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 June 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-24353
THISTLE GROUP HOLDINGS, CO.
---------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2960768
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
6060 Ridge Avenue, Philadelphia, Pennsylvania 19128
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 483-2800
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N/A
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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 August 11, 2000
Class Outstanding
--------------------------------------------------------------------------------
$.10 par value common stock 7,415,161 shares
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
Page
Number
------
PART 1 - UNAUDITED CONSOLIDATED FINANCIAL INFORMATION OF
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
Item 1. Financial Statements and Notes Thereto ......................... 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................ 14
Item 2. Changes in Securities............................................ 14
Item 3. Defaults upon Senior Securities.................................. 14
Item 4. Submission of Matters to a Vote of Security Holders.............. 14
Item 5. Other Information................................................ 14
Item 6. Exhibits and Reports on Form 8-K................................. 14
SIGNATURES
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 2000 Dec 31, 1999
(unaudited)
----------- ------------
<S> <C> <C>
ASSETS
Cash on hand and in banks.............................................. $ 3,431 $ 19,494
Interest-bearing deposits.............................................. 21,910 17,703
-------- --------
Total cash and cash equivalents............................... 25,341 37,197
Investments available for sale at fair value
(amortized cost of $129,161 and $128,729)..................... 117,381 115,463
Mortgage-backed securities available for sale at fair value
(amortized cost of $215,321 and $211,304)..................... 209,391 204,706
Trading Securities..................................................... 13,160 -
Loans receivable (net of allowance for loan losses of
$1,486 and $1,234)............................................ 186,910 157,233
Loans held for sale.................................................... 3,808 3,925
Accrued interest receivable............................................ 4,010 3,692
Federal Home Loan Bank stock - at cost ................................ 8,844 8,844
Real estate acquired through foreclosure - net ........................ 116 104
Office properties and equipment - net ................................. 2,966 2,853
Cash surrender value of life insurance................................. 11,883 11,590
Prepaid expenses and other assets ..................................... 1,392 1,145
Deferred income taxes.................................................. 7,332 8,007
------- -------
TOTAL ASSETS.................................................. $592,534 $554,759
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits .............................................................. $318,314 $292,619
Accrued interest payable............................................... 860 835
Advances from borrowers for taxes and insurance........................ 1,899 2,472
FHLB advances.......................................................... 176,884 176,884
Accounts payable and accrued expenses.................................. 11,063 3,790
Other borrowings....................................................... 7,060 3,000
Dividends payable ..................................................... 445 467
Accrued income taxes .................................................. 15 32
------- -------
TOTAL LIABILITIES ............................................ 516,540 480,099
------- -------
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; 7,415,161 outstanding June 30, 2000
and 7,780,432 outstanding December 31, 1999............................ 900 900
Additional paid-in capital............................................. 93,358 93,400
Common stock acquired by stock benefit plans .......................... (7,727) (8,199)
Treasury stock at cost, 1,584,828 shares at June 30, 2000 and
1,219,557 shares at December 31, 1999 ........................... (14,296) (11,787)
Accumulated other comprehensive loss .................................. (11,687) (13,108)
Retained earnings - partially restricted .............................. 15,446 13,454
------- -------
Total stockholders' equity ................................... 75,994 74,660
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................ $592,534 $554,759
======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
Thistle Group Holdings, Co. and subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------- --------------------------
2000 1999 2000 1999
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest on loans ................................................. $ 3,693 $ 2,782 $ 7,024 $ 5,531
Interest on mortgage-backed securities ............................ 3,646 3,360 7,132 6,774
Interest and dividends on investments ............................. 2,735 2,169 5,465 3,776
----------- ----------- ----------- -----------
Total interest income ...................................... 10,074 8,311 19,621 16,081
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits .............................................. 3,618 2,864 6,902 5,717
Interest on borrowed money ........................................ 2,527 1,824 4,973 3,271
----------- ----------- ----------- -----------
Total interest expense ..................................... 6,145 4,688 11,875 8,988
----------- ----------- ----------- -----------
NET INTEREST INCOME .................................................. 3,929 3,623 7,746 7,093
PROVISION FOR LOAN LOSSES ............................................ 120 120 240 150
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ...................................................... 3,809 3,503 7,506 6,943
----------- ----------- ----------- -----------
OTHER INCOME:
Service charges and other fees ..................................... 114 114 221 213
(Loss) gain on sale of real estate owned ........................... (9) 6 (34) 6
Gain (loss) on sale of mortgage-backed securities.................. - (16) 173 (16)
Gain on sale of loans .............................................. - - 23 -
Gain on sale of investments ........................................ 333 259 333 261
Rental income ...................................................... 44 37 73 84
Trading revenues from brokerage operations ......................... 114 - 114 -
Miscellaneous other income ......................................... 19 - 50 -
----------- ----------- ----------- -----------
Total other income ......................................... 615 400 953 548
----------- ----------- ----------- -----------
OTHER EXPENSES:
Salaries and employee benefits .................................... 1,284 1,038 2,588 2,053
Occupancy and equipment ........................................... 343 276 666 541
Federal insurance premium ......................................... 15 43 30 85
Professional fees ................................................. 91 155 177 274
Advertising and promotion ......................................... 70 56 161 85
Other ............................................................. 603 499 1,142 950
----------- ----------- ----------- -----------
Total other expenses ....................................... 2,406 2,067 4,764 3,988
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES ........................................... 2,018 1,836 3,695 3,503
----------- ----------- ----------- -----------
INCOME TAXES ......................................................... 438 427 810 889
----------- ----------- ----------- -----------
NET INCOME ........................................................... $ 1,580 $ 1,409 $ 2,885 $ 2,614
=========== =========== =========== ===========
BASIC EARNINGS PER SHARE ............................................. $.23 $.19 $.41 $.35
DILUTED EARNINGS PER SHARE ........................................... $.23 $.19 $.41 $.35
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC ............................................... 6,877,771 7,314,902 6,974,481 7,483,232
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED ............................................. 6,909,325 7,410,652 7,005,967 7,610,123
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
THISTLE GROUP HOLDINGS, CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
For the Six Months
Ended June 30
2000 1999
---- ----
OPERATING ACTIVITIES:
Net income ........................................... $ 2,885 $ 2,614
Adjustments to reconcile income to net cash provided
by operating activities:
Provision for loan losses ......................... 240 150
Depreciation ...................................... 294 211
Amortization of stock benefit plans ............... 444 188
Amortization of net premiums (discounts) on:
Loans purchased ................................... 21 38
Investments ....................................... (669) (645)
Mortgage-backed securities ........................ 439 817
Gain on sale of loans ................................ (23) -
Gain on sale of investments .......................... (333) (261)
(Gain) loss on sale of mortgage-backed securities .... (173) 16
Net increase in trading securities ................... (13,160) -
Loss (gain) on sale of real estate owned ............ 34 (6)
(Increase) decrease in other assets .................. (738) 765
Increase (decrease) in other liabilities ............. 7,216 (1,126)
-------- --------
Net cash (used in) provided by operating activities .. (3,523) 2,761
-------- --------
INVESTING ACTIVITIES:
Principal collected on:
Mortgage-backed securities ........................ 10,013 31,639
Loans ............................................. 16,184 16,539
Loans originated ..................................... (35,704) (20,090)
Loans acquired ....................................... (10,373) (3,810)
Purchases of:
Investments ...................................... (263) (62,320)
Mortgage-backed securities ....................... (31,914) (39,285)
Office properties and equipment .................. (407) (174)
FHLB Stock ....................................... (149) (2,500)
Proceeds from the sale of loans ...................... 23 -
Proceeds from sale of investments .................... 833 4,653
Proceeds from the sale of mortgage-backed securities . 17,617 27,728
Proceeds from sale of real estate owned .............. 27 6
Maturities and calls of investments .................. - 764
-------- --------
Net cash used in investing activities ............... (34,113) (46,850)
-------- --------
FINANCING ACTIVITIES:
Net increase in deposits ............................. 25,695 2,154
Net decrease in advances from borrowers for
taxes and insurance ............................... (573) (587)
Net increase in FHLB advances ........................ - 50,000
Net increase in other borrowings ..................... 4,060 -
Purchase of treasury stock ........................... (2,509) (13,149)
Net proceeds from exercise of stock options .......... - 214
Cash dividends ....................................... (893) (790)
-------- --------
Net cash provided by financing activities ............ 25,780 37,842
-------- --------
Net decrease in cash and cash equivalents ............ (11,856) (6,247)
Cash and cash equivalents, beginning of period ....... 37,197 26,136
-------- --------
Cash and cash equivalents, end of period ............. 25,341 19,889
======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid on deposits and funds borrowed ......... 11,850 8,768
Income taxes paid .................................... 546 467
Noncash transfers from loans to real estate owned .... 85 45
See notes to unaudited consolidated financial statements
5
<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., (the "Company") organized in March of 1998, has
three wholly owned subsidiaries; TGH Corp., TGH Securities, and Roxborough
Manayunk Bank (the "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 three and six months ended June 30,
2000 are not necessarily indicative of the results which may be expected for the
entire fiscal year or any other future 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 June 30, 2000 and December 31, 1999 consisted of the following:
<TABLE>
<CAPTION>
June 30, 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 $2,834
5 to 10 years................................... 6,014 5,783 3,017 2,965
More than 10 years.............................. 42,000 39,070 42,000 38,706
FHLB and FHLMC Bonds - more than 10 years....... 18,244 14,895 17,622 13,661
Municipal bonds - 5 to 10 years................. 153 153 - -
Municipal bonds - more than 10 years............ 41,691 38,588 41,613 37,129
Mutual funds.................................... 1,385 1,385 1,345 1,345
Capital trust securities........................ 12,873 10,856 12,900 11,340
Equity investments.............................. 5,345 5,195 5,795 6,046
Other........................................... 1,456 1,456 1,437 1,437
-------- -------- -------- --------
Total........................................... $129,161 $117,381 $128,729 $115,463
======== ======== ======== =========
</TABLE>
NOTE 4 - MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities at June 30, 2000 and December 31, 1999 of the
following:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
Amortized Approximate Amortized Approximate
Cost Fair Value Cost Fair Value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
GNMA pass-through certificates................... $120,116 $117,599 $111,825 $108,963
FNMA pass-through certificates................... 70,053 66,850 77,567 73,801
FHLMC pass-through certificates.................. 18,856 18,699 20,550 20,621
FHLMC real estate mortgage investment conduits... 6,296 6,243 1,362 1,321
-------- -------- -------- --------
Total............................................ $215,321 $209,391 $211,304 $204,706
======== ======== ======== ========
</TABLE>
6
<PAGE>
NOTE 5 - TRADING SECURITIES
Trading Securities are securities owned by TGH Securities, a wholly-owned
broker/dealer subsidiary of Thistle Group Holdings, Co. Trading securities are
carried at fair value. These securities generally consist of short term
municipal notes and bonds. Gains and losses both realized and unrealized are
included in operating income.
NOTE 6 - LOANS RECEIVABLE
Loans receivable at June 30, 2000 and December 31, 1999 consisted of the
following:
<TABLE>
<CAPTION>
June 30, 2000 December 31. 1999
------------- ----------------
<S> <C> <C>
Mortgage loans:
1-4 family residential...................... $117,058 $110,032
Commercial real estate...................... 48,069 29,867
Home equity lines of credit and improvement loans.... 8,639 8,518
Commercial non-mortgage loans........................ 8,465 5,496
Construction loans - net............................. 7,060 5,365
Loans on savings accounts............................ 201 170
Consumer loans....................................... 130 126
-------- --------
Total Loans................................. 189,622 159,574
-------- --------
Plus: unamortized premiums........................... 350 373
Less:
Net discounts on loans purchased............ (24) (28)
Deferred loan fees......................... (1,552) (1,452)
Allowance for loan losses................... (1,486) (1,234)
-------- ---------
Total $186,910 $157,233
======= ========
</TABLE>
NOTE 7 - DEPOSITS
The major types of deposits by amounts and percentages were as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
Amount % of Total Amount % of Total
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
NOW accounts and
transaction checking............ $21,980 6.9% $19,880 6.8%
Money Market Demand accounts....... 9,660 3.0% 8,963 3.1%
Passbook accounts.................. 96,932 30.5% 99,018 33.8%
Certificate accounts............... 189,742 59.6% 164,758 56.3%
-------- ------ -------- -------
Total $318,314 100% $292,619 100.0%
======== ======= ======== =======
</TABLE>
NOTE 8 - 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 9 - COMPREHENSIVE INCOME (LOSS)
For the three and six months ended June 30, 2000, the Company reported total
comprehensive income of approximately $2,000 and $4,300, respectively. For the
three and six month periods of the prior year the Company reported total
comprehensive loss of $4,500 and 4,200 respectively. Other comprehensive income
consisted of unrealized gains or losses, net of taxes, on available for sale
securities and reclassification adjustments for gains included in net income.
NOTE 10 - DIVIDENDS
On June 22, 2000, the Company declared a dividend of $.06 per share payable July
14, 2000 to stockholders of record on June 30, 2000.
7
<PAGE>
NOTE 11 - BRANCH ACQUISITIONS
On May 23, 2000, the Bank signed a definitive agreement with Crown Bank, FSB to
purchase its branch office located in Wilmington, Delaware including the real
property, approximately $20 million in certain loans, and the assumption of
approximately $52 million in deposit liabilities.
On May 25, 2000, the Bank signed a definitive agreement with Wilmington Trust of
Pennsylvania to purchase four branch offices from Wilmington Trust located in
Lionville, Media, Westtown, and West Chester, Pennsylvania including real
property and the assumption of approximately $59 million in deposit liabilities.
The Bank anticipates paying a deposit premium of approximately 7.8% of total
deposits assumed in these two transactions. The acquisition of these five new
branches is expected to be completed by the end of the third quarter.
8
<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, year 2000 issues, 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.
On May 26, 2000, TGH Securities commenced operations. Also, on May 23 and May
25, 2000, the Bank entered into two separate agreements to purchase a total of
five branches in Eastern Pennsylvania. The Branch transactions are expected to
be completed by the end of the third quarter.
Comparison of Financial Condition
The Company had total assets of $592.5 million as of June 30, 2000, representing
an increase of $37.8 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 $30
million funded by $26 million in deposit growth during the quarter.
Cash and cash equivalents decreased $11.9 million or 32% from $37.2 million at
December 31, 1999 to $25.3 million at June 30, 2000 as it was no longer
necessary to keep the higher balance for Y2K concerns.
Investments increased $1.9 million or 2% from $115.5 million at December 31,
1999 to $117.4 million at June 30, 2000 primarily due to a decrease in the
unrealized loss of $1.5 million.
Trading securities were $13.2 million at June 30, 2000. Such securities were the
product of the activities of TGH Securities, which began operations during the
quarter ended June 30, 2000.
Mortgage-backed securities increased $4.7 million or 2% from $204.7 million at
December 31, 1999 to $209.4 at June 30, 2000. This increase was the result of
$31.9 million in purchases offset by $10.0 million in repayments and sales of
$17.6 million.
Loans increased $29.7 million or 19% from $157.2 million at December 31, 1999 to
$186.9 million at June 30, 2000. This increase was the result of $35.7 million
of originations including $18 million of non-residential loans, and $9.2 million
in non-residential loan purchases, offset by principal repayments of $16.2
million. During the quarter the Bank engaged an independent firm to provide
additional detailed loan review and asset quality reports two times a year to
monitor asset quality and adherence to the Bank's underwriting standards.
9
<PAGE>
Deposits increased $25.7 million or 9% from $292.6 million at December 31, 1999
to $318.3 million at June 30, 2000. Certificates of deposit increased $25
million, passbook accounts decreased $2.1 million and NOW accounts, transactions
checking and money market accounts increased $2.8 million.
Accounts payable and accrued expenses increased $7.3 million and other
borrowings increased $4.1 million due mainly to activity at TGH Securities.
Amounts represent monies borrowed for securities purchased and due to
brokers/dealers for securities purchased.
Total stockholders' equity increased $1.3 million or 2% from $74.7 million at
December 31, 1999 to $76 million at June 30, 2000 primarily due to the
repurchase of 390,271 shares at an average cost of $6.88 per share and dividends
declared of $893 offset by net income for the six months ended of $2.9 million
and to a decrease in the accumulated other comprehensive loss of $1.4 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
June 30, 2000 December 31, 1999
-------------- -----------------
(Dollars in Thousands)
Total non-performing loans ................. $ 211 $ 223
Real estate owned .......................... 116 104
------ ------
Total non-performing assets ................ $ 327 $ 327
====== ======
Total non-performing loans to
total loans ................................ .11% .14%
Total non-performing assets to
total assets ............................... .06% .07%
Allowance for loan loss .................... $1,486 $1,234
Allowance for loan losses as a percentage
of total non-performing assets ............. 422% 377%
Allowance for loan losses as a percentage
of total non-performing loans .............. 704% 553%
Allowance for loan losses as a percentage
of total average loans ..................... .87% .85%
Comparison of Operations for the Three and Six Month Periods Ended June 30, 2000
and 1999
--------------------------------------------------------------------------------
Net Income. Net income for the three and six months ended June 30, 2000
increased $171,000 or 12.1% and $271,000 or 10.3%, respectively, over the same
periods in 1999. The increase for the three-month period is due to an increase
in net interest income of $306,000, and increase of $215,000 in other income
offset by an increase of $339,000 in non-interest expense. The increase for the
six month period is due to an increase in net interest income of $563,000, and
an increase of $405,000 in other income, offset by an increase of $776,000 in
non-interest expense.
Total Interest Income. Interest income for the three months ended June 30, 2000
increased $1.8 million or 21% over the quarter ended June 30, 1999 due primarily
to an increase of $64.4 million in the average balance of interest-earning
assets and an increase in the average yield of 48 basis points. Interest income
for the six months ended June 30, 2000 increased $3.5 million or 22% over the
quarter ended June 30, 1999 due to an increase of $69.3 million in the average
balance of interest-earning assets and an increase in the average yield of 45
basis points.
10
<PAGE>
Total Interest Expense. Interest expense for the three months ended June 30,
2000 increased $1.5 million or 31% over the quarter ended June 30, 1999 due
primarily to an increase of $73.0 million in the average balance of
interest-bearing liabilities and an increase of 52 basis points in the average
cost of funds. Interest expense for the six months ended June 30, 2000 increased
$2.9 million or 32% over the same period of the prior year due to an increase of
$80.8 million in the average balance of interest-bearing liabilities and to an
increase of 45 basis points in the average cost of funds.
Net Interest Income. Net interest income for the three months ended June 30,
2000 increased $306,000 or 8% over the quarter ended June 30, 1999 due to the
reasons discussed above. The net interest spread, the difference between the
average rate earned and the average rate paid, decreased by 4 basis points to
2.28% for the three months ended June 30, 2000 from 2.32% for the same period in
1999. Net interest income for the six months ended June 30, 2000 increased
$653,000 or 9% as compared to the same period of the prior year due to the
reasons discussed above. The net interest spread for the current six month
period remained relatively constant from the prior year.
Provision for Losses on Loans. The provision for losses on loans for the three
and six months ended June 30, 2000 totaled $120,000 and $240,000, respectively,
as compared to $120,000 and $150,000 for the same periods in 1999. The increase
is attributable to the increase in the loan portfolio as well as a change in the
composition of the portfolio. 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 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 June 30, 2000 increased $215,000
over the quarter ended June 30, 1999 due primarily to trading revenues of
$114,000 from TGH Securities and a gain on the sale of a portion of the
Company's equity securities of $333,000, offset by a gain on the sale of equity
securities in the prior year's quarter of $259,000. Non-interest income for the
six months ended June 30, 2000 increased $405,000 over the same period of the
prior year due to the reasons discussed above as well as to a gain on the sale
of mortgage-backed securities of $173,000 to improve the duration and yield of
the investment portfolio.
Other Expenses. Other expenses increased $339,000 or 16% for the quarter ended
June 30, 2000 over the quarter ended June 30, 1999. Salaries and employee
benefits increased $246,000 due to compensation expense related to the
restricted stock plan which began to vest in July 1999, addition of personnel
and normal salary increases offset somewhat by the termination of the pension
plan in December 1999. Occupancy and equipment costs increased $67,000 due to
additional depreciation on current year purchases of office and computer
equipment. Federal insurance premiums decreased $28,000 due to a decrease in the
assessment rate. Professional fees decreased $64,000 as there were additional
legal fees in the quarter ended June 1999 related to the adoption of the
Restricted Stock and Option Plans. Other expense increased $104,000 due to costs
associated with sales training for all employees, operating expenses for TGH
Securities, the management of investments at the Delaware holding companies, an
increase in capital stock tax and small increases in operating costs.
Other expense increased $776,000 or 19% for the six months ended June 30, 2000
over the same period of the prior year. Salaries and employee benefits increased
$535,000, occupancy and equipment increased $125,000, and federal insurance
premiums decreased $55,000 due mainly to the reasons discussed above.
Professional fees decreased $97,000 due to the reason discussed above as well as
to cost savings in the second year of being a public company. Advertising and
promotion increased $76,000 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 expenses increased $192,000 due to the reasons discussed above.
Income Tax Expense. Income tax expense for the quarter ended June 30, 2000 was
$438,000 or 22% of pre-tax income as compared to $427,000 or 23% for the quarter
ended June 30, 1999. Income tax expense for the six months ended June 30, 2000
was $810,000 or 22% of pre-tax income as compared to $889,000 or 25% of pre-tax
income for the same period of the prior year.
11
<PAGE>
Liquidity and Capital Resources
On June 30, 2000, the Bank was in compliance with its three regulatory
capital requirements as follows:
Amount Percent
------- -------
(in Thousands)
Tangible capital.......................... $58,857 10.32%
Tangible capital requirement.............. 11,405 1.50%
------- --------
Excess over requirement................... $47,452 8.82%
======= ========
Core capital.............................. $58,857 10.32%
Core capital requirement.................. 22,810 3.00%
------- --------
Excess over requirement................... $36,047 7.32%
======= ========
Risk based capital........................ $60,343 28.85%
Risk based capital requirement............ 16,678 8.00%
------- --------
Excess over requirement................... $43,665 20.85%
======= ========
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 June 30, 2000, the Company originated $14.6 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 $10.5 million during the
three-month period ended June 30, 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.
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 10.7% at June 30, 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 June 30, 2000, cash and cash equivalents totaled
$25.3 million.
The Company anticipates that it will have sufficient funds available to meet its
current commitments. As of June 30, 2000, the Company had $16.5 million in
commitments to fund loans. Certificates of deposit which were scheduled to
mature in one year or less as of June 30, 2000 totaled $104.4 million.
Management believes that a significant portion of such deposits will remain with
the Company.
12
<PAGE>
Additional Key Operating Ratios
-------------------------------
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
<S> <C> <C> <C> <C>
2000(1) 1999(1) 2000(1) 1999(1)
Return on average assets.................... 1.08% 1.09% 1.01% 1.03%
Return on average equity.................... 8.56% 6.52% 7.86% 5.91%
Yield on average interest-earning assets.... 7.21% 6.73% 7.12% 6.67%
Cost of average interest-bearing liabilities 4.93% 4.41% 4.84% 4.39%
Interest rate spread (2).................... 2.28% 2.32% 2.28% 2.29%
Net interest margin......................... 2.81% 2.93% 2.81% 2.94%
At June 30, 2000 At December 31, 1999
---------------- --------------------
Tangible book value per share $10.25 $9.60
</TABLE>
(1) The ratios for the three and six 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 spread requirements. As of June 30, 2000, the Company's savings
accounts, checking accounts and money market deposit accounts totaled $128.6
million or 40.4% 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.
There were no significant changes for the six months ended June 30, 2000 from
the information presented in the Form 10K for December 31, 1999, under the
caption "Asset and Liability Management" and "Market Risk Analysis".
13
<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 June 30, 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 June 30,
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 May 26, 2000, the Registrant filed a Form 8-K (Items 5 and 7)
announcing that it had signed a definitive agreement with Crown Bank,
FSB to purchase its branch office in Wilmington, Delaware and also
signed a definitive agreement with Wilmington Trust of Pennsylvania to
purchase four branch offices located in Lionville, Media, Westtown and
West Chester, Pennsylvania.
14
<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: August 9, 2000 By: /s/John F. McGill, Jr.
-------------------------------
John F. McGill, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 9, 2000 By: /s/Jerry Naessens
-------------------------------
Jerry Naessens
Chief Financial Officer
(Principal Financial Officer)
