTL test set forth in the Home Owner's Loan Act by maintaining at
least 65% of its "portfolio assets" in certain"Qualified Thrift Investments"
(defined to include residential mortgages and related equity investments,
certain mortgage-related securities, small business loans, student loans and
credit card loans, and 50% of certain community development loans). For purposes
of the statutory QTL test, portfolio assets are defined as total assets minus
intangible assets, property used by the institution in conducting its business,
and liquid assets equal to 10% of total assets. A savings institution must
maintain its status as a QTL on a monthly basis in at least nine out of every 12
months. A failure to qualify as a QTL results in a number of sanctions,
including the imposition of certain operating restrictions and a restriction on
obtaining additional advances from its FHLB. At June 30, 2000, the Bank was in
compliance with its QTL requirement.
Federal Home Loan Bank System. The Bank is a member of the FHLB of
Pittsburgh, which is one of 12 regional FHLBs that administers the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB.
18
<PAGE>
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Pittsburgh in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year.
Liquidity Requirements. All savings associations are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations.
Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW, and Super
NOW checking accounts) and non-personal time deposits. The balances maintained
to meet the reserve requirements imposed by the Federal Reserve Board may be
used to satisfy the liquidity requirements that are imposed by the OTS. At June
30, 2000, the Bank was in compliance with these Federal Reserve Board
requirements.
Item 2. Description of Property
--------------------------------
(a) Properties.
The Registrant operates from its main office and two branch
offices.
Year Leased
Location Leased or Owned or Acquired
-------- --------------- -----------
MAIN OFFICE:
1015 Commerce Street Owned 1984
Wellsburg, West Virginia
BRANCH OFFICES:
1409 Main Street Leased (1) 1996
Follansbee, West Virginia
805 Main Street
Wintersville, Ohio Leased (2) 1997
-----------------------
(1) The Bank holds a 40 year lease on the land upon which its branch office is
located. The Bank owns the branch building. In addition, the Bank owns
property at 901 Main Street, Follansbee, West Virginia, which was formerly
a branch office.
(2) The Wintersville office opened June 8, 1999. The Bank holds a ten year
lease (with two five year renewal options) on the land upon which its
branch office is located. The Bank owns the branch building.
(b) Investment Policies. See "Item 1. Business" above for a general
description of the Bank's investment policies and any regulatory or Board of
Directors' percentage of assets limitations regarding certain investments. The
Bank's investments are primarily acquired to produce income, and to a lesser
extent, possible capital gain.
19
<PAGE>
(1) Investments in Real Estate or Interests in Real Estate.
See "Item 1. Business - Lending Activities and - Regulation of the Bank," and
"Item 2. Description of Property."
(2) Investments in Real Estate Mortgages. See "Item 1.
Business - Lending Activities and - Regulation of the Bank."
(3) Investments in Securities of or Interests in Persons
Primarily Engaged in Real Estate Activities. See "Item 1. Business - Lending
Activities and - Regulation of the Bank."
(c) Description of Real Estate and Operating Data. Not Applicable.
Item 3. Legal Proceedings
--------------------------
There are various claims and lawsuits in which the Company or the Bank
are periodically involved, such as claims to enforce liens, condemnation
proceedings on properties in which the Bank holds security interests, claims
involving the making and servicing of real property loans, and other issues
incident to the Bank's business. In the opinion of management, no material loss
is expected from any of such pending claims or lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------
The information contained under the section captioned "Stock Market
Information" of the Company's Annual Report to stockholders for the fiscal year
ended June 30, 2000 (the "Annual Report") is incorporated herein by reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
Item 7. Financial Statements
-----------------------------
The Registrant's financial statements listed under Item 13 are
incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants On Accounting and
--------------------------------------------------------------------------------
Financial Disclosure.
---------------------
Not applicable.
20
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance
--------------------------------------------------------------------------------
with Section 16(a) of the Exchange Act.
---------------------------------------
The information required under this item is incorporated herein by
reference to the Proxy Statement for the 2000 Annual Meeting (the "Proxy
Statement") contained under the sections captioned "Section 16(a) Beneficial
Ownership Reporting Compliance," "Proposal I - Election of Directors," and "-
Biographical Information."
Item 10. Executive Compensation
--------------------------------
The information required by this item is incorporated by reference to
the Proxy Statement contained under the section captioned "Director and
Executive Officer Compensation."
Item 11. Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
(b) Security Ownership of Management
The information required by items (a) and (b) is incorporated
herein by reference to the Proxy Statement contained under the
sections captioned "Principal Holders" and "Proposal I -
Election of Directors."
(c) Management of the Company knows of no arrangements, including
any pledge by any person of securities of the Company, the
operation of which may at a subsequent date result in a change
in control of the Company.
Item 12. Certain Relationships and Related Transactions
--------------------------------------------------------
The information required by this item is incorporated herein by
reference to the Proxy Statement contained under the section captioned "Certain
Relationships and Related Transactions."
Item 13. Exhibits, List, and Reports on Form 8-K
------------------------------------------------
(a) Listed below are all financial statements and exhibits filed as
part of this report.
1. The consolidated balance sheets of Advance Financial Bancorp
and Subsidiary as of June 30, 2000 and 1999 and the related
consolidated statements of income, changes in stockholders'
equity and cash flows for each of the two years ended June
30, 2000, together with the related notes and the
independent auditors' report of S. R. Snodgrass, A.C.
independent certified public accountants.
21
<PAGE>
2. Schedules omitted as they are not applicable.
3. The following exhibits are included in this Report or
incorporated herein by reference:
<TABLE>
<CAPTION>
(a) List of Exhibits:
<S> <C>
3(i) Certificate of Incorporation of Advance Financial Bancorp *
3(ii) Amended Bylaws of Advance Financial Bancorp*****
4(i) Specimen Stock Certificate *
4(ii) Shareholder 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 ****
13 Portions of the 2000 Annual Report to Stockholders
21 Subsidiaries of the Registrant (See "Item 1- Description of
Business")
23 Consent of S.R. Snodgrass, A.C.
27 Financial Data Schedule (electronic filing only)
</TABLE>
(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 with
the SEC on July 17, 1997.
*** Incorporated by reference to the June 30, 1997 Form 10-KSB filed with
the SEC on September 24, 1997.
**** Incorporated by reference to the Proxy Statement for the Special Meeting
of Stockholders on January 20, 1998 and filed with the SEC on December
12, 1997.
***** Incorporated by reference to the June 30, 1999 Form 10-KSB filed with
the SEC on September 28, 1999.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 as of
September 28, 2000.
ADVANCE FINANCIAL BANCORP
By: /s/Stephen M. Gagliardi
-----------------------------------------------
Stephen M. Gagliardi
President, Chief Executive Officer and Director
(Duly Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of September 28, 2000.
<TABLE>
<CAPTION>
<S> <C>
/s/Stephen M. Gagliardi /s/George H. Johnson
----------------------------------------------- ---------------------------------------------
Stephen M. Gagliardi George H. Johnson
President, Chief Executive Officer and Director Director
(Principal Executive Officer)
/s/John R. Sperlazza /s/Steven D. Martino
----------------------------------------------- ---------------------------------------------
John R. Sperlazza Steven D. Martino
Director Senior Vice President
/s/William E. Watson /s/Gary Young
----------------------------------------------- ---------------------------------------------
William E. Watson Gary Young
Director Director
/s/James R. Murphy /s/William B. Chesson
----------------------------------------------- ---------------------------------------------
James R. Murphy William B. Chesson
Director Director
/s/Stephen M. Magnone
-----------------------------------------------
Stephen M. Magnone
Treasurer
(Principal Accounting Officer)
</TABLE>
