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 March 31, 2000
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 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 3,216,702 shares of
the Registrant's common stock outstanding as of May 1, 2000.
<PAGE>
ONEIDA FINANCIAL CORP.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Consolidated Statements of Condition (unaudited) 2
As of March 31, 2000 and December 31, 1999 (audited)
Consolidated Statements of Operations (unaudited) 3
For the three months ended March 31, 2000 and 1999
Consolidated Statements of Comprehensive Income (unaudited) 4
For the three months ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows (unaudited) 5
For the three months ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II. OTHER INFORMATION 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Page 1 of 18
<PAGE>
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
At March 31, 2000 and December 31, 1999
(unaudited) (audited)
At At
March 31, December 31,
2000 1999
--------- ---------
ASSETS (in thousands)
<S> <C> <C>
Cash and due from banks $ 6,446 $ 8,815
Federal funds sold 400
--------- ---------
TOTAL CASH AND CASH EQUIVALENTS 6,846 8,815
Investment securities, at fair value 91,073 85,543
Mortgage-backed securities, at fair value 33,536 26,355
--------- ---------
TOTAL INVESTMENT SECURITIES 124,609 111,898
Mortgage loans held for sale 501 341
Loans receivable 156,939 150,328
Allowance for credit losses (1,545) (1,523)
--------- ---------
LOANS RECEIVABLE, NET 155,394 148,805
Bank premises and equipment, net 5,221 5,301
Accrued interest receivable 2,273 1,766
Refundable income taxes 0 0
Other real estate 116 94
Other assets 3,537 3,192
--------- ---------
TOTAL ASSETS $ 298,497 $ 280,212
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to Depositors $ 195,047 $ 188,271
Mortgagors' escrow funds 613 849
Borrowings 63,000 50,200
Other Liabilities 913 941
--------- ---------
TOTAL LIABILITIES 259,573 240,261
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Shareholders' equity:
Common stock ( $.10 par value; 8,000,000
shares authorized; 3,580,200 issued) 358 358
Additional paid-in capital 15,413 15,413
Retained earnings 29,744 29,682
Common shares issued under employee
stock plans - unearned (1,167) (1,167)
Accumulated other comprehensive income (loss) (2,895) (2,584)
Treasury Stock (at cost, 238,600
and 167,100 shares) (2,529) (1,751)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 38,924 39,951
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 298,497 $ 280,212
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
Page 2 of 18
<PAGE>
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 (unaudited) and 1999 (unaudited )
Three Months Ended
March 31,
2000 1999
------ ------
(in thousands, except Earnings Per Share Data)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $3,180 $2,763
Interest on investment and mortgage-
backed securities 1,618 1,454
Dividends on equity securities 286 23
Interest on federal fund sold and
interest-bearing deposits 16 125
------ ------
Total interest and dividend income 5,100 4,365
------ ------
INTEREST EXPENSE:
Savings deposit 275 275
Money market and Super NOW 170 134
Time deposits 1,340 1,406
Borrowings 807 202
------ ------
Total interest expense 2,592 2,017
------ ------
NET INTEREST INCOME 2,508 2,348
Less: Provision for credit losses 66 45
------ ------
Net interest income after provision for credit losses 2,442 2,303
------ ------
OTHER INCOME:
Investment security gain, net 0 1
Other operating income 259 234
------ ------
Total other income 259 235
------ ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
OTHER EXPENSES:
Compensation and employee benefits 1,085 879
Occupancy expenses, net 347 336
Other operating expense 407 329
------ ------
Total other expenses 1,839 1,544
------ ------
INCOME BEFORE INCOME TAXES 862 994
------ ------
Provision for income taxes 254 389
------ ------
NET INCOME $ 608 $ 605
====== ======
EARNINGS PER SHARE $ 0.19 $ 0.17
====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3 of 18
<PAGE>
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2000 (unaudited) and 1999 (unaudited)
Three Months Ended
March 31, March 31,
2000 1999
----- -----
in thousands)
<S> <C> <C>
Net income $ 608 $ 605
----- -----
Othercomprehensive income, net of tax:
Unrealized gains(losses) on assets
available for sale:
Unrealized holding losses
arising during period (518) (620)
Less: reclassification adjustment for
gains included in net income (0) (1)
----- -----
(518) (621)
Net income tax benefit effect 207 248
Other comprehensive income(loss), net of tax (311) (373)
----- -----
Comprehensive Income $ 297 $ 232
===== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4 of 18
<PAGE>
<TABLE>
<CAPTION>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2000 (unaudited) and 1999 (unaudited)
Three Months Ended
March 31, March 31,
2000 1999
-------- --------
Operating Activities: (in thousands)
<S> <C> <C>
Net income $ 608 $ 605
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 170 165
Amortization of premiums/discounts on securities, net 5 6
Provision for credit losses 66 45
Loss on sale of other real estate 7 0
Gain on sale/call of securities, net 0 (1)
Gain on sale of loans, net (3) (28)
Income tax refundable (payable) (234) 335
Accrued interest receivable (507) (190)
Other assets (136) (209)
Other liabilities 206 (69)
Origination of loans held for sale (466) (3,984)
Proceeds from sales of loans 309 3,754
-------- --------
Net cash provided by operating activities 25 429
-------- --------
Investing Activities:
Purchase of investment securities (5,958) (28,465)
Principal collected on and proceeds of maturities
or calls from investments 12 10,522
Purchase of mortgage-backed securities (7,982) (3,033)
Principal collected from mortgage-backed securities 693 1,832
Net (increase) decrease in loans (6,727) 2,295
Purchase of bank premises and equipment (90) (235)
Proceeds from sale of other real estate 43 83
-------- --------
Net cash used in investing activities (20,009) (17,001)
-------- --------
Financing Activities:
Net increase (decrease) in demand deposit, savings,
money market, super now and escrow 5,014 (4,525)
Net increase (decrease) in time deposits 1,525 (2,191)
Proceeds from borrowings 23,200 10,000
Repayment of borrowings (10,400) 0
Cash dividends (546) 0
Purchase of treasury stock (778) 0
Adjust net proceeds 0 (123)
Common stock acquired by ESOP 0 (913)
-------- --------
Net cash provided by financing activities 18,015 2,248
-------- --------
Decrease in cash and cash equivalents (1,969) (14,324)
-------- --------
Cash and cash equivalents at beginning of year 8,815 26,156
-------- --------
Cash and cash equivalents at end of year 6,846 11,832
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest 2,482 2,016
Cash paid for income taxes 5 0
Non-cash investing activities:
Unrealized loss on investment and mortgage-backed
securities designated as available for sale (518) (621)
Transfer of loans to other real estate 72 42
======== ========
</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)
March 31, 2000
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 March 31,
2000 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 March 31:
Income Shares Per Share
March 31, 2000:
- ---------------
Net income (Three Months Ended) $607,743 3,284,141 $0.19
======== ========= =====
March 31, 1999:
- ---------------
Net income (Three Months Ended) $605,078 3,580,200 $0.17
======== ========= =====
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 March 31,
2000, the principal balance outstanding of real estate loans in the REIT totaled
$41.9 million.
Note D - Subsequent Events
On April 25, 2000, the Company announced that a Letter of intent has been
executed to acquire Bailey and Haskell Associates, Inc., an independent
insurance agency located n Central New York State. The agency provides a
diversified portfolio of insurance products and services to individuals and
businesses in Madison, Oneida, and Onondaga counties. The acquisition is
expected to be completed before the end of the year, subject to the execution of
a definitive purchase agreement and necessary regulatory approval.
<PAGE>
On April 25, 2000, shareholder approval was obtained by more than a majority of
total shareholders for the acceptance of the Oneida Financial Corp. 2000 Stock
Option Plan and the Oneida Financial Corp. 2000 Recognition and Retention Plan.
The plans as approved authorize 166,475 and 83, 238 shares respectively of the
Company's common stock to be used for the purpose of granting awards under the
terms of the plans as submitted to shareholders. In addition, a majority vote of
shares held by shareholders other than Oneida Financial MHC was received for
both plans, allowing board members to participate in the plans
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
On December 30, 1998 Oneida Financial Corp. (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.
Oneida Financial Corp. 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 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 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 March
31, 2000 the principal balance outstanding of real estate loans in the REIT
totaled $41.9 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 March 31, 2000 the Bank
had total borrowings of $63.0 million at an average cost of 5.86%. The Bank's
net income is enhanced through the positive spread between the borrowing rate
and investment returns.
On July 1, 1999 the Company commenced a 5% stock repurchase program,
representing 179,010 shares of common stock. The repurchase program was
completed during the first quarter of 2000 with 11,900 remaining shares
purchased. The average cost of the shares purchased in the program was $10.493
per share.
Page 8 of 18
<PAGE>
On February 2, 2000 the Company commenced its second 5% stock
repurchase program, representing 170,000 shares of the Company's common stock.
The repurchase program is expected to be completed within six months. Through
March 31, 2000 at total of 59,590 shares were repurchased at an average price of
$10.919. 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 paid its second semiannual cash dividend following the
completion of the year as a publicly traded stock company. The dividend was paid
to all shareholders of record as of January 25, 2000 and was paid on February 8,
2000 at $0.16 per share of common stock.
On April 25, 2000 the Company announced that a Letter of Intent had
been executed to acquire Bailey and Haskell Associates, Inc. an independent
insurance agency located in Central New York State. The agency provides a
diversified portfolio of insurance products and services to individuals and
businesses in Madison, Oneida and Onondaga counties. The acquisition is expected
to be completed before the end of the year, subject to the execution of a
definitive purchase agreement and necessary regulatory approvals.
On April 25, 2000, shareholder approval was obtained by more than a
majority of total shareholders for the acceptance of the Oneida Financial Corp.
2000 Stock Option Plan and the Oneida Financial Corp. 2000 Recognition and
Retention Plan. The plans as approved authorize 166,475 and 83, 238 shares
respectively of the Company's common stock to be used for the purpose of
granting awards under the terms of the plans as submitted to shareholders. In
addition, a majority vote of shares held by shareholders other than Oneida
Financial MHC was received in favor of both plans, allowing board members to
participate in the plans
FINANCIAL CONDITION
ASSETS. Total Assets at March 31, 2000 were $298.5 million, an increase
of $18.3 million from $280.2 million at December 31, 1999. The increase in total
assets was achieved through a balance of retail and wholesale banking
activities. Investment and mortgage-backed securities increased $12.7 million as
a result of the Bank's continuing leveraging strategies. Asset growth was also
supported by an increase of $6.7 million in net loans receivable. 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 March 31, 2000, total consumer and commercial business loans
increased by $4.4 million from December 31, 1999.
LIABILITIES. Total liabilities increased by $19.3 million or 8.0% to
$259.6 million at March 31, 2000 from $240.3 million at December 31, 1999. The
increase is primarily the result of an increase of $12.8 million in borrowings
as well as an increase of $6.5 million in total deposits. The Bank continues to
emphasize core deposits and checking accounts, which increased by $2.6 million
since December 31, 1999. The Bank's newest branch addition in Canastota, New
York, which opened in November 1999, has deposits of $2.6 million as of March
31, 2000 with $1.7 million in deposit growth during the first quarter of 2000.
STOCKHOLDERS' EQUITY. Total stockholders' equity at March 31, 2000 was
$38.9 million, a decrease of $1.1 million from $40.0 million at December 31,
1999. The decrease in stockholder's equity is primarily a result of management
efforts to effectively manage the Company's capital through a combination of
stock repurchases and dividends as well as valuation adjustments made for the
<PAGE>
Company's available for sale investment and mortgage-backed security portfolio.
The Company has acquired 71,500 additional shares of its common stock, at an
average price of $10.878 per share, since December 31, 1999 resulting in an
increase of $778,000 in Treasury stock held. The current stock repurchase
program authorizes an additional 110,400 shares for purchase by the Company. The
Company also paid its second semiannual dividend at the rate of $0.16 resulting
in an equity reduction of $546,000. In addition, Accumulated Other Comprehensive
Income (Loss) decreased $311,000 from December 31, 1999 primarily 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 March 31,
2000 as compared with December 31, 1999. 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 decreases in stockholders' equity
were partially offset by the addition of after-tax net income of $608,0000 for
the three months ended March 31, 2000.
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.
Page 9 of 18
<PAGE>
AVERAGE BALANCE SHEET. The following tables set forth certain
information relating to the Company for the three months ended March 31, 2000
and 1999 and for the year ended December 31, 1999. 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.
TABLE 1. Average Balance Sheet. (Quarterly)
<TABLE>
<CAPTION>
Three Months Ended March 31, Twelve Months Ended Dec. 31,
---------------------------------------------------------------- -------------------------------
2000 1999 1999
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ---- ------- ---- ----
Interest-earning Assets: (Dollars in Thousands)
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans Receivable $153,852 $3,180 8.27% $130,578 $2,763 8.46% $136,765 $11,358 8.30%
Investment Securities 111,000 1,852 6.67% 90,068 1454 6.46% 104,294 6,757 6.48%
Federal Funds 2,182 16 2.93% 10,808 125 4.63% 6,565 323 4.92%
Equity Securities 4,997 52 4.16% 3,122 23 2.95% 3,709 144 3.88%
-------- ------ ---- -------- ------ ---- -------- ------- ----
Total Interest-earning 272,031 5,100 7.50% 234.576 4,365 7.44% 251,333 18,582 7.39%
-------- ------ ---- -------- ------ ---- -------- ------- -----
Assets
Interest-bearing Liabilities:
Money Market Deposits $16,064 $131 3.26% $12,846 $101 3.14% $14,985 $491 3.28%
Savings Accounts 45,267 276 2.44% 46,187 275 2.38% 45,824 1,094 2.39%
Interest-bearing Checking 8,319 38 1.83% 7,201 33 1.83% 7,890 143 1.81%
Time Deposits 101,316 1,340 5.29% 101,520 1,406 5.54% 103,018 5,488 5.33%
Borrowings 55,100 807 5.86% 15,363 202 5.26% 32,841 1,769 5.39%
-------- ------ ---- -------- ------ ---- -------- ------- -----
Total Interest-bearing Liabs 226,066 2,592 4.59% 183,117 2,017 4.41% 204,558 8,985 4.39%
-------- ------ ---- -------- ------ ---- -------- ------- -----
Net Interest Income $2,508 $2,348 $9,597
===== ====== ======
Net Interest Spread 2.91% 3.04% 3.00%
===== ===== =====
Net Earning Assets $ 45,965 $ 51,459 $ 46,775
======== ======== ========
Net yield on average
Interest-earning assets 3.69% 4.00% 3.82%
==== ==== =====
Average interest-earning
assets to average
Interest-bearing liabs 120.33% 128.10% 122.87%
====== ====== ======
</TABLE>
Page 10 of 18
<PAGE>
RESULTS OF OPERATIONS
GENERAL. Net income for the three months ended March 31, 2000 increased
by $3,000 to $608,000 for the first quarter 2000 from $605,000 for the three
months ended March 31, 1999. The increases were due primarily to an increase in
net interest income and other income and a decrease in the provision for income
taxes. The increases in income were partially offset by increases in operating
and other expenses and an increase in the provision for credit losses.
INTEREST INCOME. Interest Income increased by $735,000 or 15.1%, to
$5.1 million for the three months ended March 31, 2000 from $4.4 million for
three months ended March 31, 1999. The increase in interest income was primarily
derived from an increase in income on loans receivable of $417,000 for the first
quarter of 2000 compared with the same period in 1999. In addition, income on
investment and mortgage-backed securities increased $164,000 and dividend income
on equity securities increased $263,000. Interest on federal funds decreased
$109,000 for the first quarter 2000 partially offsetting the increases in
interest income.
The increase in loan income is a result of an increase of $23.3 million
in the average balance in loans receivable for the three months ended March 31,
2000 as compared with the same period in 1999, offset by a decrease of 19 basis
points in average yield from 8.46% at March 31, 1999 to 8.27% at March 31, 2000.
Management's strategy is to emphasize the origination of consumer and commercial
business loans for retention in the Bank's portfolio. Consumer and commercial
business loans increased $4.4 million during the first quarter 2000. In
addition, the Bank increased the residential real estate portfolio by $1.3
million due to the increased demand for adjustable rate loan products in the
current rate environment.
Investment income increased as a result of an increase of $25.8 million
in the average balance of investment and mortgage-backed securities for the
three month period ended March 31, 2000 as compared with the same period in
Page 11 of 18
<PAGE>
1999. The increase in investment income was offset by a decrease in the average
yield of investment securities of 7 basis points to 6.39% for the period.
Income on federal funds decreased during the three months ended March
31, 2000 to $16,000 as compared with $125,000 for the 1999 period. The decrease
in income is due to a decrease of $8.6 million in the average balance of federal
funds and a decrease of 170 basis points in the average yield earned. The
decrease in average balance was due to the temporary investment of stock
proceeds during the 1999 quarter and significant loan growth during 2000 quarter
which utilized excess cash.
INTEREST EXPENSE. Interest expense was $2.6 million for the three
months ended March 31, 2000; an increase of $575,000 or 28.5% from the same
period in 1999. The increase in interest expense is due to interest paid on
borrowed funds. The average balance outstanding in borrowings during the three
months ended March 31, 2000 was $55.1 million compared to $15.4 million for the
same period in 1999. The borrowed funds resulted in interest expense of $807,000
for the first quarter of 2000 compared with $202,000 of interest expense on
borrowed funds for the 1999 period. Interest expense on deposits decreased by
$30,000 for the three months ended March 31, 2000 to $1.8 million, a decrease of
1.6%. The decrease in interest expense on deposits was due to a 19 basis point
decrease in the average rate paid on deposits for the first quarter 2000
partially offset by an increase in the average balance on deposit accounts of
$3.2 million.
PROVISION FOR CREDIT LOSSES. Total provisions for credit losses for the
three months ended March 31, 2000 were $66,000 as compared to $45,000 made
during the same period of 1999. The allowance for credit losses was $1.5 million
or 0.99% of loans receivable at March 31, 2000 as compared with $1.5 million or
1.20% of loans receivable at March 31, 1999. Although the allowance for loan
losses has decreased, non-performing assets have also decreased representing
0.10% of total assets at March 31, 2000 compared with 0.33% of total assets at
March 31, 1999. 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.
OTHER INCOME. Other operating income increased by $25,000 for the three
month period ending March 31, 2000 compared with the same period in 1999 to
$259,000 from $234,000. This improvement is primarily due to an increase in fee
income on deposit accounts of $27,000 from $108,000 during the 1999 period to
$135,000 for the 2000 period. Trust Department income also increased from
$12,000 as of March 31, 1999 to $27,000 as of March 31, 2000. These increases
were offset by a decrease in gain on sale of mortgage loans of $20,000 during
the 2000 period as compared with the first quarter of 1999.
OTHER EXPENSES. Operating and other expenses increased by $295,000 or
19.1%, to $1.8 million for the three months ended March 31, 2000 from $1.5
million for the same period in 1999. The increase was primarily due to an
increase of $202,000 in compensation and benefits expense due in part to the
timing of recording certain payroll related expenses and the opening in November
1999 of the Bank's sixth full-service banking office located in Canastota, New
York.
<PAGE>
INCOME TAX. Income tax expense was $254,000 for the three months ended
March 31, 2000, a decrease of $135,000 from the first quarter 1999 provision of
$389,000. The effective tax rate decreased to 29.5% for 2000 to date from 39.1%
for the three months of 1999 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, 1999.
Page 12 of 18
<PAGE>
ONEIDA FINANCIAL CORP.
SELECTED FINANCIAL RATIOS
At and for the Three Months Ended March 31, 2000 and March 31, 1999(unaudited)
(annualized where appropriate)
Three Months Ending
March 31,
2000 1999
---- ----
Performance Ratios:
Return on average assets 0.84% 1.01%
Return on average equity 5.97% 5.53%
Net interest margin 3.64% 4.03%
Efficiency Ratio 66.46% 59.75%
Ratio of operating expense
to average total assets 2.53% 2.57%
Ratio of average interest-earning assets
to average interest-bearing liabilities 121.80% 127.25%
Asset Quality Ratios:
Non-performing assets to total assets 0.10% 0.33%
Allowance for loan losses
to non-performing loans 1331.90% 191.69%
Allowance for loan losses
to loans receivable, net 0.99% 1.20%
Capital Ratios:
Total shareholders' equity to total assets 13.04% 17.25%
Average equity to average assets 14.03% 18.17%
Page 13 of 18
<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 1999 Annual Report to
Stockholders. There has been no material change in the Company's risk profile
since December 31, 1999.
Page 14 of 18
<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 15 of 18
<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: May 10, 2000 By: /s/ Michael R. Kallet
---------------------
Michael R. Kallet
President and Chief Executive Officer
Date: May 10, 2000 By: /s/ Eric E. Stickels
----------------------
Eric E. Stickels
Senior Vice President and Chief
Financial Officer
Page 16 of 18
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Page 17 of 18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND THE CONSOLIDATED STATEMENT
OF INCOME FOR THREE MONTHS ENDED MARCH 31, 2000 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,114
<INT-BEARING-DEPOSITS> 332
<FED-FUNDS-SOLD> 400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 124,609
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 157,440
<ALLOWANCE> (1,545)
<TOTAL-ASSETS> 298,497
<DEPOSITS> 195,660
<SHORT-TERM> 22,000
<LIABILITIES-OTHER> 913
<LONG-TERM> 41,000
0
0
<COMMON> 358
<OTHER-SE> 38,566
<TOTAL-LIABILITIES-AND-EQUITY> 298,497
<INTEREST-LOAN> 3,180
<INTEREST-INVEST> 1,904
<INTEREST-OTHER> 16
<INTEREST-TOTAL> 5,100
<INTEREST-DEPOSIT> 1,785
<INTEREST-EXPENSE> 2,592
<INTEREST-INCOME-NET> 2,508
<LOAN-LOSSES> 66
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,839
<INCOME-PRETAX> 862
<INCOME-PRE-EXTRAORDINARY> 608
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 608
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
<YIELD-ACTUAL> 3.64
<LOANS-NON> 116
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 796
<ALLOWANCE-OPEN> 1,523
<CHARGE-OFFS> 54
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 1,545
<ALLOWANCE-DOMESTIC> 1,421
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 124
</TABLE>
