UNITED STATES
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 September 30, 1998
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 0-24739
CNY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 16-1557490
-------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Identification Number)
ONE NORTH MAIN STREET, CORTLAND, NEW YORK 13045
----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (607) 756-5643
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
As of September 30, 1998, there were no shares of the Registrant's
common stock issued and outstanding. As of November 1, 1998, there were
5,356,662 shares of the Registrant's common stock issued and outstanding.
<PAGE>
CNY FINANCIAL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. 1
Item 2. 1
PART II. OTHER INFORMATION 2
SIGNATURES 3
i
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1.
Financial statements for the Company at September 30, 1998 are omitted
because at that date the Company had no material assets or liabilities and had
not conducted any material operations. See Item 2 below.
Item 2.
CNY Financial Corporation (the "Company") was incorporated under the
laws of the State of Delaware for the purpose of becoming the holding company of
Cortland Savings Bank (the "Bank") in connection with the Bank's conversion from
a New York State chartered mutual savings bank to a New York State chartered
stock savings bank (the "Conversion"), pursuant to its Plan of Conversion. The
Plan of Conversion was approved by the Bank's depositors at a special meeting
held on September 23, 1998. The consummation of the Conversion was subject to,
among other things, the sale of the minimum number of shares offered, the
receipt of final non-objection from the Federal Deposit Insurance Corporation,
the filing of a Restated Organization Certificate for the Bank by the
Superintendent of Banks of the State of New York, and compliance with other
requirements. The Company commenced a Subscription Offering of its shares of
common stock on August 12, 1998, in connection with the Conversion. Thereafter,
the Company also commenced a Community Offering of its shares of common stock.
Through September 30, 1998, the Company had engaged in no material business
operations or activities except for the offering of its common stock. The
Conversion was consummated on October 6, 1998 and 5,251,629 shares of common
stock of the Company were sold on that date at a purchase price of $10.00 per
share. An additional 105,033 shares were donated by the Company to the Cortland
Savings Foundation.
1
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Included herein as Exhibit 99 is a news release issued by the Company
setting forth certain information regarding financial results of Cortland
Savings Bank for the three and nine month periods ended September 30, 1998.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit No. Description
27 Financial Data Schedule as of September 30, 1998.
99 News Release
b) Reports on Form 8-K
None.
2
<PAGE>
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.
CNY FINANCIAL CORPORATION
Date: October 29, 1998 /s/ Wesley D. Stisser
Wesley D. Stisser
President and Chief Executive Officer
(Principal Executive Officer)
Date: October 29, 1998 /s/ Steven A. Covert
Steven A. Covert
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
3
<PAGE>
CNY FINANCIAL CORPORATION
FORM 10-Q
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule as of September 30, 1998.
99 News Release
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 0<F1>
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 0
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 0
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 0
<INCOME-PRETAX> 0
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>CNY Financial Corporation is a newly formed bank holding company formed for the
purpose of acquiring all of the common stock of Cortland Savings Bank. At
September 30, 1998, CNY Financial Corporation was a shell corporation with no
business activities or operations and no assets.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99 - NEWS RELEASE
FOR IMMEDIATE RELEASE
From: CNY Financial Corporation and
Cortland Savings Bank
Contact: Wesley D. Stisser, President & CEO 607.758.2223
Steven A. Covert, EVP & CFO 607.756.8449
CORTLAND SAVINGS ANNOUNCES THIRD QUARTER RESULTS
Cortland, New York. Cortland Savings Bank (the Bank), the recently converted
wholly-owned subsidiary of CNY Financial Corporation (the Company) (Nasdaq
ticker "CNYF") announced net income of $566,000 for the three months ended
September 30, 1998, compared with net income of $545,000 for the third quarter
of 1997. For the nine months ended September 30, 1998 and 1997 net income was
$1.6 million and $1.4 million, respectively.
The reported results are for Cortland Savings Bank because the conversion of the
Bank from a state chartered mutual savings bank to a state chartered stock
savings bank, and related holding company formation, did not occur until October
6, 1998. On that date, the Company sold 5,251,629 shares of stock in its initial
public offering and an additional 105,033 shares were contributed to the
Cortland Savings Foundation.
Total assets of the Bank were $279.1 million, at September 30, 1998, which
represented a $45.4 million (19.4%) increase from the end of 1997, and a $44.0
million (18.7%) increase from September 30, 1997. The majority of the increase
occurred as a result of the orders for the Company's stock received as part of
the Bank's conversion. At September 30, 1998, $41.2 million had been received
from stock orders and had been placed in an account bearing interest at the
Bank's normal savings account rate of 2.75%. These funds were invested in
mortgage-backed securities, resulting in a $21.9 million increase in securities
available-for-sale from the end of 1997, and in federal funds sold and
interest-bearing deposits, which totaled $27.6 million at September 30, 1998, an
increase of $23.6 million from December 31, 1997.
Excluding the impact of the conversion orders, the Bank's total assets increased
$4.2 million (1.8%) from December 31, 1997 and $2.7 million (1.2%) from
September 30, 1997. This growth occurred mainly in the loan area as the Bank
continued its strong market presence in residential lending. Net loans were
$159.3 million at September 30, 1998, an increase of $3.9 million (2.5%) and
$1.6 million (1.0%) from December 31, 1997 and September 30, 1997, respectively.
Wesley D. Stisser, President & CEO, stated: "We have been pleased with our
success at attracting residential loan customers and expect to continue our
marketing efforts in this area." Stisser continued: "This growth has not been
without cost, however. Because of low market interest rates, the Bank has
experienced the prepayment of higher yielding loans into lower rate products."
This trend, which is being experienced by most financial institutions, resulted
in a reduction in the Bank's annualized yield on loans to 8.44% for the three
months ended September 30, 1998, compared with 8.63% for the nine months ended
September 30, 1998 and 8.53% for the third quarter of 1997. Mr. Stisser noted:
"If market rates remain at their current low levels, the Bank may experience
additional reductions in the yield on its loan portfolio, but we expect to
offset the effect of residential mortgage prepayments by increasing our
<PAGE>
emphasis on commercial lending through the expansion of our commercial
lending department in Cortland County, as well as entering the surrounding
counties."
The Bank's level of non-performing assets to total assets was .53% at September
30, 1998, compared with 2.04% and 2.94% at December 31, 1997 and September 30,
1997, respectively. This improvement occurred as the result of the sale of
approximately $5.0 million of loans in the first quarter of 1998, and continued
attention to credit quality by the Bank's lending personnel. The improved level
of non-performing assets has allowed the Bank to reduce its provision for loan
losses to $100,000 for the three months ended September 30, 1998 compared with
$200,000 in the third quarter of 1997.
Non-interest income for the quarter ended September 30, 1998 was $770,000, an
increase of $534,000 which reflects a $658,000 insurance settlement related to
the officer defalcation discovered in 1996 which brings that matter to a close,
partially offset by a $57,000 reduction in net income earned on rental
properties owned by the Bank and various other fluctuations.
Non-interest expense was $1.9 million and $1.6 million for the three months
ended September 30, 1998 and 1997, respectively. The primary contributor to this
$302,000 increase was a $406,000 accrual recorded for the planned termination of
the Bank's defined benefit plan reflected in salaries and employee benefits
expense. The plan was frozen on September 30, 1998 and will be terminated
effective December 31, 1998. The final expense of the termination may differ
from the accrual depending on market interest rate fluctuations and actuarial
valuations. The expense of the termination was partially offset by a $120,000
reduction in other non-interest expense which is attributed to a $65,000
adjustment related to deferred directors fees in the third quarter of 1997, and
a reduction in costs associated with other real estate owned and loan
collections of $80,000 as the level of problem assets has declined
significantly.
Income tax expense for the quarter ended September 30, 1998 was $576,000
compared with $212,000 for the same period in 1997, representing a $364,000
increase. The income tax expense for 1998 includes $80,000 accrued for estimated
excise taxes related to the pension plan termination.
Certain statements in this press release and other public announcements by the
Company, when discussing the future, may use words like "will probably result,"
"are expected to," "may cause," "is anticipated," "estimate," "project," or
similar words. These words represent forward-looking statements. Many factors
could cause the Company's or Bank's actual future results and future experience
to be different from what is described in the forward-looking statements. Future
profitability, interest rate sensitivity, and the adequacy of the allowance for
loan losses can be affected by, for example, (i) deterioration in local,
regional, national, or global economic conditions which could cause an increase
in loan delinquencies, a decrease in property values, or a change in the housing
turnover rate; (ii) changes in market interest rates or changes in the speed at
which market interest rates change; (iii) changes in laws and regulations
affecting the financial service industry; (iv) changes in competition; and (v)
changes in consumer preferences.
CNY Financial Corporation is a publicly traded bank holding company
headquartered in Cortland, New York. The Company serves its community through
its wholly-owned subsidiary, Cortland Savings Bank. The Bank operates three full
service offices in Cortland County and a loan production office in Ithaca,
Tompkins County.
Tables Follow
<PAGE>
FINANCIAL HIGHLIGHTS SUMMARY
AT SEP. 30, AT DEC. 31, AT SEP. 30,
SELECTED BALANCE SHEET DATA: 1998 1997 1997
-------------------------------------------
(In thousands)
Total assets 279,134 233,729 235,152
Loans receivable, net 159,341 155,422 157,709
Loans held-for-sale 0 2,541 0
Allowance for loan losses 2,407 2,143 2,245
Securities available-for-sale 65,999 44,140 47,086
Securities held-to-maturity 11,373 12,550 13,118
Deposits 241,772 199,770 200,609
Total net worth 32,780 30,740 32,040
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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SELECTED OPERATIONS DATA: 1998 1997 1998 1997
-------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Interest income 4,442 4,434 13,090 13,319
Interest expense 2,064 2,109 6,077 6,259
- -----------------------------------------------------------------------------------------------------------------
Net interest income 2,378 2,325 7,013 7,060
Provision for loan losses 100 200 250 650
- -----------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 2,278 2,125 6,763 6,410
Service charges 193 154 561 458
Net gain on loan sales 0 1 36 13
Other non-interest income 577 81 696 173
- -----------------------------------------------------------------------------------------------------------------
770 236 1,293 644
Salaries & employee benefits 1,214 745 3,013 2,323
Building, occupancy & equipment 177 224 572 748
Other non-interest expense 515 635 1,659 1,713
- -----------------------------------------------------------------------------------------------------------------
1,906 1,604 5,244 4,784
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 1,142 757 2,812 2,270
Income tax expense 576 212 1,192 878
- -----------------------------------------------------------------------------------------------------------------
Net income 566 545 1,620 1,392
=================================================================================================================
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS SUMMARY, CONTINUED
SELECTED FINANCIAL RATIOS AND OTHER DATA:
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------------------------
1998 1997 1998 1997
----------------------------------------------------------
<S> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets 0.92% 0.91% 0.91% 0.79%
Return on average net worth 7.05% 6.97% 6.94% 6.10%
Average interest-earning assets to
average interest-bearing liabilities 115.87% 116.22% 115.48% 115.58%
Net interest rate spread 3.52% 3.49% 3.64% 3.62%
Net interest margin 4.09% 4.09% 4.20% 4.20%
Net interest income after provision for
loan losses to total non-interest expenses 1.20 1.32 1.29 1.34
Efficiency ratio 60.55% 62.66% 63.41% 62.20%
NET WORTH AND ASSET QUALITY RATIOS:
Average net worth to average total assets 13.01% 13.04% 13.16% 12.89%
Total net worth to assets end of period 11.74% 13.63% 11.74% 13.63%
Risk-based capital ratio 22.35% 23.51% 22.35% 23.51%
Non-performing assets to total assets 0.53% 2.94% 0.53% 2.94%
Non-performing loans to total loans 0.76% 3.80% 0.76% 3.80%
Allowance for loan losses to total loans 1.49% 1.40% 1.49% 1.40%
Allowance for loan losses to non-performing loans 194.74% 36.98% 194.74% 36.98%
</TABLE>
