<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-23975
NIAGARA BANCORP, INC.
(exact name of registrant as specified in its charter)
DELAWARE 16-1545669
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6950 SOUTH TRANSIT ROAD, P.O. BOX 514, LOCKPORT, NY 14095-0514
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(716)625-7500
-------------
(Registrant's telephone number, including area code)
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 ___
-
The Registrant had 28,223,450 shares of Common Stock, $.01 par value,
outstanding as of May 12, 1999.
================================================================================
<PAGE>
NIAGARA BANCORP, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Number Page Number
- ----------- -----------
<S> <C>
PART I - FINANCIAL INFORMATION
1. Financial Statements
Condensed Consolidated Statements of Condition as of
March 31, 1999 (unaudited) and December 31, 1998..................... 3
Condensed Consolidated Statements of Income for the
three months ended March 31, 1999 and 1998 (unaudited)............... 4
Condensed Consolidated Statements of Comprehensive Income for the
three months ended March 31, 1999 and 1998 (unaudited)............... 5
Condensed Consolidated Statements of Changes in Stockholders' Equity
for the three months ended March 31, 1999 and 1998 (unaudited)....... 6
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 1998 (unaudited)............... 7
Notes to Condensed Consolidated Financial Statements (unaudited)...... 8
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 10
3. Quantitative and Qualitative Disclosures about Market Risk.............. 18
PART II - OTHER INFORMATION
1. Legal Proceedings....................................................... 19
2. Changes in Securities and Use of Proceeds............................... 19
3. Defaults upon Senior Securities......................................... 19
4. Submission of Matters to a Vote of Security Holders..................... 19
5. Other Information....................................................... 19
6. Exhibits and Reports on Form 8-K........................................ 19
Signatures................................................................. 19
Exhibit Index.............................................................. 20
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Niagara Bancorp, Inc. and Subsidiaries
Condensed Consolidated Statements of Condition
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------ ------------------
(unaudited)
(Dollars in thousands)
<S> <C> <C>
Assets
------
Cash and cash equivalents:
Cash and due from banks........................................ $ 20,357 $ 29,063
Federal funds sold and securities purchased
under resale agreements..................................... 8,700 82,200
------------------ ------------------
Total cash and cash equivalents......................... 29,057 111,263
Securities available for sale...................................... 677,749 580,751
Loans, net......................................................... 784,895 744,739
Premises and equipment, net........................................ 25,999 25,247
Accrued interest receivable and other assets....................... 73,300 46,734
------------------ ------------------
$ 1,591,000 $ 1,508,734
================== ==================
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits....................................................... $ 1,064,994 $ 1,060,897
Borrowings..................................................... 245,640 142,597
Other liabilities.............................................. 31,110 41,415
------------------ ------------------
1,341,744 1,244,909
------------------ ------------------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued.................................... - -
Common stock, $.01 par value, 45,000,000 shares
authorized, 29,756,250 shares issued....................... 298 298
Additional paid-in capital..................................... 136,076 136,114
Retained earnings, substantially restricted.................... 140,014 136,602
Accumulated other comprehensive income......................... 2,494 4,587
Common stock held by ESOP...................................... (13,599) (13,776)
Treasury stock, at cost, 1,487,800 shares...................... (16,027) -
------------------ ------------------
249,256 263,825
------------------ ------------------
$ 1,591,000 $ 1,508,734
================== ==================
</TABLE>
3
<PAGE>
Niagara Bancorp, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------------
1999 1998
------------------ ------------------
(Dollars in thousands)
<S> <C> <C>
Interest income:
Loans................................................ $ 15,033 $ 13,177
Investment securities................................ 9,003 7,410
Federal funds sold and securities purchased
under resale agreements.......................... 591 526
Other................................................ 314 151
------------------ ------------------
Total interest income....................... 24,941 21,264
Interest expense:
Deposits............................................. 10,473 10,965
Borrowings........................................... 2,404 564
------------------ ------------------
Total interest expense...................... 12,877 11,529
------------------ ------------------
Net interest income..................................... 12,064 9,735
Provision for credit losses............................. 821 257
------------------ ------------------
Net interest income after provision
for credit losses....................... 11,243 9,478
------------------ ------------------
Noninterest income:
Banking service charges and fees..................... 1,065 824
Loan fees............................................ 450 406
Insurance services and fees.......................... 4,000 251
Bank-owned life insurance earnings................... 330 -
Annuity and mutual fund sales commissions............ 323 107
Net gain on sales of securities available for sale... 178 -
Other................................................ 574 183
------------------ ------------------
Total noninterest income.................... 6,920 1,771
------------------ ------------------
Noninterest expense:
Salaries and employee benefits....................... 6,486 3,783
Occupancy and equipment.............................. 1,141 825
Technology and communications........................ 894 748
Marketing and advertising............................ 508 399
Goodwill amortization................................ 374 -
Other................................................ 1,892 998
------------------ ------------------
Total noninterest expense................... 11,295 6,753
------------------ ------------------
Income before income taxes................. 6,868 4,496
Income tax expense...................................... 2,363 1,550
------------------ ------------------
Net income................................. $ 4,505 $ 2,946
================== ==================
Earnings per common share:
Basic...................................... 0.16 -
Diluted.................................... 0.16 -
Cash dividends per common share......................... 0.04 -
Weighted average common shares outstanding:
Basic...................................... 27,888 -
Diluted.................................... 27,888 -
</TABLE>
4
<PAGE>
Niagara Bancorp, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Net income..................................................... $ 4,505 $ 2,946
Other comprehensive income, net of income taxes:
Net unrealized gains (losses) on securities available
for sale.......................................... (1,988) 798
Less: Reclassification adjustment for gains included
in net income..................................... 105 -
----------- -----------
Total other comprehensive income (loss)..... (2,093) 798
----------- -----------
Total comprehensive income............. $ 2,412 $ 3,744
=========== ===========
</TABLE>
5
<PAGE>
Niagara Bancorp, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
<TABLE>
<CAPTION>
Additional Other
Common paid-in Retained ESOP comprehensive Treasury
stock capital earnings shares income stock Total
-------- ------------- ---------- --------- ------------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1998..................... $ - $ - $ 127,941 $ - $ 2,530 $ - $130,471
Net income................................... - - 2,946 - - - 2,946
Unrealized gain on securities available
for sale, net of reclassification
adjustment............................... - - - - 798 - 798
-------- ------------ ---------- --------- ----------- --------- --------
Balances at March 31, 1998...................... $ - $ - $ 130,887 $ - $ 3,328 $ - $134,215
======== ============ ========== ========= =========== ========= ========
Balances at January 1, 1999..................... $ 298 $ 136,114 $ 136,602 $ (13,776) $ 4,587 $ - $263,825
Net income................................... - - 4,505 - - - 4,505
Unrealized loss on securities available
for sale, net of reclassification
adjustment............................... - - - - (2,093) - (2,093)
Purchase of treasury stock
(1,487,800 shares)........................ - - - - (16,027) (16,027)
ESOP shares committed to be released
(13,431 shares)........................... - (38) - 177 - - 139
Common stock dividend of $.04 per share...... - - (1,093) - - - (1,093)
-------- ------------ ---------- --------- ----------- --------- --------
Balances at March 31, 1999...................... $ 298 $ 136,076 $ 140,014 $ (13,599) $ 2,494 $ (16,027) $249,256
======== ============ ========== ========= =========== ========= ========
</TABLE>
6
<PAGE>
Niagara Bancorp, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
------------- -----------
(Dollars in thousands)
<S> <C> <C>
Net cash provided by operating activities................................... $ 689 $ 1,915
Cash flows from investing activities:
Proceeds from sales of securities available for sale..................... 5,338 -
Proceeds from maturities of securities:
Available for sale................................................... 5,040 635
Held to maturity..................................................... - 17,000
Principal payments on securities available for sale...................... 57,258 23,772
Purchases of securities available for sale............................... (182,167) (64,497)
Net increase in loans.................................................... (40,734) (4,946)
Purchase of Warren-Hoffman & Associates, Inc., net of cash acquired...... (11,260) -
Other.................................................................... (6,623) (834)
---------- ----------
Net cash used by investing activities........................ (173,148) (28,870)
---------- ----------
Cash flows from financing activities:
Net increase in deposits................................................. 4,097 136,145
Proceeds from short-term borrowings...................................... 39,897 229
Proceeds from long-term borrowings....................................... 63,260 4,948
Repayments of long-term borrowings....................................... (114) (84)
Repurchase of common stock............................................... (16,027) -
Dividends paid on common stock........................................... (860) -
---------- ----------
Net cash provided by financing activities................... 90,253 141,238
---------- ----------
Net increase (decrease) in cash and cash equivalents........ (82,206) 114,283
Cash and cash equivalents at beginning of period........................... 111,263 36,613
---------- ----------
Cash and cash equivalents at end of period................................. $ 29,057 $ 150,896
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes..................................................... $ 6,150 $ 3,054
Interest expense................................................. 12,499 11,302
========== ==========
Supplemental disclosure of noncash investing activities:
Acquisition of Warren-Hoffman & Associates, Inc.:
Fair value of:
Assets acquired............................................... $ 2,889
Liabilities assumed........................................... 3,655
Purchase price payable........................................ 2,919
==========
</TABLE>
7
<PAGE>
Niagara Bancorp, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) Basis of Financial Statement Presentation
The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial information and the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments necessary for a fair presentation have been
included. Results for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999. Certain reclassification adjustments were made to the 1998 financial
statements to conform them to the 1999 presentation.
(2) Business
Niagara Bancorp, Inc. (the "Company") is a Delaware corporation organized in
December 1997 by Lockport Savings Bank (the "Bank") in connection with the
conversion of the Bank from a New York chartered mutual savings bank to a New
York chartered stock savings bank and the reorganization to a two-tiered mutual
holding company. The business and management of the Company consist primarily
of the business and management of the Bank. The Company neither owns nor leases
any property, but instead uses the premises, equipment and furniture of the
Bank. At the present time, the Company does not have any employees but
utilizes certain officers and the support staff of the Bank from time to time.
Employees will be hired as appropriate to the extent the Company expands its
business in the future.
The Bank is a traditional, full-service, community-oriented savings bank engaged
primarily in the business of accepting deposits from customers through its
eighteen branch offices in the Western New York counties of Niagara, Orleans,
Erie and Genesee, and investing those deposits, together with funds generated
from operations and borrowings, in various loan and investment products.
In addition, as fully described in Note 4, the Company completed the acquisition
of Warren-Hoffman and Associates, Inc. ("WHA") and three of its affiliated
companies. The companies offer insurance products including personal and
business insurance, surety bonds, risk management, life, disability and long-
term care coverage. Also, the transaction included one affiliated company,
which provides third-party administration of employee benefit plans.
(3) Earnings per Share
Earnings per share is based on the weighted average number of shares outstanding
during the period presented. Earnings per share is not presented for the period
ended March 31, 1998 since the Company completed its initial stock offering on
April 17, 1998 and, accordingly, such data is not applicable. The Company's
"basic" and "diluted" earnings per share computations are identical in the
period presented, as there is, currently, no dilution effect. The computation
of basic and diluted earnings per share for the three months ended March 31,
1999 is as follows:
<TABLE>
<S> <C>
Net income available to common stockholders........................... $ 4,505,000
-----------
Weighted average shares outstanding:
Total shares issued............................................. 29,756,250
Unallocated ESOP shares......................................... (1,040,718)
ESOP shares committed to be released during the period.......... 149
Treasury shares................................................. (827,489)
-----------
Total weighted average shares outstanding............................. 27,888,192
-----------
Basic/diluted earnings per share for the period....................... $ 0.16
===========
</TABLE>
(4) Acquisition of Warren-Hoffman & Associates, Inc.
In January 1999, the Company completed the acquisition of 100% of the common
stock of WHA, one of the largest full-service insurance agencies in Western New
York and three of its affiliated companies.
8
<PAGE>
The acquired companies operate as wholly-owned subsidiaries of the Bank. The
acquisition has been accounted for as a purchase transaction, and accordingly,
the excess of the purchase price over the fair value of identifiable assets
acquired less liabilities assumed, has been recorded by the Company as goodwill.
Approximately $14.9 million of such goodwill is being amortized on a straight-
line basis over a period of ten years. Approximately 80% of the purchase price
was paid in cash at closing with the remaining 20% accrued in other liabilities
and to be paid in equal annual installments through 2004.
(5) Treasury Stock
During the quarter ended March 31, 1999, the Company completed the purchase of
1,487,800 shares, or approximately 5% of its common stock outstanding, in a
repurchase program approved by the Superintendent of Banks of the State of New
York in December 1998. The purchases were made in the open market and through
negotiated transactions at an average cost of $10.77 per share. In addition,
the Board of Directors of the Company has approved another 5% stock repurchase
plan for up to 1,413,422 shares. No time limit was established for completion
of this program.
(6) Dividend Declaration
On March 16, 1999, the Board of Directors of the Company approved and declared a
regular quarterly cash dividend of four cents ($0.04) per common share. The
dividend was paid on April 13, 1999 to shareholders of record as of March 30,
1999.
(7) Borrowings
During the third quarter of 1998, the Company implemented a strategy to leverage
its higher level of capital and to lock-in low funding rates utilizing Federal
Home Loan Bank advances and reverse repurchase agreements. Borrowings increased
to $245.6 million at March 31, 1999 from $142.6 million at December 31, 1998
reflecting the continuation of the program. The rates paid on these new
borrowings range from 4.97% to 6.08% with varying maturities extending through
2015.
(8) Segment Information
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which requires disclosure of selected
segment information in reports issued to stockholders. It also requires entity
wide disclosures about the products and services an entity provides, the foreign
countries in which it holds assets and reports revenues, and its major
customers. This statement was effective for interim financial statements for
fiscal years beginning after December 15, 1998. Based on the "management
approach" model, the Company has determined that it has two primary business
segments, its banking franchise and its insurance activities conducted through
WHA and the Savings Bank Life Insurance department ("SBLI"). Information about
the Company's segments is presented in the following table for the three month
period ended March 31, 1999 (amounts in thousands):
<TABLE>
<CAPTION>
Banking Insurance
Activities Activities Total
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net interest income.............................. $ 12,060 $ 4 $ 12,064
Provision for credit losses...................... 821 - 821
---------------- ---------------- ----------------
Net interest income after provision
for credit losses............................ 11,239 4 11,243
Noninterest income............................... 2,742 4,000 6,742
Net securities gains............................. 178 - 178
Noninterest expense.............................. 8,216 3,079 11,295
---------------- ---------------- ----------------
Income before income taxes.................... 5,943 925 6,868
Income tax expense............................... 1,856 507 2,363
---------------- ---------------- ----------------
Net income.................................... $ 4,087 $ 418 $ 4,505
================ ================ ================
</TABLE>
For the quarterly period ended March 31, 1998, the Company's insurance
activities consisted solely of its business conducted through SBLI. These
activities totaled $251,000 of noninterest income during the period. There were
no other revenues or expenses.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
- -------
This Quarterly Report on Form 10-Q may contain certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1993, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), that involve substantial risks and
uncertainties. When used in this report, or in the documents incorporated by
reference herein, the words "anticipate", "believe", "estimate", "expect",
"intend", "may", and similar expressions identify such forward-looking
statements. Actual results, performance or achievements could differ materially
from those contemplated, expressed or implied by the forward-looking statements
contained herein. These forward-looking statements are based largely on the
expectations of the Company or the Company's management and are subject to a
number of risks and uncertainties, including but not limited to, economic,
competitive, regulatory, and other factors affecting the Company's operations,
markets, products and services, as well as expansion strategies and other
factors discussed elsewhere in this report filed by the Company with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's control.
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the income earned on loans and
securities and the Company's cost of funds, consisting of the interest paid on
deposits and borrowings. Results of operations are also affected by the
provision for credit losses, investment activities, loan origination, sale and
servicing activities, service charges and fees collected on deposit accounts,
and insurance services and fees. Noninterest expense primarily consists of
salaries and employee benefits, occupancy and equipment expense, marketing
expenses, and other expenses.
OVERVIEW
- --------
Net income increased 53% to $4.5 million, or $.16 per share for the quarter
ended March 31, 1999, compared to $2.9 million for the first quarter of 1998.
The Company's initial stock offering was completed on April 17, 1998, therefore
earnings per share is not applicable for the quarter ended March 31, 1998.
Return on average assets was 1.20% for the quarter ended March 31, 1999 compared
to .98% for the same period in 1998. The return on average equity for the first
quarter of 1999 was 7.10% compared to 8.84% for the same period in 1998. The
additional capital raised as a result of the stock offering was the primary
factor for the decrease in the return on average equity for the first quarter of
1999.
Net interest income increased 24% to $12.1 million for the quarter ended March
31, 1999 as compared to $9.7 million in 1998. This improvement was primarily
attributable to asset growth in both loans and securities and was funded by
proceeds from borrowings and the stock offering. Similarly, average interest-
earning assets increased 23% to $1.42 billion for the first quarter of 1999 as
compared to $1.15 billion for the comparable period in 1998 while interest-
bearing liabilities increased 17% to $1.20 billion for the first quarter of 1999
compared to $1.02 billion for the first quarter of 1998.
Net income for the first quarter of 1999 also reflects an increase in
noninterest income and expense resulting primarily from our new insurance
activities. During the past twelve months, the implementation of various
noninterest income-related programs has been a strategic focus of the Company.
These programs are being incorporated in order to put less reliance on net
interest income as the primary vehicle for increasing net income.
10
<PAGE>
ANALYSIS OF FINANCIAL CONDITION
- -------------------------------
Average Balance Sheet. The following table presents, for the periods
indicated, the total dollar amount of interest income from average interest-
earning assets and the resultant yields, as well as the interest expense on
average interest-bearing liabilities, expressed both in dollars and rates. No
tax equivalent adjustments were made. All average balances are average daily
balances. Non-accruing loans have been excluded from the yield calculations in
these tables.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------
1999
-----------------------------------------------
Average Interest
Outstanding Earned/ Yield/
Balance Expensed Rate
------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Federal funds sold and securities
purchased under resale agreements............. $ 47,406 $ 591 5.06%
Investment securities (1)........................ 187,728 2,701 5.76
Mortgage related securities (1).................. 397,589 6,302 6.34
Loans (2)........................................ 768,244 15,033 7.83
Other interest-earning assets (3)................ 18,812 314 6.77
------------- -----------
Total interest-earning assets.............. 1,419,779 24,941 7.03
------------- -----------
Allowance for credit losses......................... (8,338)
Other noninterest-earning assets (4)................ 110,563(5)
-------------
Total assets............................... $ 1,522,004
=============
Interest-bearing liabilities:
Savings accounts................................. $ 296,859 $ 2,201 3.01%
Interest-bearing checking accounts............... 270,779 2,260 3.38
Certificates of deposit.......................... 448,487 5,978 5.41
Mortgagors' payments held in escrow.............. 8,173 34 1.69
Other borrowed funds............................. 175,386 2,404 5.56
------------- -----------
Total interest-bearing liabilities......... 1,199,684 12,877 4.35
------------- -----------
Noninterest-bearing demand deposits................. 30,574
Other noninterest-bearing liabilities............... 34,499
-------------
Total liabilities.......................... 1,264,757
Stockholders' equity (4)............................ 257,247
-------------
Total liabilities and stockholders' equity. $ 1,522,004
=============
Net interest income................................. $ 12,064
===========
Net interest rate spread............................ 2.68%
=============
Net earning assets $ 220,095
=============
Net interest income as a percentage of
average interest-earning assets.................. 3.45%
===========
Ratio of average interest-earning assets
to average interest-bearing liabilities.......... 118.35%
===========
<PAGE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------
1998
----------------------------------------
Average Interest
Outstanding Earned/ Yield/
Balance Expensed Rate
------------- ---------- ----------
<S> <C> <C>
Interest-earning assets:
Federal funds sold and securities
purchased under resale agreements............. $ 37,568 $ 526 5.68%
Investment securities (1)........................ 188,771 2,802 5.94
Mortgage related securities (1).................. 274,842 4,608 6.71
Loans (2)........................................ 640,485 13,177 8.23
Other interest-earning assets (3)................ 9,132 151 6.71
----------- ----------
Total interest-earning assets.............. 1,150,798 21,264 7.39
----------- ----------
Allowance for credit losses......................... (7,088)
Other noninterest-earning assets (4)................ 61,655
-----------
Total assets............................... $ 1,205,365
===========
Interest-bearing liabilities:
Savings accounts................................. $ 308,913 $ 2,446 3.21%
Interest-bearing checking accounts............... 171,628 1,328 3.14
Certificates of deposit.......................... 497,517 7,162 5.84
Mortgagors' payments held in escrow.............. 7,220 29 1.63
Other borrowed funds............................. 37,318 564 6.13
----------- ----------
Total interest-bearing liabilities......... $ 1,022,596 11,529 4.57
----------- ----------
Noninterest-bearing demand deposits................. 25,854
Other noninterest-bearing liabilities............... 23,653
-----------
Total liabilities.......................... 1,072,103
Stockholders' equity (4)............................ 133,262
-----------
Total liabilities and stockholders' equity. $ 1,205,365
===========
Net interest income................................. $ 9,735
==========
Net interest rate spread............................ 2.82%
==========
Net earning assets $ 128,202
===========
Net interest income as a percentage of
average interest-earning assets.................. 3.43%
==========
Ratio of average interest-earning assets
to average interest-bearing liabilities.......... 112.54%
==========
</TABLE>
_______________________________
(1) Amounts shown are at amortized cost.
(2) Net of deferred loans fees and expenses, loan discounts, loans-in-process
and non-accruing loans.
(3) Includes Federal Home Loan Bank stock and interest-bearing demand accounts.
(4) Includes unrealized gains/losses on securities available for sale.
(5) Includes $25.9 million of bank-owned life insurance. For the three months
ended March 31, 1999, $330,000 of earnings on bank-owned life insurance are
included in other noninterest income.
11
<PAGE>
LENDING ACTIVITIES
Total loans increased 5.4% to $788.8 million at March 31, 1999 from $748.2
million at December 31, 1998, primarily in the one- to four-family residential
and commercial real estate portfolios, reflecting the Company's continued
emphasis on the expansion of its real estate lending activities. As part of
management's continued asset/liability management efforts, particular emphasis
was placed on the origination of one- to four-family residential adjustable rate
and bi-weekly real estate mortgage loans and commercial real estate loans that
generally reprice every one, three or five years. Consumer and other loans also
increased reflecting the Company's strategic initiative focused on indirect
lending products, primarily recreational vehicle and automobile loans.
Loan Portfolio Composition. Set forth below is selected information concerning
the composition of the Company's loan portfolio in dollar amounts and in
percentages (before deductions for deferred fees and costs, unearned discounts
and allowances for credit losses) as of the dates indicated.
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
---------------------------------- ----------------------------------
Amount Percent Amount Percent
--------------- --------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real estate loans:
- ------------------
One-to four-family............................... $ 477,363 60.51% $ 456,197 60.97%
Home equity...................................... 16,255 2.06 15,520 2.07
Multi-family..................................... 73,142 9.27 72,672 9.71
Commercial real estate........................... 105,009 13.31 98,693 13.19
Construction (1)................................. 22,486 2.85 19,476 2.60
--------------- --------------- --------------- ---------------
Total real estate loans....................... 694,255 88.00 662,558 88.54
--------------- --------------- --------------- ---------------
Consumer and other loans:
- -------------------------
Mobile home................................... 25,309 3.21 24,983 3.34
Recreational Vehicle.......................... 12,981 1.65 8,906 1.19
Vehicle....................................... 11,633 1.47 8,741 1.17
Personal...................................... 15,349 1.95 15,642 2.09
Home improvement.............................. 7,518 0.95 8,131 1.09
Guaranteed student............................ 13,967 1.77 12,314 1.65
Other consumer................................ 324 0.04 342 0.05
--------------- --------------- --------------- ---------------
Total consumer and other loans............. 87,081 11.04 79,059 10.58
Commercial business loans........................ 7,503 0.96 6,616 0.88
--------------- --------------- --------------- ---------------
Total loans................................ 788,839 100.00% 748,233 100.00%
--------------- =============== --------------- ===============
Net deferred costs and
unearned discounts........................ 4,786 4,516
Allowance for credit losses................... (8,730) (8,010)
--------------- ---------------
Total loans, net........................... $ 784,895 $ 744,739
=============== ===============
</TABLE>
_____________________
(1) Includes loans for the construction of one-to four-family residential,
multi-family and commercial real estate properties. At March 31, 1999,
construction loans included $4.5 million of one-to four-family loans and
$18.0 million of commercial real estate and multi-family loans.
The credit quality of the Company's loan portfolio remained high, which is
reflected in a 32% decrease in non-accruing loans when comparing the quarter
ended March 31, 1999 to the same quarter in 1998. As a result, the Company's
allowance for credit losses as a percentage of total non-performing loans was
434% at March 31, 1999, compared to 239% at March 31, 1998. The Company's
allowance for credit losses as a percentage of total loans was 1.10% at the end
of both periods. The adequacy of the Company's allowance for credit losses is
reviewed quarterly with consideration given to potential risk inherent within
the loan portfolio, the status of particular loans, historical loan loss
experience, as well as current and anticipated economic and market conditions.
While management uses available information to recognize losses on loans, future
credit loss provisions may be necessary based on changes in economic conditions.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the allowance for credit losses and may
require the Company to recognize additional provisions based on their judgement
of information available to them at the time of their examination.
12
<PAGE>
Non-Accruing Loans and Non-Performing Assets. The following table sets forth
information regarding non-accruing loans and non-performing assets.
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
------------------- -------------------
(Dollars in thousands)
<S> <C> <C>
Non-accruing loans (1):
One-to four-family.................................................... $ 1,162 $ 1,459
Home equity........................................................... 71 13
Commercial real estate and multi-family............................... 597 1,706
Consumer and other.................................................... 57 62
Commercial business................................................... 123 56
------------- -------------
Total............................................................ 2,010 3,296
------------- -------------
Non-performing assets.................................................... $ 955 $ 589
------------- -------------
Total non-accruing loans and non-performing assets....................... $ 2,965 $ 3,885
============= =============
Total non-accruing loans and non-performing assets
as a percentage of total assets....................................... 0.19% 0.26%
============= =============
Total non-accruing loans to total loans.................................. 0.26% 0.43%
============= =============
</TABLE>
____________________
(1) Loans are placed on non-accrual status when they become 90 days or more
past due or if they have been identified by the Company as presenting
uncertainty with respect to the collectibility of interest or principal.
Analysis of the Allowance For Credit Losses. The following table sets forth the
analysis of the allowance for credit losses for the periods indicated.
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------------------------
1999 1998
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period............................................... $ 8,010 $ 6,921
Net charge-offs:
Charge-offs............................................................... (129) (204)
Recoveries................................................................ 28 114
------------- -------------
Total net charge-offs........................................................ (101) (90)
Provision for credit losses.................................................. 821 257
------------- -------------
Balance at end of period..................................................... $ 8,730 $ 7,088
============= =============
Ratio of net charge-offs during the period to
average loans outstanding during the period............................... 0.01% 0.01%
============= =============
Allowance for credit losses to total loans at end of period.................. 1.10% 1.10%
============= =============
Allowance for credit losses to non-accruing loans at end of period........... 434.31% 239.06%
============= =============
</TABLE>
13
<PAGE>
INVESTING ACTIVITIES
The investment of funds obtained primarily through borrowings and the
redeployment of federal funds sold resulted in a 17% increase in investments in
the available for sale portfolio at March 31, 1999 compared to December 31,
1998. The increase is primarily in two-to-four year weighted average life
collaterized mortgage obligations ("CMOs") which were deemed to offer reduced
interest rate risk and more consistent cash flows in this continued low interest
rate environment. Additionally, certain ten-to-twelve year weighted average life
CMOs were purchased as part of the Company's leveraging strategy and were funded
with comparable weighted average life borrowings to mitigate interest rate risk.
CMOs, which totaled $367.6 million at March 31, 1999 compared to $250.7 million
at December 31, 1998, are a debt security issued by a special-purpose entity
that aggregates pools of mortgages and mortgage related securities and creates
different classes of securities with varying maturities and amortization
schedules, which attempt to moderate risks associated with conventional mortgage
related securities resulting from unexpected prepayment activity.
The Company completed the acquisition of Warren-Hoffman & Associates, Inc.
during the first quarter of 1999 utilizing $11.3 million previously invested in
federal funds sold.
FUNDING ACTIVITIES
During the third quarter of 1998, the Company implemented a strategy to leverage
its higher level of capital and to lock-in low funding rates utilizing Federal
Home Loan Bank advances and reverse repurchase agreements. Borrowings increased
to $245.6 million at March 31, 1999 from $142.6 million at December 31, 1998
reflecting the continuation of the program. The rates paid on these new
borrowings range from 4.97% to 6.08% with varying maturities extending through
2015.
EQUITY ACTIVITIES
Stockholders' equity decreased to $249.3 million for the period ended March 31,
1999 as compared to $263.8 million at December 31, 1998. The decrease was
primarily attributable to the completion of a stock repurchase program for
1,487,800 shares, or approximately 5% of the common stock outstanding. The
purchases were made in the open market and through negotiated transactions at an
average cost of $10.77 per share.
RESULTS OF OPERATIONS
- ---------------------
NET INTEREST INCOME
Net interest income increased 24% to $12.1 million for the quarter ended March
31, 1999, compared to $9.7 million for the same period in 1998. Interest income
on loans increased 14% to $15.0 million for the 1999 quarter from $13.2 million
for the same period in 1998. The increase resulted from a $127.8 million
increase in average loans outstanding during the first quarter of 1999 compared
to the first quarter of 1998, the benefits of which were partially offset by a
40 basis point decrease in the average yield on loans over the same time
periods. Interest income on investment securities and mortgage related
securities in the available for sale portfolio increased $1.6 million to $9.0
million for the quarter ending March 31, 1999 compared to $7.4 million for the
same quarter in 1998, resulting from a $121.7 million increase in the average
balance of these securities, partially offset by a 24 basis point decrease in
the average yield earned on these investments.
Interest expense on deposits decreased $492,000 to $10.5 million for the period
ending March 31,1999 from $11.0 million for the same period in 1998, resulting
from a 36 basis point decrease in the average rate paid on interest-bearing
deposits, offset by a $39.0 million increase in the average balance of interest-
bearing deposits. The interest expense on borrowed funds increased to $2.4
million for the period ended March 31,1999 compared to $564,000 for the same
period in 1998, resulting primarily from the increase in average borrowed funds
outstanding. This increase was partially offset by a 57 basis point decline in
the average rate paid for these borrowings during the comparable periods.
The net interest margin (net interest income as a percentage of average
interest-earning assets) was 3.45% for the three months ended March 31, 1999
compared to 3.43% for the same quarter in 1998. The increase in net earning
assets, resulting primarily from proceeds generated by the stock offering, was
partially offset by a narrowing of the interest rate spread (the difference
between the weighted average yield on interest earning-assets and the weighted
average cost of interest-bearing liabilities), which declined from 2.82% for the
three months ended March 31, 1998 to 2.68% for the three months ended March 31,
1999. The decrease in the interest rate spread reflects the general decline in
market yields on interest-earning assets and the additional funding
14
<PAGE>
costs of borrowed funds and interest-bearing checking accounts, primarily money
market demand accounts, which carry a market-based cost of funds that is
slightly higher than the other interest-bearing liabilities of the Company.
PROVISION FOR CREDIT LOSSES
The provision for credit losses totaled $821,000 for the three months ended
March 31, 1999 compared to the $257,000 for the same period in 1998 reflecting
the growth in the loan portfolio, in particular, the multi-family and commercial
real estate portfolios, which generally carry a higher degree of risk. The
adequacy of the Company's allowance for credit losses is reviewed quarterly with
consideration given to potential risk inherent within the loan portfolio, the
status of particular loans, historical loan loss experience, as well as current
and anticipated economic and market conditions.
NONINTEREST INCOME
Noninterest income increased to $6.9 million for the three months ended March
31, 1999 from $1.8 million for the same period in 1998. Approximately $3.7
million of noninterest income was recognized during the first quarter of 1999
relating to the new insurance activities. Also contributing to the increase was
premium income generated by a newly implemented covered call option program,
tax-exempt earnings on bank-owned life insurance purchased during the second
quarter of 1998, increased commissions received from the sales of third-party
annuity and mutual fund products, as well as fees generated from a revised
relationship checking account product.
NONINTEREST EXPENSE
Noninterest expense totaled $11.3 million for the first quarter of 1999
reflecting a $4.5 million increase over the first quarter of 1998 total of $6.8
million. Approximately $2.7 million of this increase, primarily in salaries and
benefits and occupancy and equipment costs and $374,000 of goodwill
amortization, is due to the operation and acquisition of the new insurance
subsidiaries. Also contributing to the increase were costs associated with
three new branch locations opened during 1998, compensation expenses for the
employee stock ownership plan and the growing residential and commercial loan
origination sales forces, various expenses relating to the Company's operation
as a publicly traded entity and maintenance and depreciation costs connected
with upgrading of the Company's technology and communications equipment.
INCOME TAXES
Income tax expense totaled $2.4 million for the first three months of 1999
compared to $1.6 million for the same period in 1998. This increase relates to
the additional income earned as the Company's effective tax rate remained at
approximately 34% for both periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, borowings, proceeds from
the principal and interest payments on loans, mortgage related and debt and
equity securities, as well as proceeds from the limited sale of fixed rate
mortgage loans to the secondary market. While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit
outflows, mortgage prepayments, mortgage loan sales, and borrowings are greatly
influenced by market interest rates, economic conditions and competition.
Accelerated principal repayments on mortgage related and other available-for-
sale securities provided an additional source of liquidity, totaling $57.3
million for the three months ended March 31, 1999 compared to $23.8 million for
the three months ended March 31, 1998. Other borrowings, reflecting the
leveraging strategy and the relatively low borrowing costs, increased $103.0
million during the first three months of 1999.
The primary investing activities of the Company are the origination of both
residential one-to-four family and commercial real estate loans and the purchase
of mortgage related and debt and equity securities. During the first three
months of 1999 and 1998, loan originations totaled $83.7 million and $43.7
million, respectively. Purchases of mortgage related securities, primarily
CMOs, totaled $167.2 million for the three months ended March 31, 1999 compared
to $44.4 million for the three months ended March 31, 1998. Purchases of other
available for sale securities, primarily short-term asset-backed securities and
equity securities, during the first three months of 1999 totaled $15.0 million
compared to $20.1 million for the same period in 1998. Also during the first
quarter
15
<PAGE>
of 1999, the Company closed on the acquisition of WHA utilizing existing liquid
assets.
At March 31, 1999, outstanding loan commitments totaled $72.2 million. These
commitments do not necessarily represent future cash requirements since certain
of these instruments may expire without being funded and others may not be fully
drawn upon. It is anticipated that there will be sufficient funds available to
meet the current loan commitments and other obligations.
Cash, interest-bearing demand accounts at correspondent banks, federal funds
sold and securities purchased under resale agreements are the Company's most
liquid assets. The levels of these assets are monitored daily and are dependent
on operating, financing, lending and investing activities during any given
period. Excess short-term liquidity is usually invested in overnight federal
funds sold. In the event that funds beyond those generated internally are
required, additional sources of funds are available through the use of reverse
repurchase agreements and FHLB advances. As of March 31, 1999, the total of
cash, interest-bearing demand accounts, federal funds sold and securities
purchased under resale agreements was $29.1 million, or 1.8% of total assets.
At March 31, 1999, the Company exceeded all regulatory capital requirements.
The current requirements and the actual levels for the Company are detailed in
the following table.
<TABLE>
<CAPTION>
As of March 31, 1999
-------------------------------------------------------------------------
Required To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Action
--------------------- ------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
--------- -------- -------- ------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to risk-weighted assets)......... $ 243,001 27.29% $ 71,226 8.00% $ 89,033 10.00%
Tier 1 Capital (to risk-weighted assets)........ 232,241 26.08 35,613 4.00 53,420 6.00
Leverage Capital (to average assets)............ 232,241 15.30 26,710 3.00 44,516 5.00
</TABLE>
YEAR 2000 "Y2K" COMPLIANCE
Changing from the year 1999 to 2000 has the potential to cause problems in data
processing and other date-sensitive systems, a problem commonly referred to as
the Year 2000 or Y2K dilemma. The year 2000 date change can affect any system
that uses computer software programs or computer chips, including automated
equipment and machinery. For example, many software programs or computer chips
store calendar dates as two-digit numbers rather than four-digit numbers. This
coding presents a potential problem when the year begins with "20", instead of
"19". Computer systems may interpret the year as 1900 instead of 2000, thus
creating possible system failure or miscalculation of financial data.
The Company utilizes computers for the daily conduct of its business and for
information systems processing. Due to the reliance on such systems, the
Company is following a comprehensive process modeled from that suggested by
federal bank regulatory agencies. A description of each of the steps and the
status of the Company's efforts to date are detailed as follows:
Assessment, Validation, Testing and Implementation.
The Assessment Phase has two primary components. The first component defines
the scope of the year 2000 problem within the Company, as well as establishes a
formal committee responsible for monitoring Y2K progress on a regular basis.
The second component assesses the size and complexity of the problem by
performing an inventory of both internally developed and externally purchased
computer applications. Both components of the Assessment Phase are complete.
The Validation Phase, 98% complete, compiles the results of vendor confirmations
and internal research regarding Y2K readiness. It is during this stage that
hardware and software updates, code enhancements, system replacements, vendor
certifications, and other associated changes are made.
The Testing Phase, 95% complete, certifies that systems are Year 2000 compliant
and have end-user acceptance. The Testing Phase is scheduled to be completed by
June 30, 1999. During this phase, the Company has been addressing both
information technology (IT) and non-IT systems. With respect to IT systems,
testing of applications has begun and is scheduled to be substantially
16
<PAGE>
completed during the first quarter of 1999. To ensure compliance of non-IT
systems where testing is not possible, the Company has obtained a certification
from the vendor attesting to Y2K compliance. The Company does not anticipate
incurring any material expenses as a result of unpreparedness of its non-IT
systems.
The Implementation Phase includes the repair or replacement of systems and
computer equipment, as well as the development of contingency plans. The repair
and replacement stage is substantially complete. The Company is currently
developing a business resumption contingency plan to help ensure continued
operations in the event of Year 2000 system failures. This contingency plan
will be consistent with the Company's disaster recovery plan with modifications
for Year 2000 risks. The business resumption contingency plan is scheduled to
be completed during the second quarter of 1999.
The Company could also be adversely affected if its vendors and customers that
rely on data processing systems are not Y2K compliant prior to the end of 1999.
The Company, therefore, is working with both its vendors and commercial lending
customers regarding Y2K issues. Specifically, commercial lending clients have
provided designated information that allows the Company to evaluate the status
of each relationship relating to their Y2K readiness. Approximately 82% of
existing commercial lending customers contacted have responded and have been
identified as Y2K compliant. The Company has assigned follow up
responsibilities to individual lending officers in an effort to evaluate the
status of the remaining commercial customers. Additionally, new or renewing
commercial lending customers meeting certain outstanding balance thresholds are
required to certify as to their Y2K readiness as part of the loan underwriting
and closing process. While management believes the exposure to the Company for
customers referred to above is immaterial there remains some risk that the
Company's future business operations, financial position and results of
operations could be adversely impacted by the failure of such customers'
operating systems resulting from Y2K issues.
The Company has incurred approximately $170,000 in expenses directly related to
the Year 2000 issue, with $73,000 incurred during the quarter ended March 31,
1999. In total, the Company estimates incurring approximately $200,000 by
December 31, 1999 related to Year 2000 readiness which is in addition to
software and hardware maintenance costs, as well as personnel costs associated
with testing Year 2000 compliance. These amounts include the cost of additional
hardware and software, some of which would have been purchased in the normal
course of the Company's business. Due to the uniqueness of the Year 2000 issue,
it is difficult to quantify the potential loss in revenue in the event of non-
compliance. Based upon efforts to ensure systems will function properly, the
Company presently believes that the Year 2000 issue will not result in a
material loss in revenue. The Company believes that its most likely worst case
Year 2000 scenario is an increase in credit losses due to Year 2000 problems of
the Company's borrowers, as well as the potential disruption in financial
markets causing liquidity concerns. The Company has attempted to mitigate this
risk by identifying both material borrowers and funds providers as well as
assessing their respective compliance towards Year 2000 readiness.
17
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
NET INCOME AND NET PORTFOLIO VALUE ANALYSIS
Interest rate sensitivity is monitored partially through the use of a net income
model and a net portfolio value model which generates estimates of the changes
in net income and net portfolio value ("NPV") over a range of interest rate
scenarios. NPV is the present value of expected cash flows from assets and
liabilities.
The model below assumes estimated loan prepayment rates, reinvestment rates and
deposit decay rates. For adjustable and fixed-rate loans on residential
properties, prepayment rates were assumed to range from 7.98% to 22.74%
annually. Mortgage related securities were assumed to prepay at rates between
27.00% and 43.62% annually. Savings account cashflows were assumed to decay at
5.05%, 5.05%, 10.10%, 16.59%, 13.14%, 22.11%, and 27.96%; NOW checking account
cashflows were assumed to decay at 21.99%, 21.99%, 43.96%, 2.51%, 1.99%, 3.34%,
and 4.22%; and money market savings account cashflows were assumed to decay at
83.87%, 1.47%, 2.93%, 11.73%, 0%, 0%, and 0% for the periods of three months or
less, three to six months, six to twelve months, one to three years, three to
five years, five to ten years and more than ten years, respectively. While we
believe such assumptions to be reasonable, there can be no assurance that
assumed prepayment rates and decay rates will approximate actual future loan
prepayment and deposit withdrawal activity.
The following sets forth the Company's net income and NPV as of March 31, 1999.
<TABLE>
<CAPTION>
Net Income Net Portfolio Value
Change in ----------------------------------------- ----------------------------------------
Interest Rates
In Basis Points $ Amount $ Change % Change $ Amount $ Change % Change
(Rate Shock) ------------ ------------ ------------ ------------ ------------ ------------
(Dollars in thousands)
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
400.................................... 14,478 (3,370) (18.9)% 250,640 (32,360) (11.4)%
300.................................... 15,358 (2,490) (14.0)% 259,197 (23,802) (8.4)%
200.................................... 16,226 (1,622) (9.1)% 268,070 (14,930) (5.3)%
100.................................... 17,025 (823) (4.6)% 277,556 (5,443) (1.9)%
Static.................................. 17,848 - - 282,999 - -
(100)................................... 18,555 707 4.0% 284,646 1,647 0.6%
(200)................................... 19,158 1,310 7.3% 287,420 4,421 1.6%
(300)................................... 20,207 2,359 13.2% 292,910 9,911 3.5%
(400)................................... 21,723 3,875 21.7% 301,180 18,180 6.4%
</TABLE>
Certain shortcomings are inherent in the methodology used in the above interest
rate risk measurements. Modeling changes in net income and NPV requires making
certain assumptions which may or may not reflect the manner in which actual
yields and costs respond to changes in market interest rates. In this regard,
the net income and NPV table presented assumes that the composition of interest
sensitive assets and liabilities existing at the beginning of a period remains
constant over the period being measured and also assumes that a particular
change in interest rates is reflected uniformly across the yield curve
regardless of the duration to maturity or repricing of specific assets and
liabilities. Accordingly, although the net income and NPV table provides an
indication of interest rate risk exposure at a particular point in time, such
measurements are not intended to and do not provide a precise forecast of the
effect of changes in market interest rates on the Company's net interest income
and will differ from actual results.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or its
subsidiaries are a party other than ordinary routine litigation incidental
to their respective businesses.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith or are incorporated by
reference to other filings:
Exhibit No.
-----------
99.1 Summary of Quarterly Financial Data
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Niagara Bancorp, Inc. filed a Current Report on Form 8-K dated January
8, 1999, which disclosed that Lockport Savings Bank completed the
acquisition of Warren-Hoffman & Associates, Inc. insurance agencies.
Such Current Report, as an Item 7 exhibit also included copies of the
Lockport Savings Bank press release dated January 11, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NIAGARA BANCORP, INC.
Date: May 12, 1999 By: /s/ William E. Swan
-------------------------------------------------
William E. Swan
President and Chief Executive Officer
Date: May 12, 1999 By: /s/ Paul J. Kolkmeyer
------------------------------------------------
Paul J. Kolkmeyer
Executive Vice President and Chief Financial
Officer
19
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- ------------
99.1 Summary of Quarterly Financial Data. Filed herewith.
27.1 Financial Data Schedule. Filed herewith.
20
<PAGE>
Exhibit 99.1
Summary of Quarterly Financial Data (1)
<TABLE>
<CAPTION>
First Quarter
1999 1998 1999 vs 1998
----------- ----------------------------------------------- -------------
First Fourth Third Second First %
Quarter Quarter Quarter Quarter Quarter Change
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED QUARTERLY AVERAGE BALANCEs
(Amounts in thousands)
Total assets............................... $ 1,522,004 $ 1,440,938 $ 1,384,346 $ 1,328,491 $ 1,205,365 26.3%
Total interest-earning assets.............. 1,419,779 1,353,495 1,302,282 1,267,959 1,150,798 23.4
Securities, at amortized cost.............. 585,317 566,285 544,897 486,610 463,613 26.3
Loans (2).................................. 771,219 733,561 696,343 664,351 643,520 19.8
Interest-bearing deposits.................. 1,024,298 1,001,754 990,393 998,798 985,278 4.0
Short-term borrowings...................... 6,737 8,022 24,732 18,469 16,162 (58.3)
Long-term borrowings....................... 168,649 109,500 56,086 22,809 21,156 697.2
Total interest-bearing liabilities......... 1,199,684 1,119,276 1,071,211 1,040,076 1,022,596 17.3
Noninterest-bearing deposits............... 30,574 29,060 27,651 29,059 25,854 18.3
Total deposits............................. 1,054,872 1,030,814 1,018,044 1,027,857 1,011,132 4.3
Stockholders' equity....................... $ 257,247 $ 263,448 $ 258,769 $ 235,840 $ 133,262 93.0%
Common shares outstanding
Basic................................. 27,888 28,701 28,687 28,792 - -
Diluted............................... 27,888 28,701 28,687 28,792 - -
ASSET QUALITY DATA
(Amounts in thousands)
Non-performing loans....................... $ 2,010 $ 3,296 $ 3,759 $ 3,885 $ 2,965% (32.2)%
Other non-performing assets................ 955 /(4)/ 589 21 21 299 219.4
----------- ----------- ----------- ----------- -----------
Total non-performing assets................ 2,965 3,885 3,780 3,906 3,264 (9.2)
Allowance for credit losses................ 8,730 8,010 7,559 7,350 7,088 23.2
Net loan charge-offs....................... $ 101 $ 995 $ 451 $ 174 $ 90 12.2%
Total non-performing assets
as percentage of total assets......... 0.19% 0.26% 0.26% 0.29% 0.25% -
Total non-performing loans to total loans.. 0.26 0.43 0.53 0.57 0.46 -
Net charge-offs to average loans........... 0.01 0.15 0.04 0.03 0.01 -
Allowance for credit losses to total loans. 1.10 1.06 1.06 1.07 1.10 -
Allowance for credit losses
to non-performing loans............... 434.31% 243.02% 201.10% 189.19% 239.06% -
<CAPTION>
Average Period-end
Average for Three Months 1999 vs 1998 As of March 31, 1999 vs 1998
--------------------------- -------------------------- ------------
1999 1998 % Change 1999 1998 %
----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA
(Amounts in thousands)
Total assets......................... $ 1,522,004 $ 1,205,365 26.3% $ 1,591,000 $ 1,323,466 20.2%
Total earning assets................. 1,419,779 1,150,798 23.4 1,491,837 1,270,148 17.5
Securities, at amortized cost........ 585,317 463,613 26.3 673,521 485,053 38.9
Loans (2)............................ 771,219 643,520 19.8 793,625 647,068 22.6
Interest-bearing deposits............ 1,024,298 985,278 4.0 1,034,001 1,103,547 (6.3)
Short-term borrowings................ 6,737 16,162 (58.3) 45,446 19,012 139.0
Long-term borrowings................. 168,649 21,156 697.2 200,194 19,798 911.2
Total interest-bearing liabilities... 1,199,684 1,022,596 17.3 1,279,641 1,142,358 12.0
Noninterest-bearing deposits......... 30,574 25,854 18.3 30,993 28,219 9.8
Total deposits....................... 1,054,872 1,011,132 4.3 1,064,994 1,131,766 (5.9)
Stockholders' equity................. 257,247 133,262 93.0 249,256 134,215 85.7
Fair value adjustment included in
Stockholders' equity........... $ 3,751 $ 3,165 18.5% $ 2,495 $ 3,328 (25.0)%
Common shares outstanding
Basic........................... 27,888 - - 27,241 - -
Diluted......................... 27,888 - - 27,241 - -
Equity to assets..................... 16.90% 11.06% - 15.67% 10.14% -
Risk-weighted capital ratios:
Tier 1 capital.................. - - - 26.08 19.98 -
Total capital................... - - - 27.29 21.06 -
Leverage capital................ - - - 15.30 10.90 -
</TABLE>
<PAGE>
EXHIBIT 99.1, (CONT'D.)
SUMMARY OF QUARTERLY FINANCIAL DATA (1)
<TABLE>
<CAPTION>
1999 1998 Three Months Ended March 31,
--------- ---------------------------------------------- -----------------------------
First Fourth Third Second First %
Quarter Quarter Quarter Quarter Quarter 1999 1998 Change
--------- --------- --------- --------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA
(Amounts in thousands)
Interest income..................... $ 24,941 $ 24,269 $ 23,627 $ 22,942 $ 21,264 $ 24,941 $ 21,264 17.3%
Interest expense.................... 12,877 12,526 12,216 11,695 11,529 12,877 11,529 11.7
--------- --------- --------- --------- --------- -------- ---------
Net interest income................. 12,064 11,743 11,411 11,247 9,735 12,064 9,735 23.9
Provision for credit losses......... 821 995 486 346 257 821 257 219.5
--------- --------- --------- --------- --------- -------- ---------
Net interest income after provision. 11,243 10,748 10,925 10,901 9,478 11,243 9,478 18.6
Net securities gains................ 178 38 - 100 - 178 - -
Other noninterest income............ 6,742 2,755 2,350 2,168 1,771 6,742 1,771 280.7
--------- --------- --------- --------- --------- -------- ---------
Total noninterest income............ 6,920 2,793 2,350 2,268 1,771 6,920 1,771 290.7
--------- --------- --------- --------- --------- -------- ---------
Salaries and employee benefits...... 6,486 4,130 4,115 3,872 3,783 6,486 3,783 71.5
Other noninterest expense........... 4,809 3,694 3,517 9,865 2,970 4,809 2,970 61.9
--------- --------- --------- --------- --------- -------- ---------
Total noninterest expense........... 11,295 7,824 7,632 13,737 6,753 11,295 6,753 67.3
--------- --------- --------- --------- --------- -------- ---------
Income (loss) before income taxes... 6,868 5,717 5,643 (568) 4,496 6,868 4,496 52.8
Income taxes........................ 2,363 1,652 1,918 (214) 1,550 2,363 1,550 52.5
--------- --------- --------- --------- --------- -------- ---------
Net income (loss)................... $ 4,505 $ 4,065 $ 3,725 $ (354)/(3)/ $ 2,946 $ 4,505 $ 2,946 52.9%
========= ========= ========= ========= =========
<CAPTION>
PER SHARE DATA
(Amounts in thousands)
Net income
Basic.......................... 0.16 0.14 0.13 (0.01)/(3)/ - 0.16 - -
Diluted........................ 0.16 0.14 0.13 (0.01)/(3)/ - 0.16 - -
Cash dividends...................... 0.04 0.03 0.03 - - 0.04 - -
Dividend Payout Ratio............... 24.76% 21.19% 23.11% - - - - -
Book Value.......................... 9.15 9.19 9.09 8.93 - 9.15 - -
Market price (NASDAQ: NBCP):
High........................... 11.13 11.50 14.75 17.06 - 11.13 - -
Low............................ 9.25 8.38 8.75 14.38 - 9.25 - -
Close.......................... 10.00 10.50 9.81 14.75 - 10.00 - -
PERFORMANCE RATIOS (ANNUALIZED)
Return on average assets............ 1.20% 1.13% 1.08% (0.11)%/(3)/ 0.98% 1.20% 0.98% -
Return on average equity............ 7.10 6.17 5.76 (0.60) /(3)/ 8.84 7.10 8.84
Net interest margin................. 3.21 3.26 3.30 3.39 3.23 3.21 3.23 -
As a percentage of average assets:
Noninterest income............. 1.84 0.78 0.68 0.68 0.59 1.84 0.59 -
Noninterest expense............ 3.01 2.17 2.21 4.14 2.24 3.01 2.24 -
--------- --------- --------- --------- --------- -------- --------- -------
Net overhead................... 1.17 1.39 1.53 3.46 /(3)/ 1.65 1.17 1.65 -
Efficiency ratio.................... 60.06% 53.97% 55.46% 102.40%/(3)/ 58.69% 60.06% 58.69% -
</TABLE>
______________________________
(1) The reorganization of Lockport Savings Bank from a mutual savings bank to
a stock form of organization was effective April 17, 1998. All amounts
prior to this date are reflective of the consolidated financial results of
Lockport Savings Bank and subsidiaries.
(2) Net of deferred loan fees and expenses, loan discounts and loans-in-
process.
(3) During the second quarter of 1998, Niagara Bancorp, Inc. contributed
$3,984,000, net of applicable taxes, to the Lockport Savings Bank
Foundation. The following data excludes the effect of this contribution:
<TABLE>
<CAPTION>
<S> <C>
Net Income........................................................ $ 3,360
Basic earnings per share.......................................... 0.13
Diluted earnings per share........................................ 0.13
Return on average assets.......................................... 1.09%
Return on average equity.......................................... 6.16%
As a percentage of average assets:
Noninterest expense............................................. 2.10%
Net Overhead.................................................... 1.42%
Efficiency Ratio.................................................. 52.08%
</TABLE>
(4) Includes $527,000 for a commercial real estate property expected to be sold
at its recorded value during the second quarter of 1999.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,354
<INT-BEARING-DEPOSITS> 1,034,001
<FED-FUNDS-SOLD> 8,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 677,749
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 788,839
<ALLOWANCE> 8,730
<TOTAL-ASSETS> 1,591,000
<DEPOSITS> 1,064,994
<SHORT-TERM> 45,446
<LIABILITIES-OTHER> 31,110
<LONG-TERM> 200,194
0
0
<COMMON> 298
<OTHER-SE> 248,958
<TOTAL-LIABILITIES-AND-EQUITY> 1,590,945
<INTEREST-LOAN> 15,033
<INTEREST-INVEST> 9,003
<INTEREST-OTHER> 905
<INTEREST-TOTAL> 24,941
<INTEREST-DEPOSIT> 10,473
<INTEREST-EXPENSE> 12,877
<INTEREST-INCOME-NET> 12,064
<LOAN-LOSSES> 821
<SECURITIES-GAINS> 178
<EXPENSE-OTHER> 11,295
<INCOME-PRETAX> 6,868
<INCOME-PRE-EXTRAORDINARY> 6,868
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,505
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
<YIELD-ACTUAL> 7.03
<LOANS-NON> 2,010
<LOANS-PAST> 363
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,429
<ALLOWANCE-OPEN> 8,010
<CHARGE-OFFS> 129
<RECOVERIES> 28
<ALLOWANCE-CLOSE> 8,730
<ALLOWANCE-DOMESTIC> 2,710
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,020
</TABLE>
