UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 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
Commission file number 000-25027
COHOES BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 14-1807865
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
75 Remsen Street, Cohoes, New York 12047
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 233-6500
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained herein, and no disclosure will be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the average of the closing sales
price of such stock as of September 1, 2000, was approximately $116,621,258.
(The exclusion from such amount of the market value of the shares owned by
any person shall not be deemed an admission by the Registrant that such
person is an affiliate of the registrant.)
As of September 1, 2000, there were 7,912,705 shares issued and
outstanding of the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
June 30, 2000 are incorporated into Part II, Item 5-8 of this Form 10-K.
Portions of the Proxy Statement for the 2000 Annual Meeting of
Stockholders are incorporated into Part III, Items 10-13 of this Form 10-K.
<PAGE>
PART I
Item 1. Description of Business
General
The Company. Cohoes Bancorp, Inc. (the "Company") was formed at the
direction of Cohoes Savings Bank (the "Bank" or "Cohoes") in September 1998
for the purpose of becoming a savings and loan holding company and owning all
of the outstanding stock of the Bank, in connection with the mutual to stock
conversion of the Bank. The Company is incorporated under the laws of the
State of Delaware. The Company is authorized to do business in the State of
New York, and generally is authorized to engage in any activity that is
permitted by the Delaware General Corporation Law and applicable federal
banking laws and regulations. The business of the Company consists only of
the business of the Bank. References in this document to the Company also
includes the Bank unless the context otherwise requires. The holding company
structure, however, provides the Company with greater flexibility than the
Bank has to diversify its business activities, through existing or newly
formed subsidiaries, or through acquisitions or mergers of stock financial
institutions, as well as other companies. Although there are no current
arrangements, understandings or agreements regarding any such activity or
acquisition, the Company is in a position, subject to regulatory
restrictions, to take advantage of favorable acquisition opportunities that
may arise.
The assets of the Company consist of the stock of the Bank, a note
evidencing the Company's loan to its Employee Stock Ownership Plan (the
"ESOP") and the investments of the net proceeds from the sale of its stock
retained by the Company. Activities of the Company may also be funded through
sales of additional securities, through borrowings, through dividends from
the Bank and through income generated by other activities of the Company. At
this time, there are no plans regarding such other activities.
The executive office of the Company is located at 75 Remsen Street,
Cohoes, New York 12047-2892. Its telephone number at that address is (518)
233-6500.
The Bank. The Bank serves the financial needs of communities in its
market area through its main office and 20 other full-service branch offices
located throughout the Bank's primary market area. Its deposits are insured
up to applicable limits by the Federal Deposit Insurance Corporation
("FDIC"). At June 30, 2000, the Bank had total assets of $726.3 million,
deposits of $494.9 million and total equity of $98.3 million (or 13.53% of
total assets).
The Company's business involves attracting deposits from the general
public and using such deposits, together with other funds, to originate
primarily residential mortgage loans, and to a lesser extent, commercial and
multi-family real estate, consumer and commercial business loans. The Company
originates its loans primarily in the Company's market area and to a lesser
extent, it has in the past originated multi-family and commercial real estate
loans secured by properties in New York City. However, depending upon market
conditions and as a result of the somewhat depressed economy in the Company's
primary market area, the Company may explore lending opportunities outside
its primary market area in the future. At June 30, 2000, $353.3 million, or
58.4%, of the Company's total loan portfolio consisted of residential
mortgage loans. The Company also invests in U.S. government agency, corporate
debt securities and other permissible investments.
The executive office of the Bank is located at 75 Remsen Street,
Cohoes, New York 12047-2892. Its telephone number at that address is (518)
233-6500.
<PAGE>
Lending Activities
General. The Company primarily originates fixed- and
adjustable-rate, one- to four-family mortgage loans, including home equity
lines of credit and second mortgages, secured by the borrower's primary
residence. The Company's general practice is to originate fixed and
adjustable rate mortgage loans (ARM) with terms to maturity between 5 and 30
years and, until December 1997, sold substantially all its fixed rate
mortgage loans on the secondary market. Currently, the Company has been
retaining its 30-year and 15-year fixed-rate mortgage loans for its portfolio
as the declining interest rate environment has made it more difficult to
originate adjustable-rate loans. The Company retains all adjustable-rate
mortgage loans in its portfolio. The Company also originates multi-family and
commercial real estate, consumer and commercial business loans. In-market
loan originations are generated by eight on-staff loan originators, the
Company's marketing efforts, which include print, radio and television
advertising, lobby displays and direct contact with local civic and religious
organizations, as well as by the Company's present customers, walk-in
customers and referrals from real estate agents, brokers and builders. The
Company also has established relationships with certain mortgage brokers that
take applications for residential mortgage loans (under the Company's
underwriting guidelines) on behalf of the Company. During fiscal 2000, $9.4
million of the Company's loans were originated through mortgage brokers. At
June 30, 2000, the Company's loan portfolio totaled approximately $605.4
million.
The Company originates fixed and adjustable-rate consumer loans. ARM
and consumer loans are originated in order to increase the percentage of
loans with more frequent terms to repricing or shorter maturities than
long-term, fixed-rate, one-to four-family mortgage loans. Loan applications
are initially considered and approved at various levels of authority,
depending on the type and amount of the loan. Company employees with lending
authority are designated, and their lending limit authority defined, by the
Board of Directors. The approval of the Bank's Board of Directors is required
for any loans over $500,000. Pursuant to the Company's lending policy,
certain senior officers may approve loans up to $500,000.
The Company is not subject to state or federal regulation limiting
the aggregate amount of mortgage loans it is permitted to make to one
borrower or affiliated groups of borrowers. New York law does require lending
policies that avoid imprudent mortgage concentrations. The aggregate amount
of commercial non-mortgage loans that the Company is permitted to make to any
one borrower or group of related borrowers is generally limited to 15% of
unimpaired capital and surplus. At June 30, 2000, the Company's
loans-to-one-borrower limit for non-mortgage loans was approximately $14.7
million. On the same date, the Company had no borrowers with outstanding
balances in excess of this amount.
At June 30, 2000, the Company's largest lending relationship
consisted of eleven loans to a group of borrowers secured by medical office
space and retail facilities totaling $11.1 million. The next largest lending
relationship consisted of seven loans to a group of borrowers secured by
mobile home parks and a car wash facility totaling $7.0 million. The third
largest lending relationship consisted of two loans totaling $6.5 million
secured by a warehouse facility. The fourth largest lending relationship
consisted of four loans totaling $4.9 million secured by an office building
and furniture, fixtures and equipment. The fifth largest lending relationship
consisted of five loans totaling $4.8 million secured by office buildings,
retail plazas, and a self-storage facility. As of June 30, 2000, all of the
loans involved in the five relationships discussed above were performing in
accordance with their respective terms.
The types of loans that the Company may originate are subject to
federal and state laws and regulations. Interest rates charged by the Company
on loans are affected by the demand for such loans, the supply of money
available for lending purposes and the rates offered by competitors. These
factors are in turn affected by, among other things, economic conditions,
monetary policies of the federal government, including the Board of Governors
of the Federal Reserve System ("FRB"), and tax policies.
<PAGE>
The following table sets forth the composition of the Company's loan
portfolio in dollar amounts and as a percentage of the portfolio at the dates
indicated.
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------------------- -------------------- ------------------- ------------------- ----------------
% of % of % of % of % of
Amount Total Amount Total Amount Total Amount Total Amount Total
------- ----- ------- ----- ------- ----- ------- ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate
loans:
One- to
four-family
real estate $353,349 58.40% $320,721 61.12% $258,399 62.07% $243,620 60.62% $234,900 59.06%
Multi-family
and commercial
real estate 172,596 28.53 138,288 26.35 93,229 22.39 93,979 23.39 96,623 24.29
------- ------ ------- ----- ------- ------ ------- ----- ------- ------
Total real
estate loans 525,945 86.93 459,009 87.47 351,628 84.46 337,599 84.01 331,523 83.35
------- ------ ------- ----- ------- ------ ------- ----- ------- ------
Consumer loans:
Home equity
lines of credit 19,692 3.25 20,090 3.83 21,976 5.28 25,205 6.27 27,342 6.87
Conventional
second mortgages 11,853 1.96 12,724 2.42 15,093 3.63 14,069 3.50 11,111 2.79
Automobile loans 8,610 1.42 9,658 1.84 9,783 2.35 9,290 2.31 9,982 2.51
Credit cards -- -- -- -- 1,655 0.40 2,152 0.54 2,767 0.70
Other consumer
loans 1,626 .27 1,244 .24 1,184 0.28 1,438 0.36 1,776 0.45
------- ------ ------- ----- ------- ------ ------- ------ ------- ------
Total consumer
loans 41,781 6.90 43,716 8.33 49,691 11.94 52,154 12.98 52,978 13.32
Commercial
business loans 37,316 6.17 22,054 4.20 14,991 3.60 12,096 3.01 13,250 3.33
------- ------ ------- ------ ------- ------ ------- ----- ------- ------
Total loans 605,042 100.00% 524,779 100.00% 416,310 100.00% 401,849 100.00% 397,751 100.00%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
Less:
Net deferred
loan origination
fees and costs 384 251 (18) (214) (532)
Allowance for
loan losses (5,013) (4,025) (3,533) (3,105) (3,249)
------- ------- ------- ------- -------
Total loans, net $600,413 $521,005 $412,759 $398,530 $393,970
======= ======= ======= ======= =======
</TABLE>
<PAGE>
The following table shows the composition of the Company's loan
portfolio by fixed- and adjustable-rate at the dates indicated.
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------------------------------------
2000 1999 1998
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed-Rate Loans
Real estate:
One- to four-family
real estate $203,831 33.69% $186,302 35.50% $ 88,389 21.23%
Multi-family and
commercial real estate 100,139 16.55 72,858 13.88 42,274 10.15
------- ------ ------- ------ ------- ------
Total real estate loans 303,970 50.24 259,160 49.38 130,663 31.38
Consumer:
Home equity lines of credit -- -- -- -- -- --
Conventional second mortgages 11,853 1.96 12,724 2.42 15,093 3.63
Automobile loans 8,610 1.42 9,658 1.84 9,783 2.35
Credit cards -- -- -- -- 1,655 0.40
Other consumer loans 1,626 .27 1,244 .24 1,184 0.28
------- ------ ------- ------ ------- ------
Total consumer loans 22,089 3.65 23,626 4.50 27,715 6.66
Commercial business loans 15,761 2.60 9,795 1.87 5,651 1.36
------- ------ ------- ------ ------- ------
Total fixed-rate loans 341,820 56.49 292,581 55.75 164,029 39.40
Adjustable-Rate Loans
Real estate:
One- to four-family
real estate 149,518 24.71 134,419 25.61 170,010 40.84
Multi-family and
commercial real estate 72,457 11.98 65,430 12.47 50,955 12.24
------- ------ ------- ------ ------- ------
Total real estate loans 221,975 36.69 199,849 38.08 220,965 53.08
Consumer:
Home equity lines of credit 19,692 3.26 20,090 3.83 21,976 5.28
Conventional second mortgages -- -- -- -- -- --
Automobile loans -- -- -- -- -- --
Credit cards -- -- -- -- -- --
Other consumer loans -- -- -- -- -- --
------- ------ ------- ------ ------- ------
Total consumer loans 19,692 3.26 20,090 3.83 21,976 5.28
Commercial business loans 21,555 3.56 12,259 2.34 9,340 2.24
------- ------ ------- ------ ------- -----
Total adjustable-rate loans 263,222 43.51 232,198 44.25 252,281 60.60
------- ------ ------- ------ ------- ------
Total loans 605,042 100.00% 524,779 100.00% 416,310 100.00%
====== ====== ======
Less:
Net deferred loan origination
fees and costs 384 251 (18)
Allowance for loan losses (5,013) (4,025) (3,533)
------- ------- -------
Total loans receivable, net $600,413 $521,005 $412,759
======= ======= =======
</TABLE>
<PAGE>
The following table illustrates the contractual maturity of the
Company's loan portfolio at June 30, 2000. Mortgages, which have adjustable
or renegotiable interest rates, are shown as maturing in the period in which
the contract is due. The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
Real Estate Consumer
Loans Loans Total
-------------------- ---------------------------------------------------- ------------------
Home
One- to Multi- Commercial equity Conventional Other Weighted
four- family business lines of second Automobile Credit consumer average
family commercial loans credit mortgages loans cards loans Amount rate
------- ---------- ---------- -------- ------------ ---------- ------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amounts Due:
0 months to 1 year $ 27 $ 13,297 $11,516 $ -- $ 93 $ 372 $ -- $ 58 $ 25,363 8.40%
After 1 year:
1 to 2 years 57 6,247 3,149 -- 881 1,480 -- 195 12,009 8.18
2 to 3 years 195 5,163 1,292 -- 1,095 3,210 -- 546 11,501 8.67
3 to 5 years 1,077 15,484 13,185 -- 2,419 3,500 -- 134 35,799 8.10
5 to 10 years 14,13 112,973 6,731 431 5,716 48 -- 410 140,448 7.91
10 to 15 years 70,420 11,181 387 1,896 1,648 -- -- 29 85,561 7.20
Over 15 years 267,434 8,251 1,056 17,365 1 -- -- 254 294,361 7.78
------- ------- ------ ------ ------ ----- --- ----- ------- ----
Total due after 1 year 353,322 159,299 25,800 19,692 11,760 8,238 -- 1,568 579,679 7.77
------- ------- ------ ------ ------ ----- --- ----- ------- ----
Total amount due $353,349 $172,596 $37,316 $19,692 $11,853 $8,610 $ -- $1,626 $605,042 7.80
======= ======= ====== ====== ====== ===== === ===== ======= ====
Less:
Net deferred loan
origination fees
and costs 384
Allowance for
loan losses (5,013)
-------
Total loans
receivable, net $600,413
=======
</TABLE>
<PAGE>
The following table sets forth the dollar amounts in each loan
category at June 30, 2000 that are contractually due after June 30, 2001, and
whether such loans have fixed or adjustable interest rates.
<TABLE>
<CAPTION>
Due after June 30, 2001
----------------------------------------------------
Fixed Adjustable Total
-------- ---------- ---------
(In Thousands)
<S> <C> <C> <C>
Residential real estate $203,446 $149,876 $353,322
Commercial real estate 86,773 72,526 159,299
------- ------- -------
Total real estate loans 290,219 222,402 512,621
Commercial business loans 14,699 11,101 25,800
Consumer loans
Home equity lines of credit -- 19,692 19,692
Conventional second mortgages 11,760 -- 11,760
Automobile loans 8,238 -- 8,238
Credit cards -- -- --
Other consumer loans 1,568 -- 1,568
------- ------- -------
Total consumer loans 21,566 19,692 41,258
------- ------- -------
Total loans $326,484 $253,195 $579,679
======= ======= =======
</TABLE>
Residential Real Estate Lending
The Company's residential real estate loans consist of primarily
one- to four-family, owner occupied mortgage loans. At June 30, 2000, $353.3
million, or 58.4% of the Company's total loans consisted of one- to
four-family residential first mortgage loans. At June 30, 2000, approximately
$203.8 million or 33.7% of the Company's one- to four-family residential
first mortgage loans provided for fixed rates of interest and for repayment
of principal over a fixed period not to exceed 30 years. The Company does not
originate fixed-rate loans for terms longer than 30 years. The Company's
fixed-rate one- to four-family residential mortgage loans are priced
competitively with the market. Accordingly, the Company attempts to
distinguish itself from its competitors based on quality of service.
The Company generally underwrites its fixed-rate one- to four-family
residential first mortgage loans using Fannie Mae guidelines. Until December
1997, the Company sold substantially all fixed-rate residential mortgage
loans it originated in the secondary market, but generally continued to
service the loans it sold. Currently, the Company generally holds for
investment all adjustable and fixed-rate one- to four-family residential
first mortgage loans it originates, but it may recommence selling loans in
the future depending on its lending objectives, funding requirements and
market conditions. In underwriting one- to four-family residential first
mortgage loans, the Company evaluates, among other things, the borrower's
ability to make monthly payments and the value of the property securing the
loan. Properties securing real estate loans made by the Company are appraised
by independent fee appraisers approved by the Bank's Board of Directors. The
Company requires borrowers to obtain title insurance, and fire and property
insurance (including flood insurance, if necessary) in an amount not less
than the amount of the loan or the replacement cost of the dwelling.
<PAGE>
The Company currently offers one-, five- and seven-year residential
ARM loans with an interest rate that adjusts annually after the initial
period, based on the change in the corresponding term United States Treasury
index plus a spread. These loans provide for up to a 2.0% periodic interest
rate cap and a lifetime interest rate cap up to 6.75% over the initial rate.
As a consequence of using caps, the interest rates on these loans may not be
as rate sensitive as the Company's cost of funds. Borrowers of ARM loans are
generally qualified at the initial interest rate (however, for one-year ARMs,
borrowers are qualified at the maximum rate after the first adjustment). The
Company offers one-year ARM loans that are convertible (from the second
through the fifth year of the loan) into fixed-rate loans with interest rates
based upon the then current market rates. ARM loans generally pose greater
credit risks than fixed-rate loans, primarily because as interest rates rise,
the required periodic payment by the borrower rises, increasing the potential
for default. However, as of June 30, 2000, the Company had not experienced
higher default rates on these loans relative to its other loans.
The Company's one- to four-family mortgage loans do not contain
prepayment penalties and do not permit negative amortization of principal.
Real estate loans originated by the Company generally contain a "due on sale"
clause allowing the Company to declare the unpaid principal balance due and
payable upon the sale of the security property. The Company has waived the
due on sale clause on loans held in its portfolio from time to time to permit
assumptions of the loans by qualified borrowers.
Generally, the Company does not originate residential mortgage loans
where the ratio of the loan amount to the value of the property securing the
loan (i.e., the "loan-to-value" ratio) exceeds 95%. If the loan-to-value
ratio exceeds 80%, the Company generally requires that the borrower obtain
private mortgage insurance in amounts intended to reduce the Company's
exposure to 80% or less of the lower of the appraised value or the purchase
price of the property securing the loan. In addition, on occasion the Company
will make a loan for the construction of the borrower's primary residence. At
June 30, 2000 the Company had $1.8 million in loans outstanding for the
construction of the borrower's residence.
<PAGE>
Multi-Family and Commercial Real Estate Lending
The Company has engaged in multi-family and commercial real estate
lending secured primarily by apartment buildings, office buildings, nursing
homes, strip shopping centers and mobile home parks located in the Company's
primary market area. At June 30, 2000, the Company had $172.6 million of
multi-family and commercial real estate loans, representing 28.5% of the
Company's total loan portfolio. As of June 30, 2000, $16.7 million of this
portfolio was secured by property located in New York City.
Multi-family and commercial real estate loans generally have terms
to maturity that do not exceed 20 years. The Company's current lending
guidelines generally require that (i) the property securing a multi-family or
commercial real estate loan generate net cash flows of at least 120% of debt
service after the payment of all operating expenses, excluding depreciation,
and (ii) a loan-to-value ratio of 80% or less. As a result of a decline in
the value of some properties in the Company's primary market area and due to
economic conditions, the current loan-to-value ratio of some commercial real
estate loans in the Company's portfolio may exceed the initial loan-to-value
ratio. Adjustable rate multi-family and commercial real estate loans are
generally written as ten-year balloon loans, which adjust after five years to
a margin over the five-year United States Treasury index, and amortize over a
term up to 20 years. In underwriting commercial real estate loans, the
Company analyzes the financial condition of the borrower, the borrower's
credit history, the reliability and predictability of the net income
generated by the property securing the loan and the value of the property
itself. The Company generally requires personal guarantees of the borrowers
in addition to the secured property as collateral for such loans. Appraisals
on properties securing commercial real estate loans originated by the Company
are performed by independent fee appraisers approved by the Board of
Directors.
Multi-family and commercial real estate loans generally present a
higher level of risk than loans secured by one- to four-family residences.
This greater risk is due to several factors, including the concentration of
principal in a limited number of loans and borrowers, the effect of general
economic conditions on income producing properties and the increased
difficulty of evaluating and monitoring these types of loans. Furthermore,
the repayment of loans secured by commercial real estate is typically
dependent upon the successful operation of the related real estate project.
If the cash flow from the project is reduced (for example, if leases are not
obtained or renewed, or a bankruptcy court modifies a lease term, or a major
tenant is unable to fulfill its lease obligations), the borrower's ability to
repay the loan may be impaired and the value of the property may be reduced.
<PAGE>
Consumer Lending
The Company offers a variety of secured and unsecured consumer
loans, including home equity lines of credit and second mortgages and, to a
lesser extent, automobile and personal loans. Substantially all of the
Company's consumer loans are originated on property located or for customers
residing in the Company's primary market area. At June 30, 2000, the
Company's consumer loan portfolio totaled $41.8 million, or 6.9% of the
Company's total loan portfolio.
The Company's home equity lines of credit and second mortgages are
secured by a lien on the borrower's residence and generally do not exceed
$100,000. Company uses the same underwriting standards for home equity lines
of credit and second mortgages as it uses for one- to four-family residential
mortgage loans. Home equity lines of credit and second mortgages are
generally originated in amounts, which, together with all prior liens on such
residence, do not exceed 80% of the appraised value of the property securing
the loan. The interest rates for home equity lines of credit float with the
Wall Street Journal prime rate and second mortgages generally have fixed
interest rates. Home equity lines of credit require interest and principal
payments on the outstanding balance for the term of the loan. The terms of
the Company's home equity lines of credit are generally 25 years. As of June
30, 2000, the Company had $19.7 million, or 3.3% of the Company's total loan
portfolio outstanding, in home equity lines of credit, with an additional
$14.6 million of unused home equity lines of credit, and $11.9 million, or
2.0% of the Company's total loan portfolio, in second mortgages.
The underwriting standards employed by the Company for consumer
loans other than home equity lines of credit and second mortgages generally
include a determination of the applicant's payment history on other debts and
an assessment of ability to meet existing obligations and payments on the
proposed loan. Although creditworthiness of the applicant is the primary
consideration, the underwriting process also includes a comparison of the
value of the property securing the loan, if any, in relation to the proposed
loan amount.
The Company's automobile loans are originated as installment loans
with a fixed interest rate and terms of up to 60 months for new vehicles and
up to 60 months for certain used vehicles. The Company originates its
automobile loans directly and will loan up to 100% of the value of a new
automobile and up to 90% of the value of a used automobile. At June 30, 2000,
the Company had $8.6 million of automobile loans.
The Company does not originate any consumer loans on an indirect
basis (i.e., where loan contracts are purchased from retailers of goods or
services, which have extended credit to their customers).
Consumer loans may entail greater credit risk than residential
mortgage loans, particularly in the case of loans, which are unsecured or are
secured by assets, which may decline in value. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source
of repayment of the outstanding loan balance as a result of high initial
loan-to-value ratios, repossession, rehabilitation and carrying costs, and
the greater likelihood of damage, loss or depreciation of the property, and
thus are more likely to be affected by adverse personal circumstances. In the
case of automobile loans, which may have loan balances in excess of the
resale value of the collateral, borrowers may abandon the collateral property
making repossession by the Company and subsequent losses more likely. The
application of various federal and state laws, including bankruptcy and
insolvency laws, may limit the amount which can be recovered on consumer
loans, including automobile loans.
<PAGE>
Commercial Business Lending
At June 30, 2000, commercial business loans comprised $37.3 million,
or 6.2% of the Company's total loan portfolio. Most of the Company's
commercial business loans have been extended to finance local businesses and
include primarily short-term loans to finance machinery and equipment
purchases, inventory and accounts receivable. Commercial business loans also
involve the extension of revolving credit for a combination of equipment
acquisitions and working capital needs.
The terms of loans extended on machinery and equipment are based on
the projected useful life of such machinery and equipment, generally not to
exceed seven years. Lines of credit generally are available to borrowers
provided that the outstanding balance is paid in full (i.e., the credit line
has a zero balance) for at least 30 days every year. All lines of credit are
reviewed on an annual basis. In the event the borrower does not meet this 30
day requirement, the line of credit may be terminated and the outstanding
balance may be converted into a fixed term loan. The Company has a small
number of standby letters of credit outstanding, which are offered at
competitive rates and terms and are generally on a secured basis.
Unlike residential mortgage loans, commercial business loans are
typically made on the basis of the borrower's ability to make repayment from
the cash flow of the borrower's business. As a result, the availability of
funds for the repayment of commercial business loans may be substantially
dependent on the success of the business itself (which, in turn, is often
dependent in part upon general economic conditions). The Company's commercial
business loans are usually, but not always, secured by business assets.
However, the collateral securing the loans may depreciate over time, may be
difficult to appraise and may fluctuate in value based on the success of the
business.
The Company's commercial business lending policy includes credit
file documentation and analysis of the borrower's background, capacity to
repay the loan, the adequacy of the borrower's capital and collateral as well
as an evaluation of other conditions affecting the borrower. Analysis of the
borrower's past, present and future cash flows is also an important aspect of
the Company's current credit analysis. The Company generally obtains personal
guarantees on its commercial business loans. Nonetheless, such loans are
believed to carry higher credit risk than more traditional savings Company
loans.
Loan Originations and Sales
Mortgage and commercial loan originations are developed from the
continuing business with depositors and borrowers, soliciting realtors and
other brokers and walk-in customers. Residential and commercial loans are
originated by the Company's staff of salaried and commissioned loan
personnel, as well as through established relationships with certain mortgage
brokers. The Company currently originates substantially all its mortgage
loans to conform with the underwriting standards of Fannie Mae. As such,
these loans are saleable to the secondary market.
While the Company originates both fixed- and adjustable-rate loans,
its ability to originate loans is dependent upon demand for loans in the
markets in which it serves. Demand is affected by the applicable local
economy and the interest rate environment. Until December 1997, the Company
sold substantially all its fixed-rate loans to the secondary market with
servicing retained. Currently, the Company generally retains its fixed-rate
and adjustable-rate real estate loans in its portfolio. At June 30, 2000, the
Company serviced approximately $167.0 million of loans for others.
During the year ended June 30, 2000, the Company originated $168.0
million of loans, compared to $245.4 million in fiscal 1999.
In periods of economic uncertainty, the Company's ability to
originate large dollar volumes of loans with acceptable underwriting
characteristics may be substantially reduced or restricted, which may result
in a decrease in operating income.
<PAGE>
The following table shows the loan origination and repayment
activities of the Company for the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------
2000 1999 1998
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Loans at beginning of period $524,779 $416,310 $401,849
Originations by type:
Real estate loans:
One- to four-family 66,536 108,610 107,991
Multi-family and commercial real estate 69,664 99,473 33,171
------- ------- -------
Total real estate loans 136,200 208,083 141,162
Consumer loans:
Home equity lines of credit 4,900 3,819 8,243
Conventional second mortgages 3,365 3,374 5,918
Automobile loans 4,615 5,747 6,766
Credit cards -- 2,674 2,561
Other consumer loans 795 571 822
------- ------- -------
Total consumer loans 13,675 16,185 24,310
Commercial business loans 18,123 21,114 15,195
------- ------- -------
Total loans originated 167,998 245,382 180,667
Less:
Principal repayments 82,485 133,231 155,969
Loan sales 3,399 861 8,105
Charge-offs 692 994 1,038
Transfers to ORE 1,159 1,827 1,094
------- ------- -------
Total loan reductions 87,735 136,913 166,206
------- ------- -------
Net loan activity 80,263 108,469 14,461
------- ------- -------
Loans at end of period $605,042 $524,779 $416,310
======= ======= =======
</TABLE>
<PAGE>
Asset Quality
Delinquency Procedures. When a borrower fails to make a required
payment on a one- to four-family residential mortgage loan, the Company
attempts to cure the deficiency by contacting the borrower. Written contacts
are made after payment is 15 days past due and, in most cases, deficiencies
are cured promptly. The Company attempts to contact the borrower by telephone
to arrange payment of the delinquency between the 16th and the 30th day. If
these efforts have not resolved the delinquency within 45 days after the due
date, a second written notice is sent to the borrower, and on the 60th day a
notice is sent to the borrower warning that foreclosure proceedings will be
commenced unless the delinquent amount is paid. If the delinquency has not
been cured within a reasonable period of time after the foreclosure notice
has been sent, the Company may obtain a forbearance agreement or may
institute appropriate legal action to foreclose upon the property. If
foreclosed, property collateralizing the loan is sold at a public sale and
may be purchased by the Company. If the Company is in fact the successful
bidder at the foreclosure sale, upon receipt of a deed to the property, the
Company generally sells the property at the earliest possible date.
Collection efforts on consumer, commercial business and multi-family
and commercial real estate loans are similar to efforts on one- to
four-family residential mortgage loans, except that collection efforts on
consumer and multi-family commercial real estate loans generally begin within
15 days after the payment date is missed. The Company also maintains periodic
contact with commercial loan customers and monitors and reviews the
borrowers' financial statements and compliance with debt covenants on a
regular basis.
Delinquent Loans. The following table sets forth information
concerning delinquent loans as June 30, 2000, in dollar amounts and as a
percentage of the Company's loan portfolio. The amounts presented represent
the total remaining principal balances of the related loans, rather than the
actual payment amounts, which are overdue.
<TABLE>
<CAPTION>
June 30, 2000
----------------------------------------------------------------------------------------
60-89 90 days or Total loans delinquent 60
days more days or more
---------------------------- ---------------------------- ----------------------------
Principal Percent Principal Percent Principal Percent
Number Balance of Loan Number Balance of Loan Number Balance of Loan
of Loans of Loans Category of Loans of Loans Category of Loans of Loans Category
-------- --------- -------- -------- --------- -------- -------- --------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family real estate 6 $342 .10% $21 $2,250 .64% $27 $2,592 .74%
Multi-family and commercial
real estate 2 115 .07 5 861 .50 7 976 .57
-- --- -- ----- -- -----
Total real estate loans 8 457 .09 26 3,111 .59 34 3,568 .68
Consumer loans:
Home equity lines of credit -- -- -- 4 164 .83 4 164 .83
Conventional second mortgages 2 61 .52 3 33 .28 5 94 .80
Automobile loans 2 7 .08 2 14 .16 4 21 .24
Other consumer loans 2 1 .06 5 6 .37 7 7 .43
-- --- -- ----- -- -----
Total consumer loans 6 69 .17 14 217 .52 20 286 .69
Commercial business loans -- -- -- -- -- -- -- -- --
-- --- -- ----- -- -----
Total delinquent loans 14 526 .09% 40 3,328 .55% 54 3,854 .64%
== === === == ===== === == ===== ===
</TABLE>
<PAGE>
Non-Performing Assets. The table below sets forth the amounts and
categories of the Company's non-performing assets. Loans are generally placed
on non-accrual status when the loan is contractually past due 90 days or more
or when the collection of principal and/or interest in full becomes doubtful.
When loans are designated as non-accrual, all accrued but unpaid interest is
reversed against current period income and, as long as the loan remains on
non-accrual status, interest is recognized only when received, if considered
appropriate by management. ORE includes assets acquired in settlement of
loans.
<TABLE>
<CAPTION>
June 30,
------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
One- to four-family real estate $2,250 $2,674 $2,635 $2,835 $1,852
Multi-family and commercial real estate 861 823 1,246 3,438 1,364
Conventional second mortgages 33 9 35 62 48
Consumer loans 184 212 105 380 245
Commercial business loans -- 62 65 217 --
----- ----- ----- ----- -----
Total non-accrual loans 3,328 4,321 3,663 4,740 5,583
Loans contractually past due 90 days or
more and still accruing interest:
Consumer loans -- -- 57 42 158
----- ----- ----- ----- -----
Total loans 90 days or more past
due and still accruing interest -- -- 57 42 158
Troubled debt restructurings 715 672 1,929 1,906 2,052
----- ----- ----- ----- -----
Total non-performing loans 4,043 4,993 5,649 6,688 7,793
Real estate owned (ORE) 561 724 509 1,874 421
----- ----- ----- ----- -----
Total non-performing assets $4,604 $5,717 $6,158 $8,562 $8,214
===== ===== ===== ===== =====
Allowance for loan losses $5,013 $4,025 $3,533 $3,105 $3,249
===== ===== ===== ===== =====
Coverage of non-performing loans 123.99 % 80.61% 62.54% 46.43% 41.69%
===== ===== ===== ===== =====
Total non-performing loans as
a percentage of total loans .67 % .95% 1.36% 1.66% 1.96%
===== ===== ===== ===== =====
Total non-performing loans as
a percentage of total assets .56 % .77% 1.05% 1.36% 1.68%
===== ===== ===== ===== =====
</TABLE>
<PAGE>
Non-Accruing Loans. At June 30, 2000, the Company had approximately
$3.3 million in non-accruing loans, which constituted .5% of the Company's
total loan portfolio. As of such date, there were no non-accruing loans or
aggregate non-accruing loans-to-one-borrower in excess of $750,000.
For the year ended June 30, 2000, accumulated interest income on
nonaccrual loans of approximately $432,000 was not recognized as income.
Accruing Loans Contractually Past Due 90 Days or More. As of June
30, 2000, the Company had no accruing loans contractually past due 90 days
or more.
Troubled Debt Restructurings. As of June 30, 2000, the Company had
approximately $715,000 of troubled debt restructurings (which involve
forgiving a portion of interest or principal on the loan or restructuring a
loan to a rate materially less than that of market rates). At that date,
there were no troubled debt restructurings in excess of $750,000.
ORE. As of June 30, 2000, the Company had approximately $561,000 of
ORE. At that date, ORE consisted of 14 residential properties located in the
Company's primary market area. Real estate and other assets acquired by the
Company as a result of foreclosure or by deed-in-lieu of foreclosure or
repossession are classified as ORE until sold. When property is classified as
ORE, it is recorded at the lower of cost or fair value (net of disposition
costs) at that date and any writedown resulting therefrom is charged to the
allowance for loan losses. Subsequent writedowns are charged to operating
expenses. Net expense from ORE is expensed as incurred.
Other Loans of Concern. As of June 30, 2000, there was approximately
$64,000 of other loans not included in the table or discussed above where
known information about the possible credit or other problems of borrowers
caused management to have doubts as to the ability of the borrower to comply
with present loan repayment terms. These loans have been considered by
management in conjunction with the analysis of the adequacy of the allowance
for loan losses.
Allowance for Loan Losses. The allowance for loan losses is
replenished through a provision for loan losses charged to operations. Loans
are charged against the allowance for loan losses when management believes
that the collectibility of the principal is unlikely. Recoveries on loans
previously charged-off are credited to the allowance for loan losses. The
allowance is an amount that management believes will be adequate to absorb
losses on existing loans that may become uncollectible. Management's
evaluation of the adequacy of the allowance for loan losses is performed on a
periodic basis and takes into consideration such factors as the historical
loan loss experience, changes in the nature and volume of the loan portfolio,
overall portfolio quality, review of specific problem loans and current
economic conditions that may affect borrowers' ability to pay.
Although management believes that it uses the best information
available to determine the allowance, unforeseen market conditions could
result in adjustments and net earnings could be significantly affected if
circumstances differ substantially from the assumptions used in determining
the level of the allowance. Future additions to the Company's allowance will
be the result of periodic loan, property and collateral reviews and thus
cannot be predicted in advance. In addition, regulatory agencies, as an
integral part of the examination process, periodically review the Company's
allowance for loan losses. Such agencies may require the Company to recognize
additions to the allowance based upon their judgment of the information
available to them at the time of their examination. At June 30, 2000, the
Company had a total allowance for loan losses of $5.0 million, representing
123.99% of total non-performing loans.
<PAGE>
The following table sets forth an analysis of the Company's
allowance for loan losses at the dates and for the periods indicated.
<TABLE>
<CAPTION>
At or for the fiscal year ended June 30,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses,
beginning period $4,025 $3,533 $3,105 $3,249 $3,133
Charged-off loans:
Real estate loans
One- to four-family real estate 198 270 432 619 128
Multi-family and commercial
real estate 69 487 93 343 21
----- ----- ----- ----- -----
Total real estate loan 267 757 525 962 149
charge-offs
Commercial business loan charge-offs 367 -- 218 105 4
Consumer loans
Home equity lines of credit -- -- 84 39 18
Conventional second mortgages 6 24 16 1 --
Automobile loans 15 23 121 55 23
Credit cards 2 144 212 353 132
Other consumer loans 35 46 41 56 75
----- ----- ----- ----- -----
Total consumer loan charge-offs 58 237 474 504 248
----- ----- ----- ----- -----
Total charged-off loans 692 994 1,217 1,571 401
Recoveries on loans previously charged-off:
One- to four-family real estate 33 132 78 28 4
Multi-family and commercial real estate -- 53 93 40 13
----- ----- ----- ----- -----
Total real estate loan recoveries 33 185 171 68 17
Commercial business loan recoveries -- 1 35 -- 1
Consumer loans
Home equity lines of credit -- 19 -- 4 --
Conventional second mortgages -- -- -- -- 3
Automobile loans 1 4 8 5 --
Credit cards 38 30 23 16 4
Other consumer loans 8 12 8 9 2
----- ----- ----- ----- -----
Total consumer loan recoveries 47 65 39 34 9
----- ----- ----- ----- -----
Total recoveries 80 251 245 102 27
----- ----- ----- ----- -----
Net loans charged-off (612) (743) (972) (1,469) (374)
Provision for loan losses 1,600 1,235 1,400 1,325 490
----- ----- ----- ----- -----
Allowance for loan losses, end of period $5,013 $4,025 $3,533 $3,105 $3,249
===== ===== ===== ===== =====
Net charged-off loans to average loans 0.11% 0.16% 0.24% 0.37% 0.10%
===== ===== ===== ===== =====
Allowance for loan losses to total loans 0.83% 0.77% 0.85% 0.77% 0.82%
===== ===== ===== ===== =====
Allowance for loan losses to
nonperforming loans 123.99% 80.61% 62.54% 46.43% 41.69%
===== ===== ===== ===== =====
Net charged-off loans to allowance
for loan losses 12.21% 18.46% 27.51% 47.31% 11.51%
===== ===== ===== ===== =====
Recoveries to charged-offs 11.56% 25.25% 20.13% 6.49% 6.73%
===== ===== ===== ===== =====
</TABLE>
<PAGE>
Allocation of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance for
loan losses by category as prepared by the Company. This allocation is based
on management's assessment as of a given point in time of the risk
characteristics of each of the component parts of the total loan portfolio
and is subject to changes as and when the risk factors of each such component
part change. The allocation is not indicative of either the specific amounts
or the loan categories in which future charge-offs may be taken, nor should
it be taken as an indicator of future loss trends. The allocation to each
category does not restrict the use of the allowance to absorb losses in any
category.
<TABLE>
<CAPTION>
June 30,
---------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------ ------------------------------ -----------------------------
Percent Percent Percent
of Loans of Loans of Loans
Percent of in Each Percent of in Each Percent of in Each
Allowance Allowance Category Allowance Allowance Category Allowance Allowance Category
for Loan to Total to Total for Loan to Total to Total for Loan to Total to Total
Losses Allowance Allowance Losses Allowance Allowance Losses Allowance Allowance
--------- ---------- --------- --------- ---------- --------- --------- ---------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans
One- to four-family
real estate $ 905 18.05% 58.40% $ 708 17.59% 61.12% $ 649 18.37% 62.07%
Multi-family and commercial
real estate 3,172 63.28 28.53 1,686 41.89 26.35 1,438 40.70 22.39
----- ----- ----- ----- ----- ----- ----- ----- -----
Total real estate loans 4,077 81.33 86.93 2,394 59.48 87.47 2,087 59.07 84.46
Consumer loans
Home equity lines of credit 49 .98 3.25 29 .72 3.83 41 1.16 5.28
Conventional second mortgages 17 .33 1.96 19 .47 2.42 26 0.74 3.63
Automobile loans 51 1.02 1.42 69 1.71 1.84 74 2.09 2.35
Credit cards -- -- -- -- -- -- 154 4.36 0.40
Other consumer loans 49 .98 .27 51 1.27 .24 45 1.27 0.28
----- ----- ----- ----- ----- ----- ----- ----- -----
Total consumer loans 166 3.31 6.90 168 4.17 8.33 340 9.62 11.94
Commercial business loans 643 12.83 6.17 220 5.47 4.20 164 4.64 3.60
Unallocated 127 2.53 -- 1,243 30.88 -- 942 26.67 --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total $5,013 100.00% 100.00% $4,025 100.00% 100.00% $3,533 100.00% 100.00%
===== ====== ====== ===== ====== ====== ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------
1997 1996
------------------------------ ------------------------------
Percent Percent
of Loans of Loans
Percent of in Each Percent of in Each
Allowance Allowance Category Allowance Allowance Category
for Loan to Total to Total for Loan to Total to Total
Losses Allowance Allowance Losses Allowance Allowance
--------- ---------- --------- --------- ---------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
One- to four-family real estate $ 493 15.88% 60.62% $ 591 18.19% 59.06%
Multi-family and commercial
real estate 1,339 43.12 23.39 1,848 56.88 24.29
----- ----- ----- ----- ----- -----
Total real estate loans 1,832 59.00 84.01 2,439 75.07 83.35
Consumer loans
Home equity lines of credit 24 0.77 6.27 158 4.86 6.87
Conventional second mortgages 22 0.71 3.50 9 0.28 2.79
Automobile loans 35 1.13 2.31 40 1.23 2.51
Credit cards 132 4.25 0.54 183 5.63 0.70
Other consumer loans 56 1.80 0.36 102 3.14 0.45
----- ----- ----- ----- ----- -----
Total consumer loans 269 8.66 12.98 492 15.14 13.32
Commercial business loans 215 6.93 3.01 227 6.99 3.33
Unallocated 789 25.41 -- 91 2.80 --
Total $3,105 100.00% 100.00% $3,249 100.00% 100.00%
===== ====== ====== ===== ====== ======
</TABLE>
<PAGE>
Investment Activities
The Company is generally authorized to invest available funds in
whatever investments the Board of Directors deems appropriate. The Bank, as a
New York State chartered savings bank, may invest assets only in those
investments, which the New York Banking Law permits. The Bank is authorized
to invest in various types of liquid assets, including United States Treasury
obligations, securities of various federal agencies, certain certificates of
deposit of insured banks and savings institutions, certain bankers'
acceptances, repurchase agreements and federal funds. Subject to various
restrictions, the Bank may also invest its assets in investment grade
commercial paper and corporate debt securities and mutual funds whose assets
conform to the investments that the Bank is otherwise authorized to make
directly.
Generally, the investment policy of the Company is to invest funds
among various categories of investments and maturities based upon the
Company's need for liquidity, to achieve the proper balance between its
desire to minimize risk and maximize yield, and, to a much lesser extent, to
provide collateral for borrowings and to fulfill the Company's
asset/liability management policies. To date, the Company's investment
strategy has been directed toward high-quality assets (primarily federal
agency obligations and mortgage-backed securities) with short and
intermediate terms (five years or less) to maturity. At June 30, 2000, the
weighted average term to maturity or repricing of the security portfolio was
4.7 years. This did not take into account securities, which may be called
prior to their contractual maturity or repricing.
Management determines the appropriate classification of securities
at the time of purchase. If management has the intent and ability to hold
debt securities to maturity, they are stated at amortized cost and are
classified as investment securities. If securities are purchased for the
purpose of selling them in the near term, they are classified as trading
securities and are reported at fair value with unrealized holding gains and
losses reflected in current earnings. All other debt and marketable equity
securities are classified as securities available for sale and are reported
at fair value, with net unrealized gains or losses reported, net of income
taxes, as a separate component of equity. As a member of the FHLB of New
York, the Bank is required to hold stock in the FHLB of New York, which is
carried at cost since there is no readily available market value.
Historically, the Company has not held any securities considered to be
trading securities.
<PAGE>
The following table sets forth the composition of the Company's
securities available for sale and investment securities at the dates
indicated.
<PAGE>
<TABLE>
<CAPTION>
June 30,
---------------------------------------------------------------------------------
2000 1999 1998
------------------------ ------------------------ ---------------------
Carrying % of Carrying % of Carrying % of
Value Total Value Total Value Total
-------- ----- -------- ----- -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale,
at fair value:
Debt securities
US Government and agency obligations $14,543 36.29% $15,747 35.20% $23,237 47.69%
Other obligations 377 .94 379 0.85 276 0.57
Mortgage-backed securities 16,930 42.24 20,917 46.74 16,946 34.78
Collateralized mortgage obligations 720 1.80 1,399 3.13 4,003 8.22
------ ------ ------ ------ ------ ------
Total debt securities 32,570 81.27 38,442 85.92 44,462 91.26
Equity securities 7,504 18.73 6,300 14.08 4,258 8.74
------ ------ ------ ------ ------ ------
Total securities available for sale $40,074 100.00% $44,742 100.00% $48,720 100.00%
====== ====== ====== ====== ====== ======
Investment securities at amortized cost:
US Government and agency obligations $29,985 54.39% $27,505 50.51% $22,025 48.49%
Other obligations 2,002 3.63 2,148 3.94 388 0.85
Mortgage-backed securities 19,950 36.19 24,802 45.55 23,011 50.66
Industrial and financial 3,192 5.79 -- -- -- --
------ ------ ------ ------ ------ ------
Total investment securities $55,129 100.00% $54,455 100.00% $45.424 100.00%
====== ====== ====== ====== ====== ======
Investment securities at fair value $53,741 $53,721 $45,547
====== ====== ======
</TABLE>
<PAGE>
The following table sets forth information regarding the scheduled
maturities, amortized cost, and weighted average yields for the Company's
securities portfolios at June 30, 2000 by contractual maturity. The table
does not take into consideration the effects of scheduled repayments or
possible prepayments.
<TABLE>
<CAPTION>
At June 30, 2000
-----------------------------------------------------------------------------------------------------
Less than 1 1 to 5 5 to 10 Over 10 Total
1 year years years years Securities
------------------ ------------------ ------------------ ------------------ -------------------------
Weighted Weighted Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average Amortized Average Amortized Average Fair
Cost Yield Cost Yield Cost Yield Cost Yield Cost Yield Value
--------- ------- --------- -------- --------- -------- --------- -------- --------- ------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available
for sale:
US Government and
agency obligations $1,999 6.08% $12,994 5.96% $ -- --% $ -- --% $14,993 5.97% $14,543
Other obligations -- -- 178 3.70 200 6.60 -- -- 378 5.23 377
Mortgage-backed
securities -- -- 8,506 6.35 -- -- 8,962 6.45 17,468 6.40 16,930
Collateralized
mortgage
obligations -- -- -- -- 424 6.45 313 4.85 737 5.77 720
Other equity
securities -- -- -- -- -- -- 2,487 5.07 2,487 5.07 2,552
------ ---- ------ ---- ----- ---- ------ ---- ------ ---- ------
Subtotal 1,999 6.08 21,678 6.09 624 6.50 11,762 6.12 36,063 6.10 35,122
------ ---- ------ ---- ----- ---- ------ ---- ------ ---- ------
FHLB stock -- -- -- -- -- -- 4,952 7.00 4,952 7.00 4,952
====== ==== ====== ==== ===== ==== ====== ==== ====== ==== ======
Total securities
available for sale $1,999 6.08 $21,678 6.09 $ 624 6.50 $16,714 6.38 $41,015 6.21 $40,074
Investment securities:
US Government and
agency obligations $3,995 5.83 $25,990 5.94 $ -- -- $ -- -- $29,985 5.92 $29,220
Other obligations 2,002 6.03 -- -- -- -- -- -- 2,002 6.03 1,985
Mortgage-backed
securities 952 6.11 10,124 6.51 115 8.41 8,759 6.42 19,950 6.46 19,344
Industrial and
financial -- -- -- -- 2,351 4.58 841 6.98 3,192 5.21 3,192
------ ---- ------ ---- ----- ---- ------ ---- ------ ---- ------
Total investment
securities $6,949 5.93% $36,114 6.10% $2,466 4.76% $ 9,600 6.47% $55,129 6.08% $53,741
===== ==== ====== ==== ====== ==== ====== ==== ====== ==== ======
</TABLE>
<PAGE>
Sources of Funds
General. The Company's primary sources of funds are deposits,
amortization and prepayment of loan principal, maturities of securities,
short-term investments, funds provided from operations and borrowings.
Deposits. The Company offers a variety of deposit accounts having a
range of interest rates and terms. The Company's deposits consist of savings
accounts, school savings accounts (a volunteer program in which students are
given the opportunity to open and maintain a savings account while at school
in order to teach wise money management), money market accounts, demand
deposit accounts and time deposits currently ranging in terms from three
months to five years. The Company only solicits deposits from its primary
market area and does not currently solicit brokered deposits. However, in the
past, the Company has solicited brokered deposits. At June 30, 2000, the
Company had no brokered deposits. The Company relies primarily on competitive
pricing policies, advertising and customer service to attract and retain its
deposits. At June 30, 2000, the Company's deposits totaled $494.9 million, of
which $453.9 million were interest-bearing deposits.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates, and
competition. The variety of deposit accounts offered by the Company has
allowed it to be competitive in obtaining funds and to respond with
flexibility to changes in consumer demand. The Company has become more
susceptible to short-term fluctuations in deposit flows, as customers have
become more interest rate conscious. The Company manages the pricing of its
deposits in keeping with its asset/liability management, liquidity and
profitability objectives. Based on its experience, the Company believes that
its savings, school savings, money market and demand deposit accounts are
relatively stable sources of deposits. However, the ability of the Company to
attract and maintain time deposits and the rates paid on these deposits has
been and will continue to be significantly affected by market conditions.
<PAGE>
The following table sets forth the distribution and deposit activity of
the Company's deposit accounts for the periods indicated.
<TABLE>
<CAPTION>
Total Number
School Money Demand Time of
Savings Savings Market Deposits Deposits Total Accounts
--------- ------- ------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of June 30, 1997 $ 123,881 $13,909 $15,450 $45,844 $230,306 $429,390 86,741
Net deposits (withdrawals) (1,898) 2,558 5,653 7,806 (12,778) 1,341
Interest credited 3,629 788 569 303 13,521 18,810
--------- ------- ------- ------- -------- --------
Balance as of June 30, 1998 125,612 17,255 21,672 53,953 231,049 449,541 89,370
Net deposits (withdrawals) 5,409 (1,180) 970 11,510 (37,644) (20,935)
Interest credited 3,454 1,213 687 353 11,810 17,517
------- ------- ------ ------- -------- --------
Balance as of June 30, 1999 134,475 17,288 23,329 65,816 205,215 446,123 88,891
Net deposits (withdrawals) (5,260) (488) (1,677) 7,005 31,359 30,978
Interest credited 3,807 695 252 1,131 11,928 17,814
--------- ------- ------- ------- -------- --------
Balance as of June 30, 2000 $133,022 $17,495 $21,904 $73,952 $248,502 $494,875 94,403
======== ======= ======= ======= ======== ======== ======
</TABLE>
<PAGE>
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by the Company as of the dates
indicated.
<TABLE>
<CAPTION>
Balance as of June 30,
--------------------------------------------------------------------
2000 1999 1998
--------------------- -------------------- --------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
----- -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Savings accounts (3.0%) $133,022 26.88% $134,475 30.14% $125,612 27.94%
School savings accounts (5.5%) 17,495 3.54 17,288 3.88 17,255 3.84
Money market accounts (2.75% to 3.93%) 21,904 4.43 23,329 5.23 21,672 4.82
Demand deposits (0% to 1.75%) 73,952 14.95 65,816 14.75 53,953 12.00
Time deposits:
1.00-1.99% 482 .10 500 .11 - -
2.00-2.99% 1,650 .33 1,123 .25 - -
3.00-3.99% 1,768 .36 17,218 3.86 2 -
4.00-4.99% 45,300 9.15 78,798 17.66 4,105 0.91
5.00-5.99% 123,844 25.02 86,433 19.37 190,539 42.39
6.00-6.99% 75,139 15.18 9,090 2.04 17,664 3.93
7.00-7.99% 319 .06 12,053 2.70 18,709 4.16
8.00-8.99% - - - - 30 0.01
-------- ------ -------- ------ -------- ------
Total time deposits 248,502 50.20 205,215 46.00 231,049 51.40
-------- ------ -------- ------ -------- ------
Total deposits $494,875 100.00% $446,123 100.00% $449,541 100.00%
======== ====== ======== ====== ======== ======
</TABLE>
<PAGE>
The following table shows rate and maturity information for the
Company's time deposits as of June 30, 2000.
<TABLE>
<CAPTION>
Amount Due
12 months 12 months 12 months 12 months 12 months
ending ending ending ending ending
June 30, 2001 June 30, 2002 June 30, 2003 June 30, 2004 June 30, 2005 Thereafter Total
------------- ------------- ------------- ------------- ------------- ----------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate
1.00-1.99% $ 482 $ - $ - $ - $ - $ - $ 482
2.00-2.99% 1,648 2 - - - - 1,650
3.00-3.99% 1,768 - - - - - 1,768
4.00-4.99% 37,121 3,037 3,509 1,633 - - 45,300
5.00-5.99% 93,888 12,733 8,051 5,837 3,335 - 123,844
6.00-6.99% 56,390 16,204 679 3 1,797 66 75,139
7.00-7.99% 155 145 - - 19 - 319
8.00-8.99% - - - - - - -
-------- ------- ------- ------ ------ ------ --------
Total $191,452 $32,121 $12,239 $7,473 $5,151 $ 66 $248,502
======== ======= ====== ====== ====== ====== ========
</TABLE>
<PAGE>
The following table indicates the amount of the Company's time
deposits by the time remaining until maturity as of June 30, 2000.
<TABLE>
<CAPTION>
Maturity
--------------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
--------- ------ ------ --------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
Time deposits less than $100,000 $54,904 $34,232 $71,061 $50,791 $210,988
Time deposits $100,000 or more 10,436 7,865 12,954 6,258 37,514
------- ------- ------- ------- --------
Total time deposits $65,340 $42,097 $84,015 $57,049 $248,502
======= ======= ======= ======= ========
</TABLE>
Borrowings. Although deposits are the Company's primary source of
funds, the Company's practice has been to utilize borrowings when they are a
less costly source of funds, can be invested at a positive interest rate
spread or when the Company needs additional funds to satisfy loan demand.
The Company's borrowings historically have consisted primarily of
advances from the FHLB of New York. FHLB advances can be made pursuant to
several different credit programs, each of which has its own interest rate
and range of maturities. The Company currently maintains available lines of
credit and is currently authorized to borrow up to $65.0 million on lines of
credit with the FHLB of New York. At June 30, 2000, the Company had
outstanding $96.2 million in other borrowings from the FHLB of New York.
<PAGE>
The following table sets forth the maximum month-end balance and
average balance of FHLB advances and other borrowings for the periods
indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
2000 1999 1998
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Maximum Balance:
FHLB advances $96,201 $52,038 $19,983
Average Balance:
FHLB advances $81,927 $43,270 $ 5,467
</TABLE>
The following table sets forth the amount and rate of the Company's
borrowings at the dates indicated.
<TABLE>
<CAPTION>
June 30,
---------------------------------------
2000 1999 1998
------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
FHLB advances $96,201 $49,045 $19,897
Total borrowings $96,201 $49,045 $19,897
======= ======= =======
Weighted average interest rate of FHLB advances 5.80% 5.73% 6.07%
==== ==== ====
</TABLE>
<PAGE>
Subsidiary and Other Activities
The Bank maintains four wholly-owned subsidiaries: CSB Financial
Services, Inc., CSB Funding, Inc., CSB Services Agency, Inc. and Cohoes
Realty, Incorporated. CSB Financial Services, Inc. earns commission income
through the sale of securities, mutual funds, annuities and other insurance
products. During the fiscal year ended June 30, 2000, CSB Financial Services
had revenues of approximately $394,000 and net income of approximately
$24,000. As of June 30, 2000, CSB Funding, Inc. was inactive with no reported
income.
CSB Services Agency, Inc. owns an 84.5% interest in CSB Security
Insurance Agency, formerly Community Bank Insurance Brokers of New York, LLC
which is a joint venture formed for the purpose of selling property and
casualty insurance to the Bank's customers and to the general public. The
joint venture was formed in July 1998. In January 2000, the joint venture
acquired two other area agencies, Security Insurance Group and the Carpenter
& Milnarik Agency. During the fiscal year ended June 30, 2000, the joint
venture reported revenues of approximately $509,000 and a net loss of
approximately $161,000.
Cohoes Realty, Incorporated is a real estate investment trust formed
in 1999 to enhance liquidity, portfolio yields and capital growth. The Bank
funded Cohoes Realty, Incorporated with approximately $105.0 million of
earning assets consisting of commercial real estate loans and debt
securities. Interest income earned on the assets held by Cohoes Realty,
Incorporated will be passed through to the Bank in the form of dividends.
Cohoes Realty, Incorporated sold a limited amount of preferred stock with a
fixed rate of return to directors, officers and employees of the Bank and
their family members in order to satisfy Internal Revenue Code requirements
to qualify as a real estate investment trust.
Competition
The Company faces strong competition, both in originating real
estate and other loans and in attracting deposits. Competition in originating
real estate loans comes primarily from other savings institutions, commercial
banks, credit unions and mortgage bankers making loans secured by real estate
located in the Company's primary market area. Other savings institutions,
commercial banks, credit unions and finance companies provide vigorous
competition in consumer lending.
The Company attracts all of its deposits through its branch offices,
primarily from the communities in which those branch offices are located;
therefore, competition for those deposits is principally from mutual funds
and other savings institutions, commercial banks and credit unions located in
the same communities. The Company competes for these deposits by offering a
variety of deposit accounts at competitive rates, convenient business hours,
and convenient branch locations with interbranch deposit and withdrawal
privileges. Automated teller machine facilities are also available.
Employees
At June 30, 2000, the Company had 180 full-time employees and 30
part-time employees. The Company's employees are not represented by any
collective bargaining group. Management considers its employee relations to
be good.
<PAGE>
REGULATION
The Company
General. The Company is subject to regulation as a savings and loan
holding company under the HOLA. The Company is registered with the Office of
Thrift Supervision ("OTS") and is subject to OTS regulations, examinations,
supervision and reporting requirements relating to savings and loan holding
companies. The Company is also required to file certain reports with, and
otherwise comply with the rules and regulations of, the New York Banking
Board ("NYBB") and the Securities and Exchange Commission ("SEC"). As a
subsidiary of a savings and loan holding company, the Bank is subject to
certain restrictions in its dealings with the Company and affiliates thereof.
Activities Restrictions. The Bank is the sole savings association
subsidiary of the Company. There are generally no restrictions on the
activities of a savings and loan holding company, which holds only one
subsidiary savings institution. However, if the Director of the OTS
determines that there is reasonable cause to believe that the continuation by
a savings and loan holding company of an activity constitutes a serious risk
to the financial safety, soundness or stability of its subsidiary savings
institution, he may impose such restrictions as are deemed necessary to
address such risk, including limiting (i) payment of dividends by the savings
institution; (ii) transactions between the savings institution and its
affiliates; and (iii) any activities of the savings institution that might
create a serious risk that the liabilities of the holding company and its
affiliates may be imposed on the savings institution. Notwithstanding the
above rules as to permissible business activities of unitary savings and loan
holding companies, if the savings institution subsidiary of such a holding
company fails to meet the QTL test, as discussed under "--Qualified Thrift
Lender Test," then such unitary holding company also shall become subject to
the activities restrictions applicable to multiple savings and loan holding
companies and, unless the savings institution requalifies as a QTL within one
year thereafter, shall register as, and become subject to the restrictions
applicable to, a bank holding company.
If the Company were to acquire control of another savings
institution, other than through merger or other business combination with the
Bank, the Company would thereupon become a multiple savings and loan holding
company. Except where such acquisition is pursuant to the authority to
approve emergency thrift acquisitions and where each subsidiary savings
institution meets the QTL test, as set forth below, the activities of the
Company and any of its subsidiaries (other than the Bank or other subsidiary
savings institutions) would thereafter be subject to further restrictions.
Among other things, no multiple savings and loan holding company or
subsidiary thereof which is not a savings institution shall commence or
continue for a limited period of time after becoming a multiple savings and
loan holding company or subsidiary thereof any business activity other than:
(i) furnishing or performing management services for a subsidiary savings
institution; (ii) conducting an insurance agency or escrow business; (iii)
holding, managing, or liquidating assets owned by or acquired from a
subsidiary savings institution; (iv) holding or managing properties used or
occupied by a subsidiary savings institution; (v) acting as Director under
deeds of trust; (vi) those activities authorized by regulation as of March 5,
1987 to be engaged in by multiple savings and loan holding companies; or
(vii) unless the Director of the OTS by regulation prohibits or limits such
activities for savings and loan holding companies, those activities
authorized by the FRB as permissible for bank holding companies. Those
activities described in clause (vii) above also must be approved by the
Director of the OTS prior to being engaged in by a multiple savings and loan
holding company.
<PAGE>
Qualified Thrift Lender Test. Under Section 2303 of the Economic
Growth and Regulatory Paperwork Reduction Act of 1996, a savings association
can comply with the QTL test by either meeting the QTL test set forth in the
HOLA and implementing regulations or qualifying as a domestic building and
loan association as defined in Section 7701(a)(19) of the Internal Revenue
Code of 1986, as amended. A savings bank subsidiary of a savings and loan
holding company that does not comply with the QTL test must comply with the
following restrictions on its operations: (i) the institution may not engage
in any new activity or make any new investment, directly or indirectly,
unless such activity or investment is permissible for a national bank; (ii)
the branching powers of the institution shall be restricted to those of a
national bank, (iii) the institution shall not be eligible to obtain any
advances from its FHLB; and (iv) payment of dividends by the institution
shall be subject to the rules regarding payment of dividends by a national
bank. Upon the expiration of three years from the date the savings
institution ceases to meet the QTL test, it must cease any activity and
divest any investment not permissible for a national bank and immediately
repay any outstanding FHLB advances (subject to safety and soundness
considerations).
The QTL test set forth in the HOLA requires that qualified thrift
investments ("QTLs") represent 65% of portfolio assets of the savings
institution and its consolidated subsidiaries. Portfolio assets are defined
as total assets less intangibles, property used by a savings association in
its business and liquidity investments in an amount not exceeding 20% of
assets. Generally, QTLs are residential housing related assets. The 1996
amendments allow small business loans, credit card loans, student loans and
loans for personal, family and household purposes to be included without
limitation as qualified investments. At June 30, 2000, approximately 67.6% of
the Bank's assets were invested in QTLs, which was in excess of the
percentage required to qualify the Bank under the QTL test in effect at that
time.
Limitations on Transactions with Affiliates. Transactions between
savings institutions and any affiliate are governed by Sections 23A and 23B
of the Federal Reserve Act. An affiliate of a savings institution is any
company or entity, which controls, is controlled by or is under common
control with the savings institution. In a holding company context, the
parent holding company of a savings institution (such as the Company) and any
companies, which are controlled by such parent holding company, are
affiliates of the savings institution. Generally, Sections 23A and 23B (i)
limit the extent to which the savings institution or its subsidiaries may
engage in "covered transactions" with any one affiliate to an amount equal to
10% of such institution's capital stock and surplus, and contain an aggregate
limit on all such transactions with all affiliates to an amount equal to 20%
of such capital stock and surplus and (ii) require that all such transactions
be on terms substantially the same, or at least as favorable, to the
institution or subsidiary as those provided to a non-affiliate. The term
"covered transaction" includes the making of loans, purchase of assets,
issuance of a guarantee and other similar transactions.
In addition, Sections 22(g) and (h) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22 (h), loans to a director, an executive officer
and to a greater than 10% stockholder of a savings institution, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the savings
institution's loans to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus). Section 22(h) also requires
that loans to directors, executive officers and principal stockholders be
made on terms substantially the same as offered in comparable transactions to
other persons unless the loans are made pursuant to a benefit or compensation
program that (i) is widely available to employees of the institution and (ii)
does not give preference to any director, executive officer or principal
<PAGE>
stockholder, or certain affiliated interests of either, over other employees
of the savings institution. Section 22(h) also requires prior board approval
for certain loans. In addition, the aggregate amount of extensions of credit
by a savings institution to all insiders cannot exceed the institution's
unimpaired capital and surplus. Furthermore, Section 22(g) places additional
restrictions on loans to executive officers. At June 30, 2000, the Bank was
in compliance with the above restrictions.
Restrictions on Acquisitions. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without
prior approval of the Director of the OTS, (i) control of any other savings
institution or savings and loan holding company or substantially all the
assets thereof or (ii) more than 5% of the voting shares of a savings
institution or holding company thereof which is not a subsidiary. Except with
the prior approval of the Director of the OTS, no director or officer of a
savings and loan holding company or person owning or controlling by proxy or
otherwise more than 25% of such company's stock, may acquire control of any
savings institution, other than a subsidiary savings institution, or of any
other savings and loan holding company.
The Director of the OTS may only approve acquisitions resulting in
the formation of a multiple savings and loan holding company which controls
savings institutions in more than one state if (i) the multiple savings and
loan holding company involved controls a savings institution which operated a
home or branch office located in the state of the institution to be acquired
as of March 5, 1987; (ii) the acquirer is authorized to acquire control of
the savings institution pursuant to the emergency acquisition provisions of
the Federal Deposit Insurance Act ("FDIA"); or (iii) the statutes of the
state in which the institution to be acquired is located specifically permit
institutions to be acquired by the state-chartered institutions or savings
and loan holding companies located in the state where the acquiring entity is
located (or by a holding company that controls such state chartered savings
institutions).
Federal Securities Laws. The Company's Common Stock has been
registered with the SEC under Section 12(g) of the Securities Exchange Act of
1934, as amended. The Company is subject to the proxy and tender offer rules,
insider trading reporting requirements and restrictions, and certain other
requirements under the Exchange Act, including periodic reports and quarterly
and annual financial data.
The registration under the Securities Act of shares of the Company's
Common Stock does not cover the resale of such shares. Shares of Company
Common Stock purchased by persons who are not affiliates of the Company may
be sold without registration. Shares purchased by an affiliate of the Company
are subject to the resale restrictions of Rule 144 under the Securities Act.
If the Company meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Company who complies with the
other conditions of Rule 144 (including those that require the affiliate's
sale to be aggregated with those of certain other persons) would be able to
sell in the public market, without registration, a number of shares not to
exceed, in any three-month period, the greater of (i) 1% of the outstanding
shares of the Company or (ii) the average weekly volume of trading in such
shares during the preceding four calendar weeks.
The Bank
General. The Bank is subject to extensive regulation and examination
by the New York State Banking Department (the "Department"), as its
chartering authority, and by the FDIC, as the insurer of its deposits, and is
subject to certain requirements established by the OTS as a result of the
Company's savings and loan holding company status. The federal and state laws
<PAGE>
and regulations which are applicable to banks regulate, among other things,
the scope of their business, their investments, their reserves against
deposits, the timing of the availability of deposited funds and the nature
and amount of and collateral for certain loans. The Bank must file reports
with the NYBB and the FDIC concerning its activities and financial condition,
in addition to obtaining regulatory approvals prior to entering into certain
transactions such as establishing branches and mergers with, or acquisitions
of, other depository institutions. There are periodic examinations by the
Department and the FDIC to test the Bank's compliance with various regulatory
requirements, to look into the condition of the Bank and to assure that it is
being operated in a safe and sound manner. This regulation and supervision
establishes a comprehensive framework of activities in which an institution
can engage and is intended primarily for the protection of the insurance fund
and depositors. The regulatory structure also gives the regulatory
authorities extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate
loan loss reserves for regulatory purposes. Any change in such regulation,
whether by the Department, the FDIC or as a result of the enactment of
legislation, could have a material adverse impact on the Company, the Bank
and their operations.
Capital Requirements. The FDIC has promulgated regulations and
adopted a statement of policy regarding the capital adequacy of
state-chartered banks, which, like the Bank, are not members of the Federal
Reserve System.
The FDIC's capital regulations establish a minimum 3.0% Tier I
leverage capital requirement for the most highly-rated state-chartered,
non-member banks, with an additional cushion of at least 100 to 200 basis
points for all other state-chartered, non-member banks, which effectively
will increase the minimum Tier I leverage ratio for such other banks to 4.0%
to 5.0% or more. Under the FDIC's regulation, the highest-rated banks are
those that the FDIC determines are not anticipating or experiencing
significant growth and have well diversified risk, including no undue
interest rate risk exposure, excellent asset quality, high liquidity, good
earnings and, in general, which are considered a strong banking organization
and are rated composite I under the Uniform Financial Institutions Rating
System. Leverage or core capital is defined as the sum of common
stockholders' equity (including retained earnings), noncumulative perpetual
preferred stock and related surplus, and minority interests in consolidated
subsidiaries, minus all intangible assets other than certain qualifying
supervisory goodwill and certain mortgage servicing rights.
The FDIC also requires that savings banks meet a risk-based capital
standard. The risk-based capital standard for savings banks requires the
maintenance of total capital (which is defined as Tier 1 capital and
supplementary (Tier 2) capital) to risk-weighted assets of 8%. In determining
the amount of risk-weighted assets, all assets, plus certain off-balance
sheet assets, are multiplied by a risk-weight of 0% to 100%, based on the
risks the FDIC believes are inherent in the type of asset or item. The
components of Tier I capital are equivalent to those discussed above under
the 3% leverage capital standard. The components of supplementary capital
include certain perpetual preferred stock, certain mandatory convertible
securities, certain subordinated debt and intermediate preferred stock and
general allowances for loan and lease losses. Allowance for loan and lease
losses includable in supplementary capital is limited to a maximum of 1.25%
of risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of core capital. At June 30, 2000
the Bank met each of its capital requirements.
<PAGE>
In August 1995, the FDIC, along with the other federal banking
agencies, adopted a regulation providing that the agencies will take account
of the exposure of a bank's capital and economic value to changes in interest
rate risk in assessing a bank's capital adequacy. According to the agencies,
applicable considerations include the quality of the bank's interest rate
risk management process, the overall financial condition of the bank and the
level of other risks at the bank for which capital is needed. Institutions
with significant interest rate risk may be required to hold additional
capital. The agencies recently issued a joint policy statement providing
guidance on interest rate risk management, including a discussion of the
critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy. The agencies have determined not to proceed
with a previously issued proposal to develop a supervisory framework for
measuring interest rate risk and an explicit capital component for interest
rate risk.
Activities and Investments of New York-Chartered Savings Banks. The
Bank derives its lending, investment and other authority primarily from the
applicable provisions of New York State Banking Law and the regulations of
the Department, as limited by FDIC regulations and other federal laws and
regulations. These New York laws and regulations authorize savings banks,
including the Bank, to invest in real estate mortgages, consumer and
commercial loans, certain types of debt securities, including certain
corporate debt securities and obligations of federal, State and local
governments and agencies, certain types of corporate equity securities and
certain other assets. Under the statutory authority for investing in equity
securities, a savings bank may directly invest up to 7.5% of its assets in
certain corporate stock and may also invest up to 7.5% of its assets in
certain mutual fund securities. Investment in stock of a single corporation
is limited to the lesser of 2% of the outstanding stock of such corporation
or 1% of the savings bank's assets, except as set forth below. Such equity
securities must meet certain tests of financial performance. A savings bank's
lending powers are not subject to percentage of asset limitations, although
there are limits applicable to single borrowers. A savings bank may also,
pursuant to the "leeway" authority, make investments not otherwise permitted
under the New York State Banking Law. This authority permits investments in
otherwise impermissible investments of up to 1% of the savings bank's assets
in any single investment, subject to certain restrictions and to an aggregate
limit for all such investments of up to 5% of assets. Additionally, in lieu
of investing in such securities in accordance with the reliance upon the
specific investment authority set forth in the New York State Banking Law,
savings banks are authorized to elect to invest under a "prudent person"
standard in a wider range of debt and equity securities as compared to the
types of investments permissible under such specific investment authority.
However, in the event a savings bank elects to utilize the "prudent person"
standard, it will be unable to avail itself of the other provisions of the
New York State Banking Law and regulations which set forth specific
investment authority. A New York chartered stock savings bank may also
exercise trust powers upon approval of the NYBB. The Bank has not sought
approval to exercise trust powers.
Under recently enacted legislation, the Department has been granted
the authority to maintain the power of state-chartered banks reciprocal with
those of a national bank. Under the terms of the legislation, the Department
is granted such authority for only one year unless legislation is adopted
within such period, which extends the effective period of such power.
However, any regulations adopted by the Department pursuant to the authority
granted by such legislation would be effective regardless of whether
legislation is enacted extending the effective period.
New York-chartered savings banks may also invest in subsidiaries
under their service corporation investment power. A savings bank may use this
<PAGE>
power to invest in corporations that engage in various activities authorized
for savings banks, plus any additional activities, which may be authorized by
the NYBB. Investment by a savings bank in the stock, capital notes and
debentures of its service corporations is limited to 3% of the bank's assets,
and such investments, together with the bank's loans to its service
corporations, may not exceed 10% of the savings bank's assets.
With certain limited exceptions, a New York-chartered savings bank
may not make loans or extend credit for commercial, corporate or business
purposes (including lease financing) to a single borrower, the aggregate
amount of which would be in excess of 15% of the Bank's unimpaired capital
and surplus. The Bank currently complies with all applicable
loans-to-one-borrower limitations.
Activities and Investments of FDIC-Insured State-Chartered Banks.
The activities and equity investments of FDIC-insured, state-chartered banks
are generally limited to those that are permissible for national banks. Under
regulations dealing with equity investments, an insured state bank generally
may not directly or indirectly acquire or retain any equity investment of a
type, or in an amount, that is not permissible for a national bank. An
insured state bank is not prohibited from, among other things, (i) acquiring
or retaining a majority interest in a subsidiary, (ii) investing as a limited
partner in a partnership the sole purpose of which is direct or indirect
investment in the acquisition, rehabilitation or new construction of a
qualified housing project, provided that such limited partnership investments
may not exceed 2% of the bank's total assets, (iii) acquiring up to 10% of
the voting stock of a company that solely provides or reinsures directors',
trustees' and officers' liability insurance coverage or bankers' blanket bond
group insurance coverage for insured depository institutions, and (iv)
acquiring or retaining the voting shares of a depository institution if
certain requirements are met. In addition, an FDIC-insured state-chartered
bank may not directly, or indirectly through a subsidiary, engage as
"principal" in any activity that is not permissible for a national bank
unless the FDIC has determined that such activities would pose no risk to the
insurance fund of which it is a member and the bank is in compliance with
applicable regulatory capital requirements.
Regulatory Enforcement Authority. Applicable banking laws include
substantial enforcement powers available to federal banking regulators. This
enforcement authority includes, among other things, the ability to assess
civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions against banking organizations and
institution-affiliated parties, as defined. In general, these enforcement
actions may be initiated for violations of laws and regulations and unsafe or
unsound practices. Other actions or inactions may provide the basis for
enforcement action, including misleading or untimely reports filed with
regulatory authorities.
Under the New York State Banking Law, the New York Superintendent of
Banks (the "Superintendent") may issue an order to a New York-chartered
banking institution to appear and explain an apparent violation of law, to
discontinue unauthorized or unsafe practices and to keep prescribed books and
accounts. Upon a finding by the Superintendent that any director, trustee or
officer of any banking organization has violated any law, or has continued
unauthorized or unsafe practices in conducting the business of the banking
organization after having been notified by the Superintendent to discontinue
such practices, such director, trustee or officer may be removed from office
by the Superintendent after notice and an opportunity to be heard. The Bank
does not know of any past or current practice, condition or violation that
might lead to any proceeding by the Department against the Bank or any of its
directors or officers. The Superintendent also may take possession of a
banking organization under specified statutory criteria.
<PAGE>
Prompt Corrective Action. Section 38 of the FDIA provides the
federal banking regulators with broad power to take "prompt corrective
action" to resolve the problems of undercapitalized institutions. The extent
of the regulators' powers depends on whether the institution in question is
"well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." Under
regulations adopted by the federal banking regulators, an institution shall
be deemed to be (i) "well capitalized" if it has a total risk-based capital
ratio of 10.0% or more, has a Tier I risk-based capital ratio of 6.0% or
more, has a Tier I leverage capital ratio of 5.0% or more and is not subject
to specified requirements to meet and maintain a specific capital level for
any capital measure, (ii) "adequately capitalized" if it has a total
risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio
of 4.0% or more and a Tier I leverage capital ratio of 4.0% or more (3.0%
under certain circumstances) and does not meet the definition of "well
capitalized," (iii) "undercapitalized" if it has a total risk-based capital
ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less
than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0%
under certain circumstances), (iv) "significantly undercapitalized" if it has
a total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a Tier I leverage capital ratio that
is less than 3.0%, and (v) "critically undercapitalized" if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%. The
regulations also provide that a federal banking regulator may, after notice
and an opportunity for a hearing, reclassify a "well capitalized" institution
as "adequately capitalized" and may require an "adequately capitalized"
institution or an "undercapitalized" institution to comply with supervisory
actions as if it were in the next lower category if the institution is in an
unsafe or unsound condition or engaging in an unsafe or unsound practice. The
federal banking regulator may not, however, reclassify a "significantly
undercapitalized" institution as "critically undercapitalized."
An institution generally must file a written capital restoration
plan which meets specified requirements, as well as a performance guaranty by
each company that controls the institution, with an appropriate federal
banking regulator within 45 days of the date that the institution receives
notice or is deemed to have notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized."
Immediately upon becoming undercapitalized, an institution becomes subject to
statutory provisions, which, among other things, set forth various mandatory
and discretionary restrictions on the operations of such an institution.
At June 30, 2000, the Bank had capital levels, which qualified it as
a "well capitalized" institution.
FDIC Insurance Premiums. The Bank is a member of the Bank Insurance
Fund administered by the FDIC. As insurer, the FDIC is authorized to conduct
examinations of, and to require reporting by, FDIC-insured institutions. It
also may prohibit any FDIC-insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious threat to the
FDIC.
The FDIC may terminate the deposit insurance of any insured
depository institution, including the Bank, if it determines after a hearing
that the institution has engaged or is engaging in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations, or
has violated any applicable law, regulation, order or any condition imposed
by an agreement with the FDIC. It also may suspend deposit insurance
temporarily during the hearing process for the permanent termination of
insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of the
<PAGE>
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances, which would result in termination of the
Bank's deposit insurance.
Brokered Deposits. The FDIA restricts the use of brokered deposits
by certain depository institutions. Under the FDIA and applicable
regulations, (i) a "well capitalized insured depository institution" may
solicit and accept, renew or roll over any brokered deposit without
restriction, (ii) an "adequately capitalized insured depository institution"
may not accept, renew or roll over any brokered deposit unless it has applied
for and been granted a waiver of this prohibition by the FDIC and (iii) an
"undercapitalized insured depository institution" may not (x) accept, renew
or roll over any brokered deposit or (y) solicit deposits by offering an
effective yield that exceeds by more than 75 basis points the prevailing
effective yields on insured deposits of comparable maturity in such
institution's normal market area or in the market area in which such deposits
are being solicited. The Bank had no brokered deposits outstanding at June
30, 2000 and it is not currently soliciting brokered deposits.
Community Investment and Consumer Protection Laws. In connection
with its lending activities, the Bank is subject to a variety of federal laws
designed to protect borrowers and promote lending to various sectors of the
economy and population. Included among these are the federal Home Mortgage
Disclosure Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act,
Equal Credit Opportunity Act, Fair Credit Reporting Act and the Community
Reinvestment Act (the "CRA").
The CRA requires that the FDIC assess the Bank's record of meeting
the credit needs of its entire community, including low and moderate income
neighborhoods. The FDIC must also take that record into account when
evaluating certain applications made by the Bank. The FDIC assigns the Bank a
CRA rating of "outstanding," "satisfactory," "needs improvement" or
"unsatisfactory." The Bank's current federal CRA rating is "satisfactory."
The Bank is also subject to provisions of the New York State Banking
Law which impose continuing and affirmative obligations upon banking
institutions organized in New York State to serve the credit needs of its
local community ("NYCRA"), which are similar to those imposed by the CRA.
Pursuant to the NYCRA, a bank must file an annual NYCRA report and copies of
all federal CRA reports with the Department. The NYCRA requires the
Department to make an annual written assessment of a bank's compliance with
the NYCRA, utilizing a four-tiered rating system, and make such assessment
available to the public. The NYCRA also requires the Department to consider a
bank's NYCRA rating when reviewing a bank's application to engage in certain
transactions, including mergers, asset purchases and the establishment of
branch offices or automated teller machines, and provides that such
assessment may serve as a basis for the denial of any such application. The
Bank's latest NYCRA rating, received from the Department was "outstanding."
Limitations on Dividends. The Company is a legal entity separate and
distinct from the Bank. The Company's principal source of revenue consists of
dividends from the Bank. The payment of dividends by the Bank is subject to
various regulatory requirements including a requirement, as a result of the
Company's savings and loan holding company status, that the Bank notify the
OTS not less than 30 days in advance of any proposed declaration by its
directors of a dividend.
Under New York State Banking Law, a New York-chartered stock savings
bank may declare and pay dividends out of its net profits, unless there is an
<PAGE>
impairment of capital, but approval of the Department is required if the
total of all dividends declared in a calendar year would exceed the total of
its net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.
Miscellaneous. The Bank is subject to certain restrictions on loans
to the Company or its non-bank subsidiaries, on investments in the stock or
securities thereof, on the taking of such stock or securities as collateral
for loans to any borrower, and on the issuance of a guarantee or letter of
credit on behalf of the Company or its non-bank subsidiaries. The Bank also
is subject to certain restrictions on most types of transactions with the
Company or its non-bank subsidiaries, requiring that the terms of such
transactions be substantially equivalent to terms of similar transactions
with non-affiliated firms.
FHLB System. The Bank is a member of the FHLB of New York, which is
one of 12 regional FHLBs that administers the home financing credit function
of savings institutions. Each FHLB serves as a reserve or central bank for
its members within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It
makes loans to members (i.e., advances) in accordance with policies and
procedures established by the Board of Directors of the FHLB. The Bank had
$96.2 million of FHLB advances at June 30, 2000.
As a FHLB member, the Bank is required to purchase and maintain
stock in the FHLB of New York in an amount equal to at least 1% of its
aggregate unpaid residential mortgage loans, home purchase contracts or
similar obligations at the beginning of each year or 5% of its advances from
the FHLB of New York, whichever is greater. At June 30, 2000, the Bank had
approximately $5.0 million in FHLB stock, which resulted in its compliance
with this requirement.
The FHLBs are required to provide funds for the resolution of
troubled savings institutions and to contribute to affordable housing
programs through direct loans or interest subsidies on advances targeted for
community investment and low- and moderate-income housing projects. These
contributions have adversely affected the level of FHLB dividends paid in the
past and could continue to do so in the future. These contributions also
could have an adverse effect on the value of FHLB stock in the future.
Federal Reserve System. The FRB requires all depository institutions
to maintain reserves against their transaction accounts (primarily checking
accounts, including NOW and Super NOW accounts) and non-personal time
deposits. As of June 30, 2000, the Bank was in compliance with applicable
requirements. However, because required reserves must be maintained in the
form of vault cash or a non-interest-bearing account at a Federal Reserve
Bank, this reserve requirement may reduce the Bank's earning assets.
Federal Taxation
General. The Company and the Bank will be subject to federal income
taxation in the same general manner as other corporations with some
exceptions discussed below. The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters and
is not a comprehensive description of the tax rules applicable to the Bank.
The Bank's federal income tax returns have been audited or closed without
audit by the Internal Revenue Service through December 31, 1994.
<PAGE>
Method of Accounting. For federal income tax purposes, the Company
currently reports its income and expenses on the accrual method of accounting
and uses a tax year ending June 30 for filing its consolidated federal income
tax returns.
Bad Debt Reserves. In 1996, federal tax laws were amended to
eliminate certain methods formerly used by the Bank to calculate tax
deductions for bad debts. The new law also requires the Bank to gradually
recapture certain excess bad debt deductions taken from 1988 through 1995.
The total remaining amount required to be recaptured at June 30, 2000 was
approximately $377,000. The effect of the recapture of this entire amount has
already been reflected on the Company's financial statements.
Also in 1996, New York State tax laws were amended to retain the
method of calculating tax bad debt deductions, which were eliminated that
year for federal tax purposes. Thus, for state income tax purposes, the Bank
can calculate its tax bad debt deduction based upon either its historical
loss experience or 32% of its New York State taxable income, so long as the
Bank continues to satisfy certain definitional tests.
Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into
taxable income should the Bank fail to meet certain thrift asset and
definitional tests. New federal legislation eliminated these thrift related
recapture rules. However, under current law, pre-1988 reserves remain subject
to recapture should the Bank make certain non-dividend distributions,
dividend distributions in excess of historical earnings and profits or cease
to maintain a bank charter.
At June 30, 2000, the Bank's total federal base-year reserve was
approximately $3.7 million. These reserves reflect the cumulative effects of
federal tax deductions by the Bank for which no federal income tax provision
has been made.
Minimum Tax. The Code imposes an alternative minimum tax ("AMT") at
a rate of 20% on a base of regular taxable income plus certain tax
preferences ("alternative minimum taxable income" or "AMTI"). The AMT is
payable to the extent such AMTI is in excess of an exemption amount and
regular income tax. Net operating losses can offset no more than 90% of AMTI.
Certain payments of alternative minimum tax may be used as credits against
regular tax liabilities in future years. The Bank has not been subject to the
alternative minimum tax and has no such amounts available as credits for
carryover.
Net Operating Loss Carryovers. For the years beginning after August
5, 1997, a financial institution may carry back net operating losses to the
preceding two taxable years and forward to the succeeding 20 taxable years.
At June 30, 2000, the Bank had no net operating loss carryforwards for
federal income tax purposes.
Corporate Dividends-Received Deduction. The Company may exclude from
its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends-received deduction
is 80% in the case of dividends received from corporations with which a
corporate recipient does not file a consolidated tax return, and corporations
which own less than 20% of the stock of a corporation distributing a dividend
may deduct only 70% of dividends received or accrued on their behalf.
State and Local Taxation
<PAGE>
New York State Taxation. The Company and the Bank report income on a
combined basis utilizing a fiscal year. New York State Franchise Tax on
corporations is imposed in an amount equal to the greater of (a) 9% of
"entire net income" allocable to New York State, (b) 3% of "alternative
entire net income" allocable to New York State, (c) 0.01% of the average
value of assets allocable to New York State or (d) nominal minimum tax.
Entire net income is based on federal taxable income, subject to certain
modifications.
Delaware State Taxation. As a Delaware holding company not earning
income in Delaware, the Company is exempt from Delaware corporate income tax
but is required to file an annual report with and pay an annual franchise tax
to the State of Delaware. The tax is imposed as a percentage of the capital
base of the Company with an annual maximum of $150,000.
<PAGE>
Item 2. Description of Properties
The Company conducts business at its main office and 20 other
banking offices. The following table sets forth information relating to each
of the Company's offices as of June 30, 2000. The net book value of the
Company's premises and equipment (including land, building and leasehold
improvements and furniture, fixtures and equipment) at June 30, 2000 was $7.6
million.
<TABLE>
<CAPTION>
Net
book value
of property or
Original Total leasehold
Leased year Date of approximate improvements at
or leased or lease square June 30, 2000
Locations owned acquired expiration footage (In thousands)
------ -------- ---------- -------- --------------
<S> <C> <C> <C> <C> <C>
Cohoes Loan Center Owned 1992 N/A 10,500 $ 642
50 Mohawk Street
Cohoes, NY 12047
Annex Owned 1981 N/A 3,723 159
60 Remsen Street
Cohoes, NY 12047
Operation Center Owned 1987 N/A 11,190 322
244 North Mohawk Street
Cohoes, NY 12047
Community Outreach Center Leased 1995 Month to 200 -
Urban League Headquarters Month
95 Livingston Avenue
Albany, NY
Building Adjacent Latham Office Owned 1986 N/A 3,024 80
Storage Facility
771 New Loudon Road
Latham, NY 12110
Branch Offices:
Main Office Owned 1924 N/A 15,223 432
75 Remsen Street
Cohoes, NY 12047
Cohoes/I-787 Office Owned 1976 N/A 988 128
New Courtland Street
Cohoes, NY 12047
Latham Office Owned 1967 N/A 9,041 450
Corner of Pine & Route 9
Latham, NY 12110
Clifton Park Office Owned 1972 N/A 5,297 286
525 Vischer Ferry Road
Clifton Park, NY 12065
Delmar Office Owned 1994 N/A 4,768 1,440
197 Delaware Avenue
Delmar, NY 12182
Lansingburgh Office Owned 1976 N/A 3,216 247
820 Second Avenue
Troy, NY 12182
Loudonville Office Leased 1996 07/31/01 4,000 5
475 Albany-Shaker Road
Loudonville, NY 12211
Guilderland Office Leased 1995 10/31/05 3,500 -
1973 Western Avenue
Albany, NY 12203
<PAGE>
Branch Offices
(Continued)
Schaghticoke Leased 1999 03/31/04 900 $ 91
Route 40 and 67
Schaghticoke, NY 12154
Halfmoon Leased 1999 10/31/19 3,814 55
1532 Route 9
Clifton Park, NY 12065
Albany Leased 1999 7/31/09 4,063 81
30 South Pearl St.
Albany, NY 12207
Supermarket Branches:
Glenville Leased 1993 10/31/03 323 75
290 Saratoga Road
Scotia, NY 12302
Rotterdam Leased 1993 03/31/03 350 71
1879 Altamont Avenue
Schenectady, NY 12303
Colonie Leased 1993 09/30/03 336 77
1892 Central Avenue
Colonie, NY 12205
Westgate Leased 1995 04/30/05 565 63
911 Central Avenue
Albany, NY 12206
Brunswick Leased 1996 10/31/01 304 44
716 Hoosick Road
Brunswick, NY 12180
Bethlehem Leased 1997 05/31/02 312 40
1395 New Scotland Road
Slingerlands, NY 12159
Malta Leased 1996 05/31/01 524 95
1 Kendall Way
Malta, NY 12020
Niskayuna Leased 1996 06/30/01 544 96
2333 Nott Street East
Niskayuna, NY 12309
Queensbury Leased 1998 05/31/03 360 72
677 Upper Glen Street
Queensbury, NY 12804
Catskill Leased 1999 03/31/04 304 109
320 West Bridge Street
Catskill, NY 12414
</TABLE>
Item 3. Legal Proceedings
The Company is involved as plaintiff or defendant in various legal
actions arising in the normal course of its business. While the ultimate
outcome of these proceedings cannot be predicted with certainty, it is the
opinion of management, after consultation with counsel representing the
Company in the proceedings, that the resolution of these proceedings should
not have a material effect on the Company's consolidated financial condition
or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended June 30, 2000.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters
Information contained under the caption "Common Stock" in the 2000
Annual Report to Stockholders included as Exhibit 13 hereto is herein
incorporated by reference.
Item 6. Selected Financial Data
Information contained under the caption "Financial Highlights" in
the 2000 Annual Report to Stockholders included as Exhibit 13 hereto is
herein incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 2000 Annual
Report to Stockholders included as Exhibit 13 hereto is herein incorporated
by reference.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Information contained under the caption "Market Risk and
Asset/Liability Management" in the 2000 Annual Report to Stockholders
included as Exhibit 13 hereto is herein incorporated by reference.
Item 8. Financial Statements
The following information appearing in the Company's Annual Report
to Stockholders for the year ended June 30, 2000, which is included as
Exhibit 13 hereto is incorporated by reference in this Annual Report on Form
10-K.
Annual Report Section incorporated herein by reference
Report of Independent Public Accountants
Consolidated Statements of Financial Condition as of June 30, 2000 and 1999
Consolidated Statements of Operations for the Years Ended June 30, 2000,
1999 and 1998
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended June 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended June 30, 2000,
1999 and 1998
Notes to Consolidated Financial Statements
<PAGE>
With the exception of the information expressly incorporated herein
by reference, the Company's Annual Report to Stockholders for the year ended
June 30, 2000, is not deemed filed as part of this Annual Report on Form
10-K.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act
Directors
Information concerning directors of the Company is incorporated
herein by reference from the definitive Proxy Statement for the Annual
Meeting of Stockholders to be filed with the Commission within 120 days of
June 30, 2000.
Executive Officers
Information concerning executive officers of the Company is
incorporated herein by reference from the definitive Proxy Statement for the
Annual Meeting of Stockholders to be filed with the Commission within 120
days of June 30, 2000.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors
and greater than 10% stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company and written representations that no
other reports were required, during the fiscal year ended June 30, 2000, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with.
<PAGE>
Item 11. Executive Compensation
Information concerning executive compensation is incorporated herein
by reference from the definitive Proxy Statement for the Annual Meeting of
Stockholders to be filed with the Commission within 120 days of June 30,
2000.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
Information concerning security ownership of certain beneficial
owners and management is incorporated herein by reference from the definitive
Proxy Statement for the Annual Meeting of Stockholders to be filed with the
Commission within 120 days of June 30, 2000.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related
transactions is incorporated herein by reference from the definitive Proxy
Statement for the Annual Meeting of Stockholders to be filed with the
Commission within 120 days of June 30, 2000.
Item 14. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits
(b) Reports on Form 8-K
There was one report on Form 8-K filed during the quarter ended June
30, 2000.
1) a) Report dated May 5, 2000
b) Item 5 - Reporting the signing of an Agreement and
Plan of Merger between Hudson River Bancorp,
Inc. and Cohoes Bancorp, Inc. dated April 25, 2000.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COHOES BANCORP, INC.
Date: September 28, 2000 By: /s/ Harry L. Robinson
------------------------ --------------------------------
Harry L. Robinson
(Duly Authorized Representative)
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C> <C>
By: /s/ Harry L. Robinson By: /s/ Richard A. Ahl
Harry L. Robinson, Director, President Richard A. Ahl, Executive Vice
and Chief Executive Officer President, Chief Financial Officer
(Principal Executive and Operating and Secretary
Officer) (Chief Financial and Accounting
Officer)
Date: September 28, 2000 Date: September 28, 2000
------------------------------------- -----------------------------------
By: /s/ Arthur E. Bowen By: /s/ Peter G. Casabonne
Arthur E. Bowen, Director Peter G. Casabonne, Director
Date: September 28, 2000 Date: September 28,2000__________
------------------------------------- -----------------------------------
By: /s/ Michael L. Crotty By: /s/ Chester C. DeLaMater
Michael L. Crotty, Director Chester C. DeLaMater, Director
Date: September 28,2000 Date: September 28, 2000
------------------------------------- -----------------------------------
By: /s/ Frederick G. Field, Jr. By: /s/ Duncan S. Mac Affer
Frederick G. Field, Jr., Director Duncan S. Mac Affer, Director
Date: September 28, 2000 Date: September 28, 2000
------------------------------------- -----------------------------------
By: /s/ J. Timothy O'Hearn By: /s/ R. Douglas Paton
J. Timothy O'Hearn, Director R. Douglas Paton, Director
Date: September 28, 2000 Date: September 28, 2000
------------------------------------- -----------------------------------
By: /s/ Walter H. Speidel By: /s/ Donald A. Wilson
Walter H. Speidel, Director Donald A. Wilson, Director
Date: September 28, 2000 Date: September 28, 2000
------------------------------------- -----------------------------------
</TABLE>
<PAGE>
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
Regulation Reference to
S-K Prior Filing or
Exhibit Exhibit Number
Number Document Attached Hereto
<S> <C> <C>
3(i) Certificate of Incorporation <F1>
3(ii) Bylaws <F3>
4 Instruments defining the rights of security holders, <F2>
including debentures
10.1 Employment Agreement between Cohoes Savings Bank and Harry <F3>
L. Robinson
10.2 Schedule of Employment Agreement with Cohoes Savings Bank <F3>
Employment Agreement between Cohoes Savings Bank and Albert
10.3 J. Picchi <F3>
Employment Agreement between Cohoes Bancorp, Inc. and Harry
10.4 L. Robinson <F3>
Schedule of Employment Agreement with Cohoes Bancorp, Inc.
10.5 Change-In-Control Severance Agreement between Cohoes Savings <F3>
Bank and Johanna O. Robbins
10.6 Schedule of Change-In-Control Severance Agreements with <F3>
Cohoes Savings Bank
10.7 <F3>
10.8 Cohoes Savings Bank Employee Severance Compensation Plan <F1>
Employee Stock Ownership Plan
10.9 Cohoes Savings Bank 401(k) Savings Plan <F1>
10.10 Benefit Restoration Plan <F2>
10.11 Stock Option and Incentive Plan <F1>
10.12 Recognition and Retention Plan <F1>
10.13 <F1>
13 Annual Report to Stockholders 13
21 Subsidiaries of Registrant 21
23 Consents of Experts 23
27 Financial Data Schedule 27
----------------
<FN>
<F1> Filed as exhibits to the Company's Form S-1 registration statement
filed on September 16, 1998 (File No. 333-63539) of the Securities
Act of 1933. All of such previously filed documents are hereby
incorporated herein by reference in accordance with Item 601 of
Regulation S-B.
<F2> Filed as exhibits to the Company's Pre-effective Amendment No. One
to Form S-1 filed on October 30, 1998 (File No. 333-63539) of the
Securities Act of 1933. All of such previously filed documents are
hereby incorporated herein by reference in accordance with Item 601
of Regulation S-B.
<F3> Filed as exhibits to the Company's Form 10-K for the fiscal year
ended June 30, 1999, filed on September 24, 1999. All of such
previously filed documents are hereby incorporated herein by
reference in accordance with Item 601 of Regulation S-B.
</FN>
</TABLE>
<PAGE>
EXHIBIT 13
ANNUAL REPORT TO STOCKHOLDERS
<PAGE>
2000 Annual Report
COHOES BANCORP
INC.
<PAGE>
Contents
Financial Highlights ................................................... 2
Letter to Shareholders ................................................. 3
Management's Discussion and Analysis ................................... 5
Report of Independent Public Accountants ............................... 15
Consolidated Statements of Financial Condition ......................... 16
Consolidated Statements of Operations .................................. 17
Consolidated Statements of Changes
In Stockholders' Equity ................................................ 18
Consolidated Statements of Cash Flows .................................. 20
Notes to Consolidated Financial Statements ............................. 22
Corporate Information .................................................. 48
Board of Directors and Officers ........................................ 49
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected Consolidated Financial and other data
<CAPTION>
At June 30,
--------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Selected Consolidated Financial Data: (In thousands)
<S> <C> <C> <C> <C> <C>
Total assets $ 727,014 $ 650,470 $ 535,716 $ 491,700 $ 463,363
Cash and cash equivalents 12,658 11,114 14,229 16,664 8,900
Loans, net 600,413 521,005 412,759 398,530 393,970
Investment securities 55,129 54,455 45,424 25,273 25,969
Securities available-for-sale 40,074 44,742 48,720 35,475 20,886
Deposits 494,875 446,123 449,541 429,390 404,539
Borrowings 96,201 49,045 19,897 - 2,116
Stockholders' equity 121,306 139,430 53,282 49,092 44,290
Real estate owned 561 724 509 1,874 421
Nonperforming loans 4,043 4,993 5,649 6,688 7,793
For the Fiscal Year Ended June 30,
--------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Selected Operating Data: (Dollars in thousands)
Interest income $ 49,685 $ 43,038 $ 38,423 $ 36,285 $ 35,383
Interest expense 22,540 20,334 19,262 17,821 18,164
---------- ---------- ---------- ---------- ----------
Net interest income 27,145 22,704 19,161 18,464 17,219
Provision for loan losses 1,600 1,235 1,400 1,325 490
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 25,545 21,469 17,761 17,139 16,729
Noninterest income 2,381 2,916 2,743 2,790 2,467
Noninterest expense 18,655 20,443 13,767 12,314 11,919
---------- ---------- ---------- ---------- ----------
Income before income taxes 9,271 3,942 6,737 7,615 7,277
Income taxes 3,392 1,511 2,650 2,972 2,882
---------- ---------- ---------- ---------- ----------
Net income $ 5,879 $ 2,431 $ 4,087 $ 4,643 $ 4,395
---------- ---------- ---------- ---------- ----------
Selected Operating Ratios and Other Data:
Performance Ratios:
Yield on average interest-earning assets 7.42% 7.42% 7.96% 8.04% 7.98%
Rate paid on average interest-bearing liabilities 4.02% 4.06% 4.33% 4.27% 4.42%
Net interest rate spread 3.40% 3.36% 3.63% 3.77% 3.56%
Net interest income after provision for loan
losses to noninterest expense 136.93% 105.02% 129.01% 139.18% 140.36%
Noninterest expense as a percent of average assets 2.69% 3.40% 2.75% 2.62% 2.59%
Return on average assets 0.85% 0.40% 0.82% 0.99% 0.95%
Return on average equity 4.62% 2.53% 7.88% 9.87% 10.28%
Ratio of average equity to average assets 18.35% 15.95% 10.35% 10.03% 9.28%
Efficiency ratio 63.18% 79.79% 62.85% 57.94% 60.55%
Dividend payout ratio 35.14% 16.22% N/A N/A N/A
Book value per share $ 15.33 $ 14.62 N/A N/A N/A
Asset Quality Ratios:
Nonperforming loans as a percent of total loans 0.67% 0.95% 1.36% 1.66% 1.96%
Nonperforming assets as a percent of total assets 0.63% 0.88% 1.15% 1.74% 1.77%
Allowance for loan losses as a percent of total loans 0.83% 0.77% 0.85% 0.77% 0.82%
Allowance for loan losses as a percent of
nonperforming loans 123.99% 80.62% 62.54% 46.43% 41.69%
Net loans charged-off to average loans 0.11% 0.16% 0.24% 0.37% 0.10%
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
Dear Fellow Shareholder:
Our Bank achieved record growth for the fiscal year 2000, while continuing to
focus on increasing shareholder value and introducing new products and
services to make banking more convenient.
Our historically strong earnings growth continued in the fiscal year ended
June 30, 2000, with net income increasing 142%, to $5.9 million. (Net income
for the previous fiscal year was impacted by two non-recurring charges,
reflecting the Company's contribution of stock to establish the Cohoes
Savings Foundation and in non-recurring expenses associated with a planned
acquisition of another bank.) This significant rise in earnings was in spite
of a one-time, $950,000 charge to earnings associated with The Commons, LLC,
a subsidiary of the Urban League of Northeastern New York, a project for
which the Bank committed funding as part of its continuing efforts to support
development in low to moderate income communities. Net interest income was
$27.1 million, 19.6% higher than the $22.7 million earned in fiscal year
1999. Net interest margin was 4.05%, compared to 3.92% for the prior fiscal
year. Assets grew by $76.5 million, to $727.0 million, an 11.8% increase.
Our strong earnings trend is a result of our commitment to new product
development, quality asset growth, aggressive expansion into new communities
and a focus on prudent fiscal management.
We successfully grew net loans by $79.4 million, to $600.4 million, a 15.2%
increase, largely due to significant growth in residential mortgages,
commercial real estate lending and business financing.
Our focus on careful lending practices resulted in a decrease in
non-performing loans of over 19%, to $4.0 million. The allowance for loan
losses as a percent of non-performing loans rose to 123.99% as of June 30,
2000 from 80.62% the previous year.
The Board of Directors, management and staff, nearly all of whom are
stockholders, are focused on increasing shareholder value. As of fiscal year
end 2000, the book value of the Bank's stock rose to $15.33 per share and
earnings per share for fiscal 2000 rose to $.74 cents per share.
To make the yield on our stock as attractive as possible, it is our goal to
continue paying out 30% to 40% of our earnings in dividends. We are currently
paying $.07 per share per quarter, up from $.06 per quarter last year.
To improve the return on stockholders' equity we continued our policy of
repurchasing shares of our stock, putting 1.6 million of our outstanding
shares in treasury stock as of year-end 2000. Weighted average shares
outstanding for the fiscal year were 7,998,610, 9.1% less than the previous
year, primarily as a result of the repurchase program.
In an endeavor to accelerate our growth and increase noninterest income, we
purchased two local insurance agencies, which we then blended into our newly
named CSB Security Insurance Agency, LLC. With these acquisitions we became
one of the 20 largest insurance agencies in our market, based on premiums
paid. Our customers may now buy homeowners, auto, and various forms of
business insurance from licensed insurance salespeople.
Customers can also buy stock, bonds, and other investment products through
our other subsidiary, CSB Financial Services, Inc., which continued its
dramatic growth. Assets under management increased 52%, to $52.8 million at
June 30, 2000, from $34.6 million the previous year. Cost containment was a
key focus, and was achieved through various measures, including changing to
more cost efficient vendors.
Our subsidiaries are essential to our continued growth and we have
implemented aggressive plans to maximize both of these important segments of
our business.
In 1999 we continued our commitment to adding more branch offices by opening
our 21st branch in Halfmoon. Since 1995 we have more than doubled the size of
our retail branch system to make it easier for customers to bank with us
while extending our brand into new markets. Due to our dramatic growth, our
branch system is young, offering tremendous potential to increase market
share.
<PAGE>
We will continue our emphasis on cost efficiency, as exemplified by our
introduction of document imaging for loans, which both reduced costs and
increased efficiency. We also centralized consumer underwriting functions,
saving costs and enhancing the lending process while maintaining the same
level of customer service. This year we will introduce a more cost efficient,
paperless loan origination system.
The past year saw improvements in operational support and customer service as
part of our commitment to stay on the cutting edge of technology. We
dramatically enhanced our electronic delivery capability when we introduced
Internet Banking to our product mix, which allowed us to offer on-line cash
management, bill payment services and on-line check viewing. With Internet
Banking, customers are also now able to pre-qualify for mortgages and car
loans.
Our School Banking Club, among the largest of its type in the nation with
29,000 children saving at 132 participating schools, continues to grow. The
Club is designed to encourage children to start saving at an early age. Club
members can save right at their school through parent volunteers who then
deposit the funds at a nearby Bank branch office. We also continue to
leverage the fine reputation of the School Banking Club to assist in our
efforts to support the St. Jude Children's Research Hospital. We raised over
$25,000 for the hospital through various fund raising events, including a
walkathon, silent auction, telethon and a raffle.
Y2K, while proving to be a non-event, was a serious concern and our
preparation resulted in a smooth transition to the new millennium. Our
efforts, including our ongoing initiatives to educate our customers about Y2K
preparations, drew the attention of CBS Evening News.
We take our responsibilities as an outstanding corporate citizen very
seriously, and in 1999 once again honored our commitment to the communities
we serve by donating $132,000 to 86 organizations, through the Cohoes Savings
Foundation.
Our continued success depends on our not being content with the status quo,
but rather to quickly recognize and seize opportunities. Such was the case
with our proposed merger with Hudson River Bank and Trust Company, which was
approved by holders of 47.52% of our outstanding stock, just short of the 50%
required for approval, while 32.49% voted against or abstained. We were
gratified that we received more votes in favor of the merger than those
against, or that abstained. We thank all of our shareholders who voted,
especially those who supported our proposed merger.
As it was with the proposed merger, our underlying business philosophy
continues to be the enhancement of shareholder value. We are fortunate to
have the support and guidance of a dedicated Board of Directors and an
energized staff working tirelessly to achieve our goal of enhancing
shareholder value and providing superior returns.
Very truly yours,
/s/ Harry L. Robinson
Harry L. Robinson
President and Chief Executive Officer
<PAGE>
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 periods since the
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.
The Bank's results of operations are significantly affected by general
economic and competitive conditions (particularly changes in market interest
rates), government policies, changes in accounting standards and actions of
regulatory agencies. Future changes in applicable laws, regulations or
government policies may have a material impact on the Bank. Lending
activities are substantially influenced by the demand for and supply of
housing, competition among lenders, and level of interest rates and the
availability of funds. The ability to gather deposits and the cost of funds
are influenced by prevailing market interest rates, fees and terms on deposit
products, as well as the availability of alternative investments, including
mutual funds and stocks.
FINANCIAL CONDITION
Comparison of June 30, 2000 and June 30, 1999
Total assets at June 30, 2000 stood at $727.0 million, up $76.5 million, or
11.8%, from $650.5 million at June 30, 1999. The increase was concentrated in
the loan portfolio which increased $80.4 million, reaching $605.4 million at
June 30, 2000. The Company funded the growth in loans with an increase of
$47.2 million in borrowings from $49.0 million on June 30, 1999 to $96.2
million at June 30, 2000 and an increase of $48.8 million in deposits from
$446.1 million on June 30, 1999 to $494.9 million at June 30, 2000. These
increases as well as fluctuations in other asset and liability categories are
discussed below.
Loans. The Company was able to originate a large volume of loans by offering
competitive pricing and quality service at a time when economic conditions
were favorable to the origination of commercial real estate and commercial
business loans. Low market interest rates also stimulated residential sales
and refinances which provided an environment conducive to the origination of
residential mortgage loans. The additional capital raised in the Conversion,
which is not an interest-sensitive liability, also allowed the Company to
retain in portfolio a higher volume of fixed-rate loans which might have
otherwise been sold on the secondary market due to interest rate sensitivity
concerns. Total one to four family real estate loans increased $32.6 million,
or 10.2% from June 30, 1999 to June 30, 2000. Commercial real estate loans
increased $34.3 million during the same period, from $138.3 million to $172.6
million. At June 30, 2000, commercial real estate loans represented 28.5% of
total loans, up from 26.4% at June 30, 1999. Commercial business loans
increased $15.3 million during fiscal 2000 to $37.3 million from $22.1
million. Commercial business loans are generally loans to businesses which
are either unsecured or are secured by non-real estate business assets.
<PAGE>
Allowance for Loan Losses. The allowance for loan losses increased from $4.0
million at June 30, 1999 to $5.0 million at June 30, 2000, an increase of
$1.0 million. This increase was primarily driven by the 15.3% increase in the
total loan portfolio rather than by an increase in problem loans, as
nonperforming loans declined from $5.0 million to $4.0 million during the
year. The increase was caused by the net effect of a $1.6 million provision
for loan losses for the year ended June 30, 2000 offset by $612,000 in net
charge-offs for the same period. The adequacy of the allowance for loan
losses is evaluated quarterly by management based upon a review of multiple
factors, such as the size and general composition of the loan portfolio,
historical delinquency and charge-off rates, and an assessment of significant
loans, with particular emphasis on nonperforming and delinquent loans that
management believes warrant special attention. At June 30, 2000, the
allowance for loan losses provided coverage of 124.0% of total non-performing
loans, up from 80.6% at June 30, 1999. The balance of the allowance is
maintained at a level which is, in management's judgment, representative of
the amount of risk inherent in the Bank's loan portfolio.
Securities Available for Sale and Investment Securities. The balance of
securities available for sale decreased from $44.7 million at June 30, 1999
to $40.1 million as of June 30, 2000. Investment securities classified as
held to maturity increased from $54.5 million to $55.1 million during the
same period. The combined level of securities is consistent with the need to
maintain an appropriate level of security investments as part of the overall
asset portfolio.
Premises and Equipment. Premises and equipment decreased from $7.8 million at
June 30, 1999 to $7.6 million at June 30, 2000. This decrease was a result of
depreciation totaling $1.3 million offset by $1.1 million in capital
expenditures.
Other Real Estate Owned. Other real estate owned decreased from $724,000 at
June 30, 1999 to $561,000 at June 30, 2000, a decrease of approximately
$163,000. The decrease was part of the normal process of collecting
delinquent mortgage loans and selling the foreclosed properties.
Deposits. Total deposits increased $48.8 million, or 10.9%, from $446.1
million at June 30, 1999 to $494.9 million at June 30, 2000. Of this total
increase, time deposits increased $43.3 million (21.1%) and commercial
deposits and demand accounts increased $8.1 million (12.4%). These increases
were partially offset by a decrease of $2.7 million (1.5%) in savings
accounts and money market accounts. The decrease in savings and money market
deposits and the increase in time deposits was a result of the movement of
short term funds to higher yielding time deposits offset by the Company's
decision to focus on core deposit growth to control the cost of funds and
improve the stability of the Company's deposit liability base.
Borrowings. Borrowings, comprised primarily of Federal Home Loan Bank
advances, increased $47.2 million, or 96.3%, from $49.0 million at June 30,
1999 to $96.2 million at June 30, 2000. This increase was primarily the
result of additional Federal Home Loan Bank advances used to fund loan
demand.
<PAGE>
Analysis of Net Interest Income
Average Balance Sheets. The following table sets forth certain information
relating to the Company for the years ended June 30, 2000, 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 fees and discounts which are considered
yield adjustments.
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- ----------------------------- -----------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable <F1> $ 566,978 $ 43,511 7.67% $ 463,331 $ 36,256 7.83% $ 404,781 $ 33,573 8.29%
Securities available for sale 37,220 2,289 6.15% 37,927 2,298 6.06% 30,336 1,933 6.37%
Investments securities 57,595 3,394 5.89% 50,442 3,024 6.00% 30,372 1,926 6.34%
Federal funds sold 2,885 164 5.68% 23,839 1,182 4.96% 13,321 739 5.55%
FHLB stock 4,701 321 6.83% 3,680 253 6.88% 3,479 249 7.16%
Other interest-earning assets 182 6 3.30% 480 25 5.21% 184 3 1.63%
--------- -------- --------- -------- --------- --------
Total interest-earning assets 669,561 49,685 7.42% 579,699 43,038 7.42% 482,473 38,423 7.96%
-------- -------- --------
Non-earning assets 24,280 22,202 18,714
--------- --------- ---------
Total assets $ 693,841 $ 601,901 $ 501,187
========= ========= =========
Interest-bearing liabilities:
Savings accounts 133,847 3,739 2.79% 128,774 3,849 2.99% 120,959 3,623 3.00%
School savings accounts 16,826 719 4.27% 17,152 818 4.77% 15,112 837 5.54%
Money market accounts 24,755 860 3.47% 20,594 686 3.33% 18,163 569 3.13%
Demand deposits 69,191 440 0.64% 60,384 353 0.58% 47,075 304 0.65%
Time deposits 226,094 11,898 5.26% 215,801 11,810 5.47% 230,794 13,483 5.84%
Escrow accounts 7,716 133 1.72% 14,469 339 2.34% 7,065 114 1.61%
Borrowings 81,927 4,751 5.80% 43,204 2,479 5.74% 5,467 332 6.07%
--------- -------- --------- -------- --------- --------
Total interest-bearing
liabilities 560,356 22,540 4.02% 500,378 20,334 4.06% 444,635 19,262 4.33%
-------- -------- --------
Other liabilities 6,192 5,513 4,677
Stockholders' equity 127,293 96,010 51,875
--------- --------- ---------
Total liabilities and
stockholders' equity $ 693,841 $ 601,901 $ 501,187
========= ========= =========
Net interest income $ 27,145 $ 22,704 $ 19,161
======== ======== ========
Net interest rate spread 3.40% 3.36% 3.63%
==== ==== ====
Net earning assets $ 109,205 $ 79,321 $ 37,838
========= ========= =========
Net yield on average
interest-earning assets 4.05% 3.92% 3.97%
==== ==== ====
Average interest-earning assets to
average interest bearing
liabilities 1.19X 1.16X 1.09X
========= ========= =========
<FN>
<F1> Average balances are derived principally from average daily balances and
include nonaccruing loans.
</FN>
</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.
<TABLE>
<CAPTION>
Year Ended June 30, 2000 Year Ended June 30,1999
Compared to Compared to
Year Ended June 30, 1999 Year Ended June 30, 1998
-------------------------------- --------------------------------
Increase (Decrease) Increase (Decrease)
Due To Total Due To Total
------------------- Increase ------------------- Increase
Volume Rate (Decrease) Volume Rate (Decrease)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income from:
Loans receivable $ 7,966 $ (711) $ 7,255 $ 4,659 $(1,976) $ 2,683
Securities available for sale (43) 34 (9) 464 (99) 365
Investment securities 422 (52) 370 1,209 (111) 1,098
Federal funds sold (1,169) 151 (1,018) 529 (86) 443
FHLB stock 70 (2) 68 14 (10) 4
Other interest-earning assets (12) (7) (19) 9 13 22
------- ------- ------- ------- ------- -------
Total interest and
dividend income 7,234 (587) 6,647 6,884 (2,269) 4,615
------- ------- ------- ------- ------- -------
Interest expense from:
Savings accounts 148 (258) (110) 234 (8) 226
School savings accounts (15) (84) (99) 105 (124) (19)
Money market accounts 144 30 174 79 38 117
Demand deposits 54 33 87 80 (31) 49
Time deposits 551 (463) 88 (848) (825) (1,673)
Escrow accounts (132) (74) (206) 157 68 225
Borrowings 2,245 27 2,272 2,166 (19) 2,147
------- ------- ------- ------- ------- -------
Total interest expense 2,995 (789) 2,206 1,973 (901) 1,072
------- ------- ------- ------- ------- -------
Net interest income $ 4,239 $ 202 $ 4,441 $ 4,911 $(1,368) $ 3,543
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
Comparison of Year Ended June 30, 2000 and Year Ended June 30, 1999
For the fiscal year ended June 30, 2000 the Company realized net income of
$5.9 million, as compared to $2.4 million for the fiscal year ended June 30,
1999. Noninterest expense decreased $1.8 million and net interest income
increased $4.4 million for the fiscal year ended June 30, 2000 as compared to
fiscal 1999. These increases in net income were partially offset by a
reduction in noninterest income of $535,000 and an increase in income tax
expense of $1.9 million for the fiscal year ended June 30, 2000 as compared
to the fiscal year ended June 30, 1999.
Net Interest Income. Net interest income for the fiscal year ended June 30,
2000 was $27.1 million, up $4.4 million from fiscal 1999. The increase was
primarily the result of the increase of $89.9 million in the balance of
average earning assets from $579.7 million for the fiscal year ended June 30,
1999 to $669.6 million for fiscal 2000. Interest-bearing liabilities also
increased during fiscal year 2000, up $60.0 million. The net impact of these
volume increases resulted in an increase in net interest income of $4.2
million. The volume increases were offset by a reduction of $202,000 in net
interest income due to rate. The Company's net interest margin for the fiscal
year ended June 30, 2000 was 4.05%, up 13 basis points from 3.92% for the
fiscal year ended June 30, 1999. The yield on average earning assets remained
constant at 7.42%, while the rate paid on average interest-bearing
liabilities decreased from 4.06% to 4.02%. This resulted in an increase in
the spread of 4 basis points from 3.36% for fiscal 1999 compared to 3.40% for
fiscal 2000.
Interest Income. Interest income for the fiscal year ended June 30, 2000 was
$49.7 million, up from $43.0 million for fiscal 1999. The largest component
of interest income is interest on loans. Interest on loans increased from
$36.3 million for the fiscal year ended June 30, 1999 to $43.5 million for
the fiscal year ended June 30, 2000. This increase of $7.3 million or 20.0%
is the result of an increase in the average balance of loans offset by a
decrease in the average yield earned. The average balance of loans increased
$103.6 million or 22.4% to $567.0 million, while the yield on loans decreased
16 basis points from 7.83% to 7.67%. The increase in interest on loans was
supplemented by an increase in interest on investment securities. Interest
income on this category of earning assets increased $370,000. The average
balance of investment securities increased $7.2 million or 14.3% during the
fiscal year ended June 30, 2000 to $57.6 million, resulting in a $422,000
increase in interest income due to volume. The average balance of federal
funds decreased from $23.8 million in the fiscal year ended June 30, 1999 to
$2.9 million in the fiscal year ended June 30, 2000. The decrease in the
volume of federal funds resulted in a $1.2 million decrease in interest
income in the fiscal year ended June 30, 2000 as compared to the fiscal year
ended June 30, 1999.
Interest Expense. Interest expense increased during the fiscal year ended
June 30, 2000 to $22.5 million, up from $20.3 million for fiscal 1999. The
majority of the Company's interest expense is from interest-bearing deposits.
The largest category of interest-bearing deposits is time deposits. Interest
on time deposits for the fiscal year ended June 30, 2000 was $11.9 million,
up $88,000 from the $11.8 million for the fiscal year ended June 30, 1999.
This slight increase is the result of an increase of $10.3 million in the
average balance of time deposits partially offset by a decrease of 21 basis
points in the rates paid on these deposits from 5.47% for the fiscal year
ended June 30, 1999 to 5.26% for the fiscal year ended June 30, 2000.
Interest on school savings accounts decreased $99,000, from $818,000 for the
fiscal year ended June 30, 1999 to $719,000 for the fiscal year ended June
30, 2000, substantially all of which was the result of a decrease in the rate
paid on school savings accounts of 50 basis points. Interest on money market
accounts increased $174,000, from $686,000 for the fiscal year ended June 30,
1999 to $860,000 for the fiscal year ended June 30, 2000. The increase is
attributed to an increase in the average balance of money market accounts of
$4.2 million as well as an increase of 14 basis points in the rates paid on
these money market accounts, from 3.33% to 3.47%. Interest on borrowings for
the fiscal ended June 30, 2000 was $4.8 million, due to a $38.7 million
increase in the average balance of borrowings. Interest on escrow accounts
decreased $206,000, from $339,000 for the fiscal ended June 30, 1999 to
$133,000 for the fiscal year ended June 30, 2000. The decrease is attributed
to a decrease in the average balance of escrow accounts of $6.8 million as
well as a decrease of 62 basis points in the rates paid on these escrow
accounts, from 2.34% to 1.72%. The average balance of escrow accounts
decreased because stock subscriptions received during the quarter ended
December 31,1998 were classified as escrow accounts until the Conversion was
consummated and the funds were either used to purchase the Company's common
stock or returned to the subscriber in the case of an over subscription. The
remaining escrow accounts are primarily mortgage escrow deposits which have
lower rates than the rates paid on the stock subscriptions hence the decline
in the average rate paid on escrow accounts.
<PAGE>
Provision for Loan Losses. The provision for loan losses increased from $1.2
million for the fiscal year ended June 30, 1999 to $1.6 million for the
fiscal year ended June 30, 2000. Although the net loans charged off remained
constant for the fiscal year ended June 30, 2000 compared to fiscal 1999, the
increase in the provision is attributed to the increase in the outstanding
loan balance from $525.0 million on June 30, 1999 to $605.4 million on June
30, 2000.
Noninterest Income. Noninterest income for the fiscal year ended June 30,
2000 was $2.4 million, down from $2.9 million for the fiscal year ended June
30, 1999. This reduction is almost entirely due to the $950,000 charge off of
the Bank's investment in The Commons, LLC taken in December 1999. This
reduction was partially offset by increased recoveries on ORE properties of
$306,000 for the fiscal year ended June 30, 2000 as compared to fiscal 1999.
Service charges on deposits increased slightly to $892,000 for the fiscal
year ended June 30, 2000, from $779,000 for the fiscal year ended June 30,
1999. This increase is primarily attributable to the increase in deposit
accounts from June 30, 1999 to June 30, 2000. Loan servicing revenue declined
$89,000 from $376,000 for the fiscal year ended June 30, 1999 to $287,000 for
the fiscal year ended June 30, 2000. The decline relates to a reduction in
the balance of loans serviced for others.
Noninterest Expense. Noninterest expense decreased $1.8 million to
$18.7million for the fiscal year ended June 30, 2000, down from $20.4 million
for the fiscal year ended June 30, 1999. Merger expenses associated with the
terminated merger with SFS Bancorp, Inc. of $2.1 million and the contribution
of $2.8 million to the Cohoes Savings Foundation, Inc. account, in fiscal
1999, for the largest portion of the decrease in noninterest expense for the
fiscal year ended June 30, 2000 compared to the last fiscal year. Merger
expenses in fiscal 2000 relate to the costs incurred as of June 30, 2000
associated with the merger of equal transaction with Hudson River Bancorp,
Inc. This reduction was partially offset by an increase in compensation and
benefits of $2.5 million, of which $832,000 was due to the recognition and
retention plan approved on July 2, 1999 and an increase of $90,000 in the
contribution to the Company's Employee Stock Ownership Plan. Commission and
incentive payments increased $251,000 for the fiscal year ended June 30, 2000
compared to fiscal 1999. The remaining increase in compensation and benefits
of $1.3 million is primarily attributable to annual and merit increases for
employees, the additional staff cost of four new branches, and increases in
benefit costs. The increase in occupancy expense of $251,000 for the fiscal
year ended June 30, 2000 compared to the last fiscal year is primarily
attributable to the opening of four new branch locations during the calendar
year of 1999.
Income Tax Expense. Income tax expense increased $1.9 million from $1.5
million for the fiscal year ended June 30, 1999 to $3.4 million for the
fiscal year ended June 30, 2000. The increase is primarily the result of
increased income before income tax expense partially offset by the
establishment of a Real Estate Investment Trust (REIT) in April 1999.
<PAGE>
Comparison of Year Ended June 30, 1999 and Year Ended June 30, 1998
Net income for the year ended June 30, 1999 was $2.4 million, down from $4.1
million for the year ended June 30, 1998. Noninterest expense increased $6.6
million as compared to the previous year. This increase was partially offset
by increases in net interest income of $3.5 million and noninterest income of
$173,000 and decreases in the provision for loan losses of $165,000 and
income tax expense of $1.2 million the year ended June 30, 1999 as compared
to the previous year.
Net Interest Income. Net interest income for the year ended June 30, 1999 was
$22.7 million, up $3.5 million from the year ended June 30,1998. The increase
was partially the result of the increase of $97.2 million in average earning
assets from $482.5 million for the year ended June 30, 1998 to $579.7 million
for the same period in 1999. Interest-bearing liabilities also increased
during the same period, up $55.8 million. The net impact of these volume
increases resulted in an increase in net interest income of $4.9 million. The
increase in net interest income was also attributable to changes in the yield
on average earning assets and rate paid on average interest-bearing
liabilities. The yield on average earning assets decreased from 7.96% to
7.42%, while the rate paid on average interest-bearing liabilities decreased
from 4.33% to 4.06%. The Bank's net interest margin for the year ended June
30, 1999 was 3.92%, down 5 basis points from 3.97% for the year ended June
30, 1998.
Interest Income. Interest income for the year ended June 30, 1999 was $43.0
million, up from $38.4 million for the comparable period in 1998. The largest
component of interest income is interest on loans. Interest on loans
increased from $33.6 million for the year ended June 30, 1998 to $36.3
million for the year ended June 30, 1999. This increase of $2.7 million or
8.0% is primarily the result of a $58.5 million or 14.4% increase in the
average balance of loans to $463.3 million, while the yield on loans
decreased 46 basis points from 8.29% to 7.83%. The increase in interest on
loans was complemented by increases in interest on securities available for
sale and investment securities. Interest income on securities available for
sale increased $365,000 and the interest income on investments increased $1.1
million. Substantially all of the increases in interest income on securities
available for sale and investment securities are attributed to higher volume.
The average balance of securities available for sale increased from $30.3
million for the year ended June 30, 1998 to $37.9 million for the year ended
June 30, 1999. This 25.0% increase in volume resulted in an increase in
interest income of $464,000. The average balance of investment securities
increased 66.1% from $30.4 million in fiscal 1998 to $50.4 million in fiscal
1999, resulting in a $1.2 million increase in interest income due to volume.
The changes in rates on securities available for sale and investment
securities account for the remainder of the fluctuations in interest income
on these asset categories. The changes in volume and rate on other categories
of interest earning assets were not significant.
Interest Expense. Interest expense increased during the year ended June 30,
1999 to $20.3 million, up from $19.3 million for the comparable period in
1998. Substantially all of the Bank's interest expense is from the Bank's
interest-bearing deposits. The largest category of interest-bearing deposits
is time deposits. Interest on time deposits for the year ended June 30, 1999
was $11.8 million, down $1.7 million from the $13.5 million in 1998. This
decrease is the result of a decrease of 37 basis points in the rates paid on
these deposits from 5.84% in 1998 to 5.47% in 1999 and a decrease in the
average balance of time deposits of $15.0 million or 6.5%. Interest expense
on savings accounts increased $226,000 from fiscal 1998 to 1999, primarily
attributable to an increase in the average balance of savings accounts of
$7.8 million. Interest on school savings accounts decreased $19,000, from
$837,000 for the year ended June 30, 1998 to $818,000 for the year ended June
30, 1999. This decrease is primarily the result of a decrease of 77 basis
points in the rates paid on these deposits from 5.54% in fiscal 1998 to 4.77%
in fiscal 1999, partially offset by an increase in the average balance of
these deposits of $2.1 million. Interest on escrow accounts for the year
ended June 30, 1999 was $339,000, up $225,000 from $114,000 in 1998. This
increase is the result of an increase of 73 basis points in the rates paid on
these deposits from 1.61% in 1998 to 2.34% in 1999 and an increase in the
average balance of escrow accounts of $7.4 million due to the Conversion.
Interest on borrowings for the year ended June 30, 1999 was $2.5 million, up
from $332,000 in 1998. Most of this increase was attributable to an increase
in the average balance of borrowings, from $5.5 million in fiscal 1998 to
$43.2 million in fiscal 1999. Fluctuations in interest expense on other
categories of interest-bearing liabilities were not significant.
<PAGE>
Provision for Loan Losses. The provision for loan losses decreased from $1.4
million in the year ended June 30, 1998 to $1.2 million in the year ended
June 30, 1999. This decrease is primarily the result of decreases in net
charge-offs from $972,000 for the year ended June 30, 1998 to $743,000 for
the year ended June 30, 1999.
Noninterest Income. Total noninterest income increased $173,000 for the year
ended June 30, 1999 as compared to the same period in 1998. Income from
service charges on deposits increased only slightly to $779,000 for the year
ended June 30, 1999, from $746,000 for the year ended June 30, 1998. Loan
servicing revenue decreased $119,000 from $495,000 in the year ended June 30,
1998 to $376,000 in the year ended June 30, 1999. The decline relates to a
reduction in the balance of loans serviced for others. Net gain on the sale
of loans decreased from $81,000 for the year ended June 30, 1998 to $6,000
for the year ended June 30, 1999. Other noninterest income increased from
$1.4 million for the year ended June 30, 1998 to $1.8 million for the year
ended June 30, 1999. This increase was the result of increases in ATM fees,
loan prepayment and assignment fees and rents collected on OREO properties.
Noninterest Expense. Total noninterest expense increased $6.6 million to
$20.4 million for the year ended June 30, 1999, up from $13.8 million for the
year ended June 30, 1998. The break-up fee paid to SFS Bancorp, Inc. of $2.0
million, the contribution of $2.8 million to the Cohoes Savings Foundation,
Inc., the increase in compensation and benefits of $1.3 million, occupancy of
$247,000 and other noninterest expense of $401,000 were the primary
contributors to the overall increase. The break-up fee was paid as a result
of the termination of the merger agreement with SFS Bancorp, Inc. The
contribution to the Cohoes Savings Foundation, Inc. was associated with the
Company's Conversion. The increase in compensation and benefits was
attributable to the establishment of the Company's Employee Stock Ownership
Plan in connection with the Company's Conversion and annual merit increases.
Occupancy increased as a result of the opening of two new branch locations.
The increase in other noninterest expense was attributable to an increase in
professional service fees associated with being a public company, increases
in ORE expense, merger related expense, Y2K expense and a general increase in
other operating expenses. The remaining categories of noninterest expense did
not experience significant fluctuation.
Income Tax Expense. Income tax expense decreased from $2.7 million for the
year ended June 30, 1998 to $1.5 million for the comparable period in 1999.
The decrease is the result of less income before income tax expense, $3.9
million in fiscal 1999 as compared to $6.7 million in fiscal 1998.
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 its 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 securities available for sale.
The Company's cash inflows result primarily from loan repayments, maturities,
calls and paydowns 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.
<PAGE>
Capital. Consistent with its goals to operate a sound and profitable
financial organization, the Bank actively seeks to maintain a "well
capitalized" institution in accordance with regulatory standards. The Bank's
total equity was $98.0 million at June 30, 2000, 13.5% of total assets on
that date. As of June 30, 2000, the Bank exceeded all of the capital
requirements of the FDIC. The Bank's regulatory capital ratios at June 30,
2000 were as follows: Tier I (leverage) capital, 14.1%; Tier I risk-based
capital, 20.3%; and Total risk-based capital, 21.3%. The regulatory capital
minimum requirements to be considered well capitalized are 5.0%, 6.0%, and
10.0%, respectively.
MARKET RISK AND ASSET/LIABILITY MANAGEMENT
Interest rate risk is the most significant market risk affecting the Bank.
Other types of market risk, such as foreign currency exchange rate risk and
commodity price risk, do not arise in the normal course of the Bank's
business activities.
Interest rate risk is defined as an exposure to a movement in interest rates
that could have an adverse effect on the Bank's net interest income. Net
interest income is susceptible to interest rate risk to the degree that
interest-bearing liabilities mature or reprice on a different basis than
earning assets. When interest-bearing liabilities mature or reprice more
quickly than earning assets in a given period, a significant increase in
market rates of interest could adversely affect net income. Similarly, when
earning assets mature or reprice more quickly than interest-bearing
liabilities, falling interest rates could result in a decrease in net income.
In an attempt to manage its exposure to changes in interest rates, management
monitors the Bank's interest rate risk. Management's asset/liability
committee meets monthly to review the Bank's interest rate risk position and
profitability, and to recommend adjustments for consideration by the Board of
Directors. Management also reviews loan and deposit pricing and the Bank's
securities portfolio, formulates investment strategies and oversees the
timing and implementation of transactions. Notwithstanding the Bank's
interest rate risk management activities, the potential for changing interest
rates is an uncertainty that can adversely affect net income.
In adjusting the Bank's asset/liability position, the Board and management
attempt to manage the Bank's interest rate risk while enhancing net interest
margins. At times, depending on the level of general interest rates, the
relationship between long- and short-term interest rates, market conditions
and competitive factors, the Board and management may determine to increase
the Bank's interest rate risk position somewhat in order to increase its net
interest margins. The Bank's results of operations and net portfolio values
remain vulnerable to changes in interest rates and to fluctuations in the
difference between long- and short-term interest rates.
One approach used to quantify interest rate risk is the net market value
analysis. In essence, this analysis calculates the difference between the
present value of liabilities and the present value of expected cash flows
from assets and off-balance sheet contracts. A second approach is to quantify
the impact on net interest income due to changes in cash flows, interest
income and interest expense resulting from shifts in interest rates. The
following tables set forth, at June 30, 2000, an analysis of the Bank's
interest rate risk as measured by the estimated changes in net market value
of its assets and liabilities and net interest income resulting from
instantaneous and sustained parallel shifts in interest rates (+ or - 200
basis points, measured in 50 basis point increments).
<PAGE>
Assumed Change Net
in Interest Rates Interest Dollar Percent
(Basis Points) Income Change Change
+200 $ 27,011 $ (577) -2.09%
+150 27,204 (384) -1.39%
+100 27,363 (225) -0.81%
+50 27,490 (98) -0.35%
0 27,588 - 0.00%
-50 27,767 179 0.65%
-100 27,856 268 0.97%
-150 27,860 272 0.99%
-200 27,788 201 0.73%
Assumed Change Net
in Interest Rates Interest Dollar Percent
(Basis Points) Income Change Change
+200 $ 113,989 $ (20,206) -15.06%
+150 119,940 (14,255) -10.62%
+100 125,192 (9,003) -6.71%
+50 129,924 (4,271) -3.18%
0 134,195 - 0.00%
-50 137,549 3,354 2.50%
-100 139,549 5,616 4.19%
-150 141,304 7,109 5.30%
-200 142,303 8,108 6.04%
Certain assumptions utilized by management in assessing the interest rate
risk of the Bank were employed in preparing data included in the preceding
table. These assumptions were based upon proprietary data selected by
management and are reflective of historical results or current market
conditions. These assumptions relate to interest rates, repayment rates,
deposit decay rates, and the market values of certain assets under the
various interest rate scenarios.
Prepayment assumptions for mortgage backed securities and residential
mortgage loans were based upon industry standards for prepayments. The Bank's
mortgage backed securities and residential mortgages are the only assets or
liabilities which management assumed possess optionality for purposes of
determining market value changes.
Management assumed that non-maturity deposits could be maintained with rate
adjustments not directly proportionate to the change in market interest rate.
These assumptions are based upon management's analysis of its customer base
and competitive factors.
The net market value and net interest income tables presented above are
predicated upon a stable balance sheet with no growth or change in asset or
liability mix. In addition, the net market value table is based upon the
present value of discounted cash flows using management's estimates of
current replacement rates to discount the cash flows. The net interest income
table is based upon a cash flow simulation of the Bank's existing assets and
liabilities. It was also assumed that delinquency rates would not change as a
result of changes in interest rates although there can be no assurance that
this will be the case. Even if interest rates change in the designated
amounts, there can be no assurance that the Bank's assets and liabilities
would perform as set forth above. Also, a change in the US Treasury rates in
the designated amounts accompanied by a change in the shape of the Treasury
yield curve would cause changes to the net market value and net interest
income other than those indicated above.
The Bank does not currently engage in trading activities or use derivative
instruments to manage interest rate risk. Instruments such as interest rate
swaps, caps and floors may be utilized under certain interest rate risk
scenarios in order to manage interest rate risk. Such activities may be
permitted with the approval of the Board of Directors, and management
continually evaluates the usefulness of such instruments in managing interest
rate risk.
<PAGE>
FORWARD-LOOKING STATEMENTS
In this Annual Report, and in other public information that the company makes
available, the Company may, when discussing the future, use words like "will
probably result," "are expected to," "may cause," "is anticipated,"
"estimate," "project," or similar words. These words represent
forward-looking statements. In addition, certain disclosures and information
about financial institutions and their holding companies, such as an analysis
of the adequacy of the allowance for loan losses or an analysis of the
interest rate sensitivity of the Company's assets and liabilities, are based
upon attempts to predict future events and circumstances and also represent
forward-looking statements.
Many factors could cause the Company's actual future results and future
experience to be different from what is described in the Company's
forward-looking statements. For example, adverse changes in economic
conditions could cause an increase in loan delinquencies, a decrease in
property values, or a change in the housing turnover rate. Changes in market
interest rates or changes in the speed at which market interest rates change
could cause a reduction in the Company's interest rate spread or an increase
in loan delinquencies. Changes in laws and regulations affecting the
financial service industry could increase expenses or reduce operating
flexibility. Changes in consumer preferences could affect the Company's
ability to generate deposits or originate loans. These and other future
conditions could all have a material effect on our financial condition or
results of operations.
Please do not rely heavily on any forward-looking statements. They speak only
as of the date made and they are not guarantees of what will happen in the
future. Remember that various factors, including those described above and
others, could affect the Company's financial performance and could cause the
Company's actual results or circumstances for future periods to be materially
different from what the Company anticipates or projects in its
forward-looking statements.
IMPACT ON INFLATION AND CHANGING PRICES
The Company's consolidated financial statements are prepared in accordance
with generally accepted accounting principles which require the measurement
of financial condition and operating results in terms of historical dollars
without considering the changes in the relative purchasing power of money
over time due to inflation. The impact of inflation is reflected in the
increasing cost of the Company's operations. Unlike most industrial
companies, nearly all assets and liabilities of the Company are monetary. As
a result, interest rates have a greater impact on the Company's performance
than do the effects of general levels of inflation. In addition, interest
rates do not necessarily move in the direction, or to the same extent as the
price of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
See "Note 1 Summary of Significant Accounting Policies" in the Consolidated
Financial Statements.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Cohoes Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial
condition of Cohoes Bancorp, Inc. and subsidiary as of June 30, 2000 and
1999, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cohoes Bancorp, Inc. and
subsidiary as of June 30, 2000 and 1999, and the results of their operations
and their cash flows for each of the years in the three-year period ended
June 30, 2000, in conformity with accounting principles generally accepted in
the United States.
/s/ Arthur Andersen
New York, New York
August 17, 2000
<PAGE>
<TABLE>
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 2000 AND 1999
(000's omitted, except share data)
<CAPTION>
ASSETS 2000 1999
--------- ---------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 12,531 $ 8,886
Federal funds sold - 1,870
Interest-bearing deposits with banks 127 358
--------- ---------
Total cash and cash equivalents 12,658 11,114
Mortgage loans held for sale - 339
Securities available for sale, at fair value 40,074 44,742
Investment securities, at amortized cost (approximate fair value of 55,129 54,455
$53,741 and $53,721)
Net loans receivable 600,413 521,005
Accrued interest receivable 4,355 3,776
Premises and equipment 7,597 7,801
Other real estate owned 561 724
Mortgage servicing rights 652 840
Other assets 5,575 5,674
--------- ---------
Total assets $ 727,014 $ 650,470
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors $ 494,875 $ 446,123
Mortgagors' escrow deposits 9,729 10,787
Borrowings 96,201 49,045
Other liabilities 4,903 5,085
--------- ---------
Total liabilities 605,708 511,040
--------- ---------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued - -
Common stock, $.01 par value; 25,000,000 shares authorized; 9,535,225 95 95
shares issued
Additional paid-in capital 92,968 93,004
Retained earnings--subject to restrictions 58,652 55,173
Treasury stock, at cost (1,622,970 shares)
(17,639) -
Unallocated common stock held by ESOP (7,961) (8,598)
Unearned RRP shares (4,161) -
Accumulated other comprehensive loss, net of tax (648) (244)
--------- ---------
Total stockholders' equity 121,306 139,430
--------- ---------
Total liabilities and stockholders' equity $ 727,014 $ 650,470
========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(000's omitted, except per share data)
<CAPTION>
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 43,511 $ 36,256 $ 33,573
Securities available for sale 2,289 2,298 1,933
Investment securities 3,394 3,024 1,926
FHLB stock dividends 321 253 249
Federal funds sold 164 1,182 739
Interest-bearing deposits 6 25 3
------------- ------------- -------------
Total interest income 49,685 43,038 38,423
------------- ------------- -------------
INTEREST EXPENSE:
Deposits 17,656 17,516 18,816
Mortgagors' escrow deposits 133 339 114
Borrowings 4,751 2,479 332
------------- ------------- -------------
Total interest expense 22,540 20,334 19,262
------------- ------------- -------------
Net interest income 27,145 22,704 19,161
PROVISION FOR LOAN LOSSES 1,600 1,235 1,400
------------- ------------- -------------
Net interest income after provision for loan
losses 25,545 21,469 17,761
------------- ------------- -------------
NONINTEREST INCOME:
Service charges on deposits 892 779 746
Loan servicing revenue 287 376 495
Net gain on sale of mortgage loans 36 6 81
Recovery on other real estate owned 308 2 22
Provision for equity investment (950) - -
Other 1,808 1,753 1,399
------------- ------------- -------------
Total noninterest income 2,381 2,916 2,743
------------- ------------- -------------
NONINTEREST EXPENSE:
Compensation and benefits 11,027 8,571 7,322
Occupancy 3,184 2,933 2,686
Deposit insurance and assessments 99 63 65
Advertising 458 434 430
Contribution to the Cohoes Savings Foundation, Inc. - 2,777 -
Merger expenses 313 2,101 -
Other 3,574 3,564 3,264
------------- ------------- -------------
Total noninterest expense 18,655 20,443 13,767
------------- ------------- -------------
Income before provision for income taxes 9,271 3,942 6,737
PROVISION FOR INCOME TAXES 3,392 1,511 2,650
------------- ------------- -------------
Net income $ 5,879 $ 2,431 $ 4,087
============= ============= =============
EARNINGS PER SHARE SINCE CONVERSION:
Basic $ .74 $ .37 N/A
Diluted $ .74 $ .37 N/A
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(000's omitted)
<CAPTION>
Unallo-
cated
Accumulated common
Additional other com- stock Unearned Compre-
Common Paid in Retained Treasury prehensive held by RRP hensive
stock capital earnings stock income, net ESOP shares Total income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 $ - $ - $ 49,183 $ - $ (91) $ - $ - $ 49,092
Net income for the year ended
June 30, 1998 - - 4,087 - - - - 4,087 $ 4,087
Change in unrealized gain on
securities available for sale,
net of tax - - - - 103 - - 103 103
----- -------- -------- --------- -------- ------- -------- --------- --------
Balance, June 30, 1998/
Comprehensive income - - 53,270 - 12 - - 53,282 $ 4,190
========
Net income for the year ended
June 30, 1999 - - 2,431 - - - - 2,431 $ 2,431
Issuance of 9,257,500 shares
of $.01 par value common
stock in initial public
offering, net
of conversion related expenses 92 90,258 - - - - - 90,350
Issuance of 277,725 shares
of $.01 par value common
stock to the Cohoes Savings
Foundation, Inc. 3 2,774 - - - - - 2,777
Cash dividends paid - - (528) - - - - (528)
Public market purchases of
762,818 shares of
Cohoes Bancorp, Inc.
common stock by ESOP - - - - - (9,137) - (9,137)
ESOP shares allocated and
committed to be released - (28) - - - 539 - 511
Change in unrealized loss on
securities available for sale,
net of tax - - - - (256) - - (256) (256)
----- -------- -------- --------- -------- ------- -------- --------- --------
Balance, June 30, 1999/
Comprehensive income 95 93,004 55,173 - (244) (8,598) - 139,430 $ 2,175
========
Net income for the year ended
June 30, 2000 - - 5,879 - - - - 5,879 $ 5,879
ESOP shares allocated and
committed to be released - (36) - - - 637 - 601
Cash dividends paid - - (2,083) - - - - (2,083)
Public market purchase of 1,967,942
shares of Cohoes Bancorp, Inc.
common stock - - - (22,117) - - - (22,117)
Granting of 347,122 shares of
restricted stock under RRP - - (317) 4,505 - - (4,188) -
Forfeited 2,150 RRP shares - - - (27) - - 27 -
Change in unrealized loss on
securities available for sale,
net - - - - (404) - - (404) (404)
----- -------- -------- --------- -------- ------- -------- --------- --------
Balance, June 30, 2000 $ 95 $ 92,968 $ 58,652 $ (17,639) $ (648) $(7,961) $ (4,161) $ 121,306 $ 5,475
===== ======== ======== ========= ======== ======= ======== ========= ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
COHOES BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
(000's omitted)
<CAPTION>
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,879 $ 2,431 $ 4,087
------------- ------------- -------------
Adjustments to reconcile net income to net cash provided by operating
activities-
Charitable contribution to the Cohoes Savings Foundation, Inc. - 2,777 -
Depreciation 1,322 1,296 1,117
Amortization of purchased and originated mortgage servicing
rights 188 203 185
Provision for loan losses 1,600 1,235 1,400
ESOP compensation expense 601 511 -
Provision for deferred tax benefit (583) (1,028) (317)
Net loss (gain) on securities available for sale redeemed 8 (2) 1
Net premium amortization of investment securities 29 45 33
Net (discount) premium amortization of securities available for
sale (1) (7) 4
Net gain on sale of mortgage loans (36) (6) (81)
Proceeds from sale of loans held for sale 3,774 867 8,304
Loans originated for sale (3,399) (1,162) (8,087)
Increase in interest receivable (579) (294) (272)
Decrease (increase) in other assets, net of deferred tax benefit 682 (2,436) (197)
(Decrease) increase in other liabilities (182) 1,083 (154)
Net loss on sale/write-downs of other real estate owned
148 151 644
------------- ------------- -------------
Total adjustments 3,572 3,233 2,580
------------- ------------- -------------
Net cash provided by operating activities 9,451 5,664 6,667
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment securities called/matured $ 2,500 $ 20,025 $ 13,000
Purchase of investment securities (4,998) (37,609) (40,591)
Proceeds from securities available for sale called/matured - 26,300 23,650
Proceeds from the sale of securities available for sale 1,595 - 60
Purchase of securities available for sale (1,459) (30,600) (42,305)
Proceeds from principal reduction in investment securities 5,149 8,508 7,408
Proceeds from principal reduction in securities available for sale 4,121 8,031 5,448
Net loans made to customers (85,521) (111,308) (16,723)
Originated mortgage servicing rights - (1) (81)
Proceeds from sale of other real estate owned 1,174 1,461 1,815
Capital expenditures (1,118) (1,794) (763)
-------------- ------------- -------------
Net cash used in investing activities (78,557) (116,987) (49,082)
-------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in mortgagors' escrow deposits (1,058) 1,793 (68)
Net increase in borrowings 47,156 29,148 19,897
Net increase (decrease) in deposits 48,752 (3,418) 20,151
Net proceeds from the issuance of common stock - 90,350 -
Cash dividends paid (2,083) (528) -
Purchase of treasury shares (22,117) - -
Purchase of shares for ESOP - (9,137) -
-------------- ------------- -------------
Net cash provided by financing activities 70,650 108,208 39,980
-------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents 1,544 (3,115) (2,435)
CASH AND CASH EQUIVALENTS, beginning of year 11,114 14,229 16,664
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 12,658 $ 11,114 $ 14,229
============= ============= =============
ADDITIONAL DISCLOSURE RELATIVE TO CASH FLOWS:
Interest paid $ 22,490 $ 20,171 $ 19,235
Taxes paid 4,050 1,893 2,780
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Transfer of loans to other real estate owned $ 1,159 $ 1,827 $ 1,094
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Granting of restricted stock under RRP $ 4,188 $ - $ -
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
COHOES BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000, 1999 AND 1998
(000's omitted, except share data)
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of Cohoes Bancorp, Inc.
(the "Company") and subsidiary conform, in all material respects, to
generally accepted accounting principles and to general practice within the
savings bank industry. The Company utilizes the accrual method of accounting
for financial reporting purposes.
As more fully discussed in Note 2, Cohoes Bancorp, Inc., a Delaware
corporation, was organized by the Bank for the purpose of acquiring all of
the capital stock of the Bank pursuant to the conversion of the Bank from a
New York mutual savings bank to a New York stock savings bank. The Company is
subject to the financial reporting requirements of the Securities and
Exchange Act of 1934, as amended.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Cohoes Savings Bank (the "Bank"). All
significant intercompany accounts and transactions are eliminated in
consolidation.
Use of Estimates
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported assets and
liabilities as of the date of the consolidated statements of financial
condition. The same is true of revenues and expenses reported for the period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses
and the valuation of other real estate acquired in connection with
foreclosures. In connection with the determination of the allowance for loan
losses and the valuation of other real estate owned, management obtains
appraisals for significant properties.
<PAGE>
Investment Securities and Securities
Available for Sale
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities,"
management determines the appropriate classification of securities, including
mortgage-backed securities, at the time of purchase. If management has the
positive intent and ability to hold debt securities to maturity, they are
classified as investment securities held to maturity and are stated at
amortized cost. If securities are purchased for the purpose of selling them
in the near term, they are classified as trading securities and are reported
at fair value with unrealized holding gains and losses reflected in current
earnings. All other debt and equity securities are classified as securities
available for sale and are reported at fair value, with net unrealized gains
or losses reported, net of income taxes, as a separate component of
stockholders' equity. Gains and losses on disposition of all investment
securities are based on the adjusted cost of the specific security sold. At
June 30, 2000 and 1999, the Bank did not hold any securities considered to be
trading securities.
Unrealized losses on securities which reflect a decline in value which is
other than temporary, if any, are charged to income and reported as a
component of "other noninterest income" in the consolidated statements of
operations.
The cost of securities is adjusted for amortization of premium and accretion
of discount, which is calculated on an effective interest method.
Loans Receivable and Loan Fees
Loans receivable are reported at the principal amount outstanding, net of
unearned discount, net deferred loan fees and an allowance for loan losses.
Discounts on loans are accreted to income using a method which approximates
the level yield interest method. Interest income on loans is not recognized
when considered doubtful of collection by management.
The Bank accounts for fees and costs associated with loan originations in
accordance with SFAS No. 91, "Accounting for Nonrefundable Fees and Costs
Associated With Originating and Acquiring Loans and Initial Direct Costs of
Leases." Fees received from loan originations and certain related costs are
deferred and are amortized into income so as to provide for a level-yield of
interest on the underlying loans.
Allowance for Loan Losses
A substantial portion of the Bank's loans is secured by real estate located
in the Albany, New York area. In addition, a substantial portion of the other
real estate owned is located in this market. Accordingly, the ultimate
collectibility of a substantial portion of the Bank's loan portfolio and the
recovery of a substantial portion of the carrying amount of other real estate
owned are dependent upon market conditions in this market area.
Management believes that the allowance for loan losses is adequate and that
other real estate owned is recorded at its fair value less an estimated cost
to sell these properties. While management uses available information to
recognize losses on loans and other real estate owned, future additions to
the allowance or write-downs of other real estate owned may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the Bank's allowance for loan losses and other real estate owned. Such
agencies may require the Bank to recognize additions to the allowance or
write down other real estate owned based on their judgments about information
available to them at the time of their examination, which may not be
currently available to management.
<PAGE>
The allowance for loan losses is established through a provision for loan
losses charged to operations. Loans are charged against the allowance for
loan losses when management believes that the collectibility of the principal
is unlikely. The allowance is an amount that management believes will be
adequate to absorb losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior loan loss
experience. Management's evaluation of the adequacy of the allowance for loan
losses is performed on a periodic basis and takes into consideration such
factors as the historical loan loss experience, changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans and current economic conditions that may affect borrowers'
ability to pay.
SFAS No. 114 defines an impaired loan as a loan for which it is probable,
based on current information, that the lender will not collect all amounts
due under the contractual terms of the loan agreement. The Bank applies the
impairment criteria to all loans, except for large groups of smaller balance
homogenous loans that are collectively evaluated for impairment, such as
residential mortgages and consumer installment loans.
Mortgage Loans Held for Sale
Management determines the appropriate classification of mortgage loans at the
time that rate lock agreements are entered into with the customer. If
management has the intent and the Bank has the ability at the time of rate
lock to hold the loans to maturity, they are classified as mortgage loans and
carried at the amount of unpaid principal, net of deferred fees, reduced by
the allowance for loan losses. Mortgage loans not intended to be held to
maturity are classified as "held for sale" and carried at the lower of
aggregate cost or fair value as determined by outstanding commitments from
investors or current market prices for loans with no commitments.
Loan servicing revenues and expenses are recognized when service fees are
earned and expenses are incurred. The mortgage loans being serviced are not
included in these consolidated financial statements as they are not assets of
the Bank. Purchased mortgage servicing rights represent the costs of
acquiring the rights to service mortgage loans originated by other
institutions; such costs are capitalized and amortized into servicing fee
income over the estimated period of net servicing income, adjusted for
significant prepayments and payoffs of the underlying serviced loans.
Gains or losses on sales of mortgage loans held for sale are recognized based
upon the difference between the selling price and the carrying value of the
related mortgage loans sold. Such gains and losses are increased or decreased
by the amount of excess servicing fees recorded, if any. Net deferred
origination fees are recognized at the time of sale in the gain or loss
determination. Gains and losses are decreased or increased for commissions
and legal fees on loan closings, and direct employee costs related to loan
originations. These costs amounted to $17, $6 and $45, for the years ended
June 30, 2000, 1999 and 1998, respectively.
Premises and Equipment
Premises and equipment are carried at cost, less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets.
<PAGE>
Other Real Estate Owned
Other real estate owned includes foreclosed real estate properties. Other
real estate owned is recorded at the lower of cost or the fair value of the
asset acquired less an estimate of the costs to sell the asset. Fair value of
other real estate owned is generally determined through independent
appraisals. At the time of foreclosure, the excess, if any, of the loan value
over the estimated fair value of the asset received less costs to sell, is
charged to the allowance for loan losses. Subsequent declines in the fair
value of such assets, or increases in the estimated costs to sell the
properties and net operating expenses of such assets, are charged directly to
other noninterest expense. At June 30, 2000 and 1999, these properties
consisted of residential and commercial mortgage properties located in the
Albany, New York area.
Income Taxes
For Federal income and New York State franchise tax purposes, the Company
utilizes the accrual basis method of accounting.
The Company utilizes the asset and liability method of accounting for income
taxes required under SFAS No. 109, "Accounting for Income Taxes." Under the
asset and liability method of SFAS No. 109, deferred tax assets are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. To the extent that current
available evidence about the future raises doubt about the realization of a
deferred tax asset, a valuation allowance must be established. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Financial Instruments
In the normal course of business, the Bank is a party to certain financial
instruments with off-balance sheet risk such as commitments to extend credit,
unused lines of credit and letters of credit. The Bank's policy is to record
such instruments when funded.
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, cash and cash
equivalents consist of cash, due from banks, federal funds sold and
interest-bearing deposits with banks.
<PAGE>
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 June 30, 2000, 98,126 shares have
been released or committed to be released from the ESOP trust for allocation
to ESOP participants. Consequently, the remaining 664,692 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 year ended
June 30, 2000 and 1999.
<TABLE>
<CAPTION>
2000 1999 (since conversion)
------------------------------------------- -----------------------------------------
Weighted Weighted
Average Average
Net income Shares Per share Net income Shares Per share
(numerator) (denominator) Amount (numerator) (denominator) Amount
------------- -------------- ----------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 5,879 7,998,610 $ 0.74 $ 3,286 8,797,601 $ 0.37
=========== ==========
Dilutive effect of potential
Common shares related to
stock based compensation
plans - - - -
------------- -------------- ----------- ------------ -------------- ----------
$ 5,879 7,998,610 $ 0.74 $ 3,286 8,797,601 $ 0.37
============= ============== =========== ============ ============== ==========
</TABLE>
Employee Benefits
The Company follows the provisions of the AICPA's Statement of Position 93-6,
"Employers' Accounting for Employee Stock Ownership Plans." SOP 93-6 requires
that compensation expense be recognized in an amount equal to the shares
allocated by the ESOP multiplied by the average fair value of the common
stock during the year. The difference between the average fair value and the
weighted average per share cost of shares allocated by the ESOP is recorded
as an adjustment to additional paid-in-capital.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
About Pension and Other Postretirement Benefits." SFAS No. 132 only addresses
disclosure and does not change any of the measurement or recognition
provisions provided for in previously issued accounting standards. The
Company adopted SFAS No. 132 in fiscal 1999.
Comprehensive Income
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.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting
and reporting standards for derivative instruments and for hedging
activities.
<PAGE>
In June 1999, the FASB issued SFAS No. 137, "Deferral of the Effective
Date of SFAS No. 133". This statement defers the adoption of SFAS No. 133 by
one year.
As the Company does not engage in derivatives trading, this statement will
not have a material effect on the Company's financial statements.
Reclassifications
Amounts in the prior year's consolidated financial statements are
reclassified whenever necessary to conform with the current year's
presentation.
2. ORGANIZATION/FORM OF OWNERSHIP
On May 21,1998, the Board of Trustees adopted a Plan of Conversion ("Plan")
to convert the Bank from a New York mutual savings bank to a New York stock
savings bank and to become a wholly owned subsidiary of a new Delaware
corporation to be organized at the direction of the Bank. The Company is
regulated by the Office of Thrift Supervision ("OTS"). The Company completed
its initial public offering on December 31, 1998 and issued 9,257,500 shares
of common stock resulting in proceeds of $90.4 million, net of expenses
totaling $2.2 million. The Company used $45.2 million or 50% of the net
proceeds to purchase all of the outstanding stock of the Bank. The Company
also loaned $9.1 million to the ESOP which purchased 762,818 shares of the
Company's stock in the initial public offering.
As part of the Plan of Conversion, the Company formed the Cohoes Savings
Foundation, Inc. and donated 277,725 shares of the Company valued at
approximately $2.8 million. The Company recorded a contribution expense
charge and a corresponding deferred tax benefit of $1.1 million for this
donation. The formation of this private charitable foundation is to further
the Bank's commitment to the communities that it serves.
Additionally, the Bank established, in accordance with the requirements of
the OTS, a liquidation account for $54.5 million which was equal to its
capital as of the date of the latest consolidated statement of financial
condition (September 30, 1998) appearing in the IPO prospectus. The
liquidation account is reduced as and to the extent that eligible account
holders have reduced their qualifying deposits. Subsequent increases in
deposits do not restore an eligible account holder's interest in the
liquidation account. In the unlikely event of a complete liquidation of the
Bank, each eligible account holder will be entitled to receive a distribution
from the liquidation account in an amount proportionate to the adjusted
qualifying balances for accounts then held.
In addition to the restriction described above, the Company may not declare
or pay cash dividends on or repurchase any of its shares of common stock if
the effect thereof would cause stockholders' equity to be reduced below
applicable regulatory capital maintenance requirements or if such declaration
and payment would otherwise violate regulatory requirements. During fiscal
2000, the Company paid cash dividends totaling $2,083.
3. MERGER TERMINATIONS
On July 31, 1998, the Bank and SFS Bancorp, Inc. ("SFS"), parent of
Schenectady Federal Savings Bank, executed an Agreement and Plan of Merger.
On October 23, 1998, the proposed merger was terminated. In connection with
the termination, the Bank paid an agreed-upon breakup fee of $2.0 million to
SFS.
<PAGE>
On April 25, 2000, the Company and Hudson River Bancorp, Inc. ("HRBT"),
parent of Hudson River Bank and Trust, executed an Agreement and Plan of
Merger. On August 17, 2000, the proposed merger was not approved by the
shareholders of the Company.
In connection with stock option agreements dated April 25, 2000, each of HRBT
and the Company has granted the other a conditioned option to purchase up to
19.9% of the outstanding shares of its common stock at a fixed price equal to
the closing sales price of the common stock on April 24, 2000. The initial
triggering event, as defined, has occurred under each of these agreements.
However, neither option can be exercised until a subsequent triggering event,
as defined, also occurs, and no subsequent triggering event has occurred.
4. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's
assets, liabilities and certain off-balance sheet items calculated under
regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk weighted assets (as defined), and of Tier 1 capital (as defined) to
average assets (as defined). Management believes, as of June 30, 2000, that
the Bank meets all capital adequacy requirements to which it is subject.
As of June 30, 2000, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1
risk-based, Tier 1 leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
The Bank's and the Company's actual capital amounts and ratios are presented
in the following tables:
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Adequacy Under Prompt Corrective
Bank Actual Purposes Action Provisions
---- ---------------------- ---------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 2000:
Total capital (to risk weighted
assets) $ 102,963 21.3% $ 38,500 >8.0% $ 48,125 >10.0%
Tier 1 Capital (to risk weighted
assets) 97,950 20.3 19,250 >4.0 28,875 >6.0
Tier 1 Capital (to average assets) 97,950 14.1 27,865 >4.0 34,831 >5.0
</TABLE>
Consolidated Actual
---------------------
Amount Ratio
As of June 30, 2000:
Total capital (to risk weighted
assets) $126,319 26.2%
Tier 1 Capital (to risk weighted
assets) 121,306 25.2
Tier 1 Capital (to average assets) 121,306 17.5
<PAGE>
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Adequacy Under Prompt Corrective
Bank Actual Purposes Action Provisions
---- ---------------------- ---------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1999:
Total capital (to risk weighted
assets) $ 97,254 23.4% $ 33,271 >8.0% $ 41,589 >10.0%
Tier 1 Capital (to risk weighted
assets) 93,229 22.4 16,636 >4.0 24,953 >6.0
Tier 1 Capital (to average assets)
93,229 15.5 24,076 >4.0 30,095 >5.0
</TABLE>
Consolidated Actual
---------------------
Amount Ratio
As of June 30, 1999:
Total capital (to risk weighted
assets) $143,455 34.4%
Tier 1 Capital (to risk weighted
assets) 139,430 33.5
Tier 1 Capital (to average assets) 139,430 23.2
<PAGE>
5. SECURITIES AVAILABLE FOR SALE
The amortized cost of securities available for sale and their related
estimated fair values at June 30, 2000 and 1999, are as follows:
<TABLE>
<CAPTION>
June 30, 2000
------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Government and agencies $ 14,993 $ - $ (450) $ 14,543
Other obligations 378 5 (6) 377
Mortgage-backed securities 17,468 - (538) 16,930
Collateralized mortgage obligations 737 - (17) 720
------------- ------------- ------------- -------------
Total debt securities 33,576 5 (1,011) 32,570
Equity securities 7,439 65 - 7,504
------------- ------------- ------------- -------------
Total securities available
for sale $ 41,015 $ 70 $ (1,011) $ 40,074
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Government and agencies $ 15,991 $ 1 $ (245) $ 15,747
Other obligations 379 5 (5) 379
Mortgage-backed securities 21,142 32 (257) 20,917
Collateralized mortgage obligations 1,411 1 (13) 1,399
------------- ------------- ------------- -------------
Total debt securities 38,923 39 (520) 38,442
Equity securities 6,212 89 (1) 6,300
------------- ------------- ------------- -------------
Total securities available
for sale $ 45,135 $ 128 $ (521) $ 44,742
============= ============= ============= =============
</TABLE>
The equity investment securities at June 30, 2000 and 1999 consist primarily
of common stock of the Federal Home Loan Bank of New York.
<PAGE>
A summary of maturities of debt securities available for sale at June 30,
2000 is as follows:
Amortized Cost Estimated Fair
Value
------------- -------------
Within one year $ 1,999 $ 1,982
From one to five years 21,678 21,059
After five years to ten years 624 617
After ten years 9,275 8,912
------------- -------------
Total debt securities available
for sale $ 33,576 $ 32,570
============= =============
During the three years ended June 30, 2000, there were no sales of debt
securities available for sale.
6. INVESTMENT SECURITIES
The amortized cost of securities held for investment and their related
estimated fair values at June 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
June 30, 2000
-----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
-------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government and agencies $ 29,985 $ 4 $ (769) $ 29,220
Other obligations 5,194 - (17) 5,177
Mortgage-backed securities 19,950 1 (607) 19,344
-------------- -------------- ------------ -------------
Total investment securities
$ 55,129 $ 5 $ (1,393) $ 53,741
============== ============== ============ =============
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government and agencies $ 27,505 $ - $ (457) $ 27,048
Other obligations 2,148 1 (4) 2,145
Mortgage-backed securities 24,802 47 (321) 24,528
-------------- ------------- ------------- -------------
Total investment securities
$ 54,455 $ 48 $ (782) $ 53,721
============== ============= ============= =============
</TABLE>
<PAGE>
A summary of maturities of debt securities held for investment at June 30,
2000 is as follows:
Amortized Cost Estimated Fair
Value
-------------- --------------
Within one year $ 6,949 $ 6,909
From one to five years 36,114 35,127
After five years to ten years 2,466 2,468
After ten years 9,600 9,237
-------------- --------------
Total debt securities held
for investment $ 55,129 $ 53,741
============== ==============
There were no sales of securities held for investment during the three years
ended June 30, 2000.
7. NET LOANS RECEIVABLE
A summary of loans at June 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
2000 1999
---------------- ----------------
<S> <C> <C>
Mortgage loans on real estate:
Residential adjustable rate loans $ 149,518 $ 134,419
Commercial real estate 172,596 138,288
Residential fixed rate loans 203,406 185,769
FHA and VA insured loans 425 533
---------------- ----------------
Total mortgage loans 525,945 459,009
---------------- ----------------
Other loans:
Conventional second mortgages 11,853 12,724
Home equity lines of credit 19,692 20,090
Commercial business loans 37,316 22,054
Home improvement loans 390 349
Auto loans 8,610 9,658
Personal loans, secured and unsecured 769 565
Other loans 467 330
---------------- ----------------
Total other loans 79,097 65,770
---------------- ----------------
Less:
Deferred loan origination fees and costs 384 251
Allowance for loan losses (5,013) (4,025)
---------------- ----------------
Net loans $ 600,413 $ 521,005
================ ================
</TABLE>
Changes in the allowance for loan losses for the three years ended June 30
were as follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance, beginning of year $ 4,025 $ 3,533 $ 3,105
Provision charged to operations 1,600 1,235 1,400
Loans charged-off, net (612) (743) (972)
--------------- --------------- ---------------
Balance, end of year $ 5,013 $ 4,025 $ 3,533
=============== =============== ===============
</TABLE>
<PAGE>
The following table sets forth the information with regard to nonperforming
loans at June 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
Loans on nonaccrual status and in the process of foreclosure $ 1,837 $ 3,548
Loans on nonaccrual status but not in the process of foreclosure 1,491 773
Loans past due 90 days or more and still accruing interest - -
Loans restructured as to payment terms and/or interest rates 715 672
------------- -------------
Total nonperforming loans $ 4,043 $ 4,993
============= =============
</TABLE>
Accumulated interest income on nonaccrual loans of approximately $432, $381
and $214 was not recognized as income in the years ended June 30, 2000, 1999
and 1998, respectively. There are no commitments to extend further credit on
nonperforming loans.
As of June 30, 2000 and 1999, the Bank's recorded investment in impaired
loans and the related valuation allowance calculated under SFAS No. 114 are
as follows:
<TABLE>
<CAPTION>
2000 1999
------------------------------- -------------------------------
Recorded Valuation Recorded Valuation
Investment Allowance Investment Allowance
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Valuation allowance required $ 715 $ 113 $ 672 $ 73
Valuation allowance not required - - - -
-------------- -------------- -------------- -------------
$ 715 $ 113 $ 672 $ 73
============== ============== ============== =============
</TABLE>
This allowance is included in the allowance for loan losses on the
consolidated statements of financial condition.
The average recorded investment in impaired loans for the years ended June
30, 2000 and 1999 was approximately $695 and $1.8 million, respectively.
Interest payments received on impaired loans are recorded as interest income
unless collection of the remaining investment is doubtful in which case
payments received are recorded as reductions of principal. The Bank
recognized interest of $62, $198 and $215 on impaired loans for the years
ended June 30, 2000, 1999 and 1998, respectively. Accumulated interest income
on impaired loans of approximately $12, $9 and $15 was not recognized as
income in the years ended June 30, 2000, 1999 and 1998, respectively.
<PAGE>
8. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable consists of the following at June 30, 2000 and
1999:
2000 1999
------------ ------------
Loans $ 3,405 $ 2,827
Investment securities and securities
available for sale 950 949
------------ ------------
$ 4,355 $ 3,776
============ ============
9. PREMISES AND EQUIPMENT
Premises and equipment consist of the following at June 30, 2000 and 1999:
2000 1999
-------------- --------------
Land $ 1,707 $ 1,707
Building and leasehold improvements 7,275 7,060
Furniture, fixtures and equipment 8,280 7,390
-------------- --------------
17,262 16,157
Less- Accumulated depreciation (9,665) (8,356)
--------------- --------------
$ 7,597 $ 7,801
============== ==============
Amount charged to depreciation expense was $1.3 million, $1.3 million and
$1.1 million for the years ended June 30, 2000, 1999 and 1998, respectively.
10. MORTGAGE SERVICING RIGHTS
The following is a summary of the mortgage servicing rights activity during
the years ended June 30, 2000, 1999 and 1998:
<TABLE>
<CAPTION>
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Balance, beginning of year $ 840 $ 1,042 $ 1,146
Mortgage servicing rights originated from
unrelated third parties - 1 81
Amortization of mortgage servicing rights
included as a reduction of servicing fee
income in the consolidated statements of
operations (188) (203) (185)
------------ ------------ ------------
Balance, end of year $ 652 $ 840 $ 1,042
============ ============ ============
</TABLE>
<PAGE>
Serviced Loans
The total loans serviced by the Bank for unrelated third parties were
approximately $167.0 million, $189.7 million and $233.1 million at June 30,
2000, 1999 and 1998, respectively.
11. DUE TO DEPOSITORS
Due to depositors account balances as of June 30, 2000 and 1999 are
summarized as follows:
<TABLE>
<CAPTION>
Range of
Interest Rate 2000 1999
------------- ----------------- -----------------
<S> <C> <C> <C>
Savings accounts 2.0% - 4.9% $ 150,517 $ 151,763
Money market accounts 2.8 - 6.5 21,904 23,329
----------------- -----------------
172,421 175,092
Time deposits 1.5 - 7.8 248,502 205,215
Commercial deposits 0.0 - 4.2 22,226 19,271
Demand accounts 0.0 - 1.5 51,726 46,545
----------------- -----------------
$ 494,875 $ 446,123
================= =================
</TABLE>
Time deposits over $100,000 amounted to approximately $37.5 million and $27.8
million at June 30, 2000 and 1999, respectively.
The approximate amount of contractual maturities of time deposits for the
years subsequent to June 30, 2000 is as follows:
Years ending June 30:
2001 $ 191,452
2002 32,121
2003 12,239
2004 7,473
2005 and thereafter 5,217
-----------
$ 248,502
===========
Interest expense on deposits for the years ended June 30, 2000, 1999 and 1998
is summarized as follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Savings accounts $ 4,458 $ 4,667 $ 4,459
Money market accounts 860 686 569
Time deposits 11,898 11,810 13,484
Demand accounts 440 353 304
--------------- --------------- ---------------
Total interest expense on deposits $ 17,656 $ 17,516 $ 18,816
=============== =============== ===============
</TABLE>
<PAGE>
12. BORROWINGS
Information concerning borrowings, which primarily consist of Federal Home
Loan Bank ("FHLB") advances, for the years ended June 30, 2000, 1999 and 1998
is summarized as follows:
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Average balance during the year $ 81,927 $ 43,270 $ 5,467
Average interest rate during the year 5.80% 5.73% 6.07%
Maximum month-end balance during the year $ 96,201 $ 52,038 $ 19,983
Interest expense on borrowings $ 4,751 $ 2,479 $ 332
</TABLE>
FHLB advances are made at fixed rates with remaining maturities of
approximately 5 years as of June 30, 2000.
FHLB advances are collateralized by all FHLB stock owned by the Bank in
addition to a blanket pledge of eligible assets in an amount required to be
maintained so that the estimated fair value of such eligible assets exceeds,
at all times, 110% of the outstanding advances.
13. EMPLOYEE BENEFITS
401(k) Retirement Savings Plan
The Bank sponsors a 401(k) Retirement Savings Plan which is available to all
full-time employees who have been employed by the Bank for a minimum of one
year and are at least 21 years of age. The Plan allows employees to defer up
to 15% of their salary on a pretax basis through contributions to the
Retirement Savings Plan. The Bank matches 50% of employee contributions up to
a maximum of 6% of the amount deferred by the employee. The maximum
contribution an employee may make which is subject to matching by the Bank is
set annually by the Board of Directors.
Employees may also make additional voluntary after-tax contributions to the
Plan, which are not matched by the Bank, up to an additional 10% of the
employee's salary. Total 401(k) Plan expenses for the years ended June 30,
2000, 1999 and 1998 were approximately $474, $399 and $378, respectively.
Postretirement Medical and Life
Insurance Benefits
The Bank provides postretirement medical and life insurance benefits for
full-time employees. All employees who meet the criteria for either normal or
early retirement and have at least 10 years of service are eligible. Retired
employees are required to contribute toward the cost of coverage as
established by the Bank, based on medical and life insurance costs.
<PAGE>
Benefit and premium payments are made when they are due and are not funded in
advance. The following table sets forth the status of the postretirement
benefit obligation:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Benefit obligation at beginning of year $ 969 $ 716
Service cost 13 13
Interest cost 65 65
Benefits paid (61) (61)
Actuarial (gains)/losses - 236
------------ ------------
Benefit obligation at end of year $ 986 $ 969
============ ============
Funded status $ (986) $ (969)
Unrecognized net (gain)/losses from actual experience
different from assumed (39) (45)
------------ ------------
Accrued postretirement benefit cost $ (1,025) $ (1,014)
============ ============
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Service cost $ 13 $ 13 $ 12
Interest cost 65 65 49
Amortization of net gain from actual experience
different from assumed - - (61)
----------- ----------- -----------
Net periodic benefit cost $ 78 $ 78 $ -
=========== =========== ===========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7% as of June 30, 2000 and 1999 and
7.25% as of June 30, 1998. For measurement purposes, the assumed health care
cost trend rate of 9.5% decreases gradually until an ultimate trend rate of
5.5% is reached over 8 years. In accordance with the terms of the
Postretirement Medical Benefit Plan, once costs are 150% of the 1993 level,
additional increases become the responsibility of the retiree.
The health care cost trend rate assumption may have a significant effect on
the amount of obligation and expense reported. Increasing the health care
trend rate by one percent each year would have no material effect on the net
periodic postretirement benefit cost for the three years ended June 30, 2000.
Employee Stock Ownership Plan
The Company has established an ESOP for eligible employees. Generally
full-time employees of the Company or the Bank who are at least age 21 and
have been credited with at least 1,000 hours during a twelve-month period are
eligible to participate.
<PAGE>
The ESOP borrowed $9.1 million at an interest rate of 7.25% from the Company
and used the funds to purchase 762,818 shares of the Company's common stock
in the public trading market. The loan is being repaid principally from the
Bank's discretionary contributions to the ESOP over a 15-year period. At June
30, 2000, the loan had an outstanding balance of $8.4 million. Shares
purchased with the loan proceeds are held in a suspense account for
allocation among participants as the loan is paid. Contributions to the ESOP
and shares released from the loan collateral in an amount proportional to the
repayment of the ESOP loan are allocated among participants on the basis of
compensation, as described in the plan, in the year of allocation. Benefits
generally become 100% vested after 5 years of vesting service and are
immediately vested on death, retirement or disability. In addition, in the
event of a change in control, as defined in the plan, any unvested portion of
benefits shall vest immediately. Forfeitures are added to the employer
contributions to the Plan and allocated to other participants.
As of June 30, 2000, 71,538 shares had been specifically allocated, 26,588
shares were committed to be released and 664,692 shares remain unallocated.
The fair value of the unallocated ESOP shares was $9.1 million at June 30,
2000.
In accordance with SOP 93-6, the Company recorded compensation expense of
$601 and $511 for the years ended June 30, 2000 and 1999, respectively, which
is equal to the shares specifically allocated and committed to be released by
the ESOP multiplied by the average estimated fair value of common stock.
Recognition and Retention Plan
The Company maintains the RRP. The RRP acquired an aggregate of 347,122
shares of the Company's common stock in open market purchases, which have
been awarded to eligible directors, director emeritus, officers and employees
of the Company. During the fiscal year, 2,150 shares from this plan were
forfeited. As of June 30, 2000, 344,972 shares were unvested. Such awards
represent deferred compensation and have been accounted for as a reduction of
stockholders' equity. Awards generally vest at a rate of 20% per year,
commencing one year from the date of award. Awards become 100% vested upon
termination of service due to death or disability.
The Company recorded expense for the RRP of $832 in the year ended June 30,
2000, which is included in salary and employee benefits in the consolidated
statements of income.
Stock Option Plan
The Company maintains the Stock Option Plan and under the Stock Option Plan,
stock options (which generally expire ten years from the date of grant) have
been granted to eligible employees, directors, director emeritus and officers
of the Company and the Bank. Each option entitles the holder to purchase one
share of the Company's common stock at an exercise price equal to the fair
market value of the stock at the date of grant. Options generally become
exercisable at a rate of 20% per year, commencing one year from the date of
grant. However, all options become 100% exercisable upon termination of
service due to death or disability.
<PAGE>
The following table presents options granted, exercised or expired:
Year Ended June 30, 2000
------------------------
Option price
Shares per share
------- ---------
Balance, beginning of year - -
Options granted 865,555 $ 12.0625
Options exercised - -
Options expired or terminated 5,000 $ 12.0625
------- ---------
Balance, at end of year 860,555 $ 12.0625
======= =========
No options are currently exercisable at June 30, 2000. The fair value of each
option was estimated on the date granted using the Black-Scholes option
pricing model. The fair value of the options granted in fiscal 2000 was
$3.34. The following weighted averages were used in fiscal 2000: risk free
interest rate of 5.93%; expected dividend yield of 1.98%; expected life of
five years; and expected volatility of 26.09%.
The Company accounts for the Stock Option Plan under APB No. 25, under which
no compensation cost has been recognized. Had compensation cost for the Stock
Option Plan been determined consistent with SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the following pro
forma amounts:
Year Ended June 30,
2000
-------------------
Net Income: As Reported $ 5,879
Pro Forma $ 5,304
Basic EPS: As Reported $ .74
Pro Forma $ .66
Benefit Restoration Plan
The Bank adopted the Benefit Restoration Plan of Cohoes Savings Bank ("BRP")
,in connection with the Conversion, to provide certain designated employees
with the benefits that would be due to such employees under the other benefit
plans if such benefits were not limited under the Internal Revenue Code.
Expense related to the BRP included in the consolidated statement of income
for the year ended June 30, 2000 and 1999 was $123 and $17, respectively.
14. INCOME TAXES
The components of the income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
----------- ------------ ------------
<S> <C> <C> <C>
Current tax expense:
Federal $ 3,525 $ 2,155 $ 2,450
State 450 384 517
Deferred tax expense (benefit) (583) (1,028) (317)
----------- ------------ ------------
$ 3,392 $ 1,511 $ 2,650
=========== ============ ============
</TABLE>
<PAGE>
The provision for income taxes differs from that computed at the federal
statutory rate as follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Tax at federal statutory rate $ 3,152 $ 1,341 $ 2,291
State taxes, net of federal benefit 297 253 341
Other, net (57) (83) 18
------------- ------------- -------------
Total income tax expense $ 3,392 $ 1,511 $ 2,650
============= ============= =============
Effective rate 36.59% 38.33% 39.34%
============= ============= =============
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
2000 and 1999 are presented below:
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Deferred tax assets:
Differences in reporting the provision for loan losses $ 2,080 $ 1,731
Differences in reporting certain accrued expenses 1,176 862
Contribution carryforward 246 762
Capital loss carryforward 395 -
Other 78 146
-------------- --------------
Total gross deferred tax assets 3,975 3,501
-------------- --------------
Deferred tax liabilities:
Differences in reporting the provision for loan losses 128 257
Deferred net loan origination fees 265 240
Differences in reporting certain accrued expenses 373 381
Other 3 -
-------------- --------------
Total gross deferred tax liabilities 769 878
-------------- --------------
Net deferred tax asset at end of year 3,206 2,623
Net deferred tax asset at beginning of year 2,623 1,595
-------------- --------------
Deferred tax benefit for the year $ (583) $ (1,028)
============== ==============
</TABLE>
The total deferred tax asset as of June 30, 2000 and 1999 is considered by
the Bank to be more likely than not realizable based upon the historical
level of taxable income in the prior years as well as the time period during
which the items giving rise to the deferred tax assets are expected to turn
around.
In addition to the deferred tax assets and liabilities described above, the
Bank also has a deferred tax asset of approximately $399 and $150 at June 30,
2000 and 1999, respectively, related to the net unrealized loss on securities
available for sale.
<PAGE>
Under Section 593 of the Internal Revenue Code, thrift institutions such as
the Bank which met certain definitional tests, primarily relating to their
assets and the nature of their business, were permitted to establish a tax
reserve for bad debts and to make annual additions thereto, which additions
may, within specified limitations, be deducted in arriving at their taxable
income. The Bank's deduction with respect to "qualifying loans," which are
generally loans secured by certain interests in real property, could have
been computed using an amount based on the Bank's actual loss experience (the
"Experience Method"), or a percentage equal to 8% of the Bank's taxable
income (the "PTI Method"), computed without regard to this deduction and with
additional modifications and reduced by the amount of any permitted addition
to the nonqualifying reserve. Similar deductions or additions to the Bank's
bad debt reserve are permitted under the New York State Bank Franchise Tax;
however, for purposes of these taxes, the effective allowable percentage
under the PTI Method is approximately 32% rather than 8%.
Effective January 1, 1997, Section 593 was amended, and the Bank is unable to
make additions to its tax bad debt reserve, is permitted to deduct bad debts
only as they occur and is additionally required to recapture (that is, take
into taxable income) over a multiyear period, beginning with the Bank's
taxable year beginning on January 1, 1997, the excess of the balance of its
bad debt reserves as of December 31, 1995 over the balance of such reserves
as of December 31, 1987, or over a lesser amount if the Bank's loan portfolio
has decreased since December 31, 1987. Such recapture requirements would be
deferred for each of the two successive taxable years beginning January 1,
1997, in which the Bank originates a minimum amount of certain residential
loans based upon the average of the principal amounts of such loans
originated by the Bank during its six taxable years preceding January 1,
1997. This amendment has no impact on the Bank's results of operations for
federal income tax purposes. The New York State tax law has been amended to
prevent a similar recapture of the Bank's bad debt reserve, and to permit
continued future use of the bad debt reserve method for purposes of
determining the Bank's New York State tax liability.
In addition, the Bank has accumulated bad debt reserves for tax purposes of
$3.7 million under Section 593 through December 31, 1987 for which no
deferred taxes have been provided. Under the tax laws as amended, the event
that would result in taxation of these reserves is the failure of the Bank to
maintain a specified qualifying-assets ratio or meet other thrift definition
tests for New York State tax purposes.
15. COMMITMENTS AND CONTINGENT LIABILITIES
Off-Balance Sheet Financing and
Concentrations of Credit
The Bank is a party to certain financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include the Bank's commitments to
extend credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized on the consolidated statements
of financial condition. The contract amounts of those instruments reflect the
extent of involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the commitments to extend credit is represented by the
contractual notional amount of those instruments. The Bank uses the same
credit policies in making commitments as it does for on-balance sheet
instruments.
<PAGE>
Unless otherwise noted, the Bank does not require collateral or other
security to support financial instruments with credit risk. Contract amounts
of financial instruments that represent credit risk as of June 30, 2000 at
fixed and variable interest rates are as follows:
<TABLE>
<CAPTION>
2000
-------------------------------------------------
Fixed Variable Total
------------- ------------- -------------
<S> <C> <C> <C>
Financial instruments whose contract amounts represent
credit risk (including unused lines of credit and
unadvanced funds):
Commercial business loans $ 2,041 $ 32,439 $ 34,480
Conventional mortgages 7,376 14,888 22,264
Commercial mortgage loans 5,433 11,859 17,292
Construction loans - 1,442 1,442
Consumer loans 3,067 14,844 17,911
------------- ------------- -------------
$ 17,917 $ 75,472 $ 93,389
============= ============= =============
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since certain commitments are
expected to expire without being fully drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's credit-worthiness on a case-by-case basis. The
amount of collateral, if any, required by the Bank upon the extension of
credit is based on management's credit evaluation of the customer. Mortgage
and construction loan commitments are secured by a first lien on real estate.
Commitments to extend credit may be written on a fixed rate basis, thus
exposing the Bank to interest rate risk, given the possibility that market
rates may change between commitment and actual extension of credit.
Certain mortgage loans are written on an adjustable basis and include
interest rate caps which limit annual and lifetime increases in the interest
rates on such loans. Generally, adjustable rate mortgages have an annual rate
increase cap of 2% and lifetime rate increase cap of 4.5% to 6.75%. These
caps expose the Bank to interest rate risk should market rates increase above
these limits. As of June 30, 2000 $222.0 million of mortgage loans had
interest rate caps.
The Bank generally enters into rate lock agreements at the time that loan
applications are made. These rate lock agreements fix the interest rate at
which the loan, if ultimately made, will be originated. Such agreements may
exist with borrowers with whom commitments to extend credit have been made,
as well as with individuals who have not yet received a commitment.
In order to reduce the interest rate risk associated with these items as well
as its portfolio of loans held for sale, the Bank enters into agreements to
sell loans in the secondary market to unrelated investors. At June 30, 2000,
the Bank has no commitments to sell loans to unrelated investors.
Concentrations of Credit
The Bank primarily grants consumer and residential loans to customers located
in the New York State counties of Albany, Rensselaer, Schenectady, Saratoga,
Warren, Washington and Greene. Although the Bank has a diversified loan
portfolio, a substantial portion of its debtors' ability to honor their
contracts are dependent upon the real estate and construction-related sectors
of the economy.
<PAGE>
Borrowing Arrangements
The Bank has lines of credit available with a correspondent bank totaling
approximately $65.0 million. These lines of credit expire on October 28,
2000. As of June 30, 2000, there were outstanding balances of $18.1 million
on these lines.
Leases
The Bank leases certain branches, equipment and automobiles under various
noncancelable operating leases. The future minimum payments by year and the
aggregate, under all significant noncancelable operating leases with initial
or remaining terms of one year or more, are as follows:
Operating
Leases
---------
Year ending June 30:
2001 $ 592
2002 409
2003 363
2004 269
2005 and thereafter 118
---------
Total $ 1,751
=========
Total lease expense was approximately $624, $441 and $383 for the years ended
June 30, 2000, 1999 and 1998, respectively.
Contingent Liabilities
In the ordinary course of business, there are various legal proceedings
pending against the Company. Based on consultation with outside counsel,
management considers that the aggregate exposure, if any, arising from such
litigation would not have a material adverse effect on the Company's
consolidated statement of financial condition.
16. DISCLOSURES ABOUT THE FAIR
VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About the Fair Value of Financial Instruments,"
requires that the Company disclose estimated fair values for financial
instruments. Fair value estimates, methods and assumptions are set forth
below.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. The fair value estimates of a significant portion of
the Company's financial instruments were based on judgments regarding future
expected net cash flow, current economic conditions, risk characteristics of
various financial instruments and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in the estimate of fair
value under SFAS No. 107.
<PAGE>
Short-Term Financial Instruments
The fair value of certain financial instruments is estimated to approximate
their carrying values because the remaining term to maturity of the financial
instruments is less than 90 days or the financial instrument reprices in 90
days or less. Such financial instruments include cash and due from banks,
federal funds sold, interest-bearing deposits with banks and accrued interest
receivable.
Securities Available for Sale
and Investment Securities
Fair values are based upon market prices. If a quoted market price is not
available for a particular security, the fair value is determined by
reference to quoted market prices for securities with similar
characteristics.
Loans
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type, including residential real
estate, commercial real estate and other consumer loans.
The estimated fair value of performing loans is calculated by discounting
scheduled cash flows through the estimated maturity using estimated market
discount rates that reflect the credit and interest rate risk inherent in the
respective loan portfolio.
Estimated fair value for nonperforming loans is based on estimated cash flows
discounted using a rate commensurate with the risk associated with the
estimated cash flows. Assumptions regarding credit risk, cash flows and
discount rates are judgmentally determined using available market information
and specific borrower information.
Management has made estimates of fair value discount rates that it believes
to be reasonable. However, because there is no market for many of these
financial instruments, management has no basis to determine whether the
estimated fair value would be indicative of the value negotiated in an actual
sale.
Loans Held for Sale
The estimated fair value of loans held for sale is calculated by either using
quoted market rates or, in the case where a firm commitment has been made to
sell the loan, the firm committed price was used. The estimated fair value of
loans held for sale approximated their book value.
Deposit Liabilities
The estimated fair value of deposits with no stated maturity, such as
noninterest-bearing demand deposits, savings and money market accounts, is
regarded to be the amount payable on demand. The estimated fair value of time
deposits is based on the discounted value of contractual cash flows. The
discount rate is estimated using the rates currently offered for deposits of
similar remaining maturities. The fair value estimates for deposits do not
include the benefit that results from the low-cost funding provided by the
deposit liabilities as compared to the cost of borrowing funds in the market.
<PAGE>
Borrowings
The estimated fair value of FHLB borrowings is based on the discounted value
of their contractual cash flows. The discount rate used in the present value
computation is estimated by comparison to the current interest rates charged
by the FHLB for advances of similar remaining maturities.
Table of Financial Instruments
The carrying values and estimated fair values of financial instruments as of
June 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
--------------------------------- ----------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 12,658 $ 12,658 $ 11,114 $ 11,114
Mortgage loans held for sale - - 339 339
Securities available for sale 40,074 40,074 44,742 44,742
Investment securities 55,129 53,741 54,455 53,721
Loans $ 605,426 $ 591,894 $ 525,030 $ 491,167
Less- Allowance for loan losses (5,013) - (4,025) -
--------------- --------------- --------------- ---------------
Net loans receivable $ 600,413 $ 591,894 $ 521,005 $ 491,167
=============== =============== =============== ===============
Accrued interest receivable $ 4,355 $ 4,355 $ 3,776 $ 3,776
</TABLE>
<TABLE>
<CAPTION>
2000 1999
--------------------------------- ----------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Financial liabilities:
Due to depositors-
Demand, savings and money market $ 246,373 $ 246,373 $ 240,908 $ 240,908
accounts
Time deposits 248,502 248,017 205,215 206,811
Mortgagors' escrow deposits 9,729 9,729 10,787 10,787
Borrowings 96,201 100,943 49,045 50,804
</TABLE>
Commitments to Extend Credit, Unused Lines
of Credit and Standby Letters of Credit
The fair value of commitments to extend credit, unused lines of credit and
standby letters of credit is estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed
rate commitments to extend credit and unused lines of credit, fair value also
considers the difference between current levels of interest rates and the
committed rates. Based upon the estimated fair value of commitments to extend
credit and unused lines of credit, there are no significant unrealized gains
or losses associated with these financial instruments.
<PAGE>
17. COHOES BANCORP, INC. - PARENT COMPANY
ONLY FINANCIAL STATEMENTS
The following condensed statement of financial condition as of June 30, 2000
and 1999 and condensed statements of operations and cash flows for the year
ended June 30, 2000 and for the period from December 31, 1998 through June
30, 1999 should be read in conjunction with the consolidated financial
statements and the notes thereto.
<TABLE>
Condensed Statement of Financial Condition
June 30, 2000 and 1999
(000's omitted)
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Assets:
Checking account with subsidiary $ 40 $ 28
Securities available for sale 531 -
Investment in subsidiary 98,292 92,985
Loan receivable from ESOP 8,307 8,742
Loan receivable from subsidiary 13,500 35,700
Other assets 641 2,125
--------- ---------
Total assets $ 121,311 $ 139,580
========= =========
Liabilities:
Other liabilities $ 5 $ 150
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued - -
Common stock, $.01 par value; 25,000,000 shares authorized;
9,535,225 shares issued 95 95
Additional paid-in capital 92,968 93,004
Retained earnings subject to restrictions 58,652 55,173
Treasury stock, at cost (1,622,970 shares) (17,639) -
Unallocated common stock held by ESOP (7,961) (8,598)
Unearned RRP shares (4,161) -
Accumulated other comprehensive loss, net of tax (648) (244)
--------- ---------
Total stockholders' equity $ 121,306 $ 139,430
--------- ---------
Total liabilities and stockholders' equity $ 121,311 $ 139,580
========= =========
</TABLE>
<PAGE>
<TABLE>
Condensed Statement of Operations
For the Period Ended June 30, 2000 and 1999
(000's omitted)
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Interest and dividend income $ 1,965 $ 1,371
Interest expense - -
-------------- --------------
Net interest income 1,965 1,371
Noninterest income - -
Noninterest expenses:
Contribution to Cohoes Savings Foundation, Inc. - 2,777
Professional fees 189 56
Merger expenses 313 -
Other noninterest expense 219 144
-------------- --------------
Total noninterest expense 721 2,977
Net income (loss) before income tax 1,244 (1,606)
Income tax expense (benefit) 512 (627)
-------------- --------------
Net income before undistributed earnings of subsidiary bank 732 (979)
Equity in undistributed earnings of subsidiary 5,147 3,410
-------------- --------------
Net income $ 5,879 $ 2,431
============== ==============
</TABLE>
<PAGE>
<TABLE>
Condensed Statement of Cash Flows
For the Period Ended June 30, 2000 and 1999
(000's omitted)
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,879 $ 2,431
-------------- --------------
Adjustments to reconcile net loss to net cash used in operating
Activities-
Charitable contribution to the Cohoes Savings Foundation, Inc. - 2,777
Provision for deferred tax benefit (expense) 494 (708)
Decrease (increase) in other assets 967 (1,417)
(Decrease) increase in other liabilities (145) 150
Undistributed earnings of subsidiary bank (5,147) (3,410)
-------------- --------------
Total adjustments (3,831) (2,608)
-------------- --------------
Net cash used by operating activities 2,048 (177)
Cash flows from investing activities:
Investment in common stock of subsidiary - (45,175)
Purchase of securities available for sale (471) -
Loan repayments from/(made to) subsidiary 22,200 (35,700)
Loan repayments from/(made to) ESOP 435 (8,742)
-------------- --------------
Net cash used in investing activities 22,164 (89,617)
Cash flows from financing activities:
Net proceeds from issuance of common stock in initial public
Offering - 90,350
Purchase of treasury stock (22,117) -
Cash dividends paid (2,083) (528)
-------------- --------------
Net cash provided by financing activities (24,200) 29,822
-------------- --------------
Net increase in cash 12 28
Cash, beginning of year 28 -
-------------- --------------
Cash, end of year $ 40 $ 28
============== ==============
</TABLE>
<PAGE>
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data for the years ended June 30, 2000
and 1999 is presented below:
<TABLE>
<CAPTION>
Fourth Quarter Third Quarter Second Quarter First Quarter
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
2000:
Interest income $ 13,057 $ 12,602 $ 12,273 $ 11,753
Interest expense 6,097 5,820 5,509 5,114
-------------- ------------- -------------- -------------
Net interest income 6,960 6,782 6,764 6,639
Provision for loan losses 350 300 610 340
Noninterest income 905 912 (98) 662
Noninterest expense 5,150 4,794 4,399 4,311
-------------- ------------- -------------- -------------
Income before income tax expense
2,365 2,600 1,657 2,650
Income tax expense 876 945 567 1,005
-------------- ------------- -------------- -------------
Net income $ 1,489 $ 1,655 $ 1,090 $ 1,645
============== ============= ============== =============
Earnings per share -
Basic .21 .21 .13 .19
Diluted .21 .21 .13 .19
1999:
Interest income $ 11,209 $ 11,157 $ 10,556 $ 10,116
Interest expense 4,803 4,786 5,536 5,209
-------------- ------------- -------------- -------------
Net interest income 6,406 6,371 5,020 4,907
Provision for loan losses 450 425 180 180
Noninterest income 740 701 797 678
Noninterest expense 4,038 3,984 8,628 3,793
-------------- ------------- -------------- -------------
Income (loss) before income tax
expense 2,658 2,663 (2,991) 1,612
Income tax expense (benefit) 992 1,043 (1,153) 629
-------------- ------------- -------------- -------------
Net income (loss) $ 1,666 $ 1,620 $ (1,838) $ 983
============== ============= ============== =============
Earnings per share since
conversion-
Basic .19 .18 N/A N/A
Diluted .19 .18 N/A N/A
</TABLE>
<PAGE>
CORPORATE INFORMATION
==================================================================
Corporate Offices
Cohoes Bancorp, Inc.
75 Remsen St.
Cohoes, New York 12047
(518) 233-6500
Form 10-K
For the 2000 fiscal year, Cohoes Bancorp, Inc. has filed an Annual Report on
Form 10-K. Shareholders wishing a copy may obtain one free of charge by
writing:
Richard A. Ahl
Executive Vice President, Secretary & CFO
Cohoes Bancorp, Inc.
75 Remsen St.
Cohoes, New York 12047
Transfer Agent and Registrar
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Independent Public Accountants
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
Special Counsel
Elias, Matz, Tiernan & Herrick LLP
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
Common Stock
The common stock of Cohoes Bancorp, Inc. trades on the Nasdaq stock
market under the symbol "COHB."
At September 1, 2000, there were approximately 4,600 holders of record
and approximately 2,200 beneficial shareholders.
Cohoes Bancorp, Inc. common stock was issued at $10.00 per share in
connection with the Company's initial public offering completed on December
31, 1998. The following table shows the range of high and low sale prices for
each quarterly period since the Company's common stock began trading in
January 1999, as well as the dividends declared each quarter.
Dividends
Fiscal 1999 High Low Declared
----------- ------ ------- ---------
Third Quarter $13.00 $ 10.38 N/A
Fourth Quarter $12.00 $ 9.25 $0.06
Fiscal 2000
-----------
First Quarter $13.13 $ 11.56 $0.06
Second Quarter $12.63 $ 9.38 $0.06
Third Quarter $10.31 $ 9.38 $0.07
Fourth Quarter $14.69 $ 9.69 $0.07
<PAGE>
During fiscal 2000, the Company declared dividends totaling $2.1 million
or $.26 per share on its common stock. Dividend payment decisions are made
with consideration of a variety of factors including earnings, financial
condition, market considerations and regulatory restrictions. Restrictions on
dividend payments are described in Note 2 of the Notes to Consolidated
Financial Statements included in this Annual Report.
BOARD OF DIRECTORS AND OFFICERS
COHOES BANCORP, INC.
BOARD OF DIRECTORS
Duncan S. MacAffer Chairman, Cohoes Bancorp, Inc.; Attorney
Arthur E. Bowen President, Bowen Funeral Home, Inc.
Walter H. Speidel Retired President & CEO, Cohoes Savings Bank
Harry L. Robinson President & CEO, Cohoes Bancorp, Inc.
R. Douglas Paton Retired stockbroker; independent financial consultant
J. Timothy O'Hearn President, Century House, Inc.
Chester C. DeLaMater Retired Executive Vice President & Secretary,
Cohoes Savings Bank
Peter G. Casabonne Managing Partner, Fuller Realty, Inc.
Michael L. Crotty President, Capitol Equipment, Inc.
Donald A. Wilson President, Wilson & Stark CPA, PC.
Frederick G. Field Jr. Retired Supervisor Town of Colonie
Directors of Cohoes Bancorp, Inc. also serve as Directors of Cohoes Savings Bank
DIRECTOR EMERITUS
Charles R. Crotty
OFFICERS
Harry L. Robinson, President & CEO
Richard A. Ahl, Executive Vice President, Secretary & CFO
COHOES SAVINGS BANK
OFFICERS
Harry L. Robinson, President & CEO
Richard A. Ahl, Executive Vice President, Secretary & CFO
Albert J. Picchi, Senior Vice President
Johanna O. Robbins, Treasurer
Kathleen Kelleher, Operations Officer
Tammy L. Kimble, Director of Human Resources
John G. Sturn, Director of Retail Banking
Lisa A. Malone, Director of Lending
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<PAGE>
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF THE REGISTRANT
<CAPTION>
State of
Percent of Incorporation or
Parent Subsidiary Ownership Organization
<S> <C> <C> <C>
Cohoes Bancorp, Inc. Cohoes Savings Bank 100% New York
Cohoes Savings Bank CSB Financial Services, Inc. 100% New York
Cohoes Savings Bank CSB Funding, Inc. 100% New York
Cohoes Savings Bank CSB Services Agency, Inc. 100% New York
Cohoes Savings Bank Cohoes Realty, Incorporated 100% New York
CSB Services Agency, Inc. CSB Security Insurance Agency 84% New York
</TABLE>
<PAGE>
EXHIBIT 23
CONSENTS OF EXPERTS
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the following Registration Statements:
o Form S-8 No. 333-70903, pertaining to the Cohoes Savings Bank 401(k) Savings
Plan in RSI Retirement Trust
o Form S-8 No. 333-87569, pertaining to the 1999 Recognition and Retention Plan
o Form S-8 No. 333-87571, pertaining to the 1999 Stock Option and Incentive Plan
of our report dated August 17, 2000 with respect to the consolidated
financial statements of Cohoes Bancorp, Inc. incorporated by reference in the
Annual Report on Form 10-K for the fiscal year ended June 30, 2000 and to all
references to our Firm included in such Registration Statements.
/s/ Arthur Andersen LLP
New York, New York
September 27, 2000
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
