<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ____________ to ________________.
Commission file number 333-43697
Adirondack Financial Services Bancorp, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 14-1801465
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
52 North Main Street, Gloversville, NY 12078
- --------------------------------------------
(Address of principal executive offices)
(518) 725-6331
- ---------------------------------------------------
(Registrants telephone number, including area code)
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark 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 NA No
-------- ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
Yes No
-------- ----------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding as of May 1, 1998
Common Stock, $.01 par value 661,250 shares
<PAGE>
TABLE OF CONTENTS
Number Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition 1
March 31, 1998 (unaudited) and September 30, 1997
Consolidated Statements of Income (unaudited) 2
Three Months Ended March 31, 1998 and 1997
Consolidated Statements of Income (unaudited) 3
Six Months Ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows (unaudited) 4
Six Months Ended March 31, 1998 and 1997
Notes to Consolidated Financial Information 5 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 10
Part II. Other Information 10
Signatures 10
<PAGE>
Adirondack Financial Services Bancorp, Inc.
Consolidated Statements of Financial Condition
March 31, September 30,
1998 1997
------------ ------------
Assets
Cash and due from banks $ 1,352,030 $ 1,922,386
Interest bearing time deposits 21,200,000 --
------------ ------------
Total cash and cash equivalents 22,552,030 1,922,386
Securities available for sale 6,700,017 7,017,111
Net loans receivable 48,591,132 49,526,290
Accrued interest receivable 293,380 332,122
Other real estate owned 30,000 312,892
Net premises and equipment 1,408,536 1,538,364
Prepaid expenses and other assets 838,433 372,642
------------ ------------
Total Assets $ 80,413,528 $ 61,021,807
============ ============
Liabilities and Equity
Liabilities:
Deposits:
Demand and N.O.W. accounts $ 21,558,457 $ 5,147,684
Savings and money market accounts 25,789,573 22,954,408
Time deposit accounts 25,834,532 28,014,594
------------ ------------
Total deposits 73,182,562 56,116,686
Borrowings 3,500,000 1,300,000
Accrued expenses and other liabilities 369,908 325,152
------------ ------------
Total liabilities 77,052,470 57,741,838
------------ ------------
Equity:
Retained earnings 3,358,113 3,301,370
Net unrealized loss on securities
available for sale, net of taxes 2,945 (21,401)
------------ ------------
Total equity 3,361,058 3,279,969
------------ ------------
Total liabilities and equity $ 80,413,528 $ 61,021,807
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Adirondack Financial Services Bancorp, Inc.
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31,
--------------------------
1998 1997
----------- -----------
Interest and dividend income:
Interest and fees on loans $ 1,077,076 $ 1,111,248
Securities available for sale 104,161 114,035
Interest-bearing deposits 42,373 2,352
----------- -----------
Total interest and dividend income 1,223,610 1,227,635
----------- -----------
Interest expense:
NOW accounts 33,862 15,802
Savings and money market accounts 214,925 204,542
Time deposit accounts 358,753 378,106
Borrowings 44,081 1,782
----------- -----------
Total interest expense 651,621 600,232
----------- -----------
Net interest income 571,989 627,403
Provision for loan losses 15,000 198,066
----------- -----------
Net interest income after provision
for loan losses 556,989 429,337
----------- -----------
Other income:
Fees and service charges 33,804 33,297
Other 677 965
----------- -----------
Total other income 34,481 34,262
----------- -----------
Operating expenses:
Compensation and employee benefits 230,363 225,570
Occupancy expenses 53,931 55,948
Federal deposit insurance premiums 12,852 899
Advertising expenses 25,445 29,216
Directors' fees and expenses 19,812 32,351
Equipment and data processing expenses 75,509 83,107
Other real estate owned expenses 8,541 9,041
Other operating expenses 109,385 133,932
----------- -----------
Total operating expenses 535,838 570,064
----------- -----------
Income (loss) before income tax expense 55,632 (106,465)
Income tax expense 22,200 15,575
----------- -----------
Net income (loss) $ 33,432 $ (122,040)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Adirondack Financial Services Bancorp, Inc.
Consolidated Statements of Operations (Unaudited)
Six Months Ended March 31,
--------------------------
1998 1997
----------- -----------
Interest and dividend income:
Interest and fees on loans $ 2,151,154 $ 2,235,800
Securities available for sale 212,408 236,129
Interest-bearing deposits 44,103 10,135
----------- -----------
Total interest and dividend income 2,407,665 2,482,064
----------- -----------
Interest expense:
NOW accounts 49,499 32,623
Savings and money market accounts 431,556 410,098
Time deposit accounts 730,559 759,682
Borrowings 67,249 10,887
----------- -----------
Total interest expense 1,278,863 1,213,290
----------- -----------
Net interest income 1,128,802 1,268,774
Provision for loan losses 30,000 396,132
----------- -----------
Net interest income after provision
for loan losses 1,098,802 872,642
----------- -----------
Other income:
Fees and service charges 74,111 65,350
Other 14,132 13,039
----------- -----------
Total other income 88,243 78,389
----------- -----------
Operating expenses:
Compensation and employee benefits 464,778 442,108
Occupancy expenses 108,836 116,423
Federal deposit insurance premiums 26,249 33,162
Advertising expenses 47,846 58,498
Directors' fees and expenses 44,297 52,684
Equipment and data processing expenses 150,817 159,083
Other real estate owned expenses 16,357 14,187
Other operating expenses 233,122 280,501
----------- -----------
Total operating expenses 1,092,302 1,156,646
----------- -----------
Income (loss) before income tax expense 94,743 (205,615)
Income tax expense 38,000 29,075
----------- -----------
Net income (loss) $ 56,743 $ (234,690)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Adirondack Financial Services Bancorp, Inc.
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended March 31,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 56,743 $ (234,690)
Adjustments to reconcile net income (loss)
to net cash used by operating activities
Depreciation expense 145,852 148,992
Provision for loan losses 30,000 396,133
Deferred tax expense -- 93,547
Net gain on sale of other real estate owned (27,321) (2,143)
Decrease (increase) in accrued interest receivable 28,742 (1,620)
Increase in prepaid expenses and other assets (473,457) (110,735)
Increase (decrease) in accrued expenses
and other liabilities 44,755 (865,821)
------------ ------------
Net cash used by operating activities (194,686) (576,337)
------------ ------------
Cash flows from investing activities:
Proceeds from principal repayment of securities
available for sale 359,107 219,162
Net decrease (increase) in loans receivable 817,358 (813,085)
Proceeds from sale of other real estate owned 398,013 25,949
Capital expenditures (16,024) (13,795)
------------ ------------
Net cash provided by (used by) investing
activities 1,558,454 (581,769)
------------ ------------
Cash flows from financing activities:
Net increase in deposits 17,065,876 2,574,814
Net increase in borrowings 2,200,000 100,000
------------ ------------
Net cash provided by financing activities 19,265,876 2,674,814
------------ ------------
Net increase in cash and cash equivalents 20,629,644 1,516,708
Cash and cash equivalents at beginning of period 1,922,386 1,198,081
------------ ------------
Cash and cash equivalents at end of period $ 22,552,030 $ 2,714,789
============ ============
Cash paid during the period for:
Interest $ 1,220,399 $ 1,213,289
Taxes $ -- $ 34,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Adirondack Financial Services Bancorp, Inc.
Notes to Consolidated Financial Information
March 31, 1998
Note 1 - Basis of presentation:
The unaudited consolidated interim financial statements include the accounts of
Adirondack Financial Services Bancorp, Inc.(the "Holding Company") and
Gloversville Federal Savings and Loan Association (the "Association"). The
financial information has been prepared in accordance with the Summary of
Significant Accounting Policies as outlined in the Association's audited
financial statements as of and for the year ended September 30, 1997, and in the
opinion of management, contains all adjustments necessary to present fairly, in
all material respects, the Company's financial position as of March 31, 1998 and
September 30, 1997, and its results of operations for the three and six month
periods ended March 31, 1998 and 1997 and cash flows for the six month period
ended March 31, 1998. All adjustments made to the unaudited interim financial
information were of a recurring nature.
<PAGE>
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1998
When used in this document, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "project," or
similar expressions are intended to identify "forward looking statements," Such
statements are subject to certain risks and uncertainties-including, changes in
economic conditions in the Association's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
Association's market area, and competition that could cause actual results to
differ materially from historical results and those presently anticipated or
projected. The Association wishes to caution reader not to place undue reliance
on any such forward looking statements, which speak only as of the date made.
The Association wishes to advise readers that the factors listed above could
affect the Association's financial performance and could cause the Association's
actual results for future periods to materially differ from any opinions or
statements expressed with respect to future periods in any current statements.
Financial Condition
At March 31, 1998, Adirondack Financial Services Bancorp, Inc. (the "Holding
Company") was in the process of conducting its stock subscription. The offering
was completed on April 6, 1998. Upon completion of the offering, the Holding
Company purchased stock in Gloversville Federal Savings and Loan Association
(the "Association"). Since the Holding Company had no results of operations at
March 31, 1998; therefore, the following discussion principally reflects the
operations and financial condition of the Association.
Total assets of the Association were $80.4 million at March 31, 1998 an increase
of $19.4 million or 31.78% over total assets as of September 30, 1997. The
increase was attributable to $19.3 million of subscription offering proceeds,
all of which were held as deposits on March 31, 1998. Upon completion of the
transaction, $6.6 million of stock was purchased and $12.7 million was refunded
to subscribers.
Cash and cash equivalents increased $20.6 million from $1.9 million at September
30, 1997 to $22.6 million at March 31, 1998. The increase represented funds
primarily obtained through the Holding Company's subscription offering which
were temporarily invested in interest-bearing time deposits.
Investments available for sale were $6.7 million at March 31, 1998 or $317,000
or 4.52% less than the $7.0 million balance at September 30, 1997. The decrease
was attributable to principal paydowns received in the portfolio.
Gross loans declined from $51.3 million at September 30, 1997 by $1.0 million or
1.95% to $50.3 million at March 31, 1998. The majority of the loan decline was
in one-to-four family loans which were $36.9 million at September 30, 1997 and
$1.6 million or 4.38% less at March 31, 1998 with a balance of $35.3 million.
The decline in gross loans outstanding from September 30, 1997 to March 31, 1998
was attributable to the highly competitive nature of the residential mortgage
market and the low interest rate environment which resulted in increased payoffs
of existing mortgage loans. Offsetting to some extent the decline in one-to-four
family loans, was an increase of $869,000 or 61.11% in commercial business loans
from $1.4 million at September 30, 1997 to $2.3 million at March 31, 1998. The
increase in the commercial business loans is consistent with the Board's intent
to build the commercial business portfolio.
The Allowance for Loan Loss decreased by $43,000 or 2.67% during the period from
September 30, 1997 to March 31, 1998. The decline was the result of net
charge-offs of $73,000 exceeding the provision of $30,000 made during the six
month period ended March 31, 1998. Charge-offs taken during the period between
September 30, 1997 through March 31, 1998 were primarily on loans secured by
residential properties either foreclosed upon or deemed uncollectible. At March
31, 1998, the allowance for loan losses was 3.12% of gross loans receivable as
compared to 3.14% at September 30, 1997.
Deposits increased from the September 30, 1997 balance of $56.1 million by $17.1
million or 30.41% to $73.2 million at March 31, 1998. Demand and N.O.W. accounts
increased $16.4 million from $5.1 million at September 30, 1997 to $21.6 million
at March 31, 1998. Savings accounts increased from $12.0 million at September
30, 1997 to a March 31, 1998 balance of $13.6 million or $1.6 million, a 13.11%
change. In addition, money market account balances at March 31, 1998 were $12.2
million as compared to the September 30, 1997 balance of $11.0 million, an
increase of $1.3 million or 11.52%. The increases in demand and N.O.W., savings
and money market accounts is primarily attributable to subscriptions received
and deposits made in connection with the Holding Company's stock offering. The
Holding Company held all funds received from subscriptions in a N.O.W. account
maintained at the Association. In addition, potential investors made substantial
deposits to their existing non-time deposit accounts maintained at the
Association to fund their stock purchases. The funds to be used to fund stock
purchases held in depositors' accounts were not withdrawn by the Holding Company
until the final stock allocation was determined in April. Time deposits declined
$2.2 million or 7.78% from $28.0 million at September 30, 1997 to $25.8 million
at March 31, 1998. The decline was due to the continued maturity time deposits
all of which were not maintained by the Association as borrowings were a less
expensive option available to meet short-term funding needs.
<PAGE>
Borrowings increased from $1.3 million at September 30, 1997 by $2.2 million to
$3.5 million at March 31, 1998. The Association replaced matured time deposits
that were not maintained with less costly FHLB borrowings.
Total equity increased by $81,000 during the six month period ended March 31,
1998 from $3.3 million at September 30, 1997 to $3.4 million at March 31, 1998.
The increase was attributable to net income of $57,000 recognized for the six
month period ended March 31, 1998 and a $24,000 decline in the after-tax net
unrealized loss on available for sale securities. Non-performing assets
decreased $690,000 or 16.80% from $4.1 million at September 30, 1997 to $3.4
million at March 31, 1998. The decrease is attributable to nonperforming loans
decreasing $407,000 or 10.73% from $3.8 million at September 30, 1997 to $3.4
million at March 31, 1998 and by a decline in OREO of $283,000 during the same
period. Nonperforming loans at September 30, 1997 consisted of one-to-four
family mortgages of $3.7 million and home equity loans of $63,000. Nonperforming
loans at March 31, 1998 consisted of one-to-four family mortgages of $3.3
million and home equity loans of $46,000. OREO at both March 31, 1998 and 1997
consisted entirely of one-to-four family residences.
Comparison of Operating Results for the Six-Month Periods Ended
March 31, 1998 and 1997
General. Net income for the six months ended March 31, 1998 was $57,000,
compared to a net loss of $235,000 for the same period in fiscal 1997. The
$291,000 increase was primarily attributable to a decline of $140,000 in net
interest income, a $366,000 decrease in the provision for loan losses, an
increase of $10,000 in noninterest income and a decline of $64,000 in
non-interest expense.
Net interest income. Net interest income, or the difference between interest and
dividend income and interest expense, declined $140,000 or 11.03% comparing the
six month period ended March 31, 1997 to the six month period ended March 31,
1998. The income earned on average interest-earning assets during the period
ended March 31, 1998 was 8.15% as compared to 8.37% for the same period in
fiscal 1997. The effect of the decline in the average yield earned on
interest-earning assets was mostly attributable to a decline in loan average
loan balances from $51.4 million for the six months ended March 31, 1997 to
$50.6 million for the six months ended March 31, 1998 and in average loan yields
from 8.70% for the six month period ended March 31, 1997 to 8.51% for the six
month period ended March 31, 1998, resulting in a decline in interest income
earned on loans of $74,000 between the two periods. Interest earned from
interest-bearing time deposits increased from $10,000 for the six months ended
March 31, 1997 to $44,000 for the six months ended March 31, 1998. The increase
was primarily attributable to the interest earned on proceeds received from the
Company's stock offering invested in interest-bearing time deposits. The cost of
interest-bearing liabilities increased from 4.23% for the six months ended March
31, 1997 to 4.40% for the six months ended March 31, 1998. The cost of N.O.W
accounts increased by 33 basis points from 1.28% for the six months ended March
31, 1997 to 1.61% for the six months ended March 31, 1998 as the interest due on
stock subscription deposits was determined using the savings interest rate of
3.00% which is 150 basis points than the stated rate for N.O.W. accounts. The
cost of money market accounts for the six months ended March 31, 1998 was 4.14%,
12 basis points higher than the 4.02% average cost for the six months ended
March 31, 1997. The increase was attributable to higher balances being
maintained in the individual accounts. Money market accounts are paid higher
interest rates as the account balance increases. Time deposit average rates paid
increased from 5.25% for the six months ended March 31, 1997 to 5.61% for the
six months ended March 31, 1998 caused by lower yielding time deposits maturing
and having been renewed at higher rates. The average cost of savings accounts
and borrowings did not increase significantly between the two periods.
The Association realized lower average yields on its loans, primarily as a
result of loan originations at rates less than those currently held by the
Association coupled with the continued amortization and prepayment of higher
yielding loans. In addition, the cost of non-interest bearing liabilities have
increased primarily due to the continued upward pricing of time deposits and the
increased cost of borrowings, coupled with higher average balances outstanding
in demand and N.O.W. and money market accounts.
Provision for loan losses. The provision for loan losses was $30,000 for the six
months ended March 31, 1998 compared to $396,000 for the same period in fiscal
1997. Management charges earnings for an amount necessary to maintain the
allowance for loan losses at a level considered adequate to absorb losses in the
loan portfolio. Although the Association maintains its allowance for loan losses
at a level it considers adequate to provide for losses, there can be no
assurance that such losses will not exceed the estimated amounts or that
additional substantial provisions for loan losses will not be required in future
periods. The provision in fiscal 1997 was primarily based on a $1.3 million or
59.3% increase in non-performing loans to $3.5 million at March 31, 1997 as
compared to $2.2 million at September 30, 1996. The allowance for loan losses
totaled $1.6 million (3.12% of total loans and 46.37% of nonperforming loans) at
March 31, 1998 compared with $1.6 million (3.14% of total loans and 42.53% of
nonperforming loans) at September 30, 1997.
Other income. Other income for the six months ended March 31, 1998 increased
$10,000 or 12.57% from $78,000 during the same period in 1997 to $88,000. This
increase was primarily attributable to a $8,000 increase in service charges and
fees, reflecting newly implemented fees being collected from customers.
<PAGE>
Other expense. Other expenses decreased $64,000 or 5.56% to $1.1 million for the
six month period ended March 31, 1998 from $1.2 million for the six month period
ended March 31, 1997. Decreased operating expenses included: occupancy expenses
of $8,000 or 6.52%; deposit insurance premiums of $7,000 or 20.85%; advertising
expenses of $11,000 or 18.21%; directors fees and expenses of $8,000 or 15.92%;
equipment expenses of $8,000 or 5.20%; and other operating expenses of $47,000
or 16.89%. These decreases are generally the result of improved operations
related to the conversion to our in-house data processing system, reduced
premiums being assessed for deposit insurance due to the recapitalization of the
Savings Association Insurance Fund, reduction in discretionary expenses such as
advertising and a reduction in the number of Board members. Compensation and
benefits increased $23,000 or 5.13% from $442,000 for the six months ended March
31, 1997 to $465,000 for the six months ended March 31, 1998. The increase was
attributable to increased cost of benefits and to cost-of-living increases given
employees.
Income tax expense. Income tax expense was $38,000 for the six months ended
March 31, 1998, or 40.11% of pre-tax income compared to $29,000 on a pre-tax
loss of $206,000 for the six months ended March 31, 1997. A benefit was not
recognized for the net loss incurred during the six months ended March 31, 1997
because there was not sufficient support to increase the deferred tax asset. As
a result of the 1997 six month loss and the significant reduction in the amount
of historical taxes available for carry back, the deferred tax asset valuation
allowance was increased.
Comparison of Operating Results for the Three-Month Periods Ended
March 31, 1998 and 1997
General. Net income for the three months ended March 31, 1998 was $33,000,
compared to a net loss of $124,000 for the same period in fiscal 1997. The
$157,000 increase was primarily attributable to a decline of $55,000 in net
interest income, a $183,000 decrease in the provision for loan losses and a
decline of $34,000 in non-interest expense.
Net interest income. Net interest income declined $55,000 or 8.79% comparing the
three month period ended March 31, 1997 to the three month period ended March
31, 1998. The income earned on average interest-earning assets during the three
month period ended March 31, 1998 was 8.34% as compared to 8.15% for the same
period in fiscal 1997. The effect of the decline in the average yield earned on
interest-earning assets was mostly attributable to a decline in loan average
loan balances from $51.3 million for the three months ended March 31, 1997 to
$50.2 million for the three months ended March 31, 1998 and in average loan
yields from 8.67% for the three month period ended March 31, 1997 to 8.59% for
the three month period ended March 31, 1998, resulting in a decline in interest
income earned on loans of $34,000 between the two periods. Interest earned from
interest-bearing time deposits increased from $2,000 for the three months ended
March 31, 1997 to $42,000 for the three months ended March 31, 1998. The
increase was primarily attributable to the interest earned on proceeds received
from the Company's stock offering invested in interest-bearing time deposits.
The cost of interest-bearing liabilities increased from 4.18% for the three
months ended March 31, 1997 to 4.38% for the three months ended March 31, 1998.
The average cost of N.O.W. accounts increased from 1.24% for the three months
ended March 31, 1997 to 1.87% for the three months ended March 31, 1998. This
increase was attributable to the Association accruing interest on funds held in
escrow obtained from the Holding Company's subscription offering at a higher
rate than the rate paid on N.O.W. accounts. The cost of time deposits and
borrowings also increased from an average combined cost of 5.21% for the three
months ended March 31, 1997 to 5.61% on average for the three months ended March
31, 1998 which is the result of lower cost time deposits maturing and being
renewed at higher rates or being replaced with higher cost borrowings.
Provision for loan losses. The provision for loans losses was $15,000 for the
three months ended March 31, 1998 compared to $198,000 for the same period in
fiscal 1997. The provision for the three months ended March 31, 1997 was
primarily based on the high level of nonperforming loans. For the three months
ended March 31, 1998 as compared to the same period last fiscal year, the level
of nonperforming loans and net loan charge-offs declined.
Other expense. Other expenses decreased $34,000 or 5.96% to $536,000 for the
three month period ended March 31, 1998 from $570,000 for the three month period
ended March 31, 1997. Deposit insurance premiums were $13,000 for the three
months ended March 31, 1998 compared to $1,000 for the three months ended March
31, 1997. The 1997 deposit insurance premiums reflect a credit obtained from the
FDIC for an overpayment of the calendar year fourth quarter premiums paid.
Directors' fees and expenses declined $12,000 or 37.50% from $32,000 for the
three months ended March 31, 1997 to $20,000 for the three months ended March
31, 1998 due to a reduction of the number of paid Directors. Other operating
expenses decreased $25,000 or 18.66% from $134,000 for the three months ended
March 31, 1997 to $109,000 for the three months ended March 31, 1998. The
reduction was attributable to a decline in the expenses related to delinquent
borrowers.
Income tax expense. Income tax expense was $22,000 for the three months ended
March 31, 1998, or 40.00% of pre-tax income compared to $16,000 on a pre-tax
loss of $108,000 for the three months ended March 31, 1997. A benefit was not
recognized for the net loss incurred during the three months ended March 31,
1997 because there was not sufficient support to increase the deferred tax
asset. As a result of the 1997 three month loss and the significant reduction in
the amount of historical taxes available for carry back, the deferred tax asset
valuation allowance was increased.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Periodically, there have been various claims and lawsuits involving the
Company, mainly as a defendant, such as claims to enforce liens,
condemnation proceedings on properties in which the Company holds
security interests, claims involving the making and servicing of real
property loans and other issues incident to the Company's business. The
Company is not a party to any pending legal proceedings that it
believes would have a material adverse effect on the financial
condition or operation of the Company.
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
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 1 - Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Adirondack Financial Services Bancorp, Inc.
- -------------------------------------------
(Registrant)
Dated: May 1, 1998 \s\ Lewis E. Kolar
-----------------------
Lewis E. Kolar
President and CEO
Dated: May 1, 1998 \s\ Menzo D. Case
-----------------------
Menzo D. Case
Executive VP and CFO
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,352,030
<INT-BEARING-DEPOSITS> 21,200,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,700,017
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 50,161,144
<ALLOWANCE> 1,570,012
<TOTAL-ASSETS> 80,413,528
<DEPOSITS> 73,182,562
<SHORT-TERM> 3,500,000
<LIABILITIES-OTHER> 369,908
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 3,361,058
<TOTAL-LIABILITIES-AND-EQUITY> 80,413,528
<INTEREST-LOAN> 1,077,076
<INTEREST-INVEST> 104,161
<INTEREST-OTHER> 42,373
<INTEREST-TOTAL> 1,223,610
<INTEREST-DEPOSIT> 607,540
<INTEREST-EXPENSE> 651,621
<INTEREST-INCOME-NET> 571,989
<LOAN-LOSSES> 15,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 535,838
<INCOME-PRETAX> 55,632
<INCOME-PRE-EXTRAORDINARY> 55,632
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,432
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.15
<LOANS-NON> 3,344,861
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,464,391
<LOANS-PROBLEM> 1,195,984
<ALLOWANCE-OPEN> 1,612,981
<CHARGE-OFFS> 105,187
<RECOVERIES> 32,218
<ALLOWANCE-CLOSE> 1,570,012
<ALLOWANCE-DOMESTIC> 1,570,012
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
