UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d)of the Securities
Exchange Act of 1934
For the transition period from ___________ to _____________
Commission File Number: 00025027
COHOES BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 14-1807865
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 Remsen Street, Cohoes, New York 12047
(Address of principal executive offices) (Zip Code)
(518)233-6500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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.
[ X ] Yes [ ] No
As of November 1,1999, there were 9,024,177 shares of the registrant's
common stock outstanding.
<PAGE>
FORM 10-Q
Cohoes Bancorp, Inc.
INDEX
Page
PART 1 - FINANCIAL INFORMATION Number
Item 1. Financial Statements
Consolidated Statements of Financial Condition at
September 30, 1999 and June 30, 1999 3
Consolidated Statements of Income for the three
months ended September 30, 1999 and 1998 4
Consolidated Statements of Changes in Stockholders' Equity
for the three months ended September 30, 1999 and 1998 5
Consolidated Statements of Cash Flows for the three
months ended September 30, 1999 and 1998 6
Notes to Consolidated Interim Financial Statements 7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature Page 20
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
(In thousands)
<S> <C> <C>
ASSETS:
CASH AND CASH EQUIVALENTS:
Cash and due from banks $ 9,977 $ 8,886
Federal funds sold - 1,870
Interest-bearing deposits with banks 95 358
Total cash and cash equivalents 10,072 11,114
MORTGAGE LOANS HELD FOR SALE 526 339
SECURITIES AVAILABLE FOR SALE 42,354 44,742
INVESTMENT SECURITIES, approximate fair value of $56,625 and $53,721 57,491 54,455
NET LOANS RECEIVABLE 547,773 521,005
ACCRUED INTEREST RECEIVABLE 3,911 3,776
BANK PREMISES AND EQUIPMENT 7,881 7,801
OTHER REAL ESTATE OWNED 1,208 724
MORTGAGE SERVICING RIGHTS 791 840
OTHER ASSETS 5,159 5,674
Total assets $677,166 $650,470
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Due to depositors $454,320 $446,123
Mortgagors' escrow deposits 4,971 10,787
Borrowings 83,659 49,045
Other liabilities 4,676 5,085
Total liabilities 547,626 511,040
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000 share authorized; none issued - -
Common stock, $.01 par value; 25,000,000 shares authorized; 9,535,225
shares issued at September 30, 1999 and June 30, 1999 95 95
Additional paid-in capital 93,011 93,004
Retained earnings-subject to restrictions 56,305 55,173
Treasury stock, at cost (511,048 shares at September 30, 1999) - (6,578)
Unallocated common stock held by ESOP (8,439) (8,598)
Unearned RRP shares - (4,505)
Accumulated other comprehensive loss, net (349) (244)
Total stockholders' equity 129,540 139,430
Total liabilities and stockholders' equity $677,166 $650,470
</TABLE>
See accompanying notes to consolidated interim financial statements.
<PAGE>
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three months ended September 30,
1999 1998
(In thousands, except per share amounts)
INTEREST INCOME:
Loan receivable $10,212 $ 8,590
Securities available for sale 600 705
Investment securities 865 707
FHLB stock 72 64
Federal funds sold 2 41
Bank deposits 2 9
Total interest income 11,753 10,116
INTEREST EXPENSE:
Deposits 4,145 4,796
Mortgagors' escrow deposits 45 39
Borrowings 924 374
Total interest expense 5,114 5,209
Net interest income 6,639 4,907
Provision for loan losses 340 180
Net interest income after
provision for loan losses 6,299 4,727
NONINTEREST INCOME:
Service charges on deposits 203 198
Loan servicing revenue 76 105
Net gain on sale of mortgage loans 2 6
Other 381 369
Total noninterest income 662 678
NONINTEREST EXPENSE:
Compensation and benefits 2,601 2,012
Occupancy 764 796
FDIC deposit insurance premium 17 12
Advertising 123 75
Other 806 898
Total noninterest expense 4,311 3,793
Income before income tax expense 2,650 1,612
Income tax expense 1,005 629
NET INCOME $ 1,645 $ 983
Net income per share
Basic $ .19 $ N/A
Diluted $ .19 $ N/A
See accompanying notes to consolidated interim financial statements.
<PAGE>
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Unallocated
Accumulated common Com-
Additional other com- stock Unearned prehen-
Common paid in Retained Treasury prehensive held by RRP sive
stock capital earnings stock loss, net ESOP shares Total income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended
September 30, 1999
Balance at June 30, 1999 $95 $93,004 $55,173 $ - $(244) $(8,598) $ - $139,430
Net Income, July 1, 1999
September 30, 1999 - - 1,645 - - - - 1,645 $1,645
ESOP shares committed
to be released - 7 - - - 159 - 166
Cash dividends paid - - (513) - - - - (513)
Public market purchase of
857,170 shares of Cohoes
Bancorp, Inc. common stock - - - (11,083) - - - (11,083)
Granting of restricted stock
under RRP - - - 4,505 - - (4,505) -
Change in unrealized loss on
securities available for sale, - - - - (105) - - (105) (105)
net
Balance, September 30, 1999 $95 $93,011 $56,305 $ (6,578) $(349) $(8,439) $(4,505) $129,540 $1,540
</TABLE>
See accompanying notes to conolidated interim financial statements.
<PAGE>
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30,
1999 1998
(In thousands)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,645 $ 983
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation 328 327
Amortization of purchased and originated mortgage servicing rights 49 49
Provision for loan losses 340 180
ESOP compensation expense 166 -
Net (gain) loss on securities available for sale (1) -
Net premium (discount) amortization of investment securities 10 22
Net premium (discount) amortization of securities available for sale - (4)
Net gain on sale of mortgage loans (2) (6)
Proceeds from sale of loans held for sale 877 378
Loans originated for sale (1,062) (334)
(Increase) decrease in interest receivable (135) 57
Increase in other assets 515 (687)
Increase (decrease) in other liabilities (409) 166
Net loss on sale of other real estate owned 34 68
Total adjustments 710 216
Net cash provided by operating activities 2,355 1,199
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment securities called/matured 500 2,000
Purchase of investment securities (2,014) (3,991)
Proceeds from the maturity of securities available for sale - -
Proceeds from securities available for sale called - 15,300
Proceeds from the sale of securities available for sale 1,391 -
Purchase of securities available for sale (678) (9,004)
Proceeds from principal reduction in investment securities 1,829 2,213
Proceeds from principal reduction in securities available for sale 1,570 1,330
Net loans made to customers (31,155) (16,860)
Originated mortgage servicing rights - -
Proceeds from sale of other real estate owned 169 48
Capital expenditures (408) (243)
Net cash used in investing activities (28,796) (9,207)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in mortgagors' escrow deposits (5,816) (4,795)
Net Increase in borrowings 34,614 19,792
Net increase (decrease) in deposits 8,197 (893)
Purchase of treasury shares (11,083) -
Cash dividends paid (513) -
Net cash provided by financing activities 25,399 14,104
Net increase (decrease) in cash and cash equivalents (1,042) 6,096
CASH AND CASH EQUIVALENTS, beginning of period 11,114 14,229
CASH AND CASH EQUIVALENTS, end of period $ 10,072 $20,325
ADDITIONAL DISCLOSURE RELATIVE TO CASH FLOWS:
Interest paid $ 5,277 $ 5,223
Taxes paid 1,040 540
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Transfer of loans to other real estate owned $ 687 $ 410
</TABLE>
See accompanying notes to consolidated interim financial statements.
<PAGE>
COHOES BANCORP, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation
Cohoes Bancorp, Inc. ("Company") was incorporated under Delaware law in
September 1998 as a savings and loan holding company to purchase 100% of the
common stock of the Cohoes Savings Bank ("Bank"). On December 31, 1998,
Cohoes Bancorp, Inc. completed its initial public offering of 9,257,500
shares of common stock in connection with the conversion of the Bank from a
mutual form institution to a stock savings bank (the "Conversion").
Concurrently with the Conversion, Cohoes Bancorp, Inc. acquired all of the
Bank's common stock.
The consolidated financial statements included herein reflect all normal
recurring adjustments which are, in the opinion of management, necessary to
present a fair statement of the results for the interim periods presented.
The results of operations for the three months ended September 30, 1999 are
not necessarily indicative of the results of operations that may be expected
for the entire year ending June 30, 2000. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission.
These consolidated financial statements should be read in conjunction
with the Company's 1999 Annual Report on Form 10K.
2. Earnings Per Share
On December 31, 1998, Cohoes Bancorp, Inc. completed its initial stock
offering of 9,257,500 shares of common stock. Concurrent with the offering,
approximately 8% of the shares issued (762,818) were purchased by the Cohoes
Bancorp, Inc. Employee Stock Ownership Plan ("ESOP") using the proceeds of a
loan from the Company to the ESOP. As of September 30, 1999, 18,363 shares
have been released and 39,880 have been committed to be released from the
ESOP trust for allocation to ESOP participants. Consequently, the remaining
704,573 shares have not yet been released and under AICPA Statement of
Position 93-6, these shares will not be considered outstanding for purposes
of calculating per share amounts. Earnings per share are not presented for
periods prior to the initial public offering as the Bank was a mutual savings
bank, and had no stock outstanding. The following is a reconciliation of the
numerator and denominator for the basic and diluted earnings per share (EPS)
calculations for the three months ended September 30, 1999.
<TABLE>
<CAPTION>
Weighted
Average
Net income shares Per share
(numerator) (denominator) amount
(In thousands, except per share amounts)
<S> <C> <C> <C>
Basic EPS $1,645 8,562,120 $ 0.19
Dilutive effect of potential common shares
related to stock based compensation plans - 29,579
$1,645 8,591,699 $ 0.19
</TABLE>
<PAGE>
3. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No.130
"Reporting Comprehensive Income" ("SFAS N0. 130") in 1998. All comparative
financial statements provided for earlier periods have been reclassified to
reflect application of the provisions of this Statement.
Comprehensive income includes net income and all other changes in equity
during a period except those resulting from investments by owners and
distributions to owners. Other comprehensive income includes revenues,
expenses, gains, and losses that under generally accepted accounting
principles are included in comprehensive income but excluded from net income.
Comprehensive income and accumulated other comprehensive income are
reported net of related income taxes. Accumulated other comprehensive income
for the Company consists solely of unrealized holding gains or losses on
available-for-sale securities.
<PAGE>
4. Loan Portfolio Composition
The following table sets forth the composition of the loan portfolio in
dollar amounts and percentage of the portfolio at the dates indicated.
<TABLE>
<CAPTION>
September 30,1999 June 30, 1999
Amount % of Total Amount % of Total
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real estate loans:
One-to-four family real estate $329,284 59.67% $320,721 61.12%
Multi-family and commercial real estate 150,403 27.26 138,288 26.35
Total real estate loans 479,687 86.93 459,009 87.47
Consumer loans:
Home equity lines of credit 19,629 3.56 20,090 3.83
Conventional second mortgages 12,101 2.19 12,724 2.42
Automobile loans 9,708 1.76 9,658 1.84
Other consumer loans 1,508 0.27 1,244 0.24
Total consumer loans 42,946 7.78 43,716 8.33
Commercial business loans 29,187 5.29 22,054 4.20
Total loans 551,820 100.00% 524,779 100.00%
Less:
Net deferred loan origination fees and costs 286 251
Allowance for loan losses (4,333) (4,025)
Net loans receivable $547,773 $521,005
</TABLE>
<PAGE>
5. Non-Performing Assets
The following table sets forth information regarding non-accrual loans,
other past due loans, troubled debt restructurings and other real estate
owned at the dates indicated.
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
(Dollars in thousands)
<S> <C> <C>
Non-accrual loans:
One-to-four family real estate $ 1,967 $2,674
Multi-family and commercial real estate 1,300 1,364
Conventional second mortgages 31 9
Consumer loans 190 212
Commercial business loans 62
62
Total non-accrual loans 3,550 4,321
Loans contractually past due 90 days or more and still accruing interest:
Consumer loans - -
Total loans 90 days or more and still accruing interest - -
Troubled debt restructurings 651 672
Total non-performing loans 4,201 4,993
Other real estate owned (ORE) 1,208 724
Total non-performing assets $ 5,409 $5,717
Allowance for loan losses $ 4,333 $4,025
Coverage of non-performing loans 103.14% 80.62%
Total non-performing loans as a percentage of total loans .76% .95%
Total non-performing loans as a percentage of total assets .62% .77%
</TABLE>
<PAGE>
6. Allowance for Loan Losses
The following table sets forth the activity in the allowance for loan
losses at the dates and for the periods indicated.
At or for the three months
ended September 30,
1999 1998
(In thousands)
Allowance for loan losses, beginning period $4,025 $3,533
Charge-off loans:
Real estate loans
One-to-four family real estate 45 50
Multi-family and commercial real estate - -
Total real estate loan charge-offs 45 50
Commercial business loans charge-offs - -
Consumer loans
Home equity lines of credit - -
Conventional second mortgages - -
Automobile loans - 5
Credit cards - 61
Other consumer loans 5 10
Total consumer loan charge-offs 5 76
Total charged-offs loans 50 126
Recoveries on loans previously charged-off:
Real estate loans
One-to-four family real estate 7 21
Multi-family and commercial real estate - -
Total real estate loan recoveries 7 21
Commercial business loan recoveries - 1
Consumer loans
Home equity lines of credit - -
Conventional second mortgages - -
Automobile loans - -
Credit cards 9 9
Other consumer loans 2 2
Total consumer loan recoveries 11 11
Total recoveries 18 33
Net loans charged-off 32 93
Provision for loan losses 340 180
Allowance for loan losses, end of period $4,333 $3,620
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Cohoes Bancorp, Inc. ("Company"), headquartered in Cohoes, New York is a
savings and loan holding company incorporated in September 1998 under the
laws of the State of Delaware. The Company was organized at the direction of
Cohoes Savings Bank ("Bank") for the purpose of acquiring all of the common
stock of the Bank issued in connection with the conversion of the Bank from
mutual to stock form ("Conversion"). On December 31, 1998, the Bank completed
its Conversion, and the Company sold 9,257,500 shares of its common stock at
a price of $10.00 per share in a subscription offering ("Offering") to
certain depositors of the Bank. In connection with the Conversion and
Offering, the Company established the Cohoes Savings Foundation, Inc.
("Foundation") and made a charitable contribution of 277,725 shares of the
Company's common stock to the Foundation, which resulted in a one-time charge
relating to the funding of the Foundation of $2.8 million ($1.7 million net
of tax). The net proceeds from the Offering amounted to $90.4 million, and
the Company contributed 50% of the net proceeds from the Offering to the Bank
in exchange for all of the issued and outstanding shares of common stock of
the Bank. The Company had no significant assets or operations prior to
December 31, 1998. Per share data is reported for the period since
Conversion. Presently, the only significant assets of the Company are the
capital stock of the Bank, the Company's loan to the Employee Stock Ownership
Plan of the Company and the investments of the net proceeds from the Offering
retained by the Company. The Company is subject to the financial reporting
requirements of the Securities Exchange Act of 1934, as amended.
Financial Condition
For the three month period ending September 30, 1999, total assets of
the company increased $26.7 million, or 4.1%, from $650.5 million at June 30,
1999 to $677.2 million at September 30, 1999. This increase in total assets
was primarily attributable to a $26.8 million, or 5.1%, increase in net loans
receivable which increased from $521.0 at June 30, 1999 to $547.8 million at
September 30, 1999. The increase in the loan portfolio was primarily the
result of an increase in commercial mortgage and commercial business loan
closings during the quarter. The commercial mortgage portfolio increased
$12.1 million, or 8.7% and commercial business loans increased $7.1 million,
or 32.1%.
Deposits increased $8.2 million, or 1.8%, from $446.1 million at June
30, 1999, to $454.3 million at September 30, 1999. This increase was
primarily attributable to the deposit growth in newly opened branches.
Borrowings, comprised primarily of Federal Home Loan Bank advances,
increased $34.6 million, or 70.6%, from $49.0 million at June 30, 1999 to
$83.7 million at September 30, 1999. This increase was primarily the result
of additional Federal Home Loan Bank advances used to fund loan growth.
Total stockholder's equity decreased $9.9 million, or 7.1%, from $139.4
million at June 30, 1999 to $129.5 million at September 30, 1999. The
decrease was primarily attributable to the purchase of treasury stock of
$11.1 million. The book value per share at September 30,1999 was $14.35.
<PAGE>
Average Balance Sheets. The following table set forth certain
information relating to the Company for the three months ended September 30,
1999 and 1998. The yields and costs were derived by dividing interest income
or expense by the average balance of assets or liabilities, respectively, for
the periods shown. The yields include deferred origination fees and costs
which are considered yield adjustments.
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 1998
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Loans receivable $540,186 $10,212 7.50% $424,261 $ 8,590 8.03%
Securities available for sale 39,212 600 6.07 43,941 705 6.37
Investments securities 57,668 865 5.95 47,767 707 5.87
Federal funds sold 171 2 4.64 3,027 41 5.37
FHLB stock 4,065 72 7.03 3,552 64 7.15
Other interest-earning assets 195 2 4.07 583 9 6.12
Total interest-earning assets 641,497 11,753 7.27 523,131 10,116 7.67
Non-earning assets 23,821 19,107
Total assets $665,318 $542,238
Interest-bearing liabilities
Savings accounts $136,667 1,003 2.91 $128,438 959 2.96
School savings accounts 17,044 182 4.24 17,673 246 5.52
Money market accounts 26,714 234 3.48 19,561 171 3.47
Demand deposits 65,679 103 0.62 53,834 85 0.63
Time deposits 204,752 2,623 5.08 229,496 3,335 5.77
Escrow accounts 9,765 45 1.83 8,618 39 1.80
Borrowings 65,656 924 5.58 25,010 374 5.93
Total interest-bearing 526,277 5,114 3.86 482,630 5,209 4.28
liabilities
Other liabilities 6,274 5,481
Stockholders' equity 132,767 54,127
Total liabilities and
stockholders' equity $665,318 $542,238
Net interest income $ 6,639 $ 4,907
Net interest rate spread 3.41% 3.39%
Net earning assets $115,220 $ 40,501
Net yield on average
interest-earning assets 4.11% 3.72%
Average interest-earning assets to
average interest-bearing 1.22X 1.08X
liabilities
</TABLE>
<PAGE>
Rate/Volume Analysis. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities have affected the Company's interest
income and interest expense during the periods indicated. Information is
provided in each category with respect to (i) changes attributable to changes
in volume (changes in volume multiplied by prior rate), (ii) changes
attributable to changes in rate (changes in rate multiplied by prior volume)
and (iii) the net change. The changes attributable to the combined impact of
volume and rate have been allocated proportionately to the changes due to
volume and the changes due to rate.
Three Months Ended September 30,1999
Compared to
Three Months Ended September 30,1998
Increase (Decrease)
Due To Total
Increase
Volume Rate (Decrease)
(Dollars in thousands)
Interest and dividend income from:
Loans receivable $4,942 $(3,320) $1,622
Securities available for sale (73) (32) (105)
Investment securities 148 10 158
Federal funds sold (34) (5) (39)
FHLB stock 15 (7) 8
Other interest-earning assets
(5) (2) (7)
Total interest and dividend income 4,993 (3,356) 1,637
Interest expense for:
Savings accounts 137 (93) 44
School savings accounts (8) (56) (64)
Money market accounts 63 - 63
Demand deposits 22 (4) 18
Time deposits (339) (373) (712)
Escrow accounts 5 1 6
Borrowings 699 (149) 550
Total interest expense 579 (674) (95)
Net interest income $4,493 $(2,761) $1,732
<PAGE>
Comparison of Operating Results for the Three Months Ended
September 30, 1999 and 1998
For the three months ended September 30, 1999 the Company reported net
income of $1.6 million, as compared to net income of $983,000 for the three
months ended September 30, 1998. Net interest income increased $1.7 million
for the three months ended September 30, 1999 as compared to the same period
last year. This increase was in part offset by an increase in the provision
for loan losses of $160,000, an increase in noninterest expense of $518,000
and an increase in income tax expense of $376,000.
Net Interest Income. Net interest income for the three months ended
September 30, 1999 was $6.6 million, up $1.7 million from the same period
last year. The increase was primarily the result of the increase of $118.4
million in average earning assets from $523.1 million for the three months
ended September 30, 1998 to $641.5 million for the same period this year.
Interest-bearing liabilities also increased during the same period, up $43.6
million. The net impact of these volume increases account for nearly the
entire increase in net interest income. The increase in interest rate spread
of 2 basis points accounted for the remaining increase in net interest
income. The yield on average earning assets decreased from 7.67% to 7.27%,
while the rate paid on average interest-bearing liabilities decreased from
4.28% to 3.86%. The Company's net interest margin for the three months ended
September 30, 1999 was 4.11%, up 39 basis points from 3.72% for the same
period last year.
Interest Income. Interest income for the three months ended September
30, 1999 was $11.8 million, up from $10.1 million for the comparable period
in 1998. The largest component of interest income is interest on loans.
Interest on loans increased from $8.6 million for the three months ended
September 30, 1998 to $10.2 million for the three months ended September 30,
1999. This increase of $1.6 million is the result of an increase in the
average balance of loans partially offset by a decrease in the average yield
earned. The average balance of loans increased $115.9 million to $540.2
million, while the yield on loans decreased 53 basis points from 8.03% to
7.50%. The increase in interest on loans was supplemented by increases in
interest on investment securities. Interest income on this category of
earning assets increased $158,000. The average balance of securities
available for sale increased from $47.8 million for the quarter ended
September 30, 1998 to $57.7 million for the quarter ended September 30, 1999.
The average balance of securities available for sale decreased from $43.9
million in the quarter ended September 30, 1998 to $39.2 million in the
quarter ended September 30, 1999, resulting in a $73,000 decrease in interest
income due to volume. The average balance of federal funds sold decreased
from $3.0 million in the quarter ended September 30, 1998 to $171,000 in the
quarter ended September 30, 1999. The decrease in the volume of federal funds
sold resulted in a $34,000 decrease in interest income in the quarter ended
September 30, 1999 as compared to the quarter ended September 30, 1998. The
changes in yield on securities available for sale, federal funds sold and
FHLB stock reduced interest income by $44,000.
Interest Expense. Interest expense decreased during the quarter ended
September 30, 1999 to $5.1 million, down from $5.2 million for the comparable
period in 1998. Substantially all of the Company's interest expense is from
the Company's interest-bearing deposits. The largest category of
interest-bearing deposits is time deposits. Interest on time deposits for the
quarter ended September 30, 1999 was $2.6 million, down $712,000 from the
$3.3 million for the quarter ended September 30, 1998. This decrease is the
result of a decrease in the average balance of time deposits, from $229.5
million for the quarter ended September 30, 1998 to $204.8 million for the
quarter ended September 30, 1999 and a decrease of 69 basis points in the
rates paid on these deposits from 5.77% for the quarter ended September 30,
1998 to 5.08% for the same period in 1999. Interest expense on savings
accounts increased $44,000 for the quarter ended September 30, 1999 as
compared to the same period in the prior year. This increase is almost
entirely attributable to an increase in the average balance of savings
accounts of $8.2 million. Interest on school savings accounts decreased
$64,000, from $246,000 for the quarter ended September 30, 1998 to $182,000
for the quarter ended September 30, 1999, due primarily to a decrease of 128
basis points in the average rate paid on school savings accounts from 5.52%
to 4.24%. Interest on money market accounts increased $63,000, from $171,000
for the quarter ended September 30, 1998 to $234,000 for the quarter ended
September 30, 1999. The increase is attributed to an increase in the average
balance of money market accounts of $7.2 million. Interest on borrowings
increased $550,000, from $374,000 for the quarter ended September 30, 1998 to
$924,000 for the quarter ended September 30, 1999. The increase is primarily
due to a $40.6 million increase in the average balance of borrowings.
<PAGE>
Provision for Loan Losses. The provision for loan losses increased from
$180,000 for the quarter ended September 30, 1998 to $340,000 for the quarter
ended September 30, 1999. The increase in the provision is attributed to an
increase in the balance of loans outstanding.
Noninterest Income. Total noninterest income for the quarter ended
September 30, 1999 was $662,000, down $16,000 from the $678,000 for the
quarter ended September 30, 1998. Service charges on deposits increased
slightly to $203,000 for the quarter ended September 30, 1999, from $198,000
for the quarter ended September 30, 1998. Loan servicing revenue declined
$29,000 from $105,000 for the quarter ended September 30, 1998 to $76,000 for
the quarter ended September 30, 1999. The decline relates to a reduction in
the balance of loans serviced for others. Other noninterest income increased
$12,000 primarily as a result of the increased volume of ATM surcharges.
Noninterest Expense. Total noninterest expense increased $518,000 to
$4.3 million for the quarter ended September 30, 1999, up from $3.8 million
for the comparable period in 1998. The increase in compensation and benefits
of $589,000 was the primary contributor to the overall increase. The increase
in compensation and benefits is primarily attributable to the establishment
of the Company's Employee Stock Ownership Plan, establishment of the
Recognition and Retention Plan, increase of personnel due to the addition of
three new branches and annual merit increases. This increase is partially
offset by a decrease in other noninterest expense of $92,000. This decrease
is due to a decrease of ORE expense of $59,000 and a $30,000 reduction in
foreclosure expense.
Income Tax Expense. Income tax expense increased from $629,000 for the
quarter ended September 30, 1998 to $1.0 million for the comparable period in
1999. The increase is primarily the result of increased income before income
tax expense.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Liquidity is defined as the ability to generate sufficient cash flow to
meet all present and future funding commitments, depositor withdrawals and
operating expenses. Management monitors the Company's liquidity position on a
daily basis and evaluates it ability to meet depositor withdrawals or make
new loans or investments. The Company's liquid assets include cash and cash
equivalents, investment securities that mature within one year, and its
portfolio of securities available for sale.
The Company's cash inflows result primarily from loan repayments,
maturities, calls and pay downs of securities, new deposits, and to a lesser
extent, drawing upon the Company's credit lines with the Federal Home Loan
Bank of New York. The Company's cash outflows are substantially new loan
originations, securities purchases, and deposit withdrawals. The timing of
cash inflows and outflows are closely monitored by management although
changes in interest rates, economic conditions, and competitive forces
strongly impact the predictability of these cash flows. The Company attempts
to provide stable and flexible sources of funding through the management of
its liabilities, including core deposit products offered through its branch
network as well as with limited use of borrowings. Management believes that
the level of the Company's liquid assets combined with daily monitoring of
inflows and outflows provide adequate liquidity to fund outstanding loan
commitments, meet daily withdrawal requirements of our depositors, and meet
all other daily obligations of the Company.
Capital
Consistent with its goals to operate a sound and profitable financial
organization, the Bank actively seeks to remain a "well capitalized"
institution in accordance with regulatory standards. The Bank's total equity
was $91.8 million at September 30, 1999, 14.0% of total assets on that date.
As of September 30, 1999, the Bank exceeded all of the capital requirements
of the FDIC. The Bank's regulatory capital ratios at September 30, 1999 were
as follows: Tier I (leverage) capital, 13.9%; Tier I risk-based capital,
21.5%; and Total risk-based capital, 22.4%. The regulatory capital minimum
requirements to be considered well capitalized are 5.0%, 6.0%, and 10.0%,
respectively.
Impact of the Year 2000
General. The year 2000 ("Y2K") issue confronting the Bank and its
suppliers, customers, customers' suppliers and competitors centers on the
inability of computer systems to recognize the year 2000. Many existing
computer programs and systems originally were programmed with six digit dates
that provided only two digits to identify the calendar year in the date
field. With the impending new millennium, these programs and computers will
recognize "00" as the year 1900 rather than the year 2000.
Financial institution regulators recently have increased their focus
upon Y2K compliance issues and have issued guidance concerning the
responsibilities of senior management and directors. The Federal Financial
Institutions Examination Council ("FFIEC") has issued several interagency
statements on Y2K Project Management Awareness. These statements require
financial institutions to, among other things, examine the Y2K implications
of their reliance on vendors and with respect to data exchange and the
potential impact of the Y2K issue on their customers, suppliers and
borrowers. These statements also require each federally regulated financial
institution to survey its exposure, measure risk and prepare a plan to
address the Y2K issue. In addition, the federal banking regulators have
issued safety and soundness guidelines to be followed by insured depository
institutions, such as the Bank, to assure resolution of any Y2K problems. The
federal banking agencies have asserted that Y2K testing and certification is
a key safety and soundness issue in conjunction with regulatory examinations
and, thus, that an institution's failure to address appropriately the Y2K
issue could result in supervisory action, including the reduction of the
institution's supervisory ratings, the denial of applications for approval of
mergers or acquisitions or the imposition of civil money penalties.
<PAGE>
Risk. Like most financial institutions service providers, the Bank and
its operations may be significantly affected by the Y2K issue due to its
dependence on technology and date-sensitive data. Computer software and
hardware and other equipment, both within and outside the Bank's direct
control and third parties with whom the Bank electronically or operationally
interfaces (including without limitation its customers and third party
vendors) are likely to be affected. If computer systems are not modified in
order to be able to identify the year 2000, many computer applications could
fail or create erroneous results. As a result, many calculations which rely
on date field information, such as interest, payment or due dates and other
operating functions, could generate results which are significantly
misstated, and the Bank could experience an inability to process
transactions, prepare statements or engage in similar normal business
activities. Likewise, under certain circumstances, a failure to adequately
address the Y2K issue could adversely affect the viability of the Bank's
suppliers and creditors and the creditworthiness of its borrowers. Thus, if
not adequately addressed, the Y2K issue could result in a significant adverse
impact on the Bank's operations and, in turn, its financial condition and
results of operations.
State of Readiness. During November 1997, the Bank formulated its plan
to address the Y2K issue. Since that time, the Bank has taken the following
steps:
* Established senior management advisory and review responsibilities;
* Completed a Bank-wide inventory of applications and system software;
* Built an internal tracking database for application and vendor software;
* Developed compliance plans and schedules for all lines of business;
* Initiated vendor compliance verification;
* Begun awareness and education activities for employees through existing
internal communication channels; and
* Developed a process to respond to customer inquiries as well as help
educate customers on the Y2K issue.
The following paragraphs summarize the phases of the Bank's Y2K plan:
Awareness Phase. The Bank formally established a Y2K plan headed by a
senior manager, and a project team was assembled for management of the Y2K
project. The project team created a plan of action that includes milestones,
budget estimates, strategies, and methodologies to track and report the
status of the project. Members of the project team also attended conferences
and information sharing sessions to gain more insight into the Y2K issue and
potential strategies for addressing it. This phase is substantially complete.
Assessment Phase. The Bank's strategies were further developed with
respect to how the objectives of the Y2K plan would be achieved, and a Y2K
business risk assessment was made to quantify the extent of the Bank's Y2K
exposure. A corporate inventory (which is periodically updated as new
technology is acquired and as systems progress through subsequent phases) was
developed to identify and monitor Y2K readiness for information systems
(hardware, software, utilities and vendors) as well as environmental systems
(security systems, facilities, etc.). Systems were prioritized based on
business impact and available alternatives. Mission critical systems supplied
by vendors were researched to determine Y2K readiness. If Y2K-ready versions
were not available, the Bank began identifying functional replacements, which
were either upgradable or currently Y2K-ready, and a formal plan was
developed to repair, upgrade or replace all mission critical systems. This
phase is substantially complete.
<PAGE>
Beginning in October 1998, all unsecured credits greater than $100,000
were sent a questionnaire developed by the Bank's credit administration staff
to evaluate Y2K exposure. The Bank also contacted its most significant
borrowers informing them of the Y2K issue. Because the Bank's loan portfolio
is primarily real estate-based and is diversified with regard to individual
borrowers and types of businesses, and the Bank's primary market area is not
significantly dependent on one employer or industry, the Bank does not expect
any significant or prolonged Y2K-related difficulties that will affect net
earnings or cash flow. As part of the current credit approval process, all
new and renewed loans are evaluated for Y2K risk.
Renovation Phase. The Bank's corporate inventory revealed that Y2K
upgrades were available for all vendor supplied mission critical systems, and
all these Y2K-ready versions have been delivered and placed into production.
The upgrades include the automated teller machines, the voice response unit,
network equipment, and the Bank's voice mail system.
Validation Phase. The validation phase is designed to test the ability
of hardware and software to accurately process date sensitive data. As of
March 31, 1999, the Bank completed the validation testing of its mission
critical systems. The remainder of the validation phase, including testing
with our service providers and supply vendors, was completed as of June 30,
1999. To date, the validation testing indicates that the mission critical
systems are Y2K-ready.
Implementation Phase. After passing the validation phase, the modified
or upgraded versions of hardware/ software have been placed into production.
As of March 31, 1999, the Bank has been operating all mission critical
systems with Y2K compliant versions. Any remaining systems requiring Y2K
upgrades were remedied by June 30, 1999.
Contingency Plans. During the assessment phase, the Bank began to
develop back-up or contingency plans for each of its mission critical
systems. Since virtually all of the Bank's mission critical systems are
dependent upon third party vendors or service providers, the contingency plan
included the option of selecting new vendors or service provider if Y2K-ready
products could not be delivered by our current suppliers. To date, it has not
been necessary to exercise this option. In addition, the Bank is preparing
and testing contingency plans in the event of power outages or
telecommunication disruptions. These plans include backup generators,
reversion to manual procedures, and the use of paper reports until the
problems are corrected.
Cost. The Y2K related costs have been expensed as incurred. Management
believes that additional Y2K costs will not be material.
Customer Education. In October 1998, the Bank sent out a FDIC Y2K
brochure with all statement mailings, explaining the Y2K problem and
reassuring customers that FDIC insurance coverage guarantees the safety of
their deposit accounts. All Bank employees have attended special Y2K classes
and there is an ongoing awareness campaign to encourage Y2K dialogue with
customers. A statement mailer with an updated status of our system testing
was distributed during the month of May. Y2K messages will be displayed on
ATM screens, transaction receipts and monthly statements throughout the
remainder of 1999.
In June of 1999, the Bank hosted a Y2K informational seminar. In
addition to newspaper advertising and branch signs, the Bank publicized the
event by calling hundreds of customers. On September 15, 1999 the Bank
co-sponsored a Community Conversation in conjunction with the President's
Council on Year 2000 Conversion.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
Not applicable
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities and Use of Proceeds
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) A special meeting of stockholders of the registrant was held on
July 2, 1999.
(b) The meeting did not involve the election of directors
(c) The two matters voted on at the meeting were the ratification of
the adoption of the registrant's 1999 Stock Option and Incentive
Plan and the ratification of the adoption of the registrant's 1999
Recognition and Retention Plan. The results of the vote on these
matters is as follows:
Stock Option and Incentive Plan: Recognition and Retention Plan:
For: 4,915,413 votes For: 4,877,956 votes
Against: 618,289 votes Against: 658,834 votes
Abstentions: 53,844 votes Abstentions: 53,182 votes
Broker non-votes: 2,426 votes Broker non-votes: None votes
(d) None
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedules (submitted only with filing in
electronic format)
(b) Reports on Form 8-K
There was one report on Form 8-K filed during the quarter ended
September 30,1999:
1) a) Report dated July 21, 1999
b) Item 5 - Reporting the issuance of a press release announcing
the earnings for the fourth quarter and fiscal year ended
June 30, 1999 and the annual meeting date.
c) Selected consolidated financial information was included
in the press release.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cohoes Bancorp, Inc.
(Registrant)
Date: November 9,1999 By: /s/ Harry L. Robinson
Harry L. Robinson
President and Chief Executive Officer
Date: November 9, 1999 By: /s/ Richard A. Ahl
Richard A. Ahl
Executive Vice President, Chief
Financial Officer and Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Exhibit 27
Financial Data Schedule
This schedule contains summary financial information extracted from the
Form 10Q for the quarter ended September 30, 1999 of Cohoes Bancorp, Inc. and
subsidiary and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 9,997
<INT-BEARING-DEPOSITS> 95
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 42,354
<INVESTMENTS-CARRYING> 57,491
<INVESTMENTS-MARKET> 56,625
<LOANS> 552,106
<ALLOWANCE> 4,333
<TOTAL-ASSETS> 677,166
<DEPOSITS> 454,320
<SHORT-TERM> 34,835
<LIABILITIES-OTHER> 4,676
<LONG-TERM> 48,824
0
0
<COMMON> 95
<OTHER-SE> 129,445
<TOTAL-LIABILITIES-AND-EQUITY> 677,166
<INTEREST-LOAN> 10,212
<INTEREST-INVEST> 1,537
<INTEREST-OTHER> 4
<INTEREST-TOTAL> 11,753
<INTEREST-DEPOSIT> 4,145
<INTEREST-EXPENSE> 5,114
<INTEREST-INCOME-NET> 6,639
<LOAN-LOSSES> 340
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 4,311
<INCOME-PRETAX> 2,650
<INCOME-PRE-EXTRAORDINARY> 1,645
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,645
<EPS-BASIC> .19
<EPS-DILUTED> .19
<YIELD-ACTUAL> 4.11
<LOANS-NON> 3,550
<LOANS-PAST> 0
<LOANS-TROUBLED> 651
<LOANS-PROBLEM> 72
<ALLOWANCE-OPEN> 4,025
<CHARGE-OFFS> 50
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 4,333
<ALLOWANCE-DOMESTIC> 3,027
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,306
</TABLE>
