SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------- ------------------------
Commission file number 0-24353
THISTLE GROUP HOLDINGS, CO.
---------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2960768
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
6060 Ridge Avenue, Philadelphia, Pennsylvania 19128
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 483-2800
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check 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 _____
-----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date May 12, 2000
Class Outstanding
- --------------------------------------------------------------------------------
$.10 par value common stock 7,445,332 shares
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
Page
Number
PART 1 - UNAUDITED CONSOLIDATED FINANCIAL INFORMATION OF
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
Item 1. Financial Statements and Notes Thereto ........................... 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 11
Item 2. Changes in Securities.............................................. 11
Item 3. Defaults upon Senior Securities.................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................ 11
Item 5. Other Information.................................................. 11
Item 6. Exhibits and Reports on Form 8-K................................... 11
SIGNATURES
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
ASSETS
Cash on hand and in banks.............................................. $ 7,739 $19,494
Interest-bearing deposits.............................................. 25,959 17,703
------ ------
Total cash and cash equivalents............................... 33,698 37,197
Investments available for sale at fair value...........................
(amortized cost of $129,141 and $128,729)..................... 117,626 115,463
Mortgage-backed securities available for sale..........................
at fair value (amortized cost of $215,931 and $211,304)....... 209,155 204,706
Loans receivable (net of allowance for loan losses of
$1,380 and $1,234)............................................ 173,744 157,233
Loans held for sale.................................................... 3,869 3,925
Accrued interest receivable............................................ 4,180 3,692
Federal Home Loan Bank stock - at cost ................................ 8,993 8,844
Real estate acquired through foreclosure - net ........................ 93 104
Office properties and equipment - net ................................. 2,963 2,853
Cash surrender value of life insurance................................. 11,716 11,590
Prepaid expenses and other assets ..................................... 989 1,145
Deferred income taxes.................................................. 7,515 8,007
------- -------
TOTAL ASSETS.................................................. $574,541 $554,759
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits .............................................................. $312,879 $292,619
Accrued interest payable............................................... 853 835
Advances from borrowers for taxes and insurance........................ 1,183 2,472
FHLB advances.......................................................... 176,884 176,884
Accounts payable and accrued expenses.................................. 4,352 3,790
Other borrowings....................................................... 2,500 3,000
Dividends payable ..................................................... 448 467
Accrued income taxes .................................................. 858 32
Deferred income taxes.................................................. -- --
------- -------
TOTAL LIABILITIES ............................................ 499,957 480,099
------- -------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, no par value - 10,000,000 shares authorized,
none issued in 2000 and 1999........................................... -- --
Common stock - $.10 par, 40,000,000 shares authorized, 8,999,989
issued in 2000 and 1999; 7,465,332 outstanding March 31, 2000
and 7,780,432 outstanding December 31, 1999............................ 900 900
Additional paid-in capital............................................. 93,379 93,400
Common stock acquired by stock benefit plans .......................... (7,969) (8,199)
Treasury stock at cost, 1,534,657 shares at March 31, 2000 and
1,219,557 shares at December 31, 1999 ........................... (13,967) (11,787)
Accumulated other comprehensive loss .................................. (12,070) (13,108)
Retained earnings - partially restricted .............................. 14,311 13,454
------- -------
Total stockholders' equity ................................... 74,584 74,660
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................ $574,541 $554,759
======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
1
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------
2000 1999
<S> <C> <C>
INTEREST INCOME:
Interest on loans ........................................................................... $ 3,331 $ 2,749
Interest on mortgage-backed securities ...................................................... 3,486 3,414
Interest and dividends on investments ....................................................... 2,730 1,607
----------- -----------
Total interest income ................................................................ 9,547 7,770
----------- -----------
INTEREST EXPENSE:
Interest on deposits ........................................................................ 3,284 2,853
Interest on borrowed money .................................................................. 2,446 1,447
----------- -----------
Total interest expense ............................................................... 5,730 4,300
----------- -----------
NET INTEREST INCOME ............................................................................ 3,817 3,470
PROVISION FOR LOAN LOSSES ...................................................................... 120 30
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................................................................................ 3,697 3,440
----------- -----------
OTHER INCOME:
Service charges and other fees ............................................................... 107 99
Loss on sale of real estate owned ............................................................ (25) -
Gain on sale of mortgage-backed securities ................................................... 173 -
Gain on sale of loans......................................................................... 23 -
Gain on sale of investments .................................................................. - 2
Rental income ................................................................................ 29 47
Miscellaneous other income ................................................................... 31 -
----------- -----------
Total other income ................................................................... 338 148
----------- -----------
OTHER EXPENSES:
Salaries and employee benefits .............................................................. 1,285 1,015
Occupancy and equipment ..................................................................... 319 265
Federal insurance premium ................................................................... 15 42
Professional fees ........................................................................... 84 119
Advertising and promotion ................................................................... 91 29
Other ....................................................................................... 564 451
----------- -----------
Total other expenses ................................................................. 2,358 1,921
----------- -----------
INCOME BEFORE INCOME TAXES ..................................................................... 1,677 1,667
----------- -----------
INCOME TAXES ................................................................................... 372 462
----------- -----------
NET INCOME ..................................................................................... $ 1,305 $ 1,205
=========== ===========
BASIC EARNINGS PER SHARE ....................................................................... $ .18 $ .16
DILUTED EARNINGS PER SHARE ..................................................................... $ .18 $ .15
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC ......................................................................... 7,071,192 7,690,169
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED ....................................................................... 7,102,610 7,857,438
</TABLE>
See notes to unaudited consolidated financial statements
2
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
For the
Three Months
Ended March 31,
2000 1999
-------- --------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income ........................................................ $ 1,305 $ 1,205
Adjustments to reconcile income to net cash provided
by operating activities:
Provision for loan losses ...................................... 120 30
Depreciation ................................................... 145 105
Amortization of stock benefit plans ............................ 239 109
Amortization of net premiums (discounts) on:
Loans purchased ................................................ 26 38
Investments .................................................... (337) (386)
Mortgage-backed securities ..................................... 243 399
Gain on sale of loans ............................................. (23)
Gain on sale of investments ....................................... -- (2)
Gain on sale of mortgage-backed securities ........................ (173) --
Loss on sale of real estate owned.................................. 25 --
(Increase) decrease in other assets ............................... (483) 1,162
Increase (decrease) in other liabilities .......................... 1,344 (287)
-------- --------
Net cash provided by operating activities ......................... 2,431 2,373
-------- --------
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities ..................................... 4,666 18,085
Loans .......................................................... 9,306 8,737
Loans originated .................................................. (21,132) (6,527)
Loans acquired .................................................... (4,800) (1,650)
Purchases of:
Investments ................................................... (80) (26,979)
Mortgage-backed securities .................................... (26,980) (9,990)
Office properties and equipment ............................... (255) (42)
FHLB Stock .................................................... (149) (1,000)
Proceeds from the sale of loans ................................... 23 --
Proceeds from sale of investments ................................. -- 3,011
Proceeds from the sale of mortgage-backed securities .............. 17,617 --
Proceeds from sale of real estate owned ........................... 11 --
Maturities and calls of investments ............................... -- 500
-------- --------
Net cash used in investing activities ............................ (21,773) (15,855)
-------- --------
FINANCING ACTIVITIES:
Net increase in deposits .......................................... 20,260 181
Net decrease in advances from borrowers for
taxes and insurance ............................................ (1,289) (1,042)
Net increase in FHLB advances ..................................... -- 20,000
Decrease in other borrowings ...................................... (500) --
Purchase of treasury stock ........................................ (2,180) (10,837)
Net proceeds from exercise of stock options ....................... -- 214
Cash dividends .................................................... (448) (402)
-------- --------
Net cash provided by financing activities ......................... 15,843 8,114
-------- --------
Net decrease in cash and cash equivalents ......................... (3,499) (5,368)
Cash and cash equivalents, beginning of period .................... 37,197 26,136
-------- --------
Cash and cash equivalents, end of period .......................... 33,698 $ 20,768
======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid on deposits and funds borrowed ...................... $ 5,712 $ 4,211
Income taxes paid ................................................. -- 46
Noncash transfers from loans to real estate owned ................. 25 27
</TABLE>
See notes to unaudited consolidated financial statements
3
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 - PRINCIPLES OF CONSOLIDATION
Thistle Group Holdings, Co., organized in March of 1998, has three
wholly owned subsidiaries; TGH Corp., TGH Securities, and Roxborough
Manayunk Bank. Roxborough Manayunk Bank has three wholly owned
subsidiaries; Roxdel Corp., Montgomery Service Corp. and Ridge Service
Corp. The Company's business is conducted principally through the
Bank. All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-Q and, therefore,
do not include all information necessary for a complete presentation of
consolidated financial condition, results of operations, and cash flows
in conformity with generally accepted accounting principles. However,
all adjustments, consisting of normal recurring accruals, which, in the
opinion of management, are necessary for a fair presentation of the
consolidated financial statements have been included. The results of
operations for the periods ended March 31, 2000 are not necessarily
indicative of the results which may be expected for the entire fiscal
year or any other period.
These statements should be read in conjunction with the consolidated
financial statements and related notes which are included in the
Company's Annual Report to stockholders for the year ended December 31,
1999.
NOTE 3 - INVESTMENTS AVAILABLE FOR SALE
Investments at March 31, 2000 and December 31, 1999 consisted of the
following:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
Amortized Approximate Amortized Approximate
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and securities
of U.S. government agencies -
1 to 5 years.................................... $ 3,000 $ 2,828 $3,000 $2,834
5 to 10 years................................... 3,015 2,944 3,017 2,965
More than 10 years.............................. 42,000 39,110 42,000 38,706
FHLB and FHLMC Bonds - more than 10 years....... 17,931 14,368 17,622 13,661
Municipal bonds - more than 10 years............ 41,653 38,497 41,613 37,129
Mutual funds.................................... 1,365 1,365 1,345 1,345
Capital trust securities........................ 12,890 11,091 12,900 11,340
Equity investments.............................. 5,841 5,977 5,795 6,046
Other........................................... 1,446 1,446 1,437 750
-------- -------- -------- --------
Total........................................... $129,141 $117,626 $128,729 $115,463
======== ======== ======== ========
</TABLE>
NOTE 4 - MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities at March 31, 2000 and December 31, 1999
consisted of the following:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
Amortized Approximate Amortized Approximate
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
GNMA pass-through certificates................... $123,336 $120,377 $111,825 $108,963
FNMA pass-through certificates................... 71,943 68,348 77,567 73,801
FHLMC pass-through certificates.................. 19,290 19,085 20,550 20,621
FHLMC real estate mortgage investment conduits... 1,362 1,345 1,362 1,321
--------- ---------- ---------- ----------
Total............................................ $215,931 $209,155 $211,304 $204,706
======== ======== ======== ========
</TABLE>
4
<PAGE>
NOTE 5 - LOANS RECEIVABLE
Loans receivable at March 31, 2000 and December 31, 1999 consisted of
the following:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Mortgage loans:
1-4 family residential...................... $112,961 $110,032
Commercial real estate...................... 37,487 29,867
Home equity lines of credit and improvement loans.... 8,617 8,518
Commercial non-mortgage loans........................ 10,614 5,496
Construction loans - net............................. 6,356 5,365
Loans on savings accounts............................ 170 170
Consumer loans....................................... 128 126
-------- --------
Total Loans................................. 176,333 159,574
-------- --------
Plus: unamortized premiums........................... 344 373
Less:
Net discounts on loans purchased............ (26) (28)
Deferred loan fees......................... (1,527) (1,452)
Allowance for loan losses................... (1,380) (1,234)
-------- --------
Total $173,744 $157,233
======== ========
</TABLE>
NOTE 6- DEPOSITS
The major types of deposits by amounts and percentages were as follows:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
Amount % of Total Amount % of Total
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
NOW accounts and
transaction checking............ $21,023 6.7% $19,880 6.8%
Money Market Demand accounts....... 9,919 3.2% 8,963 3.1%
Passbook accounts.................. 96,626 30.9% 99,018 33.8%
Certificate accounts............... 185,311 59.2% 164,758 56.3%
-------- ------ -------- ------
Total $312,879 100.0% $292,619 100.0%
======== ====== ======== ======
</TABLE>
NOTE 7 - EARNINGS PER SHARE
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the
earnings of the Company.
NOTE 8 - COMPREHENSIVE INCOME (LOSS)
For the three months ended March 31, 2000, the Company reported total
comprehensive income of $2.3 million. For the three month period of the
prior year the Company reported total comprehensive income of $326,000.
Other comprehensive income consisted of unrealized gains or losses, net
of taxes, on available for sale securities for the three month periods
ended March 31, 2000 and 1999 and a reclassification adjustment for
gains included in net income for the three month periods ended March
31, 2000 and 1999.
NOTE 9 - DIVIDENDS
On March 16, 2000, the Company declared a dividend of $.06 per share
payable April 14, 2000 to stockholders of record on March 31, 2000.
5
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. When used in
this discussion, the words "believes", anticipates", "contemplates",
"expects", and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain
risks and uncertainties which could cause actual results to differ
materially from those projected. Those risks and uncertainties include
changes in interest rates, risks associated with the effect of opening
a new branch, the ability to control costs and expenses, new
legislation and regulations, and general market conditions. Thistle
Group Holdings, Co. undertakes no obligation to publicly release the
results of any revisions to those forward-looking statements which may
be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
General
-------
Thistle Group Holdings, Co. (the "Company") is a Pennsylvania
Corporation which was organized in March 1998 to acquire all of the
Capital Stock of Roxborough-Manayunk Bank (the "Bank") in the
Conversion and Reorganization. The Company is a unitary thrift holding
company which, under existing laws, generally is not restricted in the
types of business activities in which it may engage provided that the
Bank retains a specified amount of its assets in housing-related
investments.
The Bank is a federally chartered stock savings bank. The Bank serves
the Pennsylvania counties of Philadelphia and Delaware through its
transactional web site RMBgo.com and a network of six offices,
providing a full range of retail banking services, with emphasis on the
origination of one-to-four family residential mortgages.
The Bank is primarily engaged in attracting deposits from the general
public through its offices and using those and other available sources
of funds to originate and purchase loans secured by one to four-family
residences, existing multi-family residential and nonresidential real
estate. In addition, the Bank originates consumer loans, such as home
equity loans and home equity lines of credit. Such loans generally
provide for higher interest rates and shorter terms than single-family
residential real estate loans.
Comparison of Financial Condition
---------------------------------
The Company had total assets of $574.5 million as of March 31, 2000,
representing an increase of $19.8 million from the balance of $554.8
million as of December 31, 1999. The increase was due mainly to an
increase in loans receivable of $17 million funded by $20 million in
new deposits during the quarter.
Cash and cash equivalents decreased $3.5 million or 9.4% from $37.2
million at December 31, 1999 to $33.7 million at March 31, 2000
primarily due to the purchase of mortgage-backed securities and the
repurchase of stock.
Investments increased $2.2 million or 2% from $115.5 million at
December 31, 1999 to $117.6 million at March 31, 2000 primarily due to
a decrease in the unrealized loss of $1.8 million.
Mortgage-backed securities increased $4.4 million or 2% from $204.7
million at December 31, 1999 to $209.2 at March 31, 2000. This increase
was the result of $27.0 million in purchases offset by $4.7 million in
repayments and sales of $17.6 million.
Loans increased $16.5 million or 10.5% from $157.2 million at December
31, 1999 to $173.7 million at March 31, 2000. This increase was the
result of $21.1 million of originations including $14.8 million of
non-residential loans, and $4.8 million in non-residential loan
purchases, offset by principal repayments of $9.3 million.
Deposits increased $20.3 million or 6.9% from $292.6 million at
December 31, 1999 to $312.9 million at March 31, 2000. Certificates of
deposit increased $20.6 million, passbook accounts decreased $2.4
million and NOW accounts, transactions checking and money market
accounts increased $2.1 million.
FHLB Advances remained unchanged at $176.9 million at March 31, 2000.
6
<PAGE>
Total stockholders' equity decreased $76,000 or less than 1% from $74.7
million at December 31, 1999 to $74.6 million at March 31, 2000
primarily due to the repurchase of 315,100 shares at an average cost of
$6.93 per share and dividends declared of $448,000 offset by net income
for the quarter of $1.3 million and to a decrease in the accumulated
other comprehensive loss of $1.0 million due to improvement in the mark
to market adjustment on securities available for sale, as required by
Financial Accounting Standards Board Statement No. 115. Any movement in
general market conditions, including interest rates, competition and
credit quality could result in a material fluctuation on the Company's
available for sale portfolio, and thus its stockholders' equity.
Non-performing Assets
---------------------
The following table sets forth information regarding non-performing
loans and real estate owned.
At At
March 31, 2000 December 31, 1999
--------------- -----------------
(Dollars in Thousands)
Total non-performing loans .............. $ 283 $ 223
Real estate owned ....................... 93 104
------ ------
Total non-performing assets ............. $ 376 $ 327
====== ======
Total non-performing loans to
total loans ............................. .18% .14%
Total non-performing assets to
total assets ............................ .07% .07%
Allowance for loan loss ................. $1,380 $1,234
Allowance for loan losses as a percentage
of total non-performing assets .......... 367% 377%
Allowance for loan losses as a percentage
of total non-performing loans ........... 488% 553%
Allowance for loan losses as a percentage
of total average loans .................. .85% .85%
Comparison of Operations for the Three Month Periods Ended March 31,
--------------------------------------------------------------------
2000 and 1999
-------------
Net Income. Net income for the three months ended March 31, 2000
increased $100,000 or 8.3% from $1.2 million at March 31, 1999 to $1.3
million at March 31, 2000. The increase for the three-month period is
due to an increase in net interest income of $347,000, and increase of
$190,000 in other income offset by an increase of $437,000 in
non-interest expense.
Total Interest Income. Interest income for the three months ended March
31, 2000 increased $1.8 million or 22.9% over the quarter ended March
31, 1999 due primarily to an increase of $74.1 million in the average
balance of interest-earning assets and an increase in the average yield
of 41 basis points.
Total Interest Expense. Interest expense for the three months ended
March 31, 2000 increased $1.4 million or 33.3% over the quarter ended
March 31, 1999 due primarily to an increase of $88.7 million in the
average balance of interest-bearing liabilities and to a lesser extent
by an increase of 37 basis points in the average cost of funds.
Net Interest Income. Net interest income for the three months ended
March 31, 2000 increased $347,000 or 10.0% over the quarter ended March
31, 1999 due to the reasons discussed above. The net interest spread,
the difference between the average rate earned and the average rate
paid, increased by 3 basis points to 2.27% for the three months ended
March 31, 2000 from 2.24% for the same period in 1999.
Provision for Losses on Loans. The provision for losses on loans for
the three months ended March 31, 2000 totaled $120,000 compared to
$30,000 for the same period in 1999 due mainly to increased loan
growth. Provisions for losses included charges to reduce the recorded
balances of mortgage loans receivable and the collateral real estate to
their estimated net realizable value or fair value, as applicable. Such
provisions are based on management's estimate of net realizable value
or fair value of the collateral, as applicable, considering the current
operating or sales conditions, thereby causing these
7
<PAGE>
estimates to be particularly susceptible to changes that could result
in a material adjustment to results of operations in the near term.
Recovery of the carrying value of such loans and its collateral is
dependent to a great extent on economic, operating and other conditions
that may be beyond the Company's control. Management will continue to
review its loan portfolio to determine the extent, if any, to which
further additional loss provisions may be deemed necessary. There can
be no assurance that the allowance for losses will be adequate to cover
losses which may in fact be realized in the future and that additional
provisions for losses will not be required.
Other Income. Other income for quarter ended March 31, 2000 increased
$190,000 over the quarter ended March 31, 1999 due primarily to gains
on the sales of mortgage-backed securities available for sale to
improve the duration and yield of the investment portfolio.
Other Expenses. Other expenses increased $437,000 or 22.7% for the
quarter ended March 31, 2000 over the quarter ended March 31, 1999.
Salaries and employee benefits increased $270,000 due to compensation
expense related to the restricted stock plan which began to vest in
July 1999, addition of personnel and normal salary increases. Occupancy
and equipment costs increased $54,000 due to additional depreciation on
current year purchases of office and computer equipment. Federal
insurance premiums decreased $27,000 due to a decrease in the
assessment rate. Professional fees decreased $35,000 due mainly to cost
savings in the second year of being a public company. Advertising and
promotion increased $62,000 as the Company began a focused strategic
marketing effort in the latter half of 1999 which included, among other
things, additional media costs for creation and placement of new print
ads to a larger geographic area. Other expense increased $113,000 due
to costs associated with the management of investments at the Delaware
holding companies, an increase in capital stock tax and small increases
in operating costs.
Income Tax Expense. Income tax expense for the quarter ended March 31,
2000 was $372,000 or 22.2% of pre-tax income as compared to $462,000 or
27.7% for the quarter ended March 31, 1999. The primary reason for the
decrease in the effective tax rate was the reduction in state taxes
resulting from purchases of tax-exempt securities. The Company has
employed various strategies to reduce both federal and state income
taxes.
Liquidity and Capital Resources
-------------------------------
On March 31, 2000, the Bank was in compliance with its three regulatory
capital requirements as follows:
Amount Percent
------- -------
(in Thousands)
Tangible capital...................... $58,333 10.31%
Tangible capital requirement.......... 11,314 1.50%
------- -----
Excess over requirement............... $47,019 8.81%
======= =====
Core capital.......................... $58,333 10.31%
Core capital requirement.............. 22,628 3.00%
------- -----
Excess over requirement............... $35,705 7.31%
======= =====
Risk based capital.................... $59,713 29.63%
Risk based capital requirement........ 16,122 8.00%
------- -----
Excess over requirement............... $43,591 21.63%
======= =====
The Company's primary sources of funds are deposits, borrowings, and
proceeds from principal and interest payments on loans, mortgage-backed
securities and other investments. While maturities and scheduled
amortization of loans and mortgage-backed securities are a predictable
source of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions, competition
and the consolidation of the financial institution industry.
The primary investment activity of the Company is the origination and
purchase of mortgage loans, mortgage-backed securities and other
investments. During the three months ended March 31, 2000, the Company
originated $21.1 million of mortgage loans. The Company also purchases
loans and mortgage-backed securities to reduce liquidity not otherwise
required for local loan demand. Purchases of mortgage loans and
mortgage-backed securities totaled $ 31.8 million during the
three-month period ended March 31, 2000. Other investment activities
include investment in U.S. government and federal agency obligations,
municipal bonds, debt and equity investments in financial services
firms, FHLB of Pittsburgh stock, commercial and consumer loans.
8
<PAGE>
The Company has other sources of liquidity if a need for additional
funds arises. In 1999, the Company utilized FHLB advances to leverage
its balance sheet. In addition, other sources of liquidity can be found
in the Company's balance sheet, such as investment securities maturing
within one year and unencumbered mortgage-backed securities that are
readily marketable.
The Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. The requirement, which may be varied at the
direction of the OTS depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term
borrowings. The required minimum ratio is currently 4.0%. The Bank's
liquidity ratio was 14.1% at March 31, 2000.
The Company's most liquid assets are cash and cash equivalents, which
include investments in highly liquid short-term investments. The level
of these assets is dependent on the Company's operating, financing and
investing activities during any given period. At March 31, 2000, cash
and cash equivalents totaled $33.7 million.
The Company anticipates that it will have sufficient funds available to
meet its current commitments. As of March 31, 2000, the Company had
$19.9 million in commitments to fund loans. Certificates of deposit
which were scheduled to mature in one year or less as of March 31, 2000
totaled $141.8 million. Management believes that a significant portion
of such deposits will remain with the Company.
Impact of Inflation and Changing Prices
---------------------------------------
The consolidated financial statements of the Company and notes thereto,
presented elsewhere herein, have been prepared in accordance with GAAP,
which require the measurement of financial position and operating
results in terms of historical dollars without considering the change
in the relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased cost of the
Company's operations. Unlike most industrial companies, nearly all the
assets and liabilities of the Company are financial. As a result,
interest rates have a greater impact on the Company's performance than
do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the
prices of goods and services.
Additional Key Operating Ratios
-------------------------------
For the
Three Months Ended
March 31,
---------
2000(1) 1999(1)
Return on average assets.................... .92% .98%
Return on average equity.................... 7.14% 5.33%
Yield on average interest-earning assets.... 7.02% 6.61%
Cost of average interest-bearing liabilities 4.74% 4.37%
Interest rate spread (2).................... 2.27% 2.24%
Net interest margin......................... 2.81% 2.95%
At March 31, 2000 At December 31, 1999
----------------- --------------------
Tangible book value per share $9.99 $9.60
(1) The ratios for the three month periods are annualized.
(2) Interest rate spread represents the difference between the
average yield on interest-earning assets and the average cost of
interest-bearing liabilities.
Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The goal of the Company's asset/liability policy is to manage interest
rate risk so as to maximize net interest income over time in changing
interest rate environments. Management monitors the Company's net
interest spreads (the difference between yields received on assets and
rates paid on liabilities) and, although constrained by market
conditions, economic conditions, and prudent underwriting standards, it
offers deposit rates and loan rates in an attempt to maximize net
interest income. Management also attempts to fund the Company's assets
with liabilities of a comparable duration to minimize the impact of
changing interest rates on the Company's net interest income. Since the
relative spread between financial assets and liabilities is constantly
changing, the Company's current net interest income may not be an
indication of future net interest income.
The Company constantly monitors its deposits in an effort to decrease
their interest rate sensitivity. Rates of interest paid on deposits at
the Company are priced competitively in order to meet the Company's
asset/liability management objectives and
9
<PAGE>
spread requirements. As of March 31, 2000, the Company's savings
accounts, checking accounts and money market deposit accounts totaled
$127.6 million or 40.8% of its total deposits. The Company believes,
based on historical experience, that a substantial portion of such
accounts represent non-interest rate sensitive core deposits.
The Company's Board of Directors is responsible for reviewing and
approving the asset and liability policy. The Board meets quarterly to
review interest rate risk and trends, as well as liquidity and capital
ratio requirements. The Company's management is responsible for
administering the policy and determinations of the Board of Directors
with respect to the Company's asset and liability goals and strategies.
Management expects that the Company's asset and liability policy and
risk strategies will continue as described above so long as competitive
and regulatory conditions in the financial institution industry and
market interest rates continue as they have in recent years.
10
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank was engaged in any legal proceeding of
a material nature at March 31, 2000. From time to time, the Company is
a party to routine legal proceedings in the ordinary course of
business, such as claims to enforce liens, condemnation proceeding on
properties in which the Company holds a security interest, claims
involving the making and servicing of real property loans, and other
issues incident to the business of the Company. There were no lawsuits
pending or known to be contemplated against the Company at March 31,
2000 that would have a material effect on the operations or income of
the Company or the Bank, taken as a whole.
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
On April 19, 2000 the Annual Meeting of stockholders of the Company was
held to elect management's nominees for director and to ratify the
appointment of the Company's independent auditors. With respect to the
election of directors, the results were as follows:
Nominee For Withheld
------- --- --------
Francis E. McGill, III 6,270,614 98.1% 119,079 1.9%
Add B. Anderson, Jr. 6,270,351 98.1% 119,342 1.9%
With respect to the ratification of Deloitte & Touche LLP as
the Company's independent certified accountants, the results
were as follows:
6,310,516 (For) 63,842 (Against) 15,335 (Abstain)
---------- ------ ------
83.4% .8% .2%
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are filed as part of this report:
27 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
On February 9, 2000, the Registrant filed a Form 8-K (Items 5
and 7) announcing that it had organized a broker/dealer to
conduct business as TGH Securities.
11
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
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.
THISTLE GROUP HOLDINGS, CO.
Date: May 12, 2000 By: /s/ John F. McGill, Jr
----------------------
John F. McGill, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 12, 2000 By: /s/Jerry Naessens
-----------------
Jerry Naessens
Chief Financial Officer
(Principal Financial Officer)
12
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<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
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<MULTIPLIER> 1000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
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