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, 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 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 3,140,502 shares
of the Registrant's common stock outstanding as of November 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 September 30, 2000 and December 31, 1999 (audited)
Consolidated Statements of Operations (unaudited) 3
For the three months ended and nine months ended September 30,
2000 and 1999
Consolidated Statements of Comprehensive Income (unaudited) 4
For the three months ended and nine months ended September 30,
2000 and 1999
Consolidated Statements of Cash Flows (unaudited) 5
For the three months ended and nine months ended September 30,
2000 and 1999
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
At September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
(unaudited) (audited)
At At
September 30, December 31,
2000 1999
---- ----
ASSETS (in thousands)
<S> <C> <C>
Cash and due from banks $ 6,494 $ 8,815
Federal funds sold 200 0
--------- ---------
TOTAL CASH AND CASH EQUIVALENTS 6,694 8,815
Investment securities, at fair value 88,346 85,543
Mortgage-backed securities, at fair value 37,999 26,355
--------- ---------
TOTAL INVESTMENT SECURITIES 126,345 111,898
Mortgage loans held for sale 2,223 341
Loans receivable 165,218 150,328
Allowance for credit losses (1,631) (1,523)
--------- ---------
LOANS RECEIVABLE, NET 163,587 148,805
Bank premises and equipment, net 6,136 5,301
Accrued interest receivable 2,401 1,766
Other real estate 0 94
Other assets 2,876 3,192
--------- ---------
TOTAL ASSETS $ 310,262 $ 280,212
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to Depositors $ 196,612 $ 188,271
Mortgagors' escrow funds 515 849
Borrowings 72,100 50,200
Other Liabilities 1,152 941
--------- ---------
TOTAL LIABILITIES 270,379 240,261
Shareholders' equity:
Common stock ( $.10 par value; 8,000,000
shares authorized; 3,663,438 and
3,580,200 shares issued respectively) 366 358
Additional paid-in capital 16,289 15,413
Retained earnings 30,430 29,682
Common shares issued under employee
stock plans - unearned (1,167) (1,167)
Accumulated other comprehensive income (loss) (1,772) (2,584)
Treasury stock (at cost, 323,149
and 167,100 shares) (3,444) (1,751)
Unearned stock compensation (819) 0
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 39,883 39,951
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 310,262 $ 280,212
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
Page 2 of 16
<PAGE>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended and Nine Months Ended September 30, 2000 (unaudited)
and 1999 (unaudited )
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
( in thousands, except Earnings Per Share Data )
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 3,619 $ 2,872 $10,161 $ 8,312
Interest on investment and mortgage-
backed securities 1,870 1,846 5,207 5,007
Dividends on equity securities 255 37 875 92
Interest on federal fund sold and
interest-bearing deposits 6 66 32 269
Total interest and dividend income 5,750 4,821 16,275 13,680
----- ----- ------ ------
INTEREST EXPENSE:
Savings deposit 281 277 832 822
Money market and Super NOW 179 175 522 464
Time deposits 1,476 1,361 4,204 4,141
Borrowings 1,093 507 2,854 1,110
----- ----- ------ ------
Total interest expense 3,029 2,320 8,412 6,537
----- ----- ------ ------
NET INTEREST INCOME 2,721 2,501 7,863 7,143
Less: Provision for credit losses 85 45 235 135
----- ----- ------ ------
Net interest income after provision for credit losses 2,636 2,456 7,628 7,008
----- ----- ------ ------
OTHER INCOME:
Investment security gain(loss), net (54) 0 (203) 281
Other operating income 269 205 778 641
----- ----- ------ ------
Total other income 215 205 575 922
----- ----- ------ ------
OTHER EXPENSES:
Compensation and employee benefits 1,135 1,017 3,290 2,926
Occupancy expenses, net 359 338 1,071 990
Other operating expense 413 390 1,183 1,226
Total other expenses 1,907 1,745 5,544 5,142
----- ----- ------ ------
INCOME BEFORE INCOME TAXES 944 916 2,659 2,788
----- ----- ------ ------
Provision for income taxes 305 340 796 999
----- ----- ------ ------
NET INCOME $ 639 $ 576 $ 1,863 $ 1,789
======= ======= ======= =======
EARNINGS PER SHARE - BASIC and DILUTED $ 0.20 $ 0.16 $ 0.58 $ 0.50
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3 of 16
<PAGE>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended and Nine Months Ended September 30, 2000 (unaudited)
and 1999 (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 639 $ 576 $ 1,863 $ 1,789
------- ------- ------- -------
Other comprehensive income, net of tax:
Unrealized gains(losses) on assets available for sale:
Unrealized holding gains (losses)
arising during period 694 (1,637) 1,150 (4,249)
Less: reclassification adjustment for
losses (gains) included in net income 54 (0) 203 (281)
------- ------- ------- -------
748 (1,637) 1,353 (4,530)
Net income tax benefit effect (299) 655 (541) 1,812
------- ------- ------- -------
Other comprehensive income(loss), net of tax 449 (928) 812 (2,718)
Comprehensive Income $ 1,088 $ (406) $ 2,675 $ (929)
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4 of 16
<PAGE>
ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended and Nine Months Ended September 30, 2000 (unaudited)
and 1999 (unaudited )
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands) (in thousands)
Operating Activities:
<S> <C> <C> <C> <C>
Net income $ 639 $ 576 1,863 1,789
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock based compensation earned 39 0 65 0
Depreciation 175 178 515 505
Amortization of premiums/discounts on securities, net (34) (10) (62) (32)
Provision for credit losses 85 45 235 135
Loss on sale of other real estate 0 0 7 26
Loss (Gain) on sale/call of securities, net 54 0 203 (281)
(Gain) Loss on sale of loans, net (8) 0 (16) (22)
Income tax payable 100 340 (390) 267
Accrued interest receivable (515) (223) (635) (519)
Other assets (15) 147 (226) 78
Other liabilities 422 (148) 601 (48)
Origination of loans held for sale (3,030) 0 (5,536) (3,984)
Proceeds from sales of loans 2,096 0 3,671 5,678
-------- -------- ----- -----
Net cash provided by operating activities 8 905 295 2,698
-------- -------- ----- -----
Investing Activities:
Purchase of investment securities (5,385) (10,225) (14,198) (68,488)
Principal collected on and proceeds of maturities
or calls from investments 4,976 12,942 11,885 37,967
Purchase of mortgage-backed securities (5,123) 0 (15,555) (8,212)
Principal collected on and proceeds from
Sale of mortgage-backed securities 3,010 1,663 4,633 4,064
Net increase in loans (5,000) (7,039) (15,089) (10,913)
Purchase of bank premises and equipment (785) (235) (1,350) (869)
Proceeds from sale of other real estate 91 137 159 271
-------- -------- ------- -------
Net cash used in investing activities (8,156) (2,757) (29,515) (46,180)
-------- -------- ------- -------
Financing Activities:
Net increase in demand deposit, savings,
money market, super now and escrow 1,735 747 5,972 2,514
Net increase (decrease) in time deposits 330 (1,603) 2,035 (3,913)
Proceeds from borrowings 12,600 5,000 42,100 35,000
Repayment of borrowings (4,800) 0 (20,200) (5,000)
Cash dividends (569) (537) (1,115) (537)
Purchase of treasury stock (440) (1,130) (1,693) (1,130)
Adjust net proceeds 0 0 0 (123)
Common stock acquired by ESOP 0 0 0 (913)
-------- -------- ------- -------
Net cash provided by financing activities 8,856 2,477 27,099 25,898
-------- -------- ------- -------
Increase (Decrease) in cash and cash equivalents 708 623 (2,121) (16,690)
-------- -------- ------- -------
Cash and cash equivalents at beginning of years 5,986 8,843 8,815 26,156
-------- -------- ------- -------
Cash and cash equivalents at end of year 6,694 9,466 6,694 9,466
======== ======== ======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest 2,908 2,264 8,251 6,282
Cash paid for income taxes 180 0 682 678
Non-cash investing activities:
Unrealized gain (loss) on investment and mortgage-backed
securities designated as available for sale 747 (1,637) 1,353 (4,530)
Transfer of loans to other real estate 0 65 72 266
======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 5 of 16
<PAGE>
Oneida Financial Corp.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 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 (consisting
of normal recurring accruals) necessary to fairly present the consolidated
financial position of the Company at September 30, 2000 and the results of its
consolidated operations and cash flows for the period then ended have been
included. Operating results for the three-month period and nine-month period are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
Note B - Earnings Per Share
Basic earnings per share is computed based on the weighted average shares
outstanding. Diluted earnings per share is computed based on the weighted
average shares outstanding adjusted for the dilutive effect of the assumed
exercise of stock options and awards during the year. The following is a
reconciliation of basic to diluted earnings per share for the three months ended
and nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Income Shares Per Share
------ ------ ---------
<S> <C> <C> <C>
For the Three Months Ended
September 30, 2000:
Net income (Three Months Ended) $638,594
========
Basic Earnings Per Share: $638,594 3,161,198 $0.20
=====
Effect of diluted securities:
Stock options and awards 0 2,847
-----------------------------------------------
Diluted Earnings Per Share $638,594 3,164,045 $0.20
=====
<CAPTION>
For the Nine Months Ended
September 30, 2000:
<S> <C> <C> <C>
Net income (Nine Months Ended) $1,862,875
==========
Basic Earnings Per Share: $1,862,875 3,219,724 $0.58
=====
Effect of diluted securities:
Stock options and awards 0 1,776
----------------------------------------------
Diluted Earnings Per Share $1,862,875 3,221,500 $0.58
=====
<CAPTION>
For the Three Months Ended
September 30,1999:
<S> <C> <C> <C>
Net income (Three Months Ended) $576,215
========
Basic and Diluted Earnings Per Share $576,215 3,524,747 $0.16
========= =====
<CAPTION>
For the Nine Months Ended
September 30,1999:
<S> <C> <C> <C>
Net income (Nine Months Ended) $1,788,881
==========
Basic and Diluted Earnings Per Share $1,788,881 3,561,512 $0.50
========= =====
</TABLE>
Page 6 of 16
<PAGE>
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,
2000, the principal balance outstanding of real estate loans in the REIT totaled
$40.4 million.
Note D - Acquisition of Insurance Agency
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 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 execution of a
definitive purchase agreement and closing of the acquisition was held on October
2, 2000. Necessary regulatory approval had been previously received from both
the New York State Banking Department and the State of New York Insurance
Department. The acquired agency was incorporated as Bailey & Haskell Associates,
Inc. as a wholly-owned subsidiary of The Oneida Savings Bank.
Note E - Stock Compensation Plans
On April 25, 2000, shareholder approval was obtained for the acceptance of the
Oneida Financial Corp. 2000 Recognition and Retention Plan and the Oneida
Financial Corp. 2000 Stock Option Plan. The Plans authorize 83,238 and 166,475
shares respectively of the Company's common stock to be used for the purpose of
granting awards under the terms of the plans. Under the Recognition and
Retention Plan, the company issued 83,238 shares of stock in April 2000 of which
74,000 shares have been awarded. The Company recorded $884,404 of unearned
compensation expense to be accrued over the five year vesting period. As of
September 30, 2000, $65,000 has been expensed to date. The Stock Option plan has
awarded 150,500 shares of that authorized. All options granted have ten year
terms and vest and become fully exercisable evenly over a five year period. The
exercise price for each option share is the fair market value at the date of the
grant, which was $10.625 on April 25, 2000.
Page 7 of 16
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
Of Operations
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 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.
RECENT DEVELOPMENTS
On April 26, 1999, the Bank funded Oneida Preferred Funding Corp., a
wholly owned subsidiary corporation has elected 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, 2000 the principal balance outstanding of real estate loans in the
REIT totaled $40.4 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, 2000 the
Bank had total borrowings of $72.1 million at an average cost of 6.41%. The
Bank's net income is enhanced through the positive spread between the borrowing
rate and investment returns.
On February 2, 2000 the Company commenced its second 5% stock
repurchase program, representing 170,000 shares of the Company's common stock.
Through September 30, 2000 at total of 144,139 shares were repurchased at an
average price of $10.861. 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 third consecutive semiannual cash dividend on
August 8, 2000. The dividend was paid to all shareholders of record as of July
25, 2000 for the six-month period ended June 30, 2000. The dividend
Page 8 of 16
<PAGE>
was paid at the rate of $0.17 per share of common stock, the third consecutive
increase in the dividend rate by the Company.
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 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 execution of a
definitive purchase agreement and closing of the acquisition was held on October
2, 2000. Necessary regulatory approval had been previously received from both
the New York State Banking Department and the State of New York Insurance
Department. The acquired agency was incorporated as Bailey & Haskell Associates,
Inc. as a wholly-owned subsidiary of The Oneida Savings Bank.
On April 25, 2000, shareholder approval was obtained for the acceptance
of the Oneida Financial Corp. 2000 Recognition and Retention Plan and the Oneida
Financial Corp. 2000 Stock Option Plan. The Plans authorize 83,238 and 166,475
shares respectively of the Company's common stock to be used for the purpose of
granting awards under the terms of the plans. Under the Recognition and
Retention Plan, the company issued 83,238 shares of stock in April 2000 of which
74,000 shares have been awarded. The company recorded $884,404 of unearned
compensation expense to be accrued over the five year vesting period. As of
September 30, 2000, $65,000 has been expensed to date. The Stock Option plan has
awarded 150,500 shares of that authorized. All options granted have ten year
terms and vest and become fully exercisable evenly over a five year period. The
exercise price for each option share is the fair market value at the date of the
grant, which was $10.625 on April 25, 2000.
FINANCIAL CONDITION
ASSETS. Total Assets at September 30, 2000 were $310.3 million, an
increase of $30.1 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 $14.4 million as
a result of the Bank's continuing leveraging strategies. Asset growth was also
supported by an increase of $16.7 million, or 11%, 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 September 30, 2000, total consumer and commercial
business loans increased by $10.5 million from December 31, 1999. The Bank also
increased its residential real estate loans by $3.2 million as a result of the
increased demand for adjustable rate loan products in the current rate
environment.
LIABILITIES. Total liabilities increased by $30.1 million or 12.5% to
$270.4 million at September 30, 2000 from $240.3 million at December 31, 1999.
The increase is primarily the result of an increase of $21.9 million in
borrowings as well as an increase of $8.0 million in total deposits. The
majority of the increase, $5.6 million, was derived from increases in Money
Market, Super-NOW and Checking accounts, which are lower yielding and
non-interest bearing deposit products. In addition, Certificate of Deposit
accounts increased $2.0 million since December 31, 1999. The Bank's newest
branch addition in Canastota, New York, which opened in November 1999, has total
deposits of $4.9 million as of September 30, 2000, with $4.0 million in net new
deposit account growth achieved during the nine month period ended September 30,
2000.
STOCKHOLDERS' EQUITY. Total stockholders' equity at September 30, 2000
was $39.9 million, a decrease of $68,000 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. The Company has acquired 156,049 additional
shares of its common stock, at an average price of $10.847 per share, since
December 31, 1999 resulting in an increase of $1.7 million in Treasury stock
held. The current stock repurchase program authorizes an additional 25,861
shares for purchase by the Company. The Company also paid its third semiannual
dividend at the rate of $0.17 resulting in an equity reduction of $569,000.
Total dividends paid during 2000 were $1.1 million. The Company also recorded
unearned stock-based compensation as a reduction in stockholders' equity during
the year, $819,000 remains unamortized at September 30, 2000. The decreases in
stockholders' equity were partially offset by the addition of after-tax net
income and an increase in Accumulated Other Comprehensive Income(Loss). Retained
Earnings increased as a result of the addition of $1,863,000 in after-tax net
income for the nine months ended September 30,2000. Accumulated Other
Comprehensive Income (Loss) increased $812,000 from December 31, 1999 primarily
as a result of a favorable adjustment in the net unrealized loss on available
for sale mortgage-backed and other investment securities, due to changes in the
market interest rates at September 30, 2000 as compared with December 31, 1999.
Changes in interest rates generally have an inverse impact on the market value
of the Company's investments and mortgage-backed securities portfolios.
Page 9 of 16
<PAGE>
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, 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 September 30, 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 $165,326 $3,619 8.76% $138,673 $2,872 8.28% $136,765 $11,358 8.30%
Investment Securities 124,711 2,068 6.63% 115,340 1,846 6.40% 104,294 6,757 6.48%
Federal Funds 292 6 8.22% 4,808 66 5.49% 6,565 323 4.92%
Equity Securities 6,123 57 3.72% 3,811 37 3.88% 3,709 144 3.88%
----- --- ----- ------ --- ----- ------ ---- -----
Total Interest-earning 296,452 5,750 7.76% 262,632 4,821 7.34% 251,333 18,582 7.39%
-------- ------ ----- -------- ------ ----- -------- ------- -----
Assets
Interest-bearing Liabilities:
-----------------------------
Money Market Deposits $16,988 $142 3.34% $16,375 $137 3.35% $14,985 $491 3.28%
Savings Accounts 46,922 281 2.40% 45,873 277 2.42% 45,824 1,094 2.39%
Interest-bearing Checking 8,167 37 1.81% 8,328 38 1.83% 7,890 143 1.81%
Time Deposits 102,934 1,476 5.74% 102,568 1,361 5.31% 103,018 5,488 5.33%
Borrowings 70,367 1,093 6.21% 37,365 507 5.43% 32,841 1,769 5.39%
-------- ------ ----- -------- ------ ----- -------- ------ -----
Total Interest-bearing liabs 245,378 3,029 4.94% 210,509 2,320 4.41% 204,558 8,985 4.39%
-------- ------ ----- -------- ------ ----- -------- ------ -----
Net Interest Income $2,721 $2,501 $9,597
====== ====== =====
Net Interest Spread 2.82% 2.93% 3.00%
===== ===== =====
Net Earning Assets $51,074 $52,123 $46,775
======== ======== =======
Net yield on average
Interest-earning assets 3.67% 3.81% 3.82%
===== ===== =====
Average interest-earning
Assets to average
Interest-bearing liabs 120.81% 124.76% 122.87%
======= ======= =======
</TABLE>
Page 10 of 16
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended June 30,
-----------------------------------------------------------
2000 1999
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ----
(Dollars in Thousands)
Interest-earning Assets:
------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans Receivable $159,989 $10,161 8.47% $134,037 $8,312 8.27%
Investment Securities 121,038 5,922 6.52% 105,585 5,007 6.32%
Federal Funds 1,014 32 4.21% 7,381 269 4.86%
Equity Securities 5,545 161 3.87% 3,492 92 3.51%
----- ------- ----- -------- ------- -----
Total Interest-earning 287,586 16,276 7.55% 250,495 13,680 7.28%
-------- ------- ----- -------- ------- -----
Assets
Interest-bearing Liabilities:
-----------------------------
Money Market Deposits $16,519 $410 3.31% $14,685 $358 3.25%
Savings Accounts 46,442 832 2.39% 46,716 822 2.35%
Interest-bearing Checking 8,355 112 1.79% 7,778 106 1.82%
Time Deposits 102,026 4,204 5.49% 102,136 4,141 5.41%
Borrowings 63,159 2,854 6.03% 27,765 1,110 5.33%
------- ------ ----- ------- ------ -----
Total Interest-bearing liabs 236,501 8,412 4.74% 199,080 6,537 4.38%
------- ------ ----- ------- ------ -----
Net Interest Income $7,864 $7,143
====== ======
Net Interest Spread 2.80% 2.90%
===== =====
Net Earning Assets $51,085 $51,415
======== =======
Net yield on average
Interest-earning assets 3.65% 3.80%
===== =====
Average interest-earning
assets to average
Interest-bearing liabs 121.60% 125.83%
======= =======
</TABLE>
RESULTS OF OPERATIONS
GENERAL. Net income for the three months ended September 30, 2000
increased $63,000 to $639,000 for the third quarter 2000 from $576,000 for the
three months ended September 30, 1999. Net income for the nine months ended
September 30, 2000 was $1.9 million, an increase of $74,000 as compared with the
net income for the nine months ended September 30, 1999. The increases were due
primarily to an increase in net interest income and a decrease in the provision
for income taxes. The increases in income were partially offset by a decrease in
other income and increases in the provision for credit losses and other
expenses.
INTEREST INCOME. Interest Income increased by $929,000, or 19.3%, to
$5.8 million for the three months ended September 30, 2000, from $4.8 million
for three months ended September 30, 1999. For the nine months ended September
30, 2000 total interest income was $16.3 million, an increase of $2.6 million or
19.0% as compared with the same period in 1999. The increase in interest income
was primarily derived from an increase in income on loans receivable of $747,000
for the third quarter of 2000 and $1.8 million for the year to date. In
addition, income on investment and mortgage-backed securities increased $24,000
and $200,000 for the three and nine months ended September 30, 2000,
respectively. Dividend income on equity securities increased $218,000 for the
quarter and $783,000 year to date 2000, as compared with the same periods during
1999. Interest on federal funds decreased $60,000 for the third quarter 2000 and
$237,000 year to date partially offsetting the increases in interest income.
The increase in loan income is a result of an increase of $26.7 million
in the average balance of loans receivable for the three months ended September
30, 2000 as compared with the same period in 1999. An increase of 48 basis
points in average yield earned, from 8.28% at September 30, 1999 to 8.76% at
September 30, 2000, also contributed to the increase in loan income.
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 $10.5 million during the first three quarters in 2000.
In addition, the Bank increased its residential real estate portfolio by $3.2
year to date as a result of the increased demand for adjustable rate loan
products in the current rate environment.
Investment income increased as a result of a $9.4 million increase in
the average balance of investment and mortgage-backed securities for the three
month period ended September 30, 2000 as compared with the same period in 1999.
The increase in investment income was also the result of an increase of 23 basis
points in the average yield of investment securities to an average yield of
6.63% for the three months ended September 30, 2000. For the nine months ended
September 30, 2000 and 1999, the average balance of investment and
mortgage-backed securities increased $15.5 million. In addition, the average
yield increased 20 basis points for the nine months ended September 30, 2000 as
compared with the same period in 1999.
Income on federal funds decreased during the three months ended
September 30, 2000 to $6,000 as compared with $66,000 for the 1999 period. The
decrease in income is due to a decrease of $4.5 million in the average balance
of federal funds.. The decrease in average balance was due to the temporary
investment of stock proceeds during the 1999 quarter resulting in a higher than
normal investment level and significant loan growth during the 2000 quarter
which has employed excess cash.
Page 11 of 16
<PAGE>
INTEREST EXPENSE. Interest expense was $3.0 million for the three
months ended September 30, 2000; an increase of $709,000 or 30.6% from the same
period in 1999. The increase in interest expense is primarily due to interest
paid on borrowed funds. The average balance outstanding in borrowings during the
three months ended September 30, 2000 was $70.4 million compared to $37.4
million for the same period in 1999. Borrowed funds resulted in interest expense
of $1.1 million for the third quarter of 2000 compared with $507,000 of interest
expense on borrowed funds for the 1999 period. Year to date interest expense on
borrowed funds has increased $1.7 million to $2.9 million for the nine months
ended September 30, 2000 as compared with the same period during 1999. Interest
expense on deposits increased by $123,000 for the three months ended September
30, 2000 to $1.9 million, an increase of 6.8%. The increase in interest expense
on deposits was due to a 38 basis point increase in the average rate paid on
deposits for the third quarter 2000 and an increase in the average balance on
deposit accounts of $1.9 million. The average balance of deposits for the nine
months ended September 30, 2000 increased $2.0 million over the same period of
1999 as well as an increase in the average yield of 15 basis points in 2000
resulting in the increase in interest expense.
PROVISION FOR CREDIT LOSSES. Total provisions for credit losses for the
three months ended September 30, 2000 were $85,000 as compared to $45,000 made
during the same period of 1999. The allowance for credit losses was $1.6 million
or 0.98% of loans receivable at September 30, 2000 as compared with $1.5 million
or 1.08% of loans receivable at September 30, 1999. Although the allowance for
loan losses as a percentage of loans receivable has decreased, non-performing
assets have also decreased representing 0.09% of total assets at September 30,
2000 compared with 0.30% of total assets at September 30, 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 $10,000 for the three
month period ending September 30, 2000 compared with the same period in 1999 to
$215,000 from $205,000. Losses of $54,000 were recognized during the third
quarter 2000 period as lower yielding securities were sold and reinvested at
higher current rates of return. Non-interest income adjusted to eliminate
investment gains and losses increased to $269,000 during the quarter ended
September 30, 2000 compared with $205,000 for the quarter ended September 30,
1999. This increase in other income is primarily the result of an increase in
mortgage service fees such as application fees and an increase in fees charged
on deposit accounts such as NSF and ATM fees.
OTHER EXPENSES. Operating and other expenses increased by $162,000 or
9.3%, to $1.9 million for the three months ended September 30, 2000 from $1.7
million for the same period in 1999. The increase was primarily due to an
increase of $118,000 in compensation and benefits expense due to the opening in
November 1999 of the Bank's sixth full-service banking office located in
Canastota, New York as well as increases in other areas.
INCOME TAX. Income tax expense was $305,000 for the three months ended
September 30, 2000, a decrease of $35,000 from the third quarter 1999 provision
of $340,000. The effective tax rate decreased to 29.9% for 2000 to date from
35.8% for the nine months of 1999 as the Company has employed various strategies
to reduce the tax burden in this and future periods.
Page 12 of 16
<PAGE>
ONEIDA FINANCIAL CORP.
SELECTED FINANCIAL RATIOS
At and for the Three Months Ended and Nine Months Ended September 30, 2000 and
September 30, 1999(unaudited)
(annualized where appropriate)
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Performance Ratios:
<S> <C> <C> <C> <C>
Return on average assets 0.82% 0.84% 0.82% 0.92%
Return on average equity 6.46% 5.50% 6.30% 5.55%
Net interest margin 3.67% 3.81% 3.65% 3.80%
Efficiency Ratio 63.78% 64.49% 64.16% 66.06%
Ratio of operating expense
to average total assets 2.45% 2.54% 2.45% 2.64%
Ratio of average interest-earning
assets to average interest-bearing
liabilities 120.81% 124.76% 121.60% 125.83%
Asset Quality Ratios:
Non-performing assets to total assets 0.09% 0.30% 0.09% 0.30%
Allowance for loan losses to
non-performing loans 595.26% 243.43% 595.26% 243.43%
Allowance for loan losses to
loans receivable, net 0.98% 1.08% 0.98% 1.08%
Capital Ratios:
Total shareholders' equity to total
assets 12.85% 14.80% 12.85% 14.80%
Average equity to average assets 13.08% 15.23% 13.08% 15.23%
</TABLE>
Page 13 of 16
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
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 expense. 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 16
<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 16
<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 5,2000 By: /s/ Michael R. Kallet
--------------------------------------
Michael R. Kallet
President and Chief Executive Officer
Date: November 5, 2000 By: /s/ Eric E. Stickels
--------------------------------------
Eric E. Stickels
Senior Vice President and Chief
Financial Officer
Page 16 of 16
