SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 30, 1999
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------- -------------------------
Securities Exchange Act Number 000-25101
ONEIDA FINANCIAL CORP.
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 16-1561678
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer)
incorporation or organization) Identification Number)
182 Main Street, Oneida, New York 13421
---------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (315) 363-2000
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check x whether the Registrant has filed all reports required to be
filed by Sections 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
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. [ ] Yes [ ] 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: There were 3,461,300 shares
of the Registrant's common stock outstanding as of November 4, 1999.
<PAGE>
ONEIDA FINANCIAL CORP.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Condition (unaudited)
As of September 30, 1999, December 31, 1998 (audited) and
September 30, 1998
Consolidated Statements of Operations (unaudited)
For the three months ended and nine months ended September 30, 1999
and 1998
Consolidated Statements of Comprehensive Income (unaudited)
For the nine months ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows (unaudited)
For the three months ended and nine months ended September 30, 1999
and 1998
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
At September 30, 1999, December 31, 1998 and September 30, 1998
<TABLE>
<CAPTION>
(unaudited) (audited) (unaudited)
At At At
September 30, December 31, September 30,
1999 1998 1998
---------------------------------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 6,766 $ 4,056 $ 3,530
Federal funds sold 2,700 22,100 6,900
---------------------------------------
TOTAL CASH AND CASH EQUIVALENTS 9,466 26,156 10,430
Investment securities, at fair value 84,397 62,669 44,661
Mortgage-backed securities, at fair value 28,746 20,022 18,736
---------------------------------------
TOTAL INVESTMENT SECURITIES 113,143 82,691 63,397
Mortgage loans held for sale 0 1,863 1,041
Loans receivable 142,616 131,936 138,148
Allowance for credit losses (1,519) (1,543) (1,695)
---------------------------------------
LOANS RECEIVABLE, NET 141,097 130,393 136,453
Bank premises and equipment, net 5,217 4,854 4,972
Accrued interest receivable 2,119 1,600 1,540
Refundable income taxes 154 421 240
Other real estate 193 224 395
Other assets 2,313 579 1,001
-----------------------------------------------------------------------------------------
TOTAL ASSETS $ 273,702 $ 248,781 $ 219,469
=========================================================================================
</TABLE>
(continued
<PAGE>
<TABLE>
<CAPTION>
(unaudited) (audited) (unaudited)
At At At
September 30, December 31, September 30,
1999 1998 1998
---------------------------------------
(in thousands)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to Depositors $ 192,385 $ 193,398 $ 190,100
Mortgagors' escrow funds 421 807 561
Borrowings 40,000 10,000 0
Other Liabilities 394 442 131
---------------------------------------
TOTAL LIABILITIES 233,200 204,647 190,792
Shareholders' equity:
Common stock ( $.10 par value; 8,000,000
shares authorized; 3,580,200 issued) 358 358 0
Additional paid-in capital 15,422 15,545 0
Retained earnings 28,962 27,710 27,950
Common shares issued under employee
stock plans - unearned (1,314) (401) 0
Accumulated other comprehensive income (loss) (1,796) 922 727
Treasury Stock (at cost, 108,900 shares) (1,130) 0 0
---------------------------------------
TOTAL SHAREHOLDERS' EQUITY 40,502 44,134 28,677
-----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 273,702 $ 248,781 $ 219,469
=========================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
Page 2 of 18
<PAGE>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended and Nine Months Ended September 30, 1999 (unaudited)
and 1998 (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Interest and fees on loans $ 2,872 $ 3,093 $ 8,312 $ 9,187
Interest on investment and mortgage-
backed securities 1,846 880 5,007 2,609
Dividends on equity securities 37 25 92 65
Interest on federal fund sold and
interest-bearing deposits 66 98 269 246
- --------------------------------------------------------------------------------------------------------------------
Total interest and dividend income 4,821 4,096 13,680 12,107
- --------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Savings deposit 277 321 822 948
Money market and Super NOW 175 140 464 381
Time deposits 1,361 1,544 4,141 4,598
Borrowings 507 0 1,110 0
- --------------------------------------------------------------------------------------------------------------------
Total interest expense 2,320 2,005 6,537 5,927
- --------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,501 2,091 7,143 6,180
Less: Provision for credit losses 45 0 135 0
- --------------------------------------------------------------------------------------------------------------------
Net interest income after provision for credit losses 2,456 2,091 7,008 6,180
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
OTHER INCOME:
Investment security gain, net 0 0 281 9
Other operating income 205 149 641 528
- --------------------------------------------------------------------------------------------------------------------
Total other income 205 149 922 537
- --------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Compensation and employee benefits 1,017 787 2,926 2,397
Occupancy expenses, net 338 335 990 984
Other operating expense 390 402 1,226 1,266
- --------------------------------------------------------------------------------------------------------------------
Total other expenses 1,745 1,524 5,142 4,647
- --------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 916 716 2,788 2,070
- --------------------------------------------------------------------------------------------------------------------
Provision for income taxes 340 217 999 769
- --------------------------------------------------------------------------------------------------------------------
NET INCOME $ 576 $ 499 $ 1,789 $ 1,301
====================================================================================================================
EARNINGS PER SHARE $ 0.16 N/M $ 0.50 N/M
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3 of 18
<PAGE>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended and Nine Months Ended September 30, 1999(unaudited)
and 1998 (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net income $ 576 $ 499 $ 1,789 $ 1,301
------- ------- ------- -------
Other comprehensive income, net of tax:
Unrealized gains(losses) on assets
available for sale:
Unrealized holding gains(losses)
arising during period (1,637) 245 (4,249) 418
Less: reclassificaion adjustment for
gains included in net income (0) (0) (281) (9)
------- ------- ------- -------
(1,637) 245 (4,530) 409
Net income (tax) benefit effect 655 (98) 1,812 (153)
------- ------- ------- -------
Other comprehensive income(loss), net of tax (982) 147 (2,718) 256
Comprehensive Income (Loss) $ (406) $ 646 $ (929) $ 1,557
=======================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
Page 4 of 18
<PAGE>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended and Nine Months Ended September 30, 1999 (unaudited)
and 1998 (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Operating Activities:
Net income $ 576 $ 499 $ 1,789 $ 1,301
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 178 145 505 381
Amortization of premiums/discounts on securities, net (10) 19 (32) 63
Provision for credit losses 45 0 135 0
Provision for deferred taxes 0 0 0 100
Loss on sale of other real estate 0 0 26 23
Gain on sale/call of securities, net 0 0 (281) (9)
(Gain) loss on sale of loans 0 (19) (22) 58
Income tax refundable 340 (67) 267 (96)
Accrued interest receivable (223) 45 (519) 28
Other assets 147 (168) 78
Other liabilities (148) (263) (48) (248)
Origination of loans held for sale 0 (3,264) (3,984) (11,703)
Proceeds from sales of loans 0 2,390 5,678 10,795
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 905 (683) 3,592 489
- ------------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Purchase of investment securities (10,225) (11,073) (68,488) (25,488)
Principal collected on and proceeds of maturities
or calls from investments 12,942 6,019 37,967 24,570
Purchase of mortgage-backed securities 0 (3,227) (8,212) (10,303)
Principal collected from mortgage-backed securities 1,663 1,297 4,0643,502
Net (increase) decrease in loans (7,039) 3,105 (10,913) 5,090
Purchase of bank premises and equipment (235) (234) (869) (1,541)
Proceeds from sale of other real estate 137 234 271 523
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (2,757) (3,879) (46,180) (3,647)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Financing Activities:
Net increase (decrease) in demand deposit, savings,
money market, super now and escrow 747 575 2,514 6,987
Net (decrease) increase in time deposits (1,603) 869 (3,913) 537
Proceeds from borrowings 5,000 0 35,000 0
Repayment of borrowings 0 0 (5,000) 0
Adjust net proceeds 0 0 (123) 0
Common stock acquired by ESOP 0 0 (913) 0
Cash dividends (537) 0 (537) 0
Purchase of treasury stock (1,130) 0 (1,130) 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,477 1,444 25,898 7,524
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 623 (3,118) (16,690) 4,366
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 8,843 13,548 26,156 6,064
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year 9,466 10,430 9,466 10,430
============================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid for interest 2,264 2,005 6,282 5,861
Cash paid for income taxes 0 284 678 865
Non-cash investing activities:
Unrealized gain (loss) on investment and mortgage-backed
securities designated as available for sale (1,637) 246 (4,530) 427
Transfer of loans to other real estate 65 337 266 634
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 5 of 18
<PAGE>
Oneida Financial Corp.
Notes to Consolidated Financial Statements
(Unaudited)
SEPTEMBER 30, 1999
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments necessary to
fairly present the consolidated financial position of the Company at September
30, 1999 and the results of its consolidated operations and cash flows for the
period then ended, all of which are normal and recurring in nature, have been
included.
Note B - Earnings Per Share
Basic earnings per share is computed based on the weighted average shares
outstanding. The following represents the calculation of earnings per share for
the three months ended and nine months ended September 30, 1999:
<TABLE>
<CAPTION>
Income Shares Per Share
September 30, 1999
- ------------------
<S> <C> <C> <C>
Net income (Three Months Ended) $ 576,215 3,524,747 $0.16
========== ========= =====
Net income (Nine Months Ended) $1,788,881 3,561,512 $0.50
========== ========= =====
</TABLE>
Earnings per share information is not presented for the quarter ended and nine
months ended September 30, 1998 as the Company completed its offering on
December 30, 1998 and accordingly such data would not be meaningful.
Note C - Formation of Real Estate Investment Trust Subsidiary
On April 26, 1999, the Bank funded Oneida Preferred Funding Corp., a wholly
owned subsidiary corporation that will elect under Federal tax law to be treated
as a Real Estate Investment Trust (REIT). The REIT was initially funded with
$43.1 million of 1-4 family residential real estate loans and commercial real
estate loans. The REIT is expected to allow the Bank to more competitively price
real estate loans and provide other benefits in future periods. At September 30,
1999 the principal balance outstanding of real estate loans in the REIT totalled
$41.7 million.
Page 6 of 18
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
Of Operations
Page 7 of 18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section presents Management's discussion and analysis of and
changes to the Company's consolidated financial results of operations and
condition and should be read in conjunction with the Company's financial
statements and notes thereto included herein.
When used in this quarterly report the words or phrases "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties,
including, among other things, changes in economic conditions in the Company's
market area, changes in policies by regulatory agencies, fluctuations in
interest rates, demand for loans in the Company's market area and competition,
that could cause actual results to differ materially from historical earnings
and those presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. The Company wishes to advise readers that
the factors listed above could affect the Company's financial performance and
could cause the Company's actual results for future periods to differ materially
from any opinions or statements expressed with respect to future periods in any
current statements.
The Company does not undertake, and specifically declines any
obligation, to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
GENERAL
Oneida Financial Corp. (the "Company") is the parent company of The
Oneida Savings Bank (the "Bank"). The Company conducts no business other than
holding the common stock of the Bank and general investment activities resulting
from the capital raised and retained in the recent initial public stock
offering. Consequently, the net income of the Company is primary derived from
its investment in the Bank. The Bank's net income is primarily dependent on its
net interest income, which is the difference between interest income earned on
its investments in loans, investment securities and mortgage-backed securities
and its cost of funds consisting of interest paid on deposits and borrowings.
The Bank's net income is also affected by its provision for loan losses, as well
as by the amount of other income, including income from fees and service
charges, net gains and losses on sales of investments and loans, and operating
expenses such as employee compensation and benefits, occupancy and equipment
costs and income taxes. Earnings of the Bank are also affected significantly by
general economic and competitive conditions, particularly changes in market
interest rates, which tend to be highly cyclical, and government policies and
actions of regulatory authorities, which events are beyond the control of the
Bank.
<PAGE>
RECENT DEVELOPMENTS
On December 30, 1998 the Company completed its reorganization and
initial public stock offering providing a total of $15.9 million in additional
paid in capital. A total of 3,580,200 shares of common stock were issued with
1,915,445 shares issued to Oneida Financial MHC the mutual holding company
parent of the Company. Approximately half of the net proceeds of the stock
offering were invested into the Bank.
On April 26, 1999, the Bank funded Oneida Preferred Funding Corp., a
wholly owned subsidiary corporation that will elect under Federal tax law to be
treated as a Real Estate Investment Trust (REIT). The REIT was initially funded
with $43.1 million of 1-4 family residential real estate loans and commercial
real estate loans. The REIT is expected to allow the Bank to more competitively
price real estate loans and provide other benefits in future periods. At
September 30, 1999 the principal balance outstanding of real estate loans in the
REIT totaled $41.7 million.
The Bank continues employing a wholesale arbitrage strategy to
compliment traditional retail deposit and loan activities. The arbitrage
transactions have involved entering into borrowing transactions with the Federal
Home Loan Bank of New York ("FHLB") as a funding source for the purchase of
investment securities and mortgage-backed securities. At September 30, 1999 the
Bank had total borrowings of $40.0 million at an average cost of 5.29%. The
Bank's net income is enhanced through the positive spread between the borrowing
rate and investment returns.
<PAGE>
The Company commenced a 5% stock repurchase, representing 179,010
shares of common stock, on July 1, 1999. The repurchase program is expected to
be completed within six months. The Company considers the common stock to be an
attractive investment, particularly in view of the current price at which the
common stock is trading relative to the Company's earnings per share, book value
per share and market and economic factors generally, as well as other factors.
The Company declared its first semiannual cash dividend following the
completion of the first six months as a publicly traded stock company. The
dividend was paid to all shareholders of record as of July 27, 1999, payable on
August 10, 1999 at $0.15 per share of common stock. It is the intention of the
Company to pay an annual cash dividend of $0.30 per common share, payable
semi-annually.
FINANCIAL CONDITION
ASSETS. Total Assets at September 30, 1999 were $273.7 million, an
increase of $24.9 million from $248.8 million at December 31, 1998. The increase
in total assets was primarily attributable to an increase of $30.4 million in
investments and mortgage-backed securities. The increase in assets reflects the
Bank's leveraging strategy as well as the investment of net proceeds from the
sale of common stock. Asset growth was also supported by an increase of $10.7
million in net loans receivable. The increase in net loans was achieved while
Management sold a total of $5.0 million of newly originated fixed-rate
residential real estate loans into the secondary mortgage market without
recourse and on a servicing retained basis during 1999. The increase in assets
was partially offset by a decrease of $19.4 million in federal funds sold to
$2.7 million at September 30, 1999 from $22.1 million at December 31, 1998 as
net offering proceeds were invested in mortgage-backed securities and other
investments.
Management has sought to increase the Bank's consumer and commercial
business loan portfolios with the intent of increasing the average yield on the
Bank's interest-earning assets. At September 30, 1999, total consumer and
commercial business loans increased by $8.8 million from December 31, 1998.
LIABILITIES. Total liabilities increased by $28.6 million or 14.0% to
$233.2 million at September 30, 1999 from $204.6 million at December 31, 1998.
The increase is primarily the result of an increase of $30.0 million in
borrowings partially offset by a decrease of $1.0 million in total deposits. The
decrease in deposits was a result of a decrease in Time Deposits of $3.9 million
from $108.9 million at December 31, 1998 to $105.0 million at September 30,
1999. The Bank continues to emphasize core deposits and checking accounts, which
increased by $2.9 million during the same period.
<PAGE>
STOCKHOLDERS' EQUITY. Total stockholders' equity at September 30, 1999
was $40.5 million, an increase of $11.8 million from $28.7 million at September
30, 1998. The increase in stockholder's equity is primarily a result of the net
proceeds received from the stock offering completed on December 30, 1998.
Stockholder's equity decreased $3.6 million from December 31, 1998 primarily due
to a decrease of $2.7 million in Accumulated Other Comprehensive Income (Loss)
as a result of an adjustment for the net unrealized loss on available for sale
mortgage-backed and other investment securities due to higher market interest
rates at September 30, 1999 as compared with December 31, 1998. The increase in
interest rates generally has a negative affect on the market value of the
Company's investments and mortgage-backed securities portfolios. The decrease in
stockholders' equity is also attributable to the open market purchases of common
stock acquired during the first quarter of 1999 to fully fund the Employee Stock
Ownership Plan ("ESOP") and an equity adjustment necessary to reflect an
additional $123,000 in stock offering expenses. At September 30, 1999, a value
of $1.3 million in common shares were issued and unearned under the ESOP Plan.
In addition, the Company has acquired a total of 108,900 shares of its common
stock, at an average price of $10.41 per share, under the stock repurchased
program previously approved. At September 30, 1999, a value of $1.1 million in
Treasury Stock was carried as a reduction of stockholders' equity as a result of
the repurchase program. The Company also declared and paid its first semiannual
dividend at the rate of $0.15 resulting in an equity reduction of $537,000. The
decreases in stockholders' equity were partially offset by the addition of
after-tax net income of $1.8 million for the nine months ended September 30,
1999.
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. Net
interest income also depends on the relative amounts of interest-earning assets
and interest-bearing liabilities and the interest rate earned or paid on the
assets or liabilities.
AVERAGE BALANCE SHEET. The following tables set forth certain
information relating to the Company for the three and nine months ended
September 30, 1999 and 1998 and for the year ended December 31, 1998. For the
periods indicated, the dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, is expressed in thousands of
dollars and percentages. No tax equivalent adjustments were made. The average
balance is an average daily balance.
<PAGE>
TABLE 1. Average Balance Sheet. (Quarterly)
<TABLE>
<CAPTION>
Three Months Ended September 30, Twelve Months Ended Dec. 31,
------------------------------------------------------- ----------------------------
1999 1998 1998
---------------------------------------------------------------------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
(Dollars Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning Assets:
Loans Receivable $138,673 $2,872 8.28% $141,638 $3,093 8.73% $138,953 $12,063 8.68%
Investment Securities 115,340 1,846 6.40% 57,614 880 6.11% 56,646 3,736 6.60%
Federal Funds 4,808 66 5.49% 6,443 98 6.08% 7,274 347 4.77%
Equity Securities 3,811 37 3.88% 2,722 25 3.67% 2,550 90 3.53%
----- --- ----- ------ --- ----- ------ --- -----
Total Interest-earning 262,632 4,821 7.34% 208,417 4,096 7.86% 205,423 16,236 7.90%
-------- ------ ----- -------- ------ ----- -------- ------- -----
Assets
Interest-bearing Liabilities:
Money Market Deposits $16,375 $137 3.35% $12,989 $108 3.33% $12,519 $407 3.25%
Savings Accounts 45,873 277 2.42% 43,910 321 2.92% 44,481 1,295 2.91%
Interest-bearing Checking 8,328 38 1.83% 6,402 32 2.00% 6,091 121 1.99%
Time Deposits 102,568 1,361 5.31% 110,167 1,544 5.61% 109,419 6,110 5.58%
Borrowings 37,365 507 5.43% 0 0 0.00% 1,264 66 5.22%
------- ---- ----- -- -- ----- ------ --- -----
Total Interest-bearing
Liabilities 210,509 2,320 4.41% 173,468 2,005 4.62% 173,774 7,999 4.60%
-------- ------ ----- -------- ------ ----- -------- ------ -----
Net Interest Income $2,501 $2,091 $8,237
======= ======= ======
Net Interest Spread 2.93% 3.24% 3.30%
===== ===== =====
Net Earning Assets $52,123 $34,949 $31,649
======= ======== =======
Net yield on average
Interest-earning assets 3.81% 4.01% 4.01%
===== ===== =====
Average interest-earning
assets to average
Interest-bearing
liabilities 124.76% 120.15% 118.21%
======= ======= =======
</TABLE>
(continued)
<PAGE>
TABLE 2. Average Balance Sheet. (Year to Date)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Twelve Months Ended Dec. 31,
-------------------------------------------------------- ------------------------------
1999 1998 1998
----------------------------------------------------------------------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning Assets:
Loans Receivable $134,037 $8,312 8.27% $142,074 $9,187 8.62% $138,953 $12,063 8.68%
Investment Securities 105,585 5,007 6.32% 53,888 2,609 6.46% 56,646 3,736 6.60%
Federal Funds 7,381 269 4.86% 5,846 246 5.61% 7,274 347 4.77%
Equity Securities 3,492 92 3.51% 2,465 65 3.52% 2,550 90 3.53%
------ --- ----- ------ --- ----- ------ --- -----
Total Interest-earning
Assets 250,495 13,680 7.28% 204,273 12,107 7.90% 205,423 16,236 7.90%
-------- ------- ----- -------- ------- ----- -------- ------- -----
Interest-bearing Liabilities:
Money Market Deposits $14,685 $358 3.25% $12,133 $294 3.23% $12,519 $407 3.25%
Savings Accounts 46,716 822 2.35% 44,155 948 2.86% 44,481 1,295 2.91%
Interest-bearing Checking 7,778 106 1.82% 5,916 87 1.96% 6,091 121 1.99%
Time Deposits 102,136 4,141 5.41% 109,160 4,598 5.62% 109,419 6,110 5.58%
Borrowings 27,765 1,110 5.33% 0 0 0.00% 1,264 66 5.22%
------- ------ ----- -- -- ----- ------ --- -----
Total Interest-bearing
Liabilities 199,080 6,537 4.38% 171,364 5,927 4.61% 173,774 7,999 4.60%
-------- ------ ----- -------- ------ ----- -------- ------ -----
Net Interest Income $7,143 $6,180 $8,237
======= ======= ======
Net Interest Spread 2.90% 3.29% 3.30%
===== ===== =====
Net Earning Assets $51,415 $32,909 $31,649
======== ======= =======
Net yield on average
Interest-earning assets 3.80% 4.03% 4.01%
===== ===== =====
Average interest-earning
assets to average
Interest-bearing
liabilities 125.83% 119.20% 118.21%
======= ======= =======
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
GENERAL. Net income for the three months ended September 30, 1999
increased by $77,000 to $576,000 for the third quarter 1999 from $499,000 for
the three months ended September 30, 1998. For the nine months ended September
30, 1999 net income was $1.8 million an increase of $488,000 or 37.5% from the
net income reported for the nine months ended September 30, 1998 of $1.3
million. The increases were due primarily to an increase in net interest income
and other income. The increases in income were partially offset by increases in
operating and other expenses and an increase in the provision for credit losses
and the provision for income taxes.
INTEREST INCOME. Interest Income increased by $725,000 or 18.0%, to
$4.8 million for the three months ended September 30, 1999 from $4.1 million for
three months ended September 30, 1998. For the nine months ended September 30,
1999 interest income was $13.7 million, an increase of $1.6 million or 13.0% as
compared with the same period in 1998. The increase in interest income was
primarily derived from an increase in income on investment and mortgage-backed
securities of $966,000 for the quarter and $2.4 million for the year to date.
Income on loans decreased by $221,000 for the third quarter of 1999 compared
with the same period in 1998 and decreased by $875,000 for the year to date
partially offsetting the increases in investment and mortgage-backed securities
interest income.
The decrease in loan income is a result of a decrease of $2.9 million
in the average balance in loans receivable for the three months ended September
30, 1999 as compared with the same period in 1998, and a decrease of 45 basis
points in average yield from 8.73% at September 30, 1998 to 8.28% at September
30, 1999. Management's strategy is to emphasize the origination of consumer and
commercial business loans for retention in the Bank's portfolio while
originating for sale in the secondary market substantially all fixed-rate
residential real estate loans. As of September 30, 1999 residential real estate
loans totaled $80.6 million, a decrease of $5.4 million from September 30, 1998.
During the same period a total of $11.9 million in fixed-rate residential real
estate loans were sold in the secondary market. The decrease in residential real
estate loans was offset by increases in consumer and commercial business loans
of $8.4 million during the same period resulting in a net increase in total
loans receivable of $4.5 million at September 30,1999.
Investment income increased as a result of an increase of $57.7 million
in the average balance of investment and mortgage-backed securities for the
three month period ended September 30, 1999 as compared with the same period in
1998. The increase in investment income was further supported by an increase in
the average yield of investment securities of 29 basis points to 6.40% for the
period. For the nine month period ending September 30, 1999, the average yield
on investment securities has decreased 14 basis points as compared with the same
period in 1998. The yield reduction is reflective of the general decrease in
market interest rates between the two periods resulting in lower reinvestment
yields on maturities and called bonds. In addition, the investment of borrowing
proceeds, loan sales proceeds and stock proceeds have contributed to the
tightening of the average portfolio yield as these additional sources of
invested funds have also obtained the lower current attainable interest rates.
<PAGE>
Income on federal funds decreased during the three months ended
September 30, 1999 to $66,000 as compared with $98,000 for the 1998 period. The
decrease in income is due to a decrease of $1.6 million in the average balance
of federal funds and a decrease of 59 basis points in the average yield earned.
However, income on federal funds increased to $269,000 from $246,000 during the
nine month periods ended 1999 and 1998, respectively. The increase for this
period is a result of an increase of $1.6 million in the average balance of
federal funds sold to $7.4 million on average during the nine months of 1999 as
compared with the same period in 1998. The increase was due to the temporary
investment of stock proceeds during the first quarter of 1999. The increase was
partially offset by a reduction in the average yield earned of 75 basis points
to 4.86% for the 1999 period. The yield decrease is the result of the Federal
Reserve Bank's decreases in short term interest rates during the fourth quarter
of 1998.
INTEREST EXPENSE. Interest expense was $2.3 million for the three
months ended September 30, 1999; an increase of $315,000 or 15.7% from the same
period in 1998. For the nine months ended September 30, 1999 interest expense
totaled $6.5 million compared with $5.9 million for the 1998 period. The
increase in interest expense is due to interest paid on borrowed funds. The
average balance outstanding in borrowings during the three and nine months ended
September 30, 1999 was $37.4 million and $27.8 million, respectively. This
compares with no borrowings during the three and nine month periods ending
September 30, 1998. The borrowed funds resulted in additional interest expense
of $507,000 for the third quarter of 1999 and $1.1 million for the year to date
compared with no interest expense on borrowed funds in the 1998 period. Interest
expense on deposits decreased by $192,000 for the three months ended September
30, 1999 to $1.8 million from $2.0 million for the same period in 1998, a
decrease of 9.6%. For the nine months ended September 30, 1999 interest expense
on deposits was $5.4 million, a reduction of $500,000 from 1998 levels. The
decrease in interest expense on deposits was due to a 43 basis point decrease in
the average rate paid on deposits for the third quarter 1999 and a reduction of
39 basis points for the year to date compared with the 1998 periods. This
reduction in the average rate paid on deposits is the result of a shift in
deposit mix toward the lower cost source of funds available with core deposits
while reducing reliance on time deposits as a funding source between the two
periods.
PROVISION FOR CREDIT LOSSES. Total provisions for credit losses for the
three months ended September 30, 1999 were $45,000, with $135,000 in provisions
made for the nine month period. This compares with no provisions made during the
same periods of 1998. The allowance for credit losses was $1.5 million or 1.08%
of loans receivable at September 30, 1999 as compared with $1.7 million or 1.24%
of loans receivable at September 30, 1998. Although the allowance for loan
losses has decreased, non-performing assets have also decreased representing
0.30% of total assets at September 30, 1999 compared with 0.53% of total assets
at September 30, 1998. Management continues to monitor changes in the loan
portfolio mix in response to the redirection of loan asset origination and
retention toward consumer and commercial business loans. The method utilized to
evaluate adequacy of the allowance level accounts for the higher relative degree
of credit risk associated with this activity as compared with traditional
residential real estate lending. The allowance for loan losses has decreased by
$24,000 from December 31, 1998 to September 30, 1999.
<PAGE>
OTHER INCOME. Other operating income increased by $56,000 for the three
month period ending September 30, 1999 compared with the same period in 1998 to
$205,000 from $149,000. This improvement is primarily due to an increase in fee
income on deposit accounts of $44,000 to $125,000 for the 1999 period. An
improvement in other operating income is also reported for the nine months
ending September 30, 1999 increasing 71.7%, or $385,000 for the nine month
period ended September 30, 1999 compared with 1998. The increase was primarily
the result a realized gain upon the sale of an investment security held as
available for sale. Through the third quarter of 1999 security gains totaled
$281,000 compared with gains of $9,000 for the 1998 period. In addition,
improved revenue on deposit accounts totaled $49,000 to $354,000 in income for
the nine months ending September 30, 1999 and trust department income increased
$42,000 between the two periods.
OTHER EXPENSES. Operating and other expenses increased by $221,000 or
14.5%, to $1.7 million for the three months ended September 30, 1999 from $1.5
million for the same period in 1998. For the nine months ended September 30,
1999 total other expenses were $5.1 million compared with $4.6 million in 1998.
The increase was primarily due to an increase in compensation and employee
benefits, which increased to $1.0 million for the third quarter of 1999 and to
$2.9 million for the year to date, from $787,000 for the third quarter of 1998
and $2.4 million for the nine months ended September 30, 1998. This increase is
primarily due to accrued expenses relative to the Bank's ESOP plan and Incentive
Compensation plan which in 1998 were recorded in the fourth quarter. Total
operating expenses incurred during the third quarter of 1999 and year to date
for these benefit plans were $81,000 and $261,000 respectively. Salary and
related benefit expense increases and the recognition of one additional payroll
period in 1999 as compared with 1998 have contributed toward the balance of the
increase in operating and other expenses for the third quarter of 1999 and year
to date compared with the same periods in 1998.
INCOME TAX. Income tax expense was $340,000 for the three months ended
September 30, 1999, an increase of $123,000 from the third quarter 1998
provision of $217,000. For the nine months ended September 30, 1999 and 1998,
income tax provisions of $999,000 and $769,000 respectively were recorded. The
effective tax rate decreased to 35.8% for 1999 to date from 37.1% for the nine
months of 1998 as the Company has employed various strategies to reduce the tax
burden in this and future periods.
MANAGEMENT OF MARKET RISK
The Bank is in the business of risk management. Various forms of market
risk are inherent in the business of the Bank including concentration risk,
liquidity management, credit risk and collateral risk among others. However, the
Bank's most significant form of market risk is interest rate risk, as the
majority of the Bank's assets and liabilities are sensitive to changes in
interest rates. Ongoing monitoring and management of this risk is an important
component of the Company's asset and liability management process. The Bank's
interest rate risk management program focuses primarily on evaluating and
managing the composition of the Bank's assets and liabilities in the context of
various interest rate scenarios. Factors beyond Management's control, such as
market interest rates and competition, also have an impact on interest income
and interest expense. The Bank has experienced no significant change in the risk
exposure or asset and liability management targets since December 31, 1998.
<PAGE>
YEAR 2000. The Bank continues to actively prepare all aspects of its
business for the turn of the century and the possibility of business
interruptions due to the inability of some computers and computer programs to
properly "read" the new year. The Bank installed a new in-house deposit and loan
processing system in 1998 and all testing has returned satisfactory results. The
Bank has also completed testing of ancillary systems with all systems either
providing satisfactory results or replaced, with implementation completed by
September 30, 1999. The FDIC completed their Phase II examination of Year 2000
preparedness of the Bank and the New York State Banking Department and the FDIC
are currently reviewing Phase III of their respective examinations. The reviews
have resulted in satisfactory reports.
The Bank developed a bank-wide contingency plan for the Year 2000
issue, which was completed by June 30, 1999, which was approved and adopted by
the Board of Directors. As part of the plan, the Bank identified potential
alternative suppliers of computer services (including third party vendors) and
processing methods. Management will continue to monitor this issue and report to
the Board of Directors on a monthly basis.
Through September 30, 1999 the costs incurred to address the Year 2000
issue or otherwise upgrade and test the Bank's computer capabilities have been
approximately $320,000. Additional costs related to the year 2000 issue will be
expensed as they are incurred except for costs for new hardware and software
that will be capitalized. The funds used to address the year 2000 issue have
been obtained from operating income. Management does not expect that the
additional costs to be incurred in connection with the year 2000 issue will have
a material impact on the Bank's financial condition or results of operations.
System replacement and testing has not delayed other information technology
projects to date.
<PAGE>
ONEIDA FINANCIAL CORP.
SELECTED FINANCIAL RATIOS
At and for the Three Months Ended and Nine Months Ended September 30, 1999
and September 30, 1998
(unaudited) (annualized where appropriate)
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Performance Ratios:
Return on average assets 0.84% 0.91% 0.92% 0.81%
Return on average equity 5.50% 7.04% 5.55% 6.22%
Net interest margin 3.81% 4.01% 3.80% 4.03%
Efficiency Ratio 64.49% 68.04% 66.06% 69.28%
Ratio of operating expense
to average total assets 2.54% 2.79% 2.64% 2.89%
Ratio of average interest-earning assets
to average interest-bearing liabilities 124.76% 120.15% 125.83% 119.20%
Asset Quality Ratios:
Non-performing assets to total assets 0.30% 0.53% 0.30% 0.53%
Allowance for loan losses
to non-performing loans 243.43% 212.41% 243.43% 212.41%
Allowance for loan losses
to loans receivable, net 1.08% 1.24% 1.08% 1.24%
Capital Ratios:
Total shareholders' equity to total assets 14.80% 13.07% 14.80 13.07%
Average equity to average assets 15.23% 12.99% 16.52% 13.01%
</TABLE>
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
For a discussion of the Company's asset and liability management
policies as well as the potential impact of interest rate changes upon the
earnings of the Company, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1998 Annual Report to
Stockholders. There has been no material change in the Company's risk profile
since December 31, 1998.
<PAGE>
ONEIDA FINANCIAL CORP.
AND SUBSIDIARIES
Part II - Other Information
Item 1 Legal Proceedings
The Company and its subsidiary are not involved in any litigation, nor
is the Company aware of any pending litigation, other than legal proceedings
incident to the business of the Company, such as foreclosure actions filed on
behalf of the Company. The Oneida Indian Nation (the "Oneidas") continues to
pursue their land claim over 270,000 acres on Central New York State which
includes much of the Bank's market area. To date neither the original claim nor
the amended motion has had an adverse impact on the local economy or real
property values. Both the State of New York and the Oneidas have indicated in
their respective communications that individual landowners will not be adversely
affected by the ongoing litigation. Neither the Company nor the Bank is a named
defendant in the pending motion. Management, therefore, believes the results of
any current litigation would be immaterial to the consolidated financial
condition or results of operation of the Company.
Item 2 Changes in Securities
None
Item 3 Default Upon Senior Securities
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) All required exhibits are included in Part I under
Consolidated Financial Statements, Notes to Unaudited
Consolidated Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations,
and are incorporated by reference, herein.
(b) Exhibits
(27) Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
ONEIDA FINANCIAL CORP.
Date: November 5,1999 By: /s/ Michael R. Kallet
--------------------------------------
Michael R. Kallet
President and Chief Executive Officer
Date: November 5, 1999 By: /s/ Eric E. Stickels
--------------------------------------
Eric E. Stickels
Senior Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999 AND THE CONSOLIDATED STATEMENT OF
INCOME FOR THREE MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,909
<INT-BEARING-DEPOSITS> 857
<FED-FUNDS-SOLD> 2,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 113,143
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 142,616
<ALLOWANCE> (1,519)
<TOTAL-ASSETS> 273,702
<DEPOSITS> 192,806
<SHORT-TERM> 10,000
<LIABILITIES-OTHER> 394
<LONG-TERM> 30,000
0
0
<COMMON> 358
<OTHER-SE> 40,144
<TOTAL-LIABILITIES-AND-EQUITY> 273,702
<INTEREST-LOAN> 2,872
<INTEREST-INVEST> 1,883
<INTEREST-OTHER> 66
<INTEREST-TOTAL> 4,821
<INTEREST-DEPOSIT> 1,813
<INTEREST-EXPENSE> 2,320
<INTEREST-INCOME-NET> 2,501
<LOAN-LOSSES> 45
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,745
<INCOME-PRETAX> 916
<INCOME-PRE-EXTRAORDINARY> 576
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 576
<EPS-BASIC> 0.16
<EPS-DILUTED> 0.16
<YIELD-ACTUAL> 3.81
<LOANS-NON> 624
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,838
<ALLOWANCE-OPEN> 1,560
<CHARGE-OFFS> 99
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 1,519
<ALLOWANCE-DOMESTIC> 1,329
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 190
</TABLE>
