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 June 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 [ ]
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
reports 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 3,558,600 shares
of the Registrant's common stock outstanding as of July 30, 1999.
<PAGE>
ONEIDA FINANCIAL CORP.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Statements of Condition (unaudited) 2
As of June 30, 1999, December 31, 1998 (audited) and June 30, 1998
Consolidated Statements of Operations (unaudited) 3
For the three months ended and six months ended June 30, 1999 and 1998
Consolidated Statements of Comprehensive Income (unaudited) 4
For the six months ended June 30, 1999 and 1998
Consolidated Statements of Cash Flows (unaudited) 5
For the three months ended and six months ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II. OTHER INFORMATION 14
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Page 1 of 17
<PAGE>
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
At June 30, 1999, December 31, 1998 and June 30, 1998
(unaudited) (audited) (unaudited)
At At At
June 30, December 31, June 30,
1999 1998 1998
--------- --------- ---------
(in thousands)
ASSETS
<S> <C> <C> <C>
Cash and due from banks ................. $ 4,743 $ 4,056 $ 4,848
Federal funds sold ...................... 4,100 22,100 8,700
--------- --------- ---------
TOTAL CASH AND CASH EQUIVALENTS ............... 8,843 26,156 13,548
Investment securities, at fair value .... 88,554 62,669 39,571
Mortgage-backed securities, at fair value 30,596 20,022 16,615
--------- --------- ---------
TOTAL INVESTMENT SECURITIES ................... 119,150 82,691 56,186
Mortgage loans held for sale ............ 0 1,863 0
Loans receivable ........................ 135,728 131,936 141,764
Allowance for credit losses ............. (1,560) (1,543) (1,721)
--------- --------- ---------
LOANS RECEIVABLE, NET ......................... 134,168 130,393 140,043
Bank premises and equipment, net ........ 5,161 4,854 4,883
Accrued interest receivable ............. 1,897 1,600 1,585
Refundable income taxes ................. 494 421 174
Other real estate ....................... 264 224 292
Other assets ............................ 1,803 579 931
--------- --------- ---------
TOTAL ASSETS ............................ $ 271,780 $ 248,781 $ 217,642
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to Depositors ....................... $ 192,839 $ 193,398 $ 188,035
Mortgagors' escrow funds ................ 823 807 1,182
Borrowings .............................. 35,000 10,000 0
Other Liabilities ....................... 542 442 394
--------- --------- ---------
TOTAL LIABILITIES ............................. 229,204 204,647 189,611
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Shareholders' equity:
Common stock ( $.10 par value,
8,000,000 shares authorized,
3,580,200 issued and outstanding) . 358 358 0
Additional paid-in capital .............. 15,422 15,545 0
Retained earnings ....................... 28,923 27,710 27,451
Common shares issued under employee
stock plans - unearned ............ (1,313) (401) 0
Accumulated other comprehensive income .. (814) 922 580
--------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY .................... 42,576 44,134 28,031
--------- --------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY .................... $ 271,780 $ 248,781 $ 217,642
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
2 of 17
<PAGE>
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended and Six Months Ended June 30, 1999 (unaudited) and
1998 (unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------ ------ ------ ------
(in thousands except per share data)
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans .................... $2,677 $3,028 $5,440 $6,093
Interest on investment and mortgage-
backed securities .................... 1,707 885 3,161 1,730
Dividends on equity securities ................ 32 26 55 40
Interest on federal fund sold and
interest-bearing deposits ................. 78 79 203 148
------ ------ ------ ------
Total interest and dividend income .................. 4,494 4,018 8,859 8,011
------ ------ ------ ------
INTEREST EXPENSE:
Savings deposit ............................... 270 319 545 627
Money market and Super NOW .................... 155 124 289 241
Time deposits ................................. 1,375 1,526 2,781 3,054
Borrowings .................................... 401 0 603 0
------ ------ ------ ------
Total interest expense .............................. 2,201 1,969 4,218 3,922
------ ------ ------ ------
NET INTEREST INCOME .................................... 2,293 2,049 4,641 4,089
Less: Provision for credit losses ............. 45 0 90 0
------ ------ ------ ------
Net interest income after provision for credit losses 2,248 2,049 4,551 4,089
------ ------ ------ ------
OTHER INCOME:
Investment security gain ...................... 280 1 281 9
Other operating income ........................ 203 181 437 379
------ ------ ------ ------
Total other income .................................. 483 182 718 388
------ ------ ------ ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OTHER EXPENSES:
<S> <C> <C> <C> <C>
Compensation and employee benefits ............ 1,030 871 1,909 1,610
Occupancy expenses, net ....................... 316 352 652 649
Other operating expense ....................... 507 505 836 864
------ ------ ------ ------
Total other expenses ................................ 1,853 1,728 3,397 3,123
------ ------ ------ ------
INCOME BEFORE INCOME TAXES ............................. 878 503 1,872 1,354
------ ------ ------ ------
Provision for income taxes .......................... 270 237 659 552
------ ------ ------ ------
NET INCOME ............................................. $ 608 $ 266 $1,213 $ 802
====== ====== ====== ======
EARNINGS PER SHARE ..................................... $ 0.17 N/M $ 0.34 N/M
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3 of 17
<PAGE>
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For theThree Months Ended and Six Months Ended June 30, 1999(unaudited) and 1998
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------- ------- ------- -------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net income .................................... $ 608 $ 266 $ 1,213 $ 802
------- ------- ------- -------
Other comprehensive income, net of tax:
Unrealized gains(losses) on assets
available for sale:
Unrealized holding gains(losses)
arising during period .................. (1,992) 7 (2,612) 173
Less: reclassificaion adjustment for
gains included in net income ..... (280) (1) (281) (9)
------- ------- ------- -------
(2,272) 6 (2,893) 164
Net income (tax) benefit effect ............ 909 8 1,157 (55)
------- ------- ------- -------
Other comprehensive income(loss), net of tax .. (1,363) 14 (1,736) 109
Comprehensive Income .......................... $ (755) $ 280 $ (523) $ 911
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4 of 17
<PAGE>
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended and Six Months Ended June 30, 1999 (unaudited) and
1998 (unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- --------
Operating Activities: (in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net income .................................................... $ 608 $ 266 $ 1,213 $ 802
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ............................................... 162 152 327 236
Amortization of premiums/discounts on securities, net ...... (24) 23 (18) 44
Provision for credit losses ................................ 45 0 90 0
Provision for deferred taxes ............................... 0 100 0 100
Loss on sale of other real estate .......................... 31 23 31 23
Gain on sale/call of securities, net ....................... (280) (1) (281) (9)
(Gain) loss on sale of loans ............................... 6 120 (22) 77
Income tax refundable ...................................... (408) (123) (73) (29)
Accrued interest receivable ................................ (106) (67) (297) (17)
Other assets ............................................... 26 (234) (182) (36)
Other liabilities .......................................... 285 24 216 15
Origination of loans held for sale ......................... 0 (2,893) (3,984) (8,439)
Proceeds from sales of loans ............................... 1,924 3,093 5,678 8,405
-------- -------- -------- --------
Net cash provided by operating activities .............. 2,269 483 2,698 1,172
-------- -------- -------- --------
Investing Activities:
Purchase of Investment Securities .............................. (29,828) (7,392) (58,293) (14,415)
Principal collected on and proceeds of maturities
or calls from investments .................................. 13,927 11,895 24,449 18,551
Purchase of mortgage-backed securities ......................... (5,182) (6,066) (8,215) (7,076)
Principal collected from mortgage-backed securities ............ 1,174 1,414 3,006 2,205
Net (increase) decrease in loans ............................... (6,170) (1,042) (3,875) 1,985
Purchase of bank premises and equipment ........................ (400) (454) (634) (1,307)
Proceeds from sale of other real estate ........................ 47 289 130 289
-------- -------- -------- --------
Net cash (used in) provided by investing activities .... (26,432) (1,356) (43,432) 232
-------- -------- -------- --------
Financing Activities:
Net increase in demand deposit, savings,
money market, super now and escrow ......................... 6,294 4,995 3,707 6,412
Net (decrease) increase in time deposits ....................... (120) (974) (4,250) (332)
Proceeds from borrowings ...................................... 20,000 30,000 0
Repayment of borrowings ......................................... (5,000) (5,000) 0
Adjust net proceeds ............................................ (123) 0
Common stock acquired by ESOP .................................. (913) 0
-------- -------- -------- --------
Net cash provided by financing activities .............. 21,174 4,021 23,421 6,080
-------- -------- -------- --------
Increase (decrease) in cash and cash equivalents ................. (2,989) 3,148 (17,313) 7,484
-------- -------- -------- --------
Cash and cash equivalents at beginning of year ................... 11,832 10,400 26,156 6,064
-------- -------- -------- --------
Cash and cash equivalents at end of year ......................... 8,843 13,548 8,843 13,548
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest ........................................... 2,018 1,923 4,034 3,856
Cash paid for income taxes ....................................... 678 570 678 581
Non-cash investing activities:
Unrealized gain (loss) on investment and mortgage-backed
securities designated as available for sale ................. (2,262) 23 (2,882) 109
Transfer of loans to other real estate ........................... 159 210 201 297
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 5 of 17
<PAGE>
ONEIDA FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 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 June 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 six months ended June 30, 1999:
<TABLE>
<CAPTION>
Income Shares Per Share
------ ------ ---------
June 30, 1999
- -------------
<S> <C> <C> <C>
Net income (Three Months Ended) $ 607,588 3,580,200 $0.17
========== ========= =====
Net income (Six Months Ended) $1,212,666 3,580,200 $0.34
========== ========= =====
</TABLE>
Earnings per share information is not presented for the quarter ended and six
months ended June 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 March 23, 1999, the Bank announced its intention to create 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 funded effective April 26, 1999 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 June 30, 1999 the principal balance outstanding
of real estate loans in the REIT totalled $41.3 million.
Page 6 of 17
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
Of Operations
Page 7 of 17
<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 March 23, 1999, the Bank announced its intention to create 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 funded effective April 26, 1999 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 June 30, 1999 the principal balance
outstanding of real estate loans in the REIT totaled $41.3 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 June 30, 1999 the Bank
had total borrowings of $35.0 million at an average cost of 5.14%. The Bank's
net income is enhanced through the positive spread between the borrowing rate
and investment returns.
The Company announced the regulatory approval of a 5% stock repurchase,
representing 179,010 shares of common stock, on June 9, 1999. The Board of
Directors authorized the repurchase program and the New York State Banking
Page 8 of 17
<PAGE>
Department approved the repurchase program to begin following the Company's
six-month conversion anniversary of June 30, 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 will paid to all shareholders of record as of July 27, 1999 and is
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 June 30, 1999 were $271.8 million, an increase
of $23.0 million from $248.8 million at December 31, 1998. The increase in total
assets was primarily attributable to an increase of $36.5 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 and the proceeds from the sale of fixed-rate residential real
estate loans. Asset growth was also supported by an increase of $3.8 million in
net loans receivable. The increase in net loans was achieved while Management
continued to sell substantially all newly originated fixed-rate residential real
estate loans into the secondary mortgage market without recourse and on a
servicing retained basis. During the period between December 31, 1998 and June
30, 1999 a total of $5.0 million in fixed rate residential real estate loans
were sold. The increase in assets was partially offset by a decrease of $18.0
million in federal funds sold to $4.1 million at June 30, 1999 from $22.1
million at December 31, 1998 as stock 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 June 30, 1999, total consumer and commercial
business loans increased by $3.6 million from December 31, 1998.
LIABILITIES. Total liabilities increased by $24.6 million or 12.0% to
$229.2 million at June 30, 1999 from $204.6 million at December 31, 1998. The
increase is primarily the result of an increase of $25.0 million in borrowings
partially offset by a decrease of $559,000 in total deposits. The decrease in
deposits was a result of a decrease in Time Deposits of $2.3 million from $108.9
million at December 31, 1998 to $106.6 million at June 30, 1999. The Bank
continues to emphasize core deposits and checking accounts, which increased by
$1.8 million during the same period. In addition, total deposits increased by
$5.9 million from the quarter ending March 31, 1999.
STOCKHOLDERS' EQUITY. Total stockholders' equity at June 30, 1999 was
$42.6 million, an increase of $14.6 million from $28.0 million at June 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 $1.5 million from December 31, 1998 primarily due to a decrease
of $1.7 million in Accumulated Other Comprehensive Income 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 June 30, 1999
as compared with December 31, 1998 which negatively affected the market value of
<PAGE>
the Company's investments and mortgage-backed securities portfolios. The
decrease in shareholders' 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 June
30, 1999, a value of $1.3 million in common shares were issued and unearned
under the ESOP Plan. The decreases in stockholders' equity were partially offset
by the addition of after-tax net income of $1.2 million for the six months ended
June 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 six months ended June 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 9 of 17
<PAGE>
TABLE 1. Average Balance Sheet. (Quarterly)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------------------------------------
1999 1998
------------------------------------- -----------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ----
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets:
Loans Receivable ............. $132,860 $ 2,677 8.06% $141,301 $ 3,028 8.57%
Investment Securities ........ 111,347 1,707 6.13% 54,643 885 6.48%
Federal Funds ................ 6,526 78 4.78% 5,771 79 5.48%
Equity Securities ............ 3,544 32 3.61% 2,718 26 3.83%
-------- -------- ---- -------- -------- ----
Total Interest-earning assets 254,277 4,494 7.07% 204,433 4,018 7.86%
-------- -------- ---- -------- -------- ----
Interest-bearing Liabilities:
Money Market Deposits ........ $ 14,834 $ 120 3.24% $ 11,862 $ 95 3.20%
Savings Accounts ............. 48,088 270 2.25% 44,580 319 2.86%
Interest-bearing Checking .... 7,806 35 1.79% 5,865 29 1.98%
Time Deposits ................ 102,321 1,375 5.38% 108,720 1,526 5.61%
Borrowings ................... 30,567 401 5.25% 0 0 0.00%
-------- -------- ---- -------- -------- ----
Total Interest-bearing Liabs 203,616 2,201 4.32% 171,027 1,969 4.61%
-------- -------- ---- -------- -------- ----
Net Interest Income $ 2,293 $ 2,049
======== ========
Net Interest Spread 2.75% 3.26%
===== =====
Net Earning Assets $ 50,661 $ 33,406
======== ========
Net yield on average
Interest-earning assets 3.61% 4.01%
===== =====
Average interest-earning
assets to average
Interest-bearing liabs 124.88% 119.53%
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Twelve Months Ended Dec. 31, 1998
-----------------------------------
Average Interest
Outstanding Earned/ Yield/
Balance Paid Rate
------- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning Assets:
Loans Receivable ............. $138,953 $ 12,063 8.68%
Investment Securities ........ 56,646 3,736 6.60%
Federal Funds ................ 7,274 347 4.77%
Equity Securities ............ 2,550 90 3.53%
-------- -------- ----
Total Interest-earning assets 205,423 16,236 7.90%
-------- -------- ----
Interest-bearing Liabilities:
Money Market Deposits ........ $ 12,519 $ 407 3.25%
Savings Accounts ............. 44,481 1,295 2.91%
Interest-bearing Checking .... 6,091 121 1.99%
Time Deposits ................ 109,419 6,110 5.58%
Borrowings ................... 1,264 66 5.22%
-------- -------- ----
Total Interest-bearing Liabs 173,774 7,999 4.60%
-------- -------- ----
Net Interest Income $ 8,237
========
Net Interest Spread 3.30%
=====
Net Earning Assets $ 31,649
========
Net yield on average
Interest-earning assets 4.01%
=====
Average interest-earning
assets to average
Interest-bearing liabs 118.21%
=======
</TABLE>
<PAGE>
TABLE 2. Average Balance Sheet. (Year to Date)
<TABLE>
<CAPTION>
Six Months Ended June 30, Six Months Ended June 30,
------------------------------------- ------------------------------------
1999 1998
------------------------------------- ------------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ----
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning Assets:
Loans Receivable ............... $131,720 $ 5,440 8.26% $142,293 $ 6,093 8.56%
Investment Securities .......... 100,708 3,161 6.28% 52,025 1,730 6.65%
Federal Funds .................. 8,667 203 4.68% 5,548 148 5.34%
Equity Securities .............. 3,333 55 3.30% 2,336 40 3.42%
-------- -------- ---- -------- -------- ----
Total Interest-earning assets 244,428 8,859 7.25% 202,202 8,011 7.92%
-------- -------- ---- -------- -------- ----
Interest-bearing Liabilities:
Money Market Deposits .......... $ 13,840 $ 221 3.19% $ 11,705 $ 186 3.18%
Savings Accounts ............... 47,138 545 2.31% 44,278 627 2.83%
Interest-bearing Checking ...... 7,504 68 1.81% 5,673 55 1.94%
Time Deposits .................. 101,921 2,781 5.46% 108,656 3,054 5.62%
Borrowings ..................... 22,965 603 5.25% 0 0 0.00%
-------- -------- ---- -------- -------- ----
Total Interest-bearing Liabs . 193,368 4,218 4.36% 170,312 3,922 4.61%
-------- -------- ---- -------- -------- ----
Net Interest Income $ 4,641 $ 4,089
======== ========
Net Interest Spread 2.89% 3.32%
===== =====
Net Earning Assets $ 51,060 $31,890
======== ========
Net yield on average
Interest-earning assets 3.80% 4.04%
===== =====
Average interest-earning
assets to average
Interest-bearing liabs 126.41% 118.72%
======= =======
</TABLE>
Page 10 of 17
<PAGE>
RESULTS OF OPERATIONS
GENERAL. Net income for the three months ended June 30, 1999 increased
by $342,000 to $608,000 for the second quarter 1999 from $266,000 for the three
months ended June 30, 1998. For the six months ended June 30, 1999 net income
was $1.2 million an increase of $411,000 or 51.2% from the net income reported
for the six months ended June 30, 1998 of $802,000. 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 $476,000 or 11.8%, to
$4.5 million for the three months ended June 30, 999 from $4.0 million for three
months ended June 30, 1998. For the six months ended June 30, 1999 total
interest income was recorded at $8.9 million, an increase of $848,000 or 10.6%
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 $822,000 for the quarter and $1.4 million for the year to date.
Income on loans decreased by $351,000 for the second quarter of 1999 compared
with the same period in 1998 and decreased by $653,000 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 $8.4 million
in the average balance in loans receivable for the three months ended June 30,
1999 as compared with the same period in 1998, and a decrease of 51 basis points
in average yield from 8.57% at June 30, 1998 to 8.06% at June 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 June 30, 1999 residential real estate loans totaled $79.1 million,
a decrease of $8.9 million from June 30, 1998. During the same period a total of
$13.1 million in fixed-rate residential real estate loans were sold in the
secondary market. The decrease in loans resulting from sales activity was
partially offset by increases in consumer and commercial business loans of $2.3
million during the same period.
Investment income increased as a result of an increase of $56.7 million
in the average balance of investment and mortgage-backed securities for the
three month period ended June 30, 1999 as compared with the same period in 1998.
The increase in volume was partially offset by a decrease in the average yield
of investment securities of 35 basis points to 6.13% for the period. The yield
reduction is reflective of the general decrease in interest rates during the
twelve-month period 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.
Income on federal funds remained at similar levels for the three months
ended June 30, 1999 and 1998, however, demonstrates an increase for the six
month period of 1999 versus 1998. The increase for this period is a result of an
increase of $3.1 million in the average balance of federal funds sold to $8.7
million on average during the six 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 in income as a result of
a volume increase was partially offset by a reduction in the average yield
earned of 66 basis points to 4.68% for the 1999 period. The yield decrease is
the result of the Federal Reserve Bank's decrease in short term interest rates
during the fourth quarter of 1998.
<PAGE>
INTEREST EXPENSE. Interest expense was $2.2 million for the three
months ended June 30, 1999; an increase of $232,000 or 11.8% from the same
period in 1998. For the six months ended June 30, 1999 interest expense totaled
$4.2 million compared with $3.9 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 months ended June 30, 1999 was $30.6
million and $23.0 million in average borrowings were outstanding for the
six-month period ending June 30, 1999. This compares with no borrowings during
the first six months of 1998. The borrowed funds resulted in additional interest
expense of $401,000 for the second quarter of 1999 and $603,000 for the year to
date compared with no interest expense on borrowed funds in 1998 through June
30th. Interest expense on deposits decreased by $169,000 for the three months
ended June 30, 1999 to $1.8 million from $2.0 million for the same period in
1998, a decrease of 8.6%. For the six months ended June 30, 1999 interest
expense on deposits was $3.6 million, a reduction of $307,000 from 1998 levels.
The decrease in interest expense on deposits was due to a 45 basis point
decrease in the average rate paid on deposits for the second quarter 1999 and a
reduction of 37 basis points for the year to date compared with the 1998
periods.
Page 11 of 17
<PAGE>
PROVISION FOR CREDIT LOSSES. Total provisions for credit losses for the
three months ended June 30, 1999 were $45,000, with $90,000 in provisions made
to date for the year 1999, compared with no provisions made during the same
periods of 1998. The allowance for credit losses was $1.6 million or 1.16% of
loans receivable at June 30, 1999 as compared with $1.7 million or 1.23% of
loans receivable at June 30, 1998. Although the allowance for loan losses has
decreased, non-performing assets have also decreased representing 0.33% of total
assets at June 30, 1999 compared with 0.44% of total assets at June 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 provides 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 increased by $17,000 from
December 31, 1998 to June 30, 1999.
OTHER INCOME. Other operating income increased by $301,000 for the
three-month period ending June 30, 1999 compared with the same period in 1998 to
$483,000 from $182,000. This results in an improvement in other operating income
of $330,000 for the year to date in 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. For the second quarter of 1999 security gains
totaled $280,000 compared with gains of $1,000 for the 1998 period. In addition,
improved revenue on the Bank's secondary market loan sales and servicing
activities which increased by $39,000 to $100,000 in income for the six months
ending June 30, 1999 from $61,000 for the first quarter of 1998 also contributed
to the improvement in other income.
OTHER EXPENSES. Operating and other expenses increased by $125,000 or
7.2%, to $1.9 million for the three months ended June 30, 1999 from $1.7 million
for the same period in 1998. For the six months ended June 30, 1999 total other
expenses were $3.4 million compared with $3.1 million in 1998. The increase was
primarily due to an increase in compensation and employee benefits, which
increased to $1.0 million for the second quarter of 1999 and to $1.9 million for
the year to date, from $871,000 for the second quarter of 1998 and $1.6 million
for the six months ended June 30, 1998. This increase is primarily due to
accrued expenses relative to the Bank's ESOP plan and Incentive Compensation
plan that in 1998 were recorded in the fourth quarter. Total operating expenses
incurred during the second quarter of 1999 and year to date for these benefit
plans were $94,000 and $180,000 respectively. Salary and related benefit expense
increases contributed toward the balance of the increase in operating and other
expenses for the second quarter of 1999 and year to date compared with the same
periods in 1998.
INCOME TAX. Income tax expense was $270,000 for the three months ended
June 30, 1999, an increase of $33,000 from the second quarter 1998 provision of
$237,000. For the six months ended June 30, 1999 and 1998, income tax provisions
of $659,000 and $552,000 respectively were recorded. The effective tax rate
decreased to 35.2% for 1999 to date from 40.8% for the first six 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
<PAGE>
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.
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 replacements were ordered by June 30, 1999
with implementation to be complete by September 30, 1999. The FDIC recently
completed their Phase II examination of Year 2000 preparedness of the Bank.
The Bank developed a bank-wide contingency plan for the Year 2000 issue
that 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
Page 12 of 17
<PAGE>
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 June 30, 1999 the costs incurred to address the Year 2000 issue
or otherwise upgrade and test the Bank's computer capabilities have been
approximately $280,000. 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.
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP.
SELECTED FINANCIAL RATIOS
At and for the Three Months Ended and Six Months Ended June 30, 1999 and
June 30, 1998 (unaudited) (annualized where appropriate)
Three Months Ending June 30, Six Months Ending June 30,
1999 1998 1999 1998
---- ---- ---- ----
Performance Ratios:
<S> <C> <C> <C> <C>
Return on average assets .......................... 0.92% 0.50% 1.01% 0.76%
Return on average equity .......................... 5.62% 3.81% 5.55% 5.85%
Net interest margin ............................... 3.61% 4.01% 3.81% 4.04%
Efficiency Ratio .................................. 74.11% 77.77% 66.90% 69.90%
Ratio of operating expense
to average total assets ......................... 2.80% 3.23% 2.69% 2.94%
Ratio of average interest-earning assets
to average interest-bearing liabilities ......... 124.12% 118.39% 125.60% 117.58%
Asset Quality Ratios:
Non-performing assets to total assets ..... 0.33% 0.44% 0.33% 0.44%
Allowance for loan losses
to non-performing loans ............... 249.04% 258.02% 249.04% 258.02%
Allowance for loan losses
to loans receivable, net .............. 1.16% 1.23% 1.16% 1.23%
Capital Ratios:
Total shareholders' equity to total assets 15.67% 12.88% 15.67% 12.88%
Average equity to average assets .. 16.37% 13.05% 17.23% 13.03%
</TABLE>
Page 13 of 17
<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
On April 27, 1999, at the Annual Meeting of Shareholders, shareholders
voted in favor of the election of Directors, as follows;
For Withheld
--------- --------
Edward J. Clarke 2,838,433 31,249
Rodney D. Kent 2,837,782 31,900
Michael W. Milmoe 2,837,933 31,749
Richard B. Myers 2,839,782 29,900
Shareholders ratified the appointment of PricewaterhouseCoopers, LLP as auditors
for the Company for the fiscal year ended December 31, 1999 by a vote of;
For Against Abstain
--------- ------- -------
2,863,002 4,500 2,180
Item 5 Other Information
None
<PAGE>
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 14 of 17
<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: August 13, 1999 By: /s/ Michael R. Kallet
---------------------
Michael R. Kallet
President and Chief Executive Officer
Date: August 13, 1999 By: /s/ Eric E. Stickels
----------------------
Eric E. Stickels
Senior Vice President and Chief
Financial Officer
Page 15 of 17
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Page 16 of 17
<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,743
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 119,150
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 135,728
<ALLOWANCE> (1,560)
<TOTAL-ASSETS> 271,780
<DEPOSITS> 193,662
<SHORT-TERM> 5,000
<LIABILITIES-OTHER> 542
<LONG-TERM> 30,000
0
0
<COMMON> 358
<OTHER-SE> 42,218
<TOTAL-LIABILITIES-AND-EQUITY> 271,780
<INTEREST-LOAN> 2,677
<INTEREST-INVEST> 1,739
<INTEREST-OTHER> 78
<INTEREST-TOTAL> 4,494
<INTEREST-DEPOSIT> 1,800
<INTEREST-EXPENSE> 2,201
<INTEREST-INCOME-NET> 2,293
<LOAN-LOSSES> 45
<SECURITIES-GAINS> 280
<EXPENSE-OTHER> 1,853
<INCOME-PRETAX> 878
<INCOME-PRE-EXTRAORDINARY> 608
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
<YIELD-ACTUAL> 3.61
<LOANS-NON> 626
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,951
<ALLOWANCE-OPEN> 1,568
<CHARGE-OFFS> 69
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 1,560
<ALLOWANCE-DOMESTIC> 1,303
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 257
</TABLE>
