SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20552
----------
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] 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. 0-22499
BAYONNE BANCSHARES, INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3511899
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
568 Broadway, Bayonne, New Jersey 07002
---------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 437-1000
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [ ]
AS OF NOVEMBER 14, 1997, THERE WERE 9,050,264 SHARES OF THE
REGISTRANTS COMMON STOCK OUTSTANDING
<PAGE>
BAYONNE BANCSHARES, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition as of 1
September 30, 1997, and March 31, 1997
Consolidated Statements of Operations for the three 2
and six months ended September 30, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the six 3
months ended September 30, 1997 and 1996
Consolidated Statements of Cash Flows for the six 4-5
months ended September 30, 1997 and 1996
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial 8-11
Condition and Results of Operations
PART II. OTHER INFORMATION 12-13
<PAGE>
PART 1 FINANCIAL INFORMATION
Item 1
Consolidated Financial Statements
BAYONNE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands of dollars)
<TABLE>
<CAPTION>
ASSETS September 30, 1997 March 31, 1997
------ ------------------ --------------
(unaudited)
<S> <C> <C>
Cash and cash equivalents:
Cash on hand and in banks $ 4,216 $ 6,828
Deposits with financial institutions 10,000 8,500
AMF short-term fund 5 144
------------------ --------------
Total cash and cash equivalents 14,221 15,472
Securities available for sale, at market value 331,647 290,614
Securities held to maturity 10,293 11,277
Loans receivable, net 231,820 235,624
Accrued interest receivable, net 3,925 3,720
Federal Home Loan Bank stock, at cost 7,460 7,460
Real estate acquired in settlement of loans 389 364
Office properties and equipment, net 5,556 5,812
Prepaid expenses 274 816
Other assets 3,468 5,845
------------------ --------------
Total Assets $ 609,053 $ 577,004
================== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits $ 432,131 $ 444,139
Borrowings 75,000 75,000
ESOP loan 489 598
Advance payment by borrowers for taxes and insurance 1,813 1,539
Accrued expenses and other liabilities 4,459 7,649
------------------ --------------
Total Liabilities $ 513,892 $ 528,925
================== ==============
Stockholders' equity:
Common stock 90 307
Additional paid in capital 59,249 12,426
Common stock acquired by ESOP and MRP (4,681) (976)
Retained earnings-substantially restricted 41,937 40,658
Net unrealized loss on securities available for sale,net of tax (1,434) (4,336)
------------------ --------------
Total stockholders' equity 95,161 48,079
------------------ --------------
Total liabilities and stockholders' equity $ 609,053 $ 577,004
================== ==============
</TABLE>
See accompanying notes to the consolidated financial statements.
1
<PAGE>
Bayonne Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Operations
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
------------------------------------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans $ 4,884 $ 5,000 $ 9,801 $ 9,996
Securities available for sale 4,988 5,294 9,571 10,800
Securities held to maturity 297 309 602 621
Overnight deposits with financial institutions 124 109 212 175
Total interest and dividend income $10,293 $10,712 $20,186 $21,562
Interest expense:
Interest on deposits 5,191 5,409 10,377 10,495
Interest on other borrowings 1,238 2,082 2,368 4,132
Total interest expense 6,429 7,491 12,745 14,627
Net interest income 3,864 3,221 7,441 6,935
Provision for loan losses 45 30 90 60
Net interest income after provision for loan losses 3,819 3,191 7,351 6,875
Other income: (loss):
Loan fees and service charges 63 96 131 178
Loss on securities available for sale, net (5) (3,233) (5) (3,233)
Gain (loss) on sales of real estate acquired in
settlement of loans, net (1) (32) 11 (28)
Other 226 211 545 455
Total other income (loss) 283 (2,958) 682 (2,628)
Operating expenses:
Compensation and employee benefits 1,476 1,330 2,942 2,734
Occupancy 195 203 374 378
Equipment 323 273 659 523
Advertising and promotion 18 13 32 36
Federal insurance premiums 142 295 287 587
Other 410 3,314 870 3,725
------- ------- ------- -------
Total operating expenses 2,564 5,428 5,164 7,983
Income (loss) before income tax expense 1,538 (5,195) 2,869 (3,736)
Income tax expense (benefit) 569 (638) 1,062 (98)
------- ------- ------- -------
Net income (loss) $ 969 $(4,557) $ 1,807 $(3,638)
------- ------- ------- -------
Net income (loss) Per Common Share $ 0.18 $ (1.55) $ 0.42 $ (1.26)
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE>
Bayonne Bancshares, Inc.
and Subsidiaries
Consolidated Statements of Stockholders' Equity
Six Month Periods ended September 30, 1997 and 1996
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
Common Additional Retained Unallocated MRP Net Total
Stock Paid in Earnings ESOP Shares Unrealized Stockholders'
Capital Substantially Shares Loss on Equity
Restricted Securities
Available for
sale
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 $ 306 $ 12,216 $ 44,575 $ (815) $ (495) $ (6,268) $ 49,519
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income for the
six month period ended
September 30, 1996 - - $ (3,638) - - - $ (3,638)
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of ESOP - $ 48 - $ 109 - - $ 157
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of MRP - $ 6 - - $ 58 - $ 64
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
loss on securities available
for sale, net of tax - - - - - $ 1,624 $ 1,624
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends paid - - $ (175) - - - $ (175)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at
September 30, 1996 $ 306 $ 12,270 $ 40,762 $ (706) $ (437) $ (4,644) $ 47,551
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1997 $ 307 $ 12,426 $ 40,658 $ (598) $ (378) $ (4,336) $ 48,079
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for the six
month period ended
September 30, 1997 - - $ 1,807 - - - $ 1,807
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of ESOP - $ 207 - $ 109 - - $ 316
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of MRP - $ 72 - - $ 81 - $ 153
- ------------------------------------------------------------------------------------------------------------------------------------
Dividend Paid - - $ (528) - - - $ (528)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
losses on securities
available for sale, net of tax - - - - - $ 2,902 $ 2,902
- ------------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options - $ 61 - - - - $ 61
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance and exchange of
common stock as a result
of the conversion/reorganization $ (217) $ 46,483 - $ (3,895) - - $ 42,371
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1997 $ 90 $ 59,249 $ 41,937 $ (4,384) $ (297) $ (1,434) $ 95,161
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
Bayonne Bancshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended September 30,
------------------------------
1997 1996
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,807 $(3,638)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation of office properties and equipment 284 278
Loss on securities available for sale 5 46
Provision for loan losses 90 84
Gain (Loss) on real estate operations 11 (28)
Amortization of premiums and discounts on
investment securities and mortgage backed securities 240 (308)
Amortization of ESOP and MRP shares 469 222
Net decrease (increase) in deferred loan fees (91) (69)
Net increase in accrued interest receivable (205) (26)
Net increase in prepaid expenses 542 156
Net increase (decrease) in other assets 678 (1,252)
Net (decrease) increase in accrued expenses and other liabilities (3,191) 3,366
Total adjustments (1,168) 2,469
Net cash provided by (used in) operating activities 639 (1,169)
Cash flows from investing activities:
Principal payments and maturities on securities
available for sale $ 24,499 $14,448
Proceeds from securities available for sale - 29,149
Purchases of securities available for sale (61,076) (28,396)
Net increase in loans receivable 3,394 (15,099)
Maturities of securities held to maturity 984 65
Proceeds from sales of real estate acquired in
settlement of loans 276 78
Purchases/Sales of FHLB/FHLMC/FNMA stock - 66
Purchases of premises and equipment (28) (296)
Net cash used in investing activities (31,951) 15
Cash flows from financing activities:
Net (decrease) increase in deposits (12,008) (2,278)
Net increase in advance payments by borrowers for
taxes and insurance 274 82
Dividends paid (528) (175)
Decrease in borrowings and repurchase agreements - (1,318)
Payment on ESOP debt (109) (109)
Issuance of common stock as a result of the
conversion/reorganization 42,371 -
Exercise of stock options 61 -
Net cash provided by (used in) financing activities 30,061 (3,798)
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
Bayonne Bancshares, Inc. and Subsidiaries
Consolidated Statements of Cash flows
(continued)
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended September 30,
----------------------------------
1997 1996
------- -------
<S> <C> <C>
Net decrease in cash and cash equivalents (1,251) (4,952)
Cash and cash equivalents at start of period 15,472 11,791
Cash and cash equivalents at end of period $14,221 $ 6,839
------- -------
Supplemental schedule of cash flow
information
Real estate acquired in settlement of loans $ 302 $ 565
Taxes Paid $ 769 $ 1,150
Interest Paid $12,745 $14,627
Write-down of mutual fund asset $ - $ 3,186
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
BAYONNE BANCSHARES, INC. AND SUBSIDIARIES (THE BANK)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in conformity with the instructions to Form 10-Q and
Article 10 of Regulation S-X for Bayonne Bancshares, Inc. and Subsidiaries.
2) NON-PERFORMING LOANS
Non-performing loans at September 30, 1997, and March 31, 1997 are as
follows:
(in thousands of dollars):
September 30, 1997 March 31, 1997
-----------------------------------------
Loans delinquent 90 days or more
and other non-performing loans $6,424 $5,609
------ ------
Loans delinquent 90 days or more
and other non-performing loans
as a percentage of net loans
receivable 2.77% 2.38%
An analysis of the allowance for loan losses for the six month periods
ended September 30, 1997 and 1996 is as follows (in thousands of dollars):
September 30, 1997 September 30, 1996
-----------------------------------------
Balance at start of period $3,158 $2,979
Provision charged to operations 90 60
Net (Charge-offs) recoveries - 25
-----------------------------------------
Balance at end of period $3,248 $3,064
3) EARNINGS PER SHARE
Earnings per share was computed by dividing net income by the weighted
average number of total common shares outstanding during the three and six month
periods ended September 30, 1997 and 1996. Per share information reflects the
Company's reorganization and stock offering completed August 22, 1997 and the
issuance of 4,869,190 shares of common stock in connection with its conversion
and reorganization. Prior period per share data has not been adjusted for shares
issued in the conversion and reorganization.
6
<PAGE>
4) PLAN OF CONVERSION
On August 22, 1997, Bayonne Bancshares, Inc. in accordance with its plan of
conversion and reorganization sold 4,869,190 shares of common stock at a price
per share of $10.00. In addition, 1,410,735 shares of common stock of First
Savings Bank of New Jersey, SLA held by public stockholders were exchanged for
2.933 shares of common stock of Bayonne Bancshares, Inc. in accordance with the
Plan of Conversion and Agreement and Plan or Reorganization. At September 30,
1997 the Company had outstanding 9,050,264 shares of common stock.
5) SAIF INSURANCE RECAPITALIZATION
The deposits of the Bank are presently insured by the Savings Association
Insurance Fund (SAIF), which together with the Bank Insurance Fund (BIF), are
the two insurance funds administered by the FDIC. In the third quarter of 1995
the FDIC lowered the premium schedule for BIF-insured institutions in
anticipation of the BIF achieving its statutory reserve ratio. The reduced
premium created a significant disparity in deposit insurance expense causing a
competitive advantage for BIF members. Legislation enacted on September 30,
1996, provided for a one-time special assessment of .657% of all SAIF insured
deposits, such as the Bank's at March 31, 1995. The purpose of the assessment is
to bring the SAIF to its statutory reserve ratio. Based on the above formula,
the Bank's SAIF assessment of $2.9 million was recorded in the quarter ended
September 30, 1996. Although the special one-time assessment significantly
increased non-interest expense for the quarter ended September 30, 1996, the
reduction in the premium schedule has reduced the Bank's federal insurance
premiums for the current period.
6) RECENT ACCOUNTING PRONOUNCEMENTS
On March 3, 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Shares." SFAS No.128 establishes new standards for the computation and
presentation of earnings per share ("EPS") by simplifying the standards
prescribed in APB Opinion No.15. Under the new requirements, the Bank will be
required to present both basic and diluted EPS on the face of the income
statement. Basic EPS will replace the current EPS terminology and continue to be
computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding. Diluted EPS will include
any additional common shares as if all potentially dilutive common shares were
issued. The Bank will be required to adopt SFAS No. 128 for the period ended
December 31, 1997. All prior period EPS data is required to be restated. The
impact of adopting SFAS No. 128 is not expected to be material.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes the reporting and display requirements of
total comprehensive income and other comprehensive income in a full set of
general-purpose
7
<PAGE>
financial statements. The statement defines total comprehensive income as all
changes in equity during a period, except those resulting from investments by
owners and distributions to owners. Other comprehensive income would include
revenues, expenses, gains and losses that, under GAAP, are included in
comprehensive income but excluded from net income. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997 and comparative financial
statements will be reclassified to reflect the provisions of SFAS No. 130.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Stockholders' equity increased by $47.1 million to $95.2 million at
September 30, 1997 from $48.1 million at March 31, 1997. The increase in total
stockholders' equity was primarily attributed to additional capital of $46.3
million realized in the conversion and reorganization effective August 22, 1997.
At September 30, 1997, the Bank's tangible core and risk based capital ratio's
were 15.86%, 15.86%, 47.40%, respectively.
Total assets increased by $32.1 million to $609.1 million at September 30,
1997 compared to $577.0 million at March 31, 1997. Securities available for sale
at market value increased by $41.0 million or 14.1% to $331.6 million at
September 30, 1997 from $290.6 million at March 31, 1997. The increase was
primarily attributed to the purchase of mortgage backed securities totaling
$45.2 million in anticipation of the proceeds of the stock offering in August
1997. In addition, there was a $4.5 million decrease in the net unrealized loss
in securities available for sale, net of tax. Loans receivable, net decreased by
$3.8 million or l.6% to $231.8 million at September 30, 1997 from $235.6 million
at March 31, 1997. The decrease was primarily due to net amortization and
payoffs on mortgage loans.
Total liabilities decreased by $15.0 million to $513.9 million at September
30, 1997 compared to $528.9 million at March 31, 1997. Total deposits decreased
by $12.0 million to $432.1 million at September 30, 1997 from $444.1 million at
March 31, 1997 due primarily to the withdrawal of funds by Bank depositors to
purchase stock in the conversion and reorganization.
Results of Operations
Net income was $969,000 for the three months ended September 30, 1997
compared to a loss of $4.6 million for the quarter ended September 30, 1996.
Excluding the effects of the non recurring items of $2.9 million expense ($1.9
million after tax benefit) for the recapitalization of the SAIF Insurance Fund
and a $3.2 million loss on the restructuring of the Bank's available for sale
portfolio, the Bank would have realized net income of $544,000 for the quarter
ended September 30, 1996 compared to $969,000 for the current quarter ending
September 30, 1997 which reflects an increase in net income of $425,000 or
78.1%. Total interest and dividend income decreased by $419,000 or 3.9% to $10.3
million for the three months ended September 30, 1997 compared to $10.7 million
8
<PAGE>
for the three months ended September 30, 1996. This decrease resulted from a
decrease in average earning assets to $588.4 million for the three months ended
September 30, 1997 from $629.4 million for the comparable prior years, which was
partially offset by an increase in the average yield on interest earning assets
to 7.00% for the three months ended September 30, 1997 from 6.81% for the three
months ended September 30, 1996. The decrease in total interest income was
primarily attributed to a decrease in interest income on securities available
for sale of $306,000 to $5.0 million for the three months ended September 30,
1997 compared to $5.3 million for the comparable prior year period. Total
interest expense decreased by $1.1 million or 14.2% to $6.4 million for the
three months ended September 30, 1997 compared to $7.5 million for the three
months ended September 30, 1996. The decrease was attributable to a decrease of
$68.4 million or 11.5% on the average balance of interest bearing liabilities to
$526.5 million at September 30, 1997 compared to $594.9 million for the
comparable prior year period.
The provision for loan losses totaled $45,000 and $30,000 for the three
month periods ended September 30, 1997 and 1996, respectively. The provision is
a result of management's judgment based on a review of its loans and
consideration of a variety of factors including, (i) the risk characteristics of
its loan portfolio, (ii) current economic conditions, (iii) actual losses
previously experienced and (iv) the existing levels of reserves for possible
losses in the future. Non-performing loans at September 30, 1997 and March 31,
1997 were $6.4 million and $5.6 million or 1.05% and 0.97% of total assets,
respectively.
Total operating expenses decreased by $2.9 million to $2.6 million for the
three months ended September 30, 1997 compared to $5.4 million for the three
months ended September 30, 1996. Excluding the $2.9 million for the
recapitalization of the SAIF insurance fund, total operating expenses increased
by $31,000 for the quarter ended September 30, 1997 compared to the prior years
quarter. The increase was primarily attributed to an increase in compensation
and employee benefits of $146,000 for severance arrangements provided in the
quarter, equipment expenses of $50,000 relating to data processing charges,
partially offset by reduced Federal Insurance premiums of $153,000.
Income tax expense for the quarter increased by $1.2 million to $569,000
for the three months ended September 30, 1997 compared to a tax benefit of
$638,000 for the comparable prior years, as a result of additional income earned
during the current fiscal quarter, the payment of the SAIF special assessment
and the loss on securities available for sale in 1996.
Six Months of Operations
Net income (loss) increased by $5.4 million to net income of $1.8 million
for the six months ended September 30, 1997 from a net loss of $3.6 million for
the six months ended September 30, 1996. This increase was primarily due to the
$2.9 million assessment for the recapitalization of the SAIF Insurance Fund and
a $3.2 million loss on securities available for sale.
9
<PAGE>
Total interest income decreased by $1.4 million or 6.4% to $20.2 million
for the six months ended September 30, 1997 from $21.6 million for the six
months ended September 30, 1996. The decrease was primarily due to a decrease in
average interest earning assets to $576.3 million for the six months ended
September 30, 1997 from $630.0 million for the six months ended September 30,
1996, partially offset by an increase in the average yield on interest earning
assets to 7.01% for the six months ended September 30, 1997 from 6.85% for the
six months ended September 30, 1996. The average yield has increased due
primarily to management efforts to restructure the Bank investment portfolio.
Total interest expense decreased by $1.9 million or 12.9% to $12.7 million for
the six months ended September 30, 1997 from $14.6 million for the six months
ended September 30, 1996. The decrease resulted primarily from a decrease in the
average interest bearing liabilities to $524.9 million for the six months ended
September 30, 1997 from $595.5 million for the six months ended September 30,
1996, combined with a decrease in the average cost of interest bearing
liabilities to 4.86% for the six months ended September 30, 1997, from 4.91% for
the comparable prior year period.
The provision for loan losses totaled $90,000 and $60,000 for the six month
period ended September 30, 1997 and 1996. The provision is a result of
managements judgment based on a review of its loans and consideration of a
variety of factors including (i) the risk characteristics of its loan portfolio,
(ii) current economic conditions, (iii) actual losses previously experienced and
(iv) the existing levels of reserves for possible losses in the future.
Non-performing loans at September 30, 1997 and March 31, 1997 were $6.4 million
and $5.6 million or 1.05% and 0.97% of total assets, respectively.
Total other income (loss) increased by $3.3 million to $682,000 for the
six months ended September 30, 1997 from a loss of $2.6 million for the six
months ended September 30, 1996, as the current six month period excludes the
$3.2 million loss on securities available for sale experienced in 1996.
Total operating expenses decreased by $2.8 million or 35.3% to $5.2 million
for the six months ended September 30, 1997 from $8.0 million for the six months
ended September 30, 1996. This decrease was primarily a result of the current
six month period excluding the $2.9 million one-time special assessment for the
recapitalization for the SAIF Insurance Fund and a reduction of $300,000 in
Federal Insurance Premiums, which was partially offset by increases in
compensation in employee benefits of $208,000 for severance arrangements, and an
increase of $136,000 for equipment expense relating to data processing charges.
Income tax expense (benefit) increased to $1.2 million for the six months
ended September 30, 1997 from a $98,000 tax benefit for the six months ended
September 30, 1996 as a result of higher pre-tax income for the six month period
compared to a loss in operations of $3.7 million for the six months ended
September 30, 1996.
10
<PAGE>
Capital
The OTS requires that the Bank meet minimum tangible, core and risk-based
capital requirements. As of September 30, 1997, the Bank exceeded all regulatory
capital requirements. The Bank's required, actual and excess capital levels as
of September 30, 1997 are as follows (in thousands of dollars):
Excess of Actual
Required % of Actual % of Over Regulatory
Amount Assets Amount Assets Requirements
------ ------ ------ ------ ------------
Tangible Capital..... $9,136 1.50% $96,595 15.86% $87,459
Core Capital......... $18,272 3.00% $96,595 15.86% $78,323
Risk-based Capital... $16,746 8.00% $99,212 47.40% $82,466
If the allowance for marketable debt and equity securities was included in
capital, the Bank's tangible, core and risk-based capital ratios would be
15.62%, 15.62% and 46.71%, respectively, at September 30, 1997.
Liquidity
The Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The required ratio currently is 5.0%. The
Bank's liquidity ratio averaged 44.28% during the month of September 1997 and
39.63% during six months ended September 30, 1997. The Bank adjusts liquidity as
appropriate to meet its asset and liability management objectives.
11
<PAGE>
PART II. OTHER INFORMATION
Legal Proceedings
In the normal course of business, the Company (or Registrant) may be a
party to various outstanding legal proceedings and claims. In the opinion of
management, the financial position of the Company will not be materially
affected by the outcome of such legal proceeding and claims.
Changes in Securities
Use of Proceeds from the Conversion and Reorganization
The following information is provided in accordance with Rule 463 of the
Securities Act of 1933 (the "Securities Act") and Item 701 of Regulation S-K
under the Securities Act. On August 22, 1997, Bayonne Bancshares, Inc. completed
the conversion and reorganization of First Savings Bank of New Jersey, SLA and
its former mutual holding Company by selling 4,869,190 shares of common stock to
certain depositors and borrowers of the Bank at a price of $10.00 per share (the
"Offering"). In addition, approximately 1,410,735 shares of common stock of the
Bank held by public stockholders were exchanged for common stock of Bayonne
Bancshares, Inc. at a ratio of 2.933 shares of common stock of the Company for
each share of the Bank (the "Exchange").
The effective date of the Company's Registration Statement on Form S-1
(Registration No.333-23199) was July 2, 1997. The only class of securities
registered pursuant to the Offering was Common Stock, par value $.01 per share.
The Offering commenced on July 2, 1997 and was terminated on August 22,
1997, after the sale of all of the Common Stock registered under the Offering.
Sandler O'Neill & Partners, L.P. acted as the managing underwriter for the
Offering.
The aggregate price of the Common Stock sold in the Offering, before
underwriting discounts and commissions, was $48,691,900. Sandler O'Neill was
paid approximately $933,000 in underwriting commissions. The aggregate amount of
the other expenses and fees incurred in the conversion and reorganization was
approximately $1,493,000. Accordingly, the Company received approximately $46.3
million in net proceeds from the Offering.
All of the Common Stock registered pursuant to the Offering was sold or
exchanged for the account of the Company and the Bank. There were no selling
shareholders in the Offering. In accordance with the Plan of Conversion and
Agreement
12
<PAGE>
and Plan of Reorganization adopted by the company, the Bank, and the Bank's
former mutual holding company, the Company contributed 50%, or approximately
$23.4 million of the net proceeds from the Offering to the Bank and retained the
remaining $23.4 million of net proceeds.
There has been no material change in the use of the net proceeds from the
disclosures set forth in the prospectus filed in connection with the Offering.
The Company used a portion of the proceeds it retained to loan the Bank's
Employee Stock Ownership Plan approximately $3.9 million at a rate of 8.5%, to
be repaid over 15 years, and to declare a stock dividend of $.0425 per share.
The remaining proceeds have been loaned to the Bank for investment in adjustable
rate mortgage backed securities. The Bank has used the proceeds contributed by
the Company to fund its general business operations, including the purchase of
approximately $45.2 million of adjustable rate mortgage backed securities.
Defaults upon Senior Securities
Not applicable.
Submission of Matters to Vote of Security Holders
None.
Other Information
Not applicable.
Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
3.1 Certificate of Incorporation of Bayonne Bancshares, Inc.*
3.2 Bylaws of Bayonne Bancshares, Inc.*
4.0 Stock Certificate of Bayonne Bancshares, Inc.*
11.0 Computation of earnings per share (filed herewith)
27.0 Financial Data Schedule (filed herewith)
(b) No reports on Form 8-K were filed this quarter.
*Incorporated herein by reference in this document from the Exhibits to the Form
5-1 Registration Statement, filed on March 13, 1997, and any amendments thereto
(Registration No. 333-23199).
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Bank has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BAYONNE BANCSHARES, INC.
Date: November 13, 1997 By: /s/ MICHAEL NILAN
------------------------------------------
Michael Nilan
President and Chief Executive Officer
Date: November 13, 1997 By: /s/ EUGENE V. MALINOWSKI
------------------------------------------
Eugene V. Malinowski
Vice President and Chief Financial Officer
14
<TABLE>
<CAPTION>
Quarter Ended September 30, Six Months Ended September 30,
-------------------------------- ---------------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) applicable to common stock
and common stock equivalents (in thousands) $969 ($4,557) $1,807 ($3,638)
========= ========= ========= =========
Primary Earnings (Loss) Per Share
Average shares of common stock outstanding 5,435,349 2,935,267 4,221,247 2,882,369
Common stock equivalents 40,718 10,702 48,279 7,192
--------- --------- --------- ---------
5,476,067 2,945,969 4,269,526 2,889,561
========= ========= ========= =========
Primary Earnings (Loss) Per Share $0.18 $(1.55) $0.42 $(1.26)
========= ========= ========= =========
Fully Diluted Earnings (Loss) Per Share
Average shares of common stock outstanding 5,435,349 2,935,267 4,221,247 2,882,369
Common stock equivalents of stock options 37,366 15,799 38,302 15,799
--------- --------- --------- ---------
5,472,715 2,951,066 4,259,549 2,898,168
========= ========= ========= =========
Fully Diluted Earnings (Loss) Per Share $0.18 $(1.54) $0.42 $(1.26)
========= ========= ========= =========
</TABLE>
Note: Per share data reflect the Company's Reorganization and Stock Offering
completed August 22, 1997 and the issuance of 4,869,190 shares of common
stock in connection with its Conversion and Reorganization. Prior per per
share data have not been adjusted for the shares issued in the Conversion
and Reorganization.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 4,216
<INT-BEARING-DEPOSITS> 10,000
<FED-FUNDS-SOLD> 5
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 331,647
<INVESTMENTS-CARRYING> 10,293
<INVESTMENTS-MARKET> 10,400
<LOANS> 231,820
<ALLOWANCE> 3,248
<TOTAL-ASSETS> 609,053
<DEPOSITS> 432,131
<SHORT-TERM> 75,489
<LIABILITIES-OTHER> 4,459
<LONG-TERM> 0
0
0
<COMMON> 90
<OTHER-SE> 95,071
<TOTAL-LIABILITIES-AND-EQUITY> 609,053
<INTEREST-LOAN> 9,801
<INTEREST-INVEST> 10,173
<INTEREST-OTHER> 212
<INTEREST-TOTAL> 20,186
<INTEREST-DEPOSIT> 10,377
<INTEREST-EXPENSE> 12,745
<INTEREST-INCOME-NET> 7,441
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,164
<INCOME-PRETAX> 2,869
<INCOME-PRE-EXTRAORDINARY> 2,869
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,807
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
