SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File No. 0-25149
Ridgewood Financial, Inc.
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(Exact name of Small Business Issuer as Specified in Its Charter)
New Jersey 22-3616280
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(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
1124 East Ridgewood Avenue, Ridgewood, New Jersey 07450
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(Address of Principal Executive Offices)
(201) 445-4000
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Issuer's Telephone Number, Including Area Code
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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
------------ ------
Number of shares of Common Stock outstanding as of August 1, 2000: 3,180,000
Transitional Small Business Disclosure Format (check one)
YES NO X
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<PAGE>
RIDGEWOOD FINANCIAL, INC.
Contents
--------
Page(s)
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements............................1-4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................5-7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................ 8
Item 2. Changes in Securities and Use of Proceeds.................... 8
Item 3. Defaults upon Senior Securities.............................. 8
Item 4. Submission of Matters to a Vote of Security Holders.......... 8
Item 5. Other Information............................................ 8
Item 6. Exhibits and Reports on Form 8-K............................. 9
Signatures.............................................................10
<PAGE>
Ridgewood Financial Inc
Consolidated Statements of Financial Condition
June 30, 2000
(In Thousands, Except Share Date)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Assets
Cash and due from banks 4,522 6,553
Federal funds sold 3,700 3,900
--------- ----------
Cash and cash equivalents 8,222 10,453
Investment securities:
Held to maturity (fair values approximate $739 and $847 at
June 30, 2000 and December 31, 1999, respectively) 718 860
Available for sale 37,933 39,476
Mortgage-backed securities:
Held to maturity (fair values approximate $15,877 and $17,088 at
June 30, 2000 and December 31, 1999, respectively) 16,139 17,340
Available for sale 25,300 28,265
Loans receivable, net of allowance for loan losses of $967 and $924 at
June 30, 2000 and December 31, 1999, respectively 182,728 167,468
Accrued interest receivable 1,797 1,733
Premise and equipment, net 8,763 7,099
Federal Home Loan Bank stock, at cost 2,622 2,622
Other assets 1,464 1,530
--------- ----------
Total Assets 285,686 276,846
======== =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits
Interest bearing 201,291 195,467
Non-interest bearing 6,480 6,470
--------- ----------
Total deposits 207,771 201,937
Borrowed funds 50,618 48,678
Advances from borrowers for tax and insurance 1,393 1,247
Accounts payable and other liabilities 663 369
--------- ----------
Total liabilities 260,445 252,231
--------- ----------
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, no par value. Authorized 5,000,000 shares;
none issued and outstanding - -
Common Stock, par value $.10. Authorized 10,000,000 shares;
3,180,000 shares issued and outstanding in 2000 and 1999 318 318
Additional paid-in-capital 9,410 9,428
Retained earnings 18,094 17,802
Unallocated common stock held by employee stock ownership plan (862) (913)
Accumulated other comprehensive loss (1,719) (2,020)
--------- ----------
Total shareholders' equity 25,241 24,615
--------- ----------
Total liabilities and shareholders' equity 285,686 276,846
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
Ridgewood Financial, Inc.
Consolidated Statements of Income (Expense)
(In Thousands, Except Share Date)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year to Date
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans receivable 3,235 2,283 6,260 4,390
Investment Securities held to maturity 9 12 17 27
Investment Securities available for sale
Taxable 232 42 484 83
Tax-exempt 284 336 569 581
Mortgage-backed securities held to maturity 279 166 564 343
Mortgage-backed securities available for sale 442 936 874 2,108
Interest on federal funds sold and other short-term
investments and dividends on FHLB stock 155 201 313 508
--------- --------- --------- ---------
Total interest income 4,636 3,976 9,081 8,040
--------- --------- --------- ---------
Interest expense:
Deposits 2,462 2,177 4,754 4,468
Borrowed funds 676 576 1,350 1,033
--------- --------- --------- ---------
Total interest expense 3,138 2,753 6,104 5,501
--------- --------- --------- ---------
Net interest income before provision 1,498 1,223 2,977 2,539
for loan loss
Provision for loan losses 21 36 43 72
--------- --------- --------- ---------
Net interest income 1,477 1,187 2,934 2,467
--------- --------- --------- ---------
Non-interest income:
Fees and service charges 62 39 102 75
(Loss) gain on sale of securities - (1,070) - (1,070)
Other 5 5 9 6
--------- --------- --------- ---------
Total non-interest income 67 (1,026) 111 (989)
--------- --------- --------- ---------
Non-interest expenses:
Salaries and benefits 667 566 1,299 1,175
Occupancy and equipment 372 295 679 610
Advertising and promotion 65 18 90 45
SAIF deposit insurance premium 11 33 21 63
Other expenses 178 188 354 343
--------- --------- --------- ---------
Total noninterest expense 1,293 1,100 2,443 2,236
--------- --------- --------- ---------
Income before income taxes 251 (939) 602 (758)
Income taxes expense (benefit) 16 (415) 66 (415)
--------- --------- --------- ---------
Net Income (Loss) 235 (524) 536 (343)
========= ========= ========= =========
Earnings per common share:
Basic 0.08 (0.17) 0.17 (0.11)
Diluted 0.08 (0.17) 0.17 (0.11)
========= ========= ========= =========
Weighted average shares outstanding:
Basic 3,076,516 3,089,872 3,075,037 3,113,803
Diluted 3,076,516 3,089,872 3,075,037 3,113,803
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Ridgewood Financial Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2000
(In Thousands) (Unaudited)
<TABLE>
<CAPTION>
6/30/2000 06/30/1999
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net Income 536 (343)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 133 109
Amortization of loan fees (54) (104)
Premiums and discounts on mortgage-backed
and investment securities 127 1,827
Provision for loan losses 43 72
Increase in deferred taxes 124 44
Decrease in accrued interest receivable (64) (277)
(Increase) decrease in other assets, net (229) 143
Increase (decrease) in other liabilities 294 (62)
------- -------
Net cash provided by operating activities 910 1,409
------- -------
Cash flows from investing activities:
Net increase in first mortgage loans (15,261) (15,348)
Purchase of first mortgage loans - (15,180)
Principal collected on mortgage-backed securities 4,075 22,167
Purchases of investment securities available for sale - (15,771)
Maturities and calls of investment securities available for sale 2,000 -
Principal collected on investment securities 123 201
Purchases of premises and equipment (1,797) (4,109)
Purchases of Federal Home Loan Bank stock - (673)
Proceeds from collection of loan fees 11 36
Allocation of employee stock ownership shares 33 48
------- -------
Net cash used in investing activities (10,816) (28,629)
------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits 5,834 (15,217)
Proceeds from borrowed funds 17,000 19,774
Repayment of borrowed funds (15,060) -
Net increase in advances from borrowers for
taxes and insurance 146 154
Decrease in IPO subscription payable - (17,809)
Dividends paid (245) -
Net proceeds from initial public offering - 9,751
Purchase of employee stock ownership plan stock - (968)
Captialization of mutual holding company - (200)
------- -------
Net cash provided by (used in) financing activities 7,675 (4,515)
------- -------
Net decrease in cash and cash equivalents (2,231) (31,735)
Cash and cash equivalents at beginning of year 10,453 43,474
------- -------
Cash and cash equivalents at end of year 8,222 11,739
======= =======
Supplemental disclosures of cash flow information-cash
payments for:
Interest on deposits and borrowed funds 6,104 5,532
Income taxes 203 48
Non-cash transactions - writedown of securities - 1,070
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
RIDGEWOOD FINANCIAL, INC.
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB and therefore do not
include all disclosure necessary for a complete presentation of the consolidated
statements of financial condition, statements of income and statements of cash
flows in conformity with generally accepted accounting principles. However, all
adjustments which are, in the opinion of management, necessary for the fair
presentation of the interim financial statements have been included. All such
adjustments are of a normal recurring nature. The consolidated statements of
income are not necessarily indicative of results which may be expected for the
entire year or any other interim period. The condensed financial statements as
of and for the three and six month periods ended June 30, 2000, include the
accounts of Ridgewood Savings Bank of New Jersey (the "Bank") which became the
wholly owned subsidiary of Ridgewood Financial, Inc. (The "Company") on January
7, 1999. The Company's business is conducted principally through the Bank.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. It is suggested that these condensed
unaudited financial statement be read in conjunction with the Form 10-KSB for
the year ended December 31, 1999.
(2) Comprehensive income (loss) for the three and six month periods ended,
as follows:
<TABLE>
<CAPTION>
Three Months Six Months
-------------------- --------------------
6/30/2000 6/30/1999 6/30/2000 6/30/1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 235 $ (524) $ 536 $ (343)
Change in unrealized loss on securities
available for sale, net of taxes 240 (600) 301 (800)
----- ------- ----- -------
Comprehensive income (loss) $ 475 $(1,124) $ 837 $(1,143)
===== ======= ===== =======
</TABLE>
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Ridgewood Financial Inc.'s (the "Company") business is conducted
principally through Ridgewood Savings Bank of New Jersey (the "Bank"). All
references to the Company refer collectively to the Company and the Bank.
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, the ability to control costs and expenses, risks
associated with the effect of opening a new branch, year 2000 issues and general
economic conditions. Ridgewood Financial Inc. 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.
OVERVIEW
For the three months ended June 30, 2000, net income increased $759,000
to $235,000, or $.08 per diluted share, from a net loss of $524,000, or a loss
of $.17 per diluted share, for the comparative 1999 period. For the six months
ended June 30, 2000, net income increased $879,000 to $536,000 or $.17 per
diluted share, from a net loss of $343,000, or a loss of $.11 per diluted share,
for the comparative fiscal 1999 period. In general, higher net income for the
current three and six month periods was primarily the result of the Company's
continued efforts to increase net interest income by investing in higher
yielding interest earning assets. Also, in the prior three and six month
periods, the Company incurred a net loss of $1.1 million on the sale of its
mortgaged backed securities available for sale. Non-interest expenses for the
current three and six month periods increased slightly due to the opening of our
new headquarters and branch on May 1, 2000. Non-interest expenses in future
periods may continue to increase due to additional costs in operating the new
headquarters and branch.
CHANGES IN FINANCIAL CONDITION
At June 30, 2000, total assets increased $8.9 million to $285.7 million
from $276.8 million at December 31, 1999. Of this increase, net loans receivable
increased $15.2 million to $182.7 million from $167.5 million at December 31,
1999. Such increase was due to a very strong local housing economy and
competitive pricing of loan products. In order to fund the new loan originations
at June 30, 2000, the Company used funds from cash and cash equivalents and the
available for sale and held to maturity securities portfolios. The available for
sale and held to maturity securities portfolios declined a total of $5.9 million
from December 31, 1999 as a result of amortization and prepayments. In addition,
at June 30, 2000, cash and cash equivalents decreased $2.3 million to $8.2
million.
Total shareholders' equity increased $626,000 to $25.2 million at June
30, 2000 primarily due to net income of $536,000 for the six months ended June
30, 2000 in addition to a $301,000 decrease in unrealized losses on securities
available for sale, net of taxes. Because of interest rate volatility and
accumulated other comprehensive loss, stockholder's equity could materially
fluctuate for each interim period and year-end period.
5
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income. Net interest income before provision for loan
losses for the three month and six month periods ended June 30, 2000 was $1.5
million and $3.0 million, respectively, compared to $1.2 million and $2.5
million, respectively, for the same periods in 1999. Net interest income (on a
tax equivalent basis) before provision for loan losses for the three and six
month periods ended June 30, 2000 was $1.6 million and $3.3 million,
respectively, compared to $1.3 million and $2.8 million for the same periods in
1999. The interest rate spread (on a tax equivalent basis), which is the
difference between the yield on average interest earning assets less the cost of
average interest bearing liabilities, for the three and six month periods ended
June 30, 2000 were 2.27% and 2.21%, respectively, compared to 1.86% and 2.08%,
respectively, for the same periods in 1999. The increase in interest rate spread
for the current three and six month periods was primarily the result of an
increase in the average yield on interest earning assets offset by an increase
in average cost of funds on interest bearing liabilities.
Interest Income. Interest income on a tax equivalent basis for the
three and six months ended June 30, 2000 increased to $4.8 million and $9.4
million, respectively, from $4.0 million and $8.3 million, respectively, for the
same periods in 1999. The increase was primarily due to higher average balances
in loans receivable offset by a decrease in the average balance of securities
available for sale.
Interest income on loans receivable, net increased for the current
three and six months periods increased approximately $952,000 and $1.9 million,
respectively, to $3.2 million and $6.3 million from the same period in 1999. The
increase was due to $54.3 million and $56.5 million increase in the average
balance of loans receivable resulting from originations of new loans in excess
of prepayments and amortization. The increase in the average balance of loans
was offset by a decline in the average yield for the current three and six
months periods of 13 and 57 basis points, respectively. For the current three
and six months periods average yields were 7.32% and 7.30%, respectively.
Decreases in the average yields for the current three and six months periods
were due to lower interest rates on originated loans during the first half of
1999 and the prepayment and amortization of higher rate loans.
Interest Expense. Total interest expense for the three and six month
periods ended June 30, 2000 was $3.1 million and $6.1 million compared to $2.8
million and $5.5 million, respectively, for the same periods in fiscal 1999. The
increase in interest expense for the current three and six month periods were
primarily related to increases in the average balances of time deposits and the
average balance of borrowed funds coupled with an increase in average cost of
funds for the current three month period. Average time deposits for the current
three month and six month periods ended totaled $153.1 million and $149.5
million, respectively compared to $143.4 million and $146.2 million,
respectively for the same period in 1999. Average costs of funds for time
deposits for the current three month period increased 35 basis points to 5.52%
from 5.17%.
Average borrowed funds for the current three month and six month
periods ended totaled $46.6 million and $47.4 million, respectively compared to
$43.0 million and $38.5 million, respectively, for the same periods in 1999.
Average cost of funds for borrowed funds for the current three month periods
increased 44 basis points to 5.82% from 5.38%.
Provision for Loan Losses. The provision for loan losses for the three
and six month periods ended June 30, 2000 was $21,000 and $43,000, compared to
$36,000 and $72,000, respectively, for the same periods in fiscal 1999.
Management continually evaluates the adequacy of the allowance for loan losses,
which encompasses the overall risk characteristics of the various portfolio
segments, past
6
<PAGE>
experience with losses, the impact of economic conditions on borrowers and other
relevant factors which may come to the attention of management. Although the
Company maintains its allowance for loan losses at a level that it considers to
be adequate to provide for the inherent risk of loss in its loan portfolio,
there can be no assurance that future losses will not exceed estimated amounts
or that additional provisions for loan losses will not be required in future
periods.
Non-Interest Expenses. Total non-interest expense for the three and six
month periods ended June 30, 2000 was $1.3 million and $2.4 million compared to
$1.1 million and $2.2 million, respectively, for the same periods in fiscal
1999. The most significant increases in non-interest expenses for the current
three month and six month periods were primarily attributable to salaries and
benefits, occupancy and equipment, and advertising and promotion. Such increases
in the respective expenses for the current three and six month periods were
mainly attributable to the May 1, 2000 opening of our new headquarters and
branch.
7
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable.
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
---------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on
April 24, 2000 and the following matter was voted upon:
Proposal 1 - Election of directors with terms to expire in
2003. All directors were elected as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
WITHHELD
FROM
NOMINEE NOMINEE
------- -------
Michael W. Azzara 2,956,294 15,583
Jerome Goodman 2,957,294 14,583
Susan E. Naruk 2,957,294 14,583
Proposal 2 - To ratify the appointment of KPMG LLP, as
independent accountants for the Company for the fiscal year
December 31, 2000.
FOR AGAINST ABSTAIN
--- ------- -------
2,963,577 5,100 3,200
</TABLE>
Item 5. Other Information
-----------------
Not applicable.
8
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) 3(i) Certificate of Incorporation of Ridgewood Financial, Inc.*
3(ii) Bylaws of Ridgewood Financial, Inc.*
10.1 Amended Form of Employment Agreement with Susan E. Naruk*
10.2 Amended Form of Employment Agreement with Nelson Fiordalisi*
10.5 Supplemental Executive Retirement Plan*
27 Financial Data Schedule (electronic data filing only)
* Incorporated by reference to the identically numbered exhibits
of the Registrant's Form SB-2 (333- 62363).
(b) No reports on Form 8-K were filed during the quarter ended June 30,
2000.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RIDGEWOOD FINANCIAL, INC.
<TABLE>
<CAPTION>
<S> <C>
Date: August 8, 2000 By: /s/ Susan E. Naruk
------------------
Susan E. Naruk
President and Chief Executive Officer
(Principal Executive Officer)
(Duly Authorized Officer)
Date: August 8, 2000 By: /s/ John Scognamiglio
---------------------
John Scognamiglio
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and Chief Accounting Officer)
</TABLE>
10
