UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20552
FORM 10 - QSB
-----
X QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
----- OF 1934
For the quarterly period ended June 30, 2000
-----
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
-----
For the transition period from to
Commission File Number 0-23765
------------------------------
SFSB HOLDING COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 23 - 2934332
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
900 Saxonburg Boulevard, Pittsburgh, Pennsylvania, 15223
(Address of principal executive offices)
(412) 487 - 4200
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at August 3, 2000: 635,305
<PAGE>
SFSB HOLDING COMPANY
INDEX
<TABLE>
<CAPTION>
Page
----
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited) as of 3
June 30, 2000 and December 31, 1999
Consolidated Statement of Income (Unaudited)
for the Six Months ended June 30, 2000 and 1999 4
Consolidated Statement of Income (Unaudited)
for the Three Months ended June 30, 2000 and 1999 5
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) 6
Consolidated Statement of Cash Flows (Unaudited)
for the Six Months ended June 30, 2000 and 1999 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Default Upon Senior Securities 13
Item 4. Submissions of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8 - K 13
SIGNATURES 14
</TABLE>
<PAGE>
SFSB HOLDING COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 449,446 $ 908,791
Interest-bearing deposits in other banks 3,442,760 4,156,884
------------------ -----------------
Cash and cash equivalents 3,892,206 5,065,675
Certificates of deposit in other banks 492,940 1,056,306
Investment securities available for sale 2,867,285 2,960,757
Investment securities held to maturity (market
value of $8,962,529 and $9,446,780) 9,463,379 9,990,854
Mortgage-backed securities available for sale 1,458,792 1,774,691
Mortgage-backed securities held to maturity (market
value of $11,315,171 and $9,979,691) 11,556,509 10,277,109
Loans receivable (net of allowance for loan losses
of $144,693 and $138,193) 17,229,038 15,516,919
Accrued interest receivable 407,989 412,178
Premises and equipment 1,401,185 1,444,866
Federal Home Loan Bank stock 256,500 245,600
Other assets 162,913 58,531
------------------ -----------------
TOTAL ASSETS $ 49,188,736 $ 48,803,486
================== =================
LIABILITIES
Deposits $ 39,856,889 $ 39,411,665
Advances by borrowers for taxes and insurance 145,754 112,058
Accrued interest payable and other liabilities 491,702 388,937
------------------ -----------------
TOTAL LIABILITIES 40,494,345 39,912,660
------------------ -----------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, no par value; 1,000,000 shares
authorized; none issued and outstanding - -
Common stock, par value $.10 per share; 4,000,000
shares authorized; 726,005 issued 72,600 72,600
Additional paid-in capital 6,685,174 6,695,656
Retained earnings - substantially restricted 3,188,839 3,180,278
Accumulated other comprehensive income 235,797 308,907
Unallocated shares held by Employee Stock
Ownership Plan (ESOP) (435,600) (464,640)
Unallocated shares held by Restricted Stock Plan (RSP) (212,401) (232,413)
Treasury stock (90,700 at cost) (840,018) (669,562)
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 8,694,391 8,890,826
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 49,188,736 $ 48,803,486
================== =================
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
SFSB HOLDING COMPANY
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------------ -----------------
<S> <C> <C>
INTEREST INCOME
Loans receivable $ 628,038 $ 562,506
Interest-bearing deposits in other banks 131,012 251,971
Investment securities
Taxable 385,860 235,561
Exempt from federal income tax 24,093 35,926
Mortgage-backed securities 425,982 382,511
------------------ -----------------
Total interest income 1,594,985 1,468,475
------------------ -----------------
INTEREST EXPENSE
Deposits 811,607 749,352
------------------ -----------------
NET INTEREST INCOME 783,378 719,123
Provision for loan losses 6,500 6,000
------------------ -----------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 776,878 713,123
------------------ -----------------
NONINTEREST INCOME
Service fees on deposit accounts 59,591 59,972
Investment securities gains, net - 17,140
Other 16,259 13,076
------------------ -----------------
Total noninterest income 75,850 90,188
------------------ -----------------
NONINTEREST EXPENSE
Compensation and employee benefits 393,894 391,199
Occupancy and equipment 99,635 117,163
Data processing 110,810 114,310
Professional services 47,757 55,409
Other 100,194 107,529
------------------ -----------------
Total noninterest expense 752,290 785,610
------------------ -----------------
NET INCOME 100,438 17,701
================== =================
EARNINGS PER SHARE:
Basic $ 0.18 $ 0.03
Diluted 0.18 0.03
</TABLE>
4
<PAGE>
SFSB HOLDING COMPANY
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
------------------ -----------------
<S> <C> <C>
INTEREST INCOME
Loans receivable $ 323,521 $ 289,604
Interest-bearing deposits in other banks 65,460 101,913
Investment securities
Taxable 194,048 154,597
Exempt from federal income tax 12,361 17,263
Mortgage-backed securities 225,312 186,197
------------------ -----------------
Total interest income 820,702 749,574
------------------ -----------------
INTEREST EXPENSE
Deposits 411,463 375,929
------------------ -----------------
NET INTEREST INCOME 409,239 373,645
Provision for loan losses 4,500 3,000
------------------ -----------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 404,739 370,645
------------------ -----------------
NONINTEREST INCOME
Service fees on deposit accounts 30,090 26,830
Other 8,602 7,445
------------------ -----------------
Total noninterest income 38,692 34,275
------------------ -----------------
NONINTEREST EXPENSE
Compensation and employee benefits 194,955 200,178
Occupancy and equipment 48,745 56,306
Data processing 63,787 60,984
Professional services 22,561 23,391
Other 51,683 52,155
------------------ -----------------
Total noninterest expense 381,731 393,014
------------------ -----------------
NET INCOME 61,700 11,906
================== =================
EARNINGS PER SHARE:
Basic $ 0.11 $ 0.02
Diluted 0.11 0.02
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
SFSB HOLDING COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
Other Unallocated Unallocated
Additional Compre- Shares Shares Total Compre-
Common Paid-in Retained hensive Held by Held by Treasury Stockholders' hensive
Stock Capital Earnings Income ESOP RSP Stock Equity Income
------- ----------- ---------- -------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 $72,600 $6,695,656 $3,180,278 $308,907 $(464,640) $(232,413) $(669,562) $8,890,826
Net income 100,438 100,438 $100,438
Other comprehensive
income:
Unrealized loss
on available for
sale securities,
net of tax
benefit $37,663 (73,110) (73,110) (73,110)
--------
Comprehensive income $ 27,328
========
RSP shares released 20,012 20,012
ESOP shares released (10,482) 29,040 18,558
Purchase treasury
stock (170,456) (170,456)
Cash dividends
($.15 per share) (91,877) (91,877)
------- ---------- ---------- -------- --------- --------- --------- ----------
Balance, June 30, 2000 $72,600 $6,685,174 $3,188,839 $235,797 $(435,600) $(212,401) $(840,018) $8,694,391
======= ========== ========== ======== ========= ========= ========= ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE>
SFSB HOLDING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------------ -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 100,438 $ 17,701
Adjustments to reconcile net income to
net cash provided by (used for) operating
activities:
Provision for loan losses 6,500 6,000
Depreciation and amortization 87,820 109,257
Investment securities gains - (17,140)
Increase (decrease) in accrued interest receivable 4,189 (125,385)
Other, net 34,159 (52,575)
------------------ -----------------
Net cash provided by (used for) operating activities 233,106 (62,142)
------------------ -----------------
INVESTING ACTIVITIES
Decrease in certificates of deposits 563,366 1,268,917
Investment securities available for sale:
Purchases (43,761) (804,847)
Proceeds from sales - 18,858
Maturities and repayments 21,663 -
Investment securities held to maturity:
Purchases - (6,798,594)
Maturities and repayments 527,966 813,918
Mortgage-backed securities available for sale:
Maturities and repayments 319,944 257,216
Mortgage-backed securities held to
maturity:
Purchases (2,007,695) (2,500,100)
Maturities and repayments 730,443 1,934,637
Net increase in loans receivable (1,718,619) (198,116)
Purchase Federal Home Loan Bank Stock (10,900) -
Purchase of premises and equipment (5,569) (4,341)
------------------ -----------------
Net cash used for investing activities (1,623,162) (6,012,452)
------------------ -----------------
FINANCING ACTIVITIES
Net increase in deposits 445,224 1,169,707
Net increase in advances by borrowers
for taxes and insurance 33,696 19,044
Purchase of treasury stock (170,456) (367,167)
Cash dividends paid (91,877) (33,686)
------------------ -----------------
Net cash provided by
financing activities 216,587 787,898
------------------ -----------------
Decrease in cash and cash equivalents (1,173,469) (5,286,696)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 5,065,675 9,094,253
------------------ -----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 3,892,206 $ 3,807,557
================== =================
SUPPLEMENTAL CASH FLOW DISCLOSURE Cash paid during the year for:
Interest on deposits and
borrowings $ 806,562 $ 749,352
Income taxes 29,600 30,100
</TABLE>
See accompanying notes to the consolidated financial statements.
7
<PAGE>
SFSB HOLDING COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of SFSB Holding Company (the
"Company") includes its wholly- owned subsidiary Stanton Federal Savings
Bank (the "Bank"). All significant intercompany items have been
eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and,
therefore, do not necessarily include all information that would be
included in audited financial statements. The information furnished
reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of the results of operations. All such
adjustments are of a normal recurring nature. The results of operations
for the interim periods are not necessarily indicative of the results to
be expected for the full year or any other interim period.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Private Securities Litigation Act of 1995 contains safe harbor provisions
regarding forward-looking statements. When used in this discussion, the words
"believes," "anticipates," "contemplates," "expects," and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those projected. Those risks and uncertainties include changes
in interest rates, the ability to control costs and expenses, general economic
conditions, government policies and action of regulatory authorities. The
Company undertakes no obligation to publicly release the results of any
revisions to those forward looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
SFSB Holding Company is a savings and loan holding company
headquartered in Pittsburgh, Pennsylvania, which provides a broad range of
deposits and loan products through its wholly owned subsidiary, Stanton Federal
Savings Bank (collectively, the "Company").
CHANGES IN FINANCIAL CONDITION
At June 30, 1999, total assets remained relatively constant at $49,189,000 from
$48,803,000 at December 31, 1999. However, the components of total assets
changed due to management's continued efforts to shift its cash and cash
equivalents and certificate of deposits into higher yielding earning assets.
Interest-bearing deposits in other banks and certificates of deposits in other
banks decreased $1,737,000 to $4,385,00 at June 30, 2000 from $6,122,000 at
December 31, 1999.
Total investment and mortgage-backed securities portfolios held to maturity and
available for sale increased $343,000 to $25,346,000 at June 30, 2000 from
$25,003,000 at December 31, 1999. The Company purchased mortgage-backed and
equity securities resulting in a net increase of $1,351,000 or 9.3%. This
increase was offset by a decline in the U.S. Government Agency securities
portfolio of $1,012,000 or 10.9%.
Net loans receivable at June 30, 2000 increased $1,712,000 or 11.0% to
$17,229,000 from $15,517,000 at December 31, 1999. Real estate mortgages and
home equity loans increased $1,240,000 and $519,000, respectively, offset
slightly by a decrease in consumer loans of $47,000. Management continues to
pursue quality loan growth within the 1-4 family loan market.
Stockholder's equity decreased $196,000 to $8,694,000 at June 30, 2000 from
$8,891,000 at December 31, 1999. Increases in stockholder's equity due to net
income and the amortization of ESOP and RSP shares were offset by a decrease in
accumulated other comprehensive income of $73,000, cash dividends of $92,000 and
purchases of treasury stock totaling $170,000.
RESULTS OF OPERATIONS
Net income increased $82,000 to $100,000 for the six months ended June 30, 2000
from net income of $18,000 for the same period ended 1999. This increase was due
to an increase in net interest income of $64,000 and a decrease in noninterest
expense of $33,000, offset by an decrease in noninterest income of $15,000.
9
<PAGE>
Net income for the three months ended June 30, 2000 increased $50,000 to $62,000
from net income of $12,000 for the same period ended June 30, 1999. This
increase was due to an increases in net interest income of $35,000 and
noninterest income of $5,000 and a decrease in noninterest expense of $11,000.
Interest income for the six month and three month periods ended June 30, 2000
increased to $1,595,000 and $821,000, respectively, from $1,468,000 and
$750,000, respectively, for the same periods in 1999. The increase was primarily
due to managements continued efforts to invest in higher yielding assets. For
the current six months and three month ended, total average interest earning
assets increased approximately $3,296,000 and $2,168,000, respectively. Average
tax equivalent yield on interest earning assets increased to 6.86% and 6.70% for
the three and six month periods ended June 30, 2000 from 6.74% and 6.59% for the
same periods in 1999.
Interest expense on deposits increased $63,000 or 8.41% from $749,000 for the
six months ended June 30, 1999 to $812,000 for the same period ended 2000. The
average cost of funds for interest bearing liabilities increased 24 basis points
from 4.18% for the six months ended June 30, 1999 compared to 4.42% for the same
period ended 2000. Interest expense for the three months ended June 30, 2000
increased $35,000 to $411,000 from $376,000 for the same period ended in 1999.
The average cost of funds on interest bearing liabilities for the current three
month period ended increased 24 basis points to 4.42%. Increased interest
expense for the current three month and six month periods were attributable to
higher rates paid on certificates of deposit. Regional interest rates on
certificate of deposits have gradually increased throughout the past twelve
months, the Company has reacted simultaneously in order to remain competitive
within its markets.
Based upon management's continuing evaluation of the adequacy of the allowance
for loan losses which encompasses the overall risk characteristics of the
various portfolio segments, past experience with losses, the impact of economic
conditions on borrowers, and other relevant factors, the provision for loan
losses remained relatively unchanged for the current six month and three month
periods ended June 30, 2000 as compared to the same periods in 1999. Management
believes the allowance for loan losses is at a level that is considered to be
adequate to provide for estimated losses; however, there can be no assurance
that further additions will not be made to the allowance and that such losses
will not exceed the estimated amount. See "Risk Elements."
Noninterest income decreased $14,000 or 15.6% from $90,000 for the six months
ended June 30, 1999 to $76,000 for the same period ended 2000. This decrease is
attributable to a $17,000 decrease in investment security gains. Gains relating
to the sale of FHLMC stock totaled $17,000 for the six months ending June 30,
1999 with no gains being recognized for the same period ending 2000.
Noninterest income increased $5,000 or 14.7% from $34,000 for the three months
ended June 30, 1999 to $39,000 for the same period ended 2000 due to an
increased service charges on deposit accounts and fee income on ATM transactions
due to increased transaction activity.
For the current six month and three month periods, noninterest expense decreased
$34,000 and $11,000, respectively, as compared to the same periods in 1999. The
Company continued to benefit from the significant cost savings obtained in the
prior quarter on annual equipment maintenance contracts.
10
<PAGE>
No income tax expense was recognized for the three and six month periods ended
June 30, 2000 and 1999 . The Company continued to utilize unused operating loss
carryforwards that are available to be applied against future taxable income.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity may be adversely affected by unexpected deposit outflows, excessive
interest rates paid by competitors, adverse publicity relating to the savings
and loan industry and similar matters. Management monitors projected liquidity
needs and determines the level desirable based in part on the Bank's commitments
to make loans and management's assessment of the Bank's ability to generate
funds.
Management monitors both the Company's and the Bank's total risk-based, Tier I
risk-based and Tier I leverage capital ratios in order to assess compliance with
regulatory guidelines. At June 30, 2000, both the Company and the Bank exceeded
the minimum risk-based and leverage capital ratios requirements. The Company's
and Bank's total risk-based, Tier I risk-based and Tier I leverage ratios are
45.2%, 43.1%, 17.2% and 36.9%, 34.8%, 13.9%, respectively at June 30, 2000.
RISK ELEMENT
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other real
estate loans, and repossessed assets. A loan is classified as nonaccrual when,
in the opinion of management, there are serious doubts about collectibility of
interest and principal. At the time the accrual of interest is discontinued,
future income is recognized only when cash is received. Renegotiated loans are
those loans which terms have been renegotiated to provide a reduction or
deferral of principal or interest as a result of the deterioration of the
borrower.
June 30, December 31,
2000 1999
--------- ---------
(Dollars in thousands)
Loans on nonaccrual basis $ 75 $ 117
Loans past due 90 days or more and still accruing 102 32
----- -----
Total nonperforming loans 177 149
----- -----
Nonperforming loans as a percent of total loans 1.03% 0.95%
===== =====
Nonperforming assets as a percent of total assets .36% 0.31%
===== =====
Allowance for loan losses to nonperforming loans 81.75% 92.75%
===== =====
11
<PAGE>
At June 30, 2000 and December 31, 1999, no real estate or other assets were held
as foreclosed or repossessed property.
Management monitors impaired loans on a continual basis. As of June 30, 2000,
impaired loans had no material effect on the Company's financial position or
results of operations.
During the six month period ended June 30, 2000, loans increased $1,712,000
while nonperforming loans increased $28,000 or 18.8%. The allowance for loan
losses increased $6,500 during this same period and the percentage of allowance
for loan losses to loans outstanding decreased slightly from .90% to .84%.
Nonperforming loans are primarily made up of one to four family residential
mortgages. The collateral requirements on such loans reduce the risk of
potential losses to an acceptable level in management's opinion.
Management believes the level of the allowance for loan losses at June 30, 2000
is sufficient; however, there can be no assurance that the current allowance for
loan losses will be adequate to absorb all future loan losses. The relationship
between the allowance for loan losses and outstanding loans is a function of the
credit quality and known risk attributed to the loan portfolio. The on-going
loan review program and credit approval process is used to determine the
adequacy of the allowance for loan losses.
12
<PAGE>
SFSB HOLDING COMPANY
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
None
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
The following represents the results of matters submitted to a vote of
the sharesholders at the annual meeting held on April 25, 2000:
Election of a Director for term to expire in 2004:
Joseph E. Gallegher was elected by the following vote:
For: 469,836
Votes Withheld: 76,200
S.R. Snodgrass A.C.was selected as the Company's independent auditors
for the fiscal year 2000 by the following vote:
For: 539,506
Against: 4,500
Votes Abstaining: 2,030
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included in this Report or incorporated
herein by reference:
3(i) Articles of Incorporation of SFSB Holding Company*
3(ii) Bylaws of SFSB Holding Company*
10.1 Directors Consultant and Retirement Plan.*
10.2 Supplemental Executive Retirement Plan for Barbara J. Mallen.*
10.3 Employment Agreement with Barbara J. Mallen*
10.4 SFSB Holding Company 1998 Stock Option Plan**
10.5 Stanton Federal Savings Bank Restricted Stock Plan**
27 Financial Data Schedule (electronic filing only)
99 Review of Report by Independent Certified Public Accountants
---------------------
* Incorporated by reference to an identically numbered exhibit to the
registration statement on Form SB-2 (File No. 333-40955) declared effective
by the SEC on January 14, 1998.
** Incorporated by reference to the Proxy Statement for the Special Meeting on
October 20, 1998 and filed with SEC on September 14, 1998.
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SFSB Holding Company
Date: August 11, 2000 By: /s/Barbara J. Mallen
------------------------------------------------
Barbara J. Mallen
President and Chief Executive Officer/Director
Date: August 11, 2000 By: /s/Joseph E. Gallegher
------------------------------------------------
Joseph E. Gallegher
Senior Vice President/Director
14
