SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended March 31, 2000
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[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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SEC File Number: 000-25009
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SKIBO FINANCIAL CORP.
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(Name of Small Business Issuer in Its Charter)
United States 25-1820465
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
242 East Main Street, Carnegie, Pennsylvania 15106
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(Address of Principal Executive Offices) (Zip Code)
(412) 276-2424
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
"Common Stock", par value $0.10 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
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $10,192,000
The registrant's voting stock is traded on the Nasdaq SmallCap Market under
the symbol "SKBO." The aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the trading price of the registrant's
"Common Stock" as reported by the Nasdaq SmallCap Market on May 24, 2000, was
$6,958,491 ($6.31 per share based on 1,102,772 shares of "Common Stock"
outstanding).
As of May 24, 2000, the registrant had 3,287,426 shares of "Common Stock"
outstanding.
Transitional Small Business Disclosure Format (check one) Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE
1. Part II -- Portions of the registrant's 2000 Annual Report to Stockholders.
2. Part III -- Portions of the registrant's Proxy Statement for the 2000
Annual Meeting of Stockholders.
<PAGE>
PART I
Item 1. Business
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The Stock Holding Company and The Bank
First Carnegie Deposit (the "Bank") was originally chartered in 1924 as
Fidelity Building and Loan. In January 1939, the Bank's name changed to First
Federal Savings and Loan Association of Carnegie. The name was again changed on
December 17, 1996 to First Carnegie Deposit. On April 4, 1997, the Bank
reorganized from a mutual savings bank into a federal mutual holding company
structure, whereby the Bank exchanged its federal mutual savings bank charter
for a federal stock savings bank charter and formed Skibo Bancshares, M.H.C.
(the "MHC"), a federally chartered mutual holding company.
On October 29, 1998, the Bank reorganized into a two-tier holding
company structure. The Bank became a wholly-owned subsidiary of Skibo Financial
Corp. (the "Company"), a stock corporation which is majority owned by the MHC.
The Company was incorporated solely for the purpose of becoming a savings and
loan holding company and had no prior operating history.
All references in this document to the Company include activities of
both Skibo Financial Corp. and First Carnegie Deposit on a consolidated basis
unless the context requires otherwise.
The Company's and Bank's executive offices are located at 242 E. Main
Street, Carnegie, Pennsylvania 15106. The telephone number is (412) 276-2424.
The Mutual Holding Company
The Company is a majority-owned subsidiary of the MHC. The Company, the
MHC, and the Bank are each subject to regulations of the Office of Thrift
Supervision (the "OTS") of the Department of the Treasury. Pursuant to OTS
regulations governing mutual holding companies, the MHC must at all times own
more than 50% of the outstanding voting stock of the Company. As the majority
(58%) owner of the Company, the MHC elects directors who oversee the affairs and
operations of the Company. The MHC currently does not engage in any business
activity other than to hold the majority of Company Common Stock and to invest a
small amount of funds retained at the MHC. At March 31, 2000, the MHC's assets
consisted of a majority ownership interest in the Company and approximately
$97,000 in cash. The MHC had no liabilities at March 31, 2000.
Business Strategy
The Bank is a community oriented savings association providing mortgage
loans and consumer loans. The Company is primarily engaged in attracting
deposits from the general public through its offices and using those and other
available sources of funds to purchase and originate one- to four-family
mortgage loans and farm loans and to invest in mortgage-backed and other
securities, Small Business Administration ("SBA") and other government agency
guaranteed commercial and consumer loans. Because the Company faces strong
competition in originating traditional residential mortgage loans, the Company
has emphasized other forms of lending, including the purchase of SBA and other
government agency guaranteed loans, and commercial real estate loans, including
farms.
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<PAGE>
The principal sources of funds for the Company's lending and investing
activities are deposits, the repayment and maturity of loans, the maturity and
call of securities and Federal Home Loan Bank ("FHLB") advances. The principal
source of income is interest on loans and mortgage-backed and investment
securities and the principal expense is interest paid on deposits and FHLB
advances.
Competition
The Company's market area is saturated with lenders of first mortgage
residential real estate loans many of whom have far greater resources than the
Company. The Company generally has had difficulty competing with the many
mortgage companies, commercial banks, credit unions, and savings associations in
the Company's market for these loans. Accordingly, the Company has followed a
non-traditional operating strategy by purchasing a large amount of one- to
four-family mortgage loans, farm loans and SBA and other government agency
guaranteed loans, as well as purchasing mortgage-backed and other securities.
The Company intends to continue purchasing loans to supplement reduced loan
demands, as needed.
The competition for deposits comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions, and
multi-state regional banks in the Company's market areas. Competition for funds
also includes a number of insurance products sold by local agents and investment
products such as mutual funds and other securities sold by local and regional
brokers. The Company competes for deposits by offering depositors competitive
interest rates and a high level of personal service.
Market Area
The Company operates three offices. The main office is located in
Carnegie, Pennsylvania, adjacent to Pittsburgh, Pennsylvania. The Company's
branch offices are located in McKees Rocks, Allegheny County and Washington,
Washington County, Pennsylvania. Based on the Company's branch locations and
deposit activity, the Company's market area covers portions of both the
Pittsburgh and Washington, Pennsylvania metropolitan areas.
Economic growth in the Company's market areas remains dependent upon
the local economy. The deposit and loan activity of the Company is significantly
affected by economic conditions in its market areas. The economy in southern
Allegheny County consists primarily of the service industries, professionals and
some heavy industries, while the economy in northeastern Washington County
consists primarily of agricultural and service industries.
Lending Activities
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General. At March 31, 2000, the Company's net portfolio of loans
receivable totaled $56.5 million as compared to $65.3 million at March 31, 1999.
Net loans receivable comprised 37.0% of Company total assets and 74.8% of total
deposits at March 31, 2000, as compared to 42.1% and 84.9%, respectively, at
March 31, 1999. The principal categories of loans in the Company's portfolio are
one- to four-family and multi-family residential real estate loans, commercial
real estate loans (including farms), government agency guaranteed and/or insured
real estate loans and SBA and other government guaranteed consumer and
commercial loans. At March 31, 2000, net government agency guaranteed or insured
loans comprised 38.7% of the Company's net loan portfolio. At March 31, 2000,
there were no mortgage loans categorized as held-for-sale.
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<PAGE>
Analysis of Loan Portfolio. The following table sets forth information
concerning the composition of the Company's loan portfolio in dollar amounts and
in percentages of the total loan portfolio as of the dates indicated.
<TABLE>
<CAPTION>
At March 31,
----------------------------------------------------
2000 1999
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(Dollars in thousands)
<S> <C> <C> <C> <C>
Type of Loans:
-------------
Real Estate:
One- to four-family ....................... $ 20,557 36.3% $ 21,839 33.3%
Government agency guaranteed and/or insured 11,739 20.7 12,814 19.5
Multi-family .............................. 2,332 4.1 2,510 3.8
Commercial* ............................... 11,080 19.5 13,175 20.1
Consumer and commercial loans:
SBA guaranteed ............................ 7,876 13.9 11,083 16.9
Other government agency guaranteed ........ 2,073 3.7 3,076 4.7
Savings account ........................... 390 .7 350 .5
Other ..................................... 621 1.1 757 1.2
-------- ----- -------- -----
Total loans ........................... 56,668 100.0% 65,604 100.0%
===== =====
Add (deduct):
Premium/discount .......................... 297 411
Loans in process .......................... -- (81)
Deferred loan origination fees and costs .. (36) (50)
Allowance for loan losses ................. (425) (575)
-------- ---------
Loans receivable, net ................. $ 56,504 $ 65,309
======== =========
</TABLE>
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* Includes farm real estate loans. See "Multi-family and Commercial Real
Estate Loans."
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<PAGE>
Loan Maturity Table. The following table sets forth the remaining
contractual maturities of the Company's loan portfolio at March 31, 2000. The
table does not include the effect of future prepayments or scheduled principal
repayments. Prepayments and scheduled principal repayments on loans totaled
$13.1 million and $19.7 million for the years ended March 31, 2000 and 1999,
respectively. Adjustable rate loans are shown as maturing based on contractual
maturities. Loans on demand are reported as due within three months.
<TABLE>
<CAPTION>
Government
Agency
1-4 Guaranteed Multi-family SBA and Other
Family and/or and Other Consumer
Real Insured Commercial Government and
Estate Real Estate Real Estate* Guaranteed Commercial Total
------- ----------- ------------ ------------ ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts Due:
Within 3 months ......... $ 5 $ 3 $ -- $ 4 $ 390 $ 402
3 months to 1 Year ...... 6 -- -- 194 -- 200
After 1 year:
1 to 3 years .......... 959 198 101 718 12 1,988
3 to 5 years .......... 693 -- 76 1,269 6 2,044
5 to 10 years ......... 1,080 513 2,837 2,488 603 7,521
10 to 20 years ........ 5,499 4,241 7,184 5,000 -- 21,924
Over 20 years ......... 12,315 6,784 3,214 276 -- 22,589
-------- -------- -------- -------- -------- --------
Total due after one year 20,546 11,736 13,412 9,751 621 56,066
-------- -------- -------- -------- -------- --------
Total amount due ........ 20,557 11,739 13,412 9,949 1,011 56,668
Add or (deduct):
Allowance for loan losses (122) (7) (289) (2) (5) (425)
Deferred loan fees ...... (5) (2) (29) -- -- (36)
Premium (discount) ...... 101 116 (22) 102 -- 297
-------- -------- -------- -------- -------- --------
Loans receivable, net ... $ 20,531 $ 11,846 $ 13,072 $ 10,049 $ 1,006 $ 56,504
======== ======== ======== ======== ======== ========
</TABLE>
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* Includes farm real estate loans. See "Multi-family and Commercial Real
Estate Loans."
The following table sets forth at March 31, 2000, the dollar amount of
all loans contractually due after March 31, 2001, and whether such loans have
fixed interest rates or adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Rates Adjustable Rates Total
----------- ---------------- -----
(In Thousands)
<S> <C> <C> <C>
One- to four-family ........................... $16,007 $ 4,539 $20,546
Government agency guaranteed and/or
insured real estate ......................... 11,481 255 11,736
Multi-family and commercial real estate* ...... 10,633 2,779 13,412
SBA guaranteed ................................ 3,480 4,215 7,695
Other government guaranteed ................... 1,280 776 2,056
Other consumer and commercial ................. 229 392 621
------- ------- -------
Total ......................................... $43,110 $12,956 $56,066
======= ======= =======
</TABLE>
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* Includes farm real estate loans. See "Multi-family and Commercial Real
Estate Loans."
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<PAGE>
The following table sets forth the Company's total loan originations,
purchases and principal repayments for the periods indicated:
Year Ended March 31,
--------------------
2000 1999
---- ----
(In Thousands)
Total gross loans receivable at
beginning of period ........................... $ 65,604 $ 68,089
======== ========
Loans originated:
One- to four-family real estate ................ 304 269
Multi-family and commercial real
estate* ...................................... 32 472
Other consumer and commercial .................. 256 766
-------- --------
Total loans originated ........................... $ 592 $ 1,507
======== ========
Loans purchased:
One- to four-family real estate ................ $ 1,610 $ 7,546
Guaranteed and/or insured real estate .......... 1,120 3,610
Multi-family and commercial real
estate* ...................................... 247 2,909
SBA guaranteed ................................. 573 294
Other government guaranteed .................... -- 1,121
Other consumer and commercial .................. -- 180
-------- --------
Total loans purchased ............................ $ 3,550 $ 15,660
======== ========
Less:
Loan principal repayments ...................... $ 13,078 $ 19,652
-------- --------
Net loan activity ................................ (8,936) (2,485)
======== ========
Total gross loans receivable at
end of period ................................ $ 56,668 $ 65,604
======== ========
-----------
* Includes farm real estate loans. See "Multi-family and Commercial Real
Estate Loans."
-5-
<PAGE>
One- to four-family Loans. The Company purchases and originates one- to
four-family mortgage loans secured by property located in the Company's primary
market areas. The Company generally originates owner-occupied one- to
four-family mortgage loans in amounts up to 80% of the lesser of the appraised
value or selling price of the mortgaged property without requiring mortgage
insurance. The Company will originate a mortgage loan in an amount up to 90% of
the lesser of the appraised value or selling price of a mortgaged property,
however, mortgage insurance is required for the amount in excess of 80% of such
value. Furthermore, the Company ordinarily requires an escrow account to
guarantee payment of taxes and written certifications concerning occupancy,
terms of sale, and the fact that no secondary financing exists.
Non-owner-occupied residential mortgage loans are generally originated up to 75%
of the lesser of the appraised value or selling price of the property on a fixed
rate basis only. Interest rates charged on mortgage loans are competitively
priced based on market conditions and the Company's cost of funds.
The Company currently originates only fixed rate loans which provide
for the repayment of principal and interest over a period not to exceed 30
years. Generally, the Company's originated fixed rate one- to four-family real
estate loans do not conform to the Federal National Mortgage Corporation
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC") guidelines,
and therefore most of the Company's fixed rate one- to four-family loans are not
salable in the secondary market. The Company originates and retains such loans
for its portfolio to meet community lending needs. All originated loans are
serviced by the Company.
The Company purchases one- to four-family adjustable rate ("ARMs") and
fixed rate mortgages. Purchased one- to four-family fixed rate and adjustable
rate mortgages are primarily bought from local mortgage banking companies and
conform to FHLMC guidelines. Purchased ARMs provide for periodic interest rate
adjustments not to exceed plus or minus 2.0% per year with a maximum adjustment
over the term of the loan as set forth in the loan agreement of 6.0% above the
initial interest rate depending on the terms of the loan. ARMs typically reprice
every year, although some adjust every three or five years, and provide for
terms of up to 30 years with most loans having terms of between 15 and 30 years.
The Company's purchased ARMs are generally indexed to the one- and three-year
Constant Maturity Treasuries ("CMT").
Adjustable rate mortgage loans decrease the risks associated with
changes in interest rates by periodically repricing, but involve other risks
because as interest rates increase, the underlying payments by the borrower
increase, thus increasing the potential for default. At the same time, the
marketability of the underlying collateral may be adversely affected by higher
interest rates. Upward adjustment of the contractual interest rate is also
limited by the maximum periodic and lifetime interest rate adjustment permitted
by the adjustable rate mortgage loan documents and, therefore, is potentially
limited in effectiveness during periods of rapidly rising interest rates. At
March 31, 2000, $4.5 million of the Company's one- to four-family loan portfolio
had adjustable rates of interest.
On occasion, the Company will buy ARMs with "teaser rates" to increase
its one- to four-family portfolio to meet its community lending needs. Teaser
rate residential mortgage loans are adjustable rate loans for which the initial
interest rate is discounted below the rate calculated based upon the formula
used to determine future interest rate adjustments. The interest rate adjusts
annually or every three years, depending upon the loan program, based upon a
Treasury Bill index. Even if the index remains constant, the interest rate
adjusts upward until it is equal to the index value plus the applicable margin
used to calculate the interest rate. This can have a positive effect on net
interest income during periods of level or declining interest rates. However,
interest rate adjustments on these loans are generally limited to 2% per
adjustment with a 6% life-of-loan maximum rate increase, measured from the
initial teaser interest rate.
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<PAGE>
Therefore, these loans may not fully reflect interest rate changes in a rapid or
sustained rising interest rate environment. Because the life-of-loan cap is
measured from the initial teaser rate, teaser loans may provide less protection
against rising rates than non-discounted ARMs with 6% life-of-loan caps.
Furthermore, borrowers who find themselves able to cope with mortgage payments
at lower rates may have difficulty paying higher payments which result when the
interest rate adjusts upward even though general interest rate conditions remain
constant. Because of the initially lower than market rate of interest and the
overall limit on increased rates of 6%, these loans do not provide the Company
with the typical amount of protection from interest rate risk as non-teaser rate
ARMs.
During the year ended March 31, 2000, the Company purchased $1.6
million of one- to four-family loans, all of which were fixed rate mortgages.
Government Agency Guaranteed and/or Insured Real Estate. The Company
acquires Farm Service Agency ("FSA") and United States Department of Agriculture
("USDA") commercial loans including farms, Federal Housing Administration
("FHA") and GNMA project loans, and other FHA and Veterans Administration ("VA")
loans from approved dealers. During the year ended March 31, 2000, the Company
purchased whole loans or a participating interest in government guaranteed
mortgage loans totaling $1.1 million.
Of the $11.7 million balance of government guaranteed loans at March
31, 2000, FSA and USDA, FHA and GNMA project, FHA, and VA loans amounted to $5.4
million, $4.1 million, $1.6 million and $577,000, respectively.
FSA and USDA loans are secured by farm real estate located in various
parts of the United States. For certain risks associated with farm lending, see
"Agricultural Related Lending." FSA and USDA loans are guaranteed as to interest
and 90% of the principal. The Company reduces its risk by purchasing only the
guaranteed portions of a FSA or USDA loan.
Much of the FHA and GNMA project loans held by the Company consist of
multi-family housing located throughout the United States. Such loans are
guaranteed 100% by the sponsoring government enterprise and can be considered
for Community Reinvestment Act ("CRA") credit, provided certain community
lending tests are satisfied.
FHA and VA loans are secured by one- to four-family properties located
in the Company's primary market area.
Multi-family and Commercial Real Estate Loans. The Company has
historically originated a limited amount of loans secured by multi-family real
estate, including non-owner occupied residential multi-family dwelling units
(more than four units). The commercial real estate loans originated by the
Company consist primarily of loans secured by small office buildings. A
substantial part of the Company's originated commercial and multi-family real
estate loans are secured by commercial buildings, apartment complexes and other
multi-family residential properties located in the Company's primary market
area.
The Company generally originates commercial and multi-family real
estate loans up to 75% of the appraised value of the property securing the loan.
The commercial and multi-family real estate loans in the Company's portfolio
generally consist of fixed rate loans which were originated at prevailing market
rates for terms up to 20 years.
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<PAGE>
Beginning in 1996, the Company entered into a participation agreement
with PennWest Farm Credit, ACA ("PWFC"). In January 1999, PennWest Farm Credit,
ACA consolidated with York Farm, ACA in York, PA and Northeastern Farm Credit,
ACA in Lewisburg, PA to become AgChoice Farm Credit, ACA ("AgChoice"). AgChoice
is an Agricultural Credit Association in the AgFirst district. Approximately 130
employees provide financial products and services to over 9,500
member/stockholders in fifty-two central and western Pennsylvania counties, as
well as four counties in West Virginia.
Under the agreement with PWFC, which extends to AgChoice, the Company
participates on a 90% basis in secured long-term real estate mortgage loans and
short-and intermediate-term loans for agricultural production or operating
purposes, some of which are FSA or USDA insured. The Company attempts to
participate in loans located in its market area; however, all PWFC participation
loans are on properties located in Pennsylvania. See "Agricultural Related
Lending" and "Government Agency Guaranteed and/or Insured Real Estate".
During the year ended March 31, 2000, the Company purchased from
AgChoice a participating interest in adjustable rate farm loans totaling
$328,000, which are included in the Company's commercial real estate portfolio.
The ARMs typically reprice every year, although some adjust every 3 to 5 years
and some adjust monthly. The Company's ARMs repricing every one to five years
are generally indexed to the one- and three-year CMT and the ARMs repricing
monthly are generally indexed to Prime.
Loans secured by commercial (including farms) and multi-family real
estate are generally larger and involve a greater degree of risk than one- to
four-family mortgage loans. Of primary concern in commercial and multi-family
real estate lending is the borrower's creditworthiness, the feasibility and cash
flow potential of the project, and the outlook for successful operation or
management of the properties. As a result, repayment of such loans may be
subject, to a greater extent than residential real estate loans, to adverse
conditions in the real estate market or the economy. However, the Company
believes that the higher yields and shorter terms compensate the Company for the
increased credit risk associated with such loans. Furthermore, in accordance
with the Company's classification of assets policy and procedure, the Company
requests annual financial statements on major loans secured by commercial and
multi-family real estate. At March 31, 2000, the largest multi-family real
estate loan totaled $667,000 and consisted of an apartment building, located in
Hopewell Township, Beaver County, Pennsylvania. The Company's largest commercial
real estate loan totaled $1.1 million at March 31, 2000, and consisted of an
office building located in Carnegie, Pennsylvania. See also "Loans to One
Borrower."
Small Business Administration Loans. In 1992, the Company began
purchasing loans qualifying for guarantees issued by the United States Small
Business Administration, an independent agency of the Federal government. SBA
guarantees on such loans currently range from 75% to 80% of the principal and
interest balance. SBA loans are generally made to small and medium size
businesses. Such loans are secured by first or second mortgages on real estate,
and additional collateral such as personal property or other real property. SBA
commercial loans consist of, among other things, commercial lines of credit,
commercial vehicle loans, and working capital loans and are typically secured by
residential or commercial property, receivables or inventory, or some other form
of collateral. SBA loans generally have terms ranging from seven to 25 years
depending on the use of the proceeds. To qualify for an SBA loan, the borrower
must demonstrate the capacity to service the loan exclusive of the collateral
and have a history of income and ability to repay the loan from historical
earnings and/or reliable projections.
If a borrower defaults on an SBA loan, the SBA lender or servicer may
proceed to pursue its remedies, subject to prior approval by the SBA, and if
received, the SBA or the SBA lender or servicer would proceed with the
collection of the loan and any losses are shared pro-rated by the SBA and the
holder
-8-
<PAGE>
of the unguaranteed portion. This generally does not result in the shifting of
the loss to the Company as holder of the guaranteed portion. However, if the SBA
determines that a loan is in default due to deficiencies in the manner in which
the loan application was prepared or due to other underwriting or document
deficiencies, the SBA may decline to honor its guarantee on the loan or seek
recovery of damages from the SBA lender or servicer.
The Company purchases only the SBA guaranteed portion of the loan.
Because the purchased portion is guaranteed, such loans have lower yields than
other types of loans. These loans are generally sold at a premium, primarily due
to the SBA's guarantee. The nonguaranteed portion of the loan is retained and
serviced by the originator or such other third party. Servicers are required to
service all SBA loans in accordance with the SBA's rules and regulations. During
the year ended March 31, 2000, the Company purchased $573,000 of SBA loans.
Agricultural Related Lending. The Company primarily purchases loans to
finance the purchase of livestock, farm machinery and equipment, seed,
fertilizer and other farm related products. Agricultural real estate loans are
primarily originated with adjustable rates of interest. Generally, such loans
provide for a fixed rate of interest for the first three years, adjusting
annually thereafter. In addition, such loans provide for a ten year term based
on a 20 year amortization schedule. Adjustable rate agricultural real estate
loans provide for a margin over the yields on the corresponding U.S. Treasury
Securities. Agricultural real estate loans are generally limited to 75% of the
value of the property.
Agricultural operating loans are originated at either an adjustable or
fixed rate of interest for up to a one year term or, in the case of livestock,
upon sale. Most agricultural operating loans have terms of one year or less.
Such loans generally provide for annual payments of principal and interest, or a
lump sum payment upon maturity if the original term is less than one year. Loans
secured by agricultural machinery are generally originated as adjustable rate
loans with terms of up to seven years.
Agricultural related lending affords the Company the opportunity to
earn yields higher than those obtainable to one- to four-family residential
lending. Nevertheless, agricultural related lending involves a greater degree of
risk than one- to four-family residential mortgage loans because of the
typically larger loan amount. In addition, payments on loans are dependent upon
the successful operation or management of the farm property securing the loan or
for which an operating loan is utilized. The success of the loan may also be
affected by many factors outside the control of the farm borrower, such as
weather, government farm policy, international demand for agricultural products
and changing consumer preferences.
At March 31, 2000, the Company's agricultural loans totaled $2.1
million, all of which were government guaranteed loans.
Consumer Loans. The Company offers consumer loans in order to provide a
wider range of financial services to its customers. Federal savings associations
are permitted to make secured and unsecured consumer loans up to 35% of their
assets. In addition, savings associations have lending authority above the 35%
limitation for certain consumer loans, such as home equity, home improvement,
mobile home, and savings account or passbook loans.
In connection with consumer loan applications (excluding savings
account loans), the Company verifies the borrower's income and reviews a credit
report. In addition, the relationship of the loan to the value of the collateral
is considered. Due to the type and nature of the collateral, and, in some cases
the absence of collateral, consumer loans generally have shorter terms, higher
interest rates and involve more
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<PAGE>
credit risk as compared to one- to four-family residential loans. Consumer
lending collections are typically dependent upon the borrower's continuing
financial stability, and thus, are more likely to be adversely effected by job
loss, divorce, illness, and personal bankruptcy. Generally, collateral for
consumer loans depreciates rapidly and often does not provide an adequate source
of repayment of the outstanding loan balance. The remaining deficiency often
warrants litigation against the borrower and is usually turned over to a
collection agency or law firm which is costly to the Company. The Company
attempts to limit its exposure in consumer lending by originating only a small
amount of such loans and by focusing on consumer loans secured by deposit
accounts.
Loan Approval Procedures and Authority. Loan originations are generally
obtained from existing customers, members of the local community, and referrals
from real estate brokers, lawyers, accountants, and current and past customers
within the Company's lending area.
Upon receipt of any loan application from a prospective borrower, a
credit report and verifications are ordered to confirm specific information
relating to the loan applicant's employment, income, and credit standing. An
appraisal or valuation determination, subject to regulatory requirements, of the
real estate intended to secure the proposed loan is undertaken. In connection
with the loan approval process, the chief lending officer (the President of the
Company) analyzes the loan applications and the property, if any, involved. All
loans originated or purchased are underwritten and processed at the Company's
main office by the chief lending officer, subject to the loan underwriting
policies as approved by the Board of Directors. All purchased and originated
loans are approved or ratified by the Board of Directors.
Loan applicants are promptly notified of the decision of the Company by
a letter setting forth the terms and conditions of the decision. If approved,
these terms and conditions include the amount of the loan, interest rate basis,
amortization term, a brief description of the real estate to be mortgaged to the
Company, and the notice requirement of insurance coverage to be maintained to
protect the Company's interest. The Company requires title insurance on first
mortgage loans and fire and casualty insurance on all properties securing loans,
which insurance must be maintained during the entire term of the loan. The
Company also requires flood insurance, if appropriate, in order to protect the
Company's interest in the security property. Mortgage loans originated and
purchased by the Company generally include due-on-sale clauses that provide the
Company with the contractual right to deem the loan immediately due and payable
in the event that the borrower transfers ownership of the property without the
Company's consent.
Loan Servicing. The Company services the loans it originates. The
Company also services a small number of loans for another institution. Loan
servicing includes collecting and remitting loan payments, accounting for
principal and interest, making inspections as required of mortgaged premises,
contacting delinquent mortgagors, supervising foreclosures and property
dispositions in the event of unremedied defaults, and generally administering
the loans. Funds that have been escrowed by borrowers for the payment of
mortgage-related expenses, such as property taxes and hazard, flood, and
mortgage insurance premiums, are maintained in escrow accounts at the Company.
The Company does not service any of the loans it purchases as such loans are
primarily purchased on a servicing released basis. The Company does, however,
monitor the servicers of purchased loans to ensure accurate and timely payments.
At March 31, 2000, the Company had $46.7 million of its total loan portfolio
serviced by others and $10.0 million were serviced by the Company.
Loan Commitments. The Company issues written commitments to prospective
borrowers on all approved mortgage loans which generally expire within 45 days
of the date of issuance. The Company charges no commitment fees or points to
lock in rates or to secure commitments. In some instances, after
-10-
<PAGE>
a review of the rate, terms, and circumstances, commitments may be renewed or
extended beyond the 45 day limit. At March 31, 2000, the Company had no
outstanding commitments.
Loans to One Borrower. Federal regulations limit loans-to-one borrower
or an affiliated group of borrowers in an amount equal to 15% of unimpaired
capital and unimpaired surplus of the Company. The Company is authorized to lend
up to an additional 10% of unimpaired capital and unimpaired surplus if the loan
is fully secured by readily marketable collateral. At March 31, 2000, the
Company was in compliance with applicable loans-to-one borrower limitations.
At March 31, 2000, the Company's largest lending relationship was $1.6
million. This relationship consisted of two loans secured by two office
buildings located in Carnegie, Pennsylvania. The second largest lending
relationship consisted of two loans totaling $756,000 secured by an office
building located in Pittsburgh, Pennsylvania and a 36 unit apartment complex
located in Hopewell Township, Beaver County, Pennsylvania. The third largest
lending relationship consisted of three loans totaling $696,000 secured by
apartment buildings located in South Fayette Township and Crafton Borough,
Pennsylvania. At March 31, 2000, these loans were performing in accordance with
their terms.
Non-Performing and Problem Assets
Loan Delinquencies. The Company's collection procedures provide that
when a mortgage loan is 30 days past due, a delinquent notice is sent to the
borrower and a late charge is imposed in accordance with the mortgage. If
payment is still delinquent after approximately 60 days, the borrower will
receive a notice of default establishing a date by which the borrower must bring
the account current or foreclosure proceedings will be instituted. Late charges
are also imposed in accordance with the mortgage. If the loan continues in a
delinquent status for 90 days past due and no repayment plan is in effect, the
account is turned over to an attorney for collection or foreclosure and the
borrower is notified when foreclosure has commenced. At March 31, 2000, loans
past due greater than 90 days totaled $48,000 or .03% of total assets.
Management reviews all delinquent loans on a monthly basis and provides
delinquency reports to the President and the Board of Directors. In addition,
the Board of Directors performs a quarterly review of all delinquent loans
ninety days or more past due. Loans are placed on non-accrual status when
considered doubtful of collection by management. Generally, loans past due 90
days or more as to principal and interest which, in the opinion of management,
are not adequately secured to insure the collection of the entire outstanding
balance of the loan including accrued interest are placed on non-accrual status.
Interest accrued and unpaid at the time a loan is placed on non-accrual status
is charged against interest income.
-11-
<PAGE>
Non-Performing Assets. The following table sets forth information
regarding non-accrual loans, accruing loans which are past due 90 days or more
as to principal or interest payments, and foreclosed assets. As of the dates
indicated, the Company had no loans categorized as troubled debt restructuring.
The amounts presented represent the total outstanding principal balance of the
related loans, rather than the actual payment amounts which are past due.
<TABLE>
<CAPTION>
At March 31,
-----------------------
2000 1999
---- ----
(Dollars in Thousands)
<S> <C> <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
One- to four-family ....................................... $ -- $ --
Government agency guaranteed and/or
insured real estate ..................................... -- 296
Multi-family and commercial* .............................. -- 68
Non-mortgage loans:
SBA and other government
guaranteed and/or insured ............................... -- 321
Other consumer and commercial ............................. -- --
----- ----
Total ....................................................... $ -- $685
===== ====
Accruing loans which are contractually past due 90 days
or more:
Mortgage loans:
One- to four-family ....................................... $ 45 $ 24
Government agency guaranteed and/or
insured real estate ..................................... 3 --
Multi-family and commercial* .............................. -- --
Non-mortgage loans:
Other government guaranteed
and/or insured .......................................... -- 109
Other consumer and commercial ............................. -- --
----- ----
Total ....................................................... $ 48 $133
===== ====
Total non-accrual and accrual loans ......................... $ 48 $818
===== ====
Real estate owned ........................................... $ -- $ --
===== ====
Total non-performing assets ................................. $ 48 $818
===== ====
Total non-performing loans to net loans ..................... .08% 1.25%
===== ====
Total non-performing loans to total assets .................. .03% .53%
===== ====
Total non-performing assets to total assets ................. .03% .53%
===== ====
</TABLE>
-----------
* Includes farm real estate loans.
There are no loans accounted for on a non-accrual basis; therefore, all
interest was recorded and included in the Company's interest income for the year
ended March 31, 2000.
The Company's three largest non-performing loans are secured by single
family properties, two of which are located in Carnegie, Pennsylvania, and the
third is located in Pittsburgh, Pennsylvania.
-12-
<PAGE>
Classified Assets. Federal regulations and the Company's Classification
of Assets Policy require that the Company utilize an internal asset
classification system as a means of reporting problem and potential problem
assets. The Company has incorporated the OTS internal asset classifications as
part of its credit monitoring system. The Company currently classifies problem
and potential problem assets as "substandard," "doubtful" or "loss" assets. An
asset is considered substandard if it is inadequately protected by the current
equity and paying capacity of the obligor or of the collateral pledged, if any.
Substandard assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as doubtful have all of the weaknesses inherent
in those classified as substandard, with the added characteristic that the
weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as loss are those considered "uncollectible" and
of such little value that their continuance as assets without the establishment
of a specific loss reserve is not warranted. Assets which do not currently
expose the insured institution to sufficient risk to warrant classification in
one of the aforementioned categories but possess weaknesses are required to be
designated "Special Mention."
When an insured institution classifies problem assets as either
substandard or doubtful, it is required to establish general allowances for loan
losses in amounts deemed prudent by management. General allowances represent
loss allowances which have been established to recognize the inherent risk
associated with lending activities, but which, unlike specific allowances, have
not been allocated to particular problem assets. When an insured institution
classifies problem assets as loss, it is required either to establish a specific
allowance equal to 100% of that portion of the asset so classified or to charge
off such amount. General loss allowances established to cover possible losses
related to assets classified as substandard or doubtful or to cover risks of
lending in general may be included as part of an institution's regulatory
capital, while specific allowances do not qualify as regulatory capital. An
institution's determination as to the classification of its assets and the
amount of its valuation allowances is subject to review by the OTS, which may
order the establishment of additional general or specific loss allowances.
For financial reporting purposes, the Company follows the guidelines of
Statement of Financial Accounting Standards ("SFAS") No. 114 "Accounting by
Creditors for Impairment of a Loan" and SFAS 118 "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures," an amendment of SFAS
114. SFAS 114 addresses the accounting by creditors for impairment of loans by
specifying how reserves for credit losses related to certain loans should be
measured. SFAS 118 rescinds SFAS 114 rules to permit a creditor to use existing
methods for recognizing interest income on impaired loans and eliminated the
income recognition provisions of SFAS 114.
In accordance with its classification of assets policy, the Company
regularly reviews the problem assets in its portfolio to determine whether any
assets require classification in accordance with applicable regulations. On the
basis of management's review of its assets, at March 31, 2000, the Company had
classified $50,000 of loans as substandard and no loans were classified as
doubtful, loss, or special mention. Of the $50,000 classified, $48,000
represents the principal balance of such loans and $2,000 represents an advance
for taxes on one of the properties.
The largest classified asset is a single-family mortgage with an
outstanding principal balance of approximately $29,000. The owner of the
property is deceased and an estate is being established. A claim will be made
against the estate.
Allowance for Loan Losses. Management regularly performs an analysis to
identify the inherent risk of loss in the Company's loan portfolio. Provisions
for losses on loans are charged to operations in an amount that results in an
allowance for loan losses sufficient, in management's judgement, to cover
-13-
<PAGE>
losses based on management's periodic evaluation of known and inherent risks in
the loan portfolio, past loss experience of the Company, current economic
conditions, industry loss reserve levels, adverse situations which may affect
the borrower, the estimated value of any underlying collateral and other
relevant factors. The Board of Director's Classified Asset Committee reviews and
approves the loan loss reserve on a quarterly basis.
The Company will continue to monitor its allowance for loan losses and
make future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Company maintains its allowance for
loan losses at a level that it considers to be adequate to provide for the
inherent risk of loss in its loan portfolio, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods. In addition, the
Company's determination as to the amount of its allowance for loan losses is
subject to review by the OTS, as part of its examination process, which may
result in the establishment of an additional allowance based upon the judgment
of the OTS after a review of the information available at the time of the OTS
examination.
At March 31, 2000, the Company's allowance for loan losses totaled
$425,000 or .75% of net loans receivable and 885.4% of non-performing loans, as
compared to $575,000 or .88% of net loans receivable and 70.3% of non-performing
loans at March 31, 1999.
-14-
<PAGE>
Analysis of Allowance for Loan Losses. The following table sets forth
information with respect to the Company's allowance for loan losses at the dates
indicated:
At March 31,
-------------------------
2000 1999
---------- -----------
(Dollars in Thousands)
Total loans outstanding, net .................... $ 56,504 $ 65,309
======== ========
Average loans outstanding, net .................. $ 59,521 $ 65,591
======== ========
Allowance balances (at beginning of
period) ..................................... $ 575 $ 549
Provision:
One- to four-family residential .............. (14) 9
Multi-family and commercial real
estate* ................................... (117) 10
Consumer and commercial ...................... (19) 6
Charge-offs:
One- to four-family residential .............. -- --
Multi-family and commercial
real estate* .............................. -- --
Consumer and commercial ...................... -- --
Recoveries:
One- to four-family residential .............. -- --
Multi-family and commercial
real estate* .............................. -- --
Consumer and commercial ...................... -- 1
-------- --------
Allowance balance (at end of period) ............ $ 425 $ 575
======== ========
Allowance for loan losses as a percent
of total loans outstanding ................. .75% .88%
Net loans charged off as a percent of
average loans outstanding .................. --% --%
-----------
* Includes farm real estate loans.
-15-
<PAGE>
Allocation of Allowance for Loan Losses. The following table sets forth
the allocation of the Company's allowance for loan losses by loan category and
the percent of loans in each category to total loans receivable, net, at the
dates indicated. The portion of the loan loss allowance allocated to each loan
category does not represent the total available for future losses which may
occur within the loan category since the total loan loss allowance is a
valuation reserve applicable to the entire loan portfolio.
<TABLE>
<CAPTION>
At March 31,
-----------------------------------------------------
2000 1999
--------------------------- ------------------------
Percent of Percent of
Loans in Each Loans in Each
Category to Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Loan Type:
One- to four-family real estate.................. $122 36.3% $142 33.3%
Government agency guaranteed
and/or insured real estate.................... 7 20.7 16 19.5
Multi-family and commercial real estate*......... 289 23.6 391 23.9
SBA and other guaranteed......................... 2 17.6 22 21.6
Other consumer and commercial.................... 5 1.8 4 1.7
---- ----- --- -----
Total $425 100.0% $575 100.0%
=== ===== === =====
</TABLE>
---------------
* Includes farm real estate loans.
Real Estate Owned. Real estate acquired by the Company as a result of
foreclosure, judgment, or deed in lieu of foreclosure is classified as real
estate owned until it is sold. When property is so acquired, it is recorded at
the lower of the cost or fair value at the date of acquisition and any write
down resulting therefrom is charged to the allowance for losses on real estate
owned. All costs incurred in maintaining the Company's interest in the property
are capitalized between the date the loan becomes delinquent and the date of
acquisition. After the date of acquisition, all costs incurred in maintaining
the property are expensed and costs incurred for the improvement or development
of such property are capitalized. At March 31, 2000, the Company had no real
estate owned.
Investment Activities of the Company
Investment Securities. The Company is required under federal
regulations to maintain a minimum amount of liquid assets which may be invested
in specified short term securities and certain other investments. The Company
has maintained a liquidity portfolio in excess of regulatory requirements.
Liquidity levels may be increased or decreased depending upon the yields on
investment alternatives and upon management's judgment as to the attractiveness
of the yields then available in relation to other opportunities and its
expectation of future yield levels, as well as management's projections as to
the short term demand for funds to be used in the Company's loan origination and
other activities. At March 31, 2000, the Company's investment portfolio policy
allowed investments in instruments such as U.S. Treasury obligations, U.S.
federal agency or federally sponsored agency obligations, state, county and
municipal obligations, mortgage-backed and asset-backed securities, banker's
acceptances, certificates of deposit, federal funds, including FHLB overnight
and term deposits (up to six months), as well as investment grade corporate
bonds and commercial paper. The Board of Directors may authorize additional
investments.
-16-
<PAGE>
The Company's investment portfolio at March 31, 2000 did not contain
securities of any issuer with an aggregate book value in excess of 10% of the
Company's equity, excluding those issued by the United States Government or its
agencies.
Mortgage-Backed Securities. The Company invests in residential
mortgage-backed securities. Mortgage-backed securities can serve as collateral
for borrowings and as a source of liquidity. Mortgage-backed securities
represent a participation interest in a pool of single-family or other type of
mortgages, the principal and interest payments on which are passed from the
mortgage originators, through intermediaries (generally government sponsored or
quasi-governmental agencies) that pool and repackage the participation interests
in the form of securities, to investors such as the Company. Such
quasi-governmental agencies, which guarantee the payment of principal and
interest to investors, primarily include FHLMC, GNMA, and FNMA.
Mortgage-backed securities typically are issued with stated principal
amounts and the securities are backed by pools of mortgages that have loans with
interest rates that are within a range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage loans. The interest rate risk characteristics of the underlying
pool of mortgages (i.e., fixed rate or adjustable rate), as well as prepayment
risk, are passed on to the certificate holder. The life of a mortgage-backed
pass-through security is equal to the life of the underlying mortgages.
Investment Portfolio. The following table sets forth the carrying value
of the Company's investment and mortgage-backed securities portfolio, short-term
investments, and FHLB stock at the dates indicated. At March 31, 2000, the
market value of the Company's investment securities portfolio and
mortgage-backed securities portfolio were $24.9 million and $57.8 million,
respectively.
At March 31,
--------------------
2000 1999
-------- -------
(In Thousands)
Investment securities held to maturity:
U.S. Agency securities ............................. $23,894 $22,509
Asset-backed securities* ........................... 2,116 1,778
State, county and municipal obligations ............ 506 356
Other investment securities ........................ 180 444
------- -------
Total investment securities
held to maturity ............................. 26,696 25,087
Interest-bearing deposits ............................ 1,280 1,211
FHLB stock ........................................... 2,615 2,465
Mortgage-backed securities held to maturity .......... 59,181 54,365
------- -------
Total investments ............................ $89,772 $83,128
======= =======
------------
* Asset-backed securities consist of FNMA, FHLMC and GNMA guaranteed REMICs.
-17-
<PAGE>
The following table sets forth certain information regarding the
carrying values, weighted average yields and contractual maturities of the
Company's investment and mortgage-backed securities portfolio at March 31, 2000.
<TABLE>
<CAPTION>
After One Year After Five Years
Within One Year Through Five Years Through Ten Years After Ten Years Total Investment Securities
--------------- ------------------ ----------------- ----------------- ----------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Yield Value Yield Value Value
------- ------ -------- ------- ------- ------- -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Agency
Obligations . $ -- --% $ 226 7.05% $ 2,550 6.65% $21,118 6.76% $23,894 6.75% $22,271
State, county
and municipal
obligations . -- -- -- -- 150 7.00 356 7.17 506 7.12 502
Asset-backed
securities .. -- -- -- -- 137 7.94 1,979 7.08 2,116 7.14 1,992
Mortgage-Backed
Securities .. 1 7.50 375 7.36 2,647 7.68 56,158 6.93 59,181 6.96 57,840
Other
Investments . -- -- -- -- 90 7.03 90 6.50 180 6.76 163
------- ------- ------- ------- ------- -------
Total ....... $ 1 7.50% $ 601 7.25% $ 5,574 7.18% $79,701 6.89% $85,877 6.91% $82,768
======= ==== ======= ==== ======= ==== ======= ==== ======= ==== =======
</TABLE>
-18-
<PAGE>
Sources of Funds
General. Deposits are the major source of the Company's funds for
lending and other investment purposes. The Company also derives funds from the
(1) amortization and prepayment of loans, (2) sales, maturities, and calls of
securities, and (3) operations. Scheduled loan principal repayments are a
relatively stable source of funds, while deposit inflows and outflows and loan
prepayments are significantly influenced by general interest rates and market
conditions. The Company also borrows funds from the FHLB. See also "Borrowings."
Deposits. Consumer and commercial deposits are attracted principally
from within the Company's primary market areas through the offering of a
selection of deposit instruments including passbook accounts, interest and
non-interest checking accounts, money market deposit accounts, and certificate
of deposit accounts. Deposit account terms vary according to the minimum balance
required, the time period the funds must remain on deposit, and the interest
rate, among other factors.
The interest rates paid by the Company on deposits are set weekly at
the direction of the asset/liability management committee. The Company
determines the interest rate to offer the public on new and maturing accounts by
reviewing the market interest rates offered by competitors, the Company's need
for funds, and the current cost of money. The Company reviews, weekly, the
interest rates being offered by other financial institutions within its market
areas.
Deposit Portfolio. Deposits in the Company at March 31, 2000, were
represented by various types of deposit programs described below.
<TABLE>
<CAPTION>
Original Interest Minimum Balance at Percentage of
Category Term Rate(1) Balance Amount March 31,2000(2) Total Deposits
-------- ---------------- -------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
NOW Accounts None 1.25% $ 200 $ 4,112 5.44%
Non-Interest Checking None -- 200 1,067 1.41
Passbook Accounts None 2.65 10 16,750 22.16
Money Market Accounts None 2.40 1,000 3,474 4.60
Certificates of Deposit:
Fixed Term, Fixed Rate 1-3 Months 3.80 1,000 136 .18
Fixed Term, Fixed Rate 4-6 Months 4.35 1,000 7,524 9.95
Fixed Term, Fixed Rate 7-12 Months 4.50 500 9,633 12.74
Fixed Term, Fixed Rate 13-24 Months 4.75 500 5,836 7.72
Fixed Term, Fixed Rate 25-36 Months 5.00 500 6,863 9.08
Fixed Term, Fixed Rate 37-48 Months 5.00 500 1,391 1.84
Fixed Term, Fixed Rate 49-120 Months 5.40 500 8,620 11.41
Fixed Term, Variable Rate 18 Months 4.30 100 223 .30
Jumbo Certificate Various Various $100,000 9,954 13.17
------ ------
Total Deposits $ 75,583 100.00%
====== ======
</TABLE>
---------------
(1) Interest rate offerings as of March 31, 2000.
(2) In thousands.
-19-
<PAGE>
The following table sets forth the amounts of certificates of deposit classified
by rate at the dates indicated.
As of March 31,
-------------------------
2000 1999
---- ----
(In Thousands)
Interest Rate
3.00-3.99%...... $ 47 $ 249
4.00-4.99....... 14,111 16,371
5.00-5.99....... 23,845 25,899
6.00-6.99....... 9,434 4,021
7.00-7.99....... 2,743 4,278
8.00-9.99....... -- 226
------ ------
Total...... $ 50,180 $ 51,044
====== ======
The following table sets forth the amount and maturities of certificates of
deposit at March 31, 2000.
<TABLE>
<CAPTION>
Amount Due
-----------------------------------------------------------------------------
On or before On or before On or before After
March 31, March 31, March 31, March 31,
Interest Rate 2001 2002 2003 2003 Total
------------- ---- ---- ---- ---- -----
(In Thousands)
<S> <C> <C> <C> <C> <C>
3.00-3.99%...... $ 47 $ -- $ -- $ -- $ 47
4.00-4.99%...... 13,296 815 -- -- 14,111
5.00-5.99%...... 13,833 3,147 2,149 4,716 23,845
6.00-6.99%...... 2,998 2,968 1,394 2,074 9,434
7.00-7.99%...... 1,234 22 24 1,463 2,743
-------- ------- ------- ------- --------
Total $ 31,408 $ 6,952 $ 3,567 $ 8,253 $ 50,180
======== ======= ======= ======= ========
</TABLE>
Jumbo Certificates of Deposit. The following table indicates the amount
of the Company's certificates of deposit of $100,000 or more by time remaining
until maturity as of March 31, 2000. The bank has never used brokered deposits.
Jumbo
Certificates
Maturity Period of Deposit
--------------- ----------
(In Thousands)
Within three months.................... $ 1,466
Three through six months............... 2,835
Six through twelve months.............. 2,619
Over twelve months..................... 3,034
-------
$ 9,954
=======
-20-
<PAGE>
Savings Deposit Activity. The following table sets forth the savings
activities of the Company for the periods indicated:
Year Ended March 31,
--------------------
2000 1999
---- ----
(In Thousands)
Net decrease
before interest credited ............ $(4,045) $(3,098)
Interest credited ..................... 2,711 2,789
------- -------
Net decrease in
savings deposits .................... $(1,334) $ (309)
======= =======
Borrowings
The Company may obtain advances from the FHLB of Pittsburgh to
supplement its supply of lendable funds. Advances from the FHLB of Pittsburgh
are typically secured by a pledge of the Company's stock in the FHLB of
Pittsburgh and a portion of the Company's mortgage-backed securities portfolio.
Each FHLB borrowing has its own interest rate, which may be fixed or variable,
and range of maturities. The Company, if the need arises, may also access the
Federal Reserve Bank discount window to supplement its supply of lendable funds
and to meet deposit withdrawal requirements. For the period ended March 31,
2000, the effective annualized cost of borrowings from the FHLB was 5.22%.
The following table sets forth information concerning only short-term
borrowings (those maturing within one year or less) the Company had during the
periods indicated.
During the
Year Ended March 31,
--------------------
2000 1999
---- ----
(In Thousands)
Average balance outstanding ...................... $ 1,821 $ 4,875
Maximum balance at end of any month .............. 7,400 15,500
Balance outstanding end of period ................ 6,000 --
Weighted average rate during period .............. 6.06% 5.94%
Weighted average rate at end of period ........... 6.59% --%
-21-
<PAGE>
Bank Subsidiary Activity
The Bank is permitted to invest up to 2% of its assets in the capital
stock of, or secured or unsecured loans to, subsidiary corporations, with an
additional investment of 1% of assets when such additional investment is
utilized primarily for community development purposes. At March 31, 2000, the
Bank was authorized to invest up to $3.1 million or 2% of its assets. At March
31, 2000, the Bank had one wholly-owned subsidiary, Fedcar, Inc. ("Fedcar"). The
Bank dissolved its Delaware Corporation, Carnegie Federal Funding Corporation
("CFFC").
Fedcar is a Pennsylvania corporation organized in 1973. Its current
activities consist solely of collecting an immaterial amount of insurance
commissions. At March 31, 2000, Fedcar had total assets, liabilities, and equity
of $18,000, $0, and $18,000, respectively.
Carnegie Federal Funding Corporation was a Delaware corporation
organized in January 1986 to issue and service collateralized bonds in the form
of collateralized mortgage obligations ("CMOs"). CFFC fully repaid the CMO in
September 1999 and the corporation was subsequently dissolved.
Personnel
As of March 31, 2000, the Company had 18 full-time employees. None of
the Company's employees are represented by a collective bargaining group. The
Company believes that its relationship with its employees is good.
-22-
<PAGE>
REGULATION
Set forth below is a brief description of certain laws which relate to
the regulation of the Company. The description does not purport to be complete
and is qualified in its entirety by reference to applicable laws and
regulations.
General
As a federally chartered, SAIF-insured savings association, the Company
is subject to extensive regulation by the OTS, as its primary regulator, and the
FDIC, as the depositor insurer. Lending activities and other investments must
comply with federal and state statutory and regulatory requirements. The Company
is also subject to reserve requirements of the Federal Reserve System. Federal
regulation and supervision establishes a comprehensive framework of activities
in which an institution can engage and is intended primarily for the protection
of the SAIF 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.
The Company must file reports with the OTS and the FDIC concerning its
activities and financial condition, and must obtain regulatory approvals prior
to entering into certain transactions such as mergers with or acquisitions of
other financial institutions. Any change in such regulations, whether by the
OTS, the FDIC or the United States Congress, could have a material adverse
impact on the Company and the Bank, and their operations. The changes to federal
banking law affected by the Gramm-Leach-Bliley Act are not expected to
materially impact the Company or the Bank.
Federal Deposit Insurance Corporation
Deposit Insurance. The FDIC is an independent federal agency that
insures the deposits, up to prescribed statutory limits, of federally insured
banks and savings institutions and safeguards the safety and soundness of the
banking and savings industries. Two separate insurance funds, the Bank Insurance
Fund ("BIF") for commercial banks, state savings banks and some federal savings
banks, and the SAIF for savings associations, are maintained and administered by
the FDIC. The Bank is a member of the SAIF and its deposit accounts are insured
by the FDIC, up to the prescribed limits. The FDIC has examination authority
over all insured depository institutions, including the Bank, and has under
certain circumstances, authority to initiate enforcement actions against
federally insured savings institutions to safeguard safety and soundness and the
deposit insurance fund.
Assessments. The FDIC is authorized to establish separate annual
assessment rates for deposit insurance for members of the BIF and the SAIF. The
FDIC may increase assessment rates for either fund if necessary to restore the
fund's ratio of reserves to insured deposits to its target level within a
reasonable time and may decrease such assessment rates if such target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under this system, assessments are set within a range, based on
the risk the institution poses to its deposit insurance fund. This risk level is
determined based on the institution's capital level and the FDIC's level of
supervisory concern about the institution.
The FDIC charges an annual assessment for the insurance of deposits
based on the risk a particular institution poses to its deposit insurance fund.
Under this system, a bank or thrift pays within a range of 0 cents to 27 cents
per $100 of domestic deposits, depending upon the institution's risk
classification. This
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risk classification is based on an institution's capital group and supervisory
subgroup assignment. In addition, the FDIC is authorized to increase such
deposit insurance rates, on a semi-annual basis, if it determines that such
action is necessary to cause the balance in the SAIF to reach the designated
reserve ratio of 1.25% of SAIF-insured deposits within a reasonable period of
time. The FDIC also may impose special assessments on SAIF members to repay
amounts borrowed from the U.S. Treasury or for any other reason deemed necessary
by the FDIC. The Bank's federal deposit insurance premium expense for the year
ended March 31, 2000, approximated $38,000.
Regulation of the Company as a Mid-tier Stock Holding Company
The Company is a mid-tier stock holding company. Under OTS rules
permitting a mutual holding company to establish a subsidiary stock holding
company, a mid-tier stock holding company will "stand in the shoes" of the
parent mutual holding company, or in certain circumstances, the subsidiary
savings association. Thus, the mid-tier stock holding company is generally
subject to the same restrictions and limitations that are currently applicable
to the mutual holding company and its savings association subsidiary. The
Company is therefore subject to the following provisions, among others:
(i) A mid-tier stock holding company is treated as a multiple
savings and loan holding company and not as a unitary savings
and loan holding company.
(ii) A mid-tier stock holding company is subject to the same
restrictions as the mutual holding company on pledges of stock
of the savings association subsidiary, and the proceeds of any
loan secured by the savings association's stock must be infused
into the savings association.
(iii) A mid-tier stock holding company is subject to the same dividend
waiver restrictions as those imposed on the savings association;
accordingly, in waiving any dividend paid by the mid-tier stock
holding company, the mutual holding company is required to
follow the same procedures it currently follows in waiving
dividends paid by the savings association.
(iv) A mid-tier stock holding company is subject to the same
restrictions on indemnification and employment contracts as
those imposed on the mutual holding company.
(v) A mid-tier stock holding company is permitted to engage in stock
repurchase programs provided the mid-tier stock holding company
complies with OTS regulations relating to repurchases by
subsidiary savings associations. Absent unusual circumstances,
for purposes of the three-year restriction on repurchases, the
OTS will generally permit a mid-tier stock holding company to
"tack on" or include the period that the shares initially issued
by the savings association were outstanding.
Regulatory Capital Requirements
The OTS capital regulations require savings institutions to meet three
minimum capital standards: a 1.5% tangible capital ratio, a 3% leverage ratio
and an 8% risk-based capital ratio. In addition, the prompt corrective action
standards discussed below also establish, in effect, a minimum 2% tangible
capital standard, a 4% leverage ratio (3% for institutions receiving the highest
rating on the CAMEL financial institution rating system), and, together with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The
OTS regulations also require that, in meeting the tangible, leverage and
risk-based capital standards, institutions must generally deduct investments in
and loans to subsidiaries engaged in activities as principal that are not
permissible for a national bank.
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The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the OTS capital regulation based on the risks
believed inherent in the type of asset. Core (Tier 1) capital is defined as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus, and minority interests in equity
accounts of consolidated subsidiaries less intangibles other than certain
mortgage servicing rights and credit card relationships. The components of
supplementary capital currently include cumulative preferred stock, long-term
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock and the allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of
supplementary capital included as part of total capital cannot exceed 100% of
core capital.
The capital regulations also incorporated an interest rate risk
component. Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements. For the present time, the OTS has deferred
implementation of the interest rate risk component. At March 31, 2000, the Bank
met each of its capital requirements.
The following table presents the Bank's capital position at March 31,
2000.
Actual Required Excess Actual Required
Capital Capital Amount Percent Percent
------- ------- ------ ------- -------
(Dollars in thousands)
Tangible $24,397 $2,284 $22,113 16.02% 1.50%
Core (Leverage) $24,397 $4,569 $19,828 16.02% 3.00%
Risk-based $24,822 $3,689 $21,133 53.83% 8.00%
Prompt Corrective Regulatory Action
The OTS is required to take certain supervisory actions against
undercapitalized institutions, the severity of which depends upon the
institution's degree of undercapitalization. Generally, a savings institution
that has a ratio of total capital to risk weighted assets of less than 8%, a
ratio of Tier 1 (core) capital to risk-weighted assets of less then 4% or a
ratio of Core capital to total assets of less than 4% (3% or less for
institutions with the highest examination rating) is considered to be
"undercapitalized." A savings institution that has a total risk-based capital
ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio
that is less than 3% is considered to be "significantly undercapitalized" and a
savings institution that has a tangible capital to assets ratio equal to or less
than 2% is deemed to be "critically undercapitalized." Subject to a narrow
exception, the OTS is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the OTS within 45 days of the
date a savings institution receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." Compliance
with the plan must be guaranteed by any parent holding company. In addition,
numerous mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to,
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<PAGE>
increased monitoring by regulators and restrictions on growth, capital
distributions and expansion. The OTS could also take any one of a number of
discretionary supervisory actions, including the issuance of a capital directive
and the replacement of senior executive officers and directors.
Dividend and Other Capital Distribution Limitations
The OTS imposes various restrictions or requirements on the ability of
savings institutions to make capital distributions, including cash dividends. A
savings association that is a subsidiary of a savings and loan holding company,
such as the Bank, must file an application or a notice with the OTS at least 30
days before making a capital distribution. Savings associations are not required
to file an application for permission to make a capital distribution and need
only file a notice if the following conditions are met: (1) they are eligible
for expedited treatment under OTS regulations, (2) they would remain adequately
capitalized after the distributions, (3) the annual amount of capital
distribution does not exceed net income for that year to date added to retained
net income for the two preceding years, and (4) the capital distribution would
not violate any agreements between the OTS and the savings association or any
OTS regulations. Any other situation would require an application to the OTS.
In addition, the OTS could prohibit a proposed capital distribution by
an institution, which would otherwise be permitted by the regulation, if the OTS
determines that the distribution would constitute an unsafe or unsound practice.
Qualified Thrift Lender Test
Savings institutions must meet a qualified thrift lender ("QTL") test.
If the Bank maintains an appropriate level of qualified thrift investments
("QTIs") (primarily residential mortgages and related investments, including
certain mortgage-related securities) and otherwise qualifies as a QTL, it will
continue to enjoy full borrowing privileges from the FHLB of Pittsburgh. The
required percentage of QTIs is 65% of portfolio assets (defined as all assets
minus intangible assets, property used by the institution in conducting its
business and liquid assets equal to 20% of total assets). Certain assets are
subject to a percentage limitation of 20% of portfolio assets. In addition,
savings associations may include shares of stock of the FHLBs, FNMA, and FHLMC
as QTIs. Compliance with the QTL test is determined on a monthly basis in nine
out of every 12 months. As of March 31, 2000, qualified thrift investments of
the Bank were approximately 93.46% of its portfolio assets, and therefore in
compliance with the OTS requirement.
Transactions With Affiliates
The Company is subject to certain restrictions on loans to the MHC 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 MHC or
its non-bank subsidiaries. The Company is subject to certain restrictions on
most types of transactions with the MHC or its non-bank subsidiaries, requiring
that the terms of such transactions be substantially equivalent to terms of
similar transactions with non-affiliated firms. In addition, the Company is
subject to restrictions on loans to its executive officers, directors and
principal stockholders.
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<PAGE>
Federal Home Loan Bank System
The Bank is a member of the FHLB of Pittsburgh, which is one of 12
regional FHLBs that administer the home financing credit function of savings
associations. 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. At March 31, 2000, the Bank had
outstanding advances of approximately $49.0 million from the FHLB of Pittsburgh.
Community Reinvestment
Under the Community Reinvestment Act ("CRA"), as implemented by OTS
regulations, a savings institution has a continuing and affirmative obligation
consistent with its safe and sound operation to help meet the credit needs of
its entire community, including low and moderate income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the OTS, in connection with
its examination of a savings institution, to assess the institution's record of
meeting the credit needs of its community and to take such record into account
in its evaluation of certain applications by such association. The CRA also
requires all institutions to make public disclosure of their CRA ratings. The
Bank received a "Satisfactory" CRA rating in its most recent examination on
April 5, 1999.
Federal Reserve System
The Federal Reserve System requires all depository institutions to
maintain non-interest bearing reserves at specified levels against their
transaction accounts (primarily checking and NOW accounts) and non-personal time
deposits. The balances maintained to meet the reserve requirements imposed by
the Federal Reserve System may be used to satisfy the liquidity requirements
that are imposed by the OTS. At March 31, 2000, the Company was in compliance
with these requirements.
Savings institutions have authority to borrow from the Federal Reserve
System "discount window," but Federal Reserve System policy generally requires
savings institutions to exhaust all other sources before borrowing from the
Federal Reserve System. The Company had no borrowings from the Federal Reserve
System at March 31, 2000.
Regulation of the Mutual Holding Company
The MHC is a federal mutual holding company within the meaning of
Section 10(o) of the HOLA, as amended. As such, the MHC is required to register
with and be subject to OTS examination and supervision as well as certain
reporting requirements. In addition, the OTS has enforcement authority over the
MHC and its non-savings institution subsidiaries, if any. Among other things,
this authority permits the OTS to restrict or prohibit activities that are
determined to be a serious risk to the financial safety, soundness, or stability
of a subsidiary savings institution. Unlike bank holding companies, federal
mutual holding companies are not subject to any regulatory capital requirements
or to supervision by the Federal Reserve System.
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Proposed Regulation
The OTS has announced that it will consider amending its capital
standards so as to more closely conform its requirements to those of the other
federal banking agencies. The impact of this possible change is not expected to
materially impact the Bank. The impact on the Company cannot yet be determined.
Item 2. Description of Property.
--------------------------------
(a) Properties. Currently, the Company operates from its main office in
Carnegie, Pennsylvania and branch offices in McKees Rocks and Washington,
Pennsylvania. The Company owns its main office facility as well as its
Washington branch office. The current lease for the McKees Rocks branch expires
March 25, 2010, with a monthly renewal option thereafter. The total net book
value of the Company's investment in premises and equipment at March 31, 2000,
was approximately $626,000.
(b) Investment Policies. See "Item 1. Description of Business" above
for a general description of the Company's investment policies and any
regulatory or Board of Directors' percentage of assets limitations regarding
certain investments. All of the Company's investment policies are reviewed and
approved by the Board of Directors of the Company, and such policies, subject to
regulatory restrictions (if any), can be changed without a vote of stockholders.
The Company's investments are primarily acquired to produce income.
(1) Investments in Real Estate or Interests in Real Estate. See "Item
1. Business -- Lending Activities," "Item 1. Business -- Regulation" and "Item
2. Description of Property, (a) Properties" above.
(2) Investments in Real Estate Mortgages. See "Item 1. Business --
Lending Activities" and "Item 1. Business -- Regulation."
(3) Investments in Securities of or Interests in Persons Primarily
Engaged in Real Estate Activities. See "Item 1. Business -- Lending Activities,"
"Item 1. Business -- Regulation" and "Item 1. Business -- Bank Subsidiary
Activity."
(c) Description of Real Estate and Operating Data.
Not Applicable.
Item 3. Legal Proceedings
--------------------------
There are various claims and lawsuits in which the Company is
periodically involved, such as claims to enforce liens, condemnation proceedings
on properties in which the Company holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Company's business. In the opinion of management, the resolution of these legal
actions are not expected to have a material adverse effect on the Company's
results of operations, financial condition or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
Not Applicable.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
--------------------------------------------------------------------------------
Matters
-------
The information contained under the sections captioned "Stock Market
Information" in the Company's Annual Report to Stockholders for the year ended
March 31, 2000 (the "Annual Report") is incorporated herein by reference. The
Annual Report is included as Exhibit 13 to this Form 10-KSB.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------
The required information is contained in the sections captioned
"Average Balance Sheet, Interest Rates, and Yield", "Rate/Volume Analysis" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report and is incorporated herein by reference.
Item 7. Financial Statements
-----------------------------
The Consolidated Financial Statements of the Company are incorporated
by reference to the following indicated pages of the Annual Report.
PAGE
----
Independent Auditors' Report 12
Consolidated Statements of Financial Condition
as of March 31, 2000 and 1999 13
Consolidated Statements of Income and Comprehensive Income
for the Years Ended March 31, 2000 and 1999 14
Consolidated Statements of Stockholders' Equity for the Years Ended
March 31, 2000 and 1999 15
Consolidated Statements of Cash Flows for the Years
Ended March 31, 2000 and 1999 16
Notes to Consolidated Financial Statements 17
The report of the prior independent auditor follows as part of this
Item 7.
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<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Skibo Financial Corp.:
We have audited the consolidated statement of financial condition of Skibo
Financial Corp. and subsidiaries (formerly First Carnegie Deposit) as of March
31, 1999, and the related consolidated statements of income and comprehensive
income, stockholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Skibo Financial
Corp. and subsidiaries as of March 31, 1999, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Pittsburgh, Pennsylvania
April 30, 1999
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Item 8. Changes in and Disagreements with Accountants on Accounting and
--------------------------------------------------------------------------------
Financial Disclosure
--------------------
On January 21, 2000, pursuant to direction from the Board of Directors
("Board") of Skibo Financial Corp., Carnegie, Pennsylvania, ("Corporation"), the
Board's Audit Committee unanimously determined that it would discontinue the
engagement of KPMG LLP, Pittsburgh, Pennsylvania, ("KPMG") as its independent
auditors. Furthermore, the Audit Committee determined that the Corporation will
engage Stokes Kelly & Hinds, LLC, Pittsburgh, Pennsylvania ("SKH") , as the
Corporation's auditors for the fiscal year ending March 31, 2000. The
Corporation's decisions were effective January 21, 2000.
KPMG audited the consolidated financial statements of the Corporation
for the year ended March 31, 1999 and its successor, First Carnegie Deposit, for
the year ended March 31, 1998. The Corporation and First Carnegie Deposit, are
collectively referred to herein as the ("Corporation"). The audit reports of
KPMG on the consolidated financial statements of the Corporation as of and for
the years ended March 31, 1999 and 1998 did not contain any adverse opinion or
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principles.
During the two fiscal years ended March 31, 1999 and 1998 and the
subsequent interim period through January 21, 2000, there were no disagreements
with KPMG on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of KPMG, would have caused them to make reference
to the subject matter of the disagreements in connection with their reports.
During the Corporation's two fiscal years ended March 31, 1999 and 1998
and the subsequent interim period preceding SKH's appointment, the Corporation
did not consult SKH regarding the application of accounting principles, either
completed or proposed, or the type of audit opinion that might be rendered on
the Corporation's financial statements.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
--------------------------------------------------------------------------------
with Section 16(a) of the Exchange Act
--------------------------------------
The required information is on page 2 of the Registrant's Proxy
Statement for the Registrant's Annual Meeting of Stockholders filed with the SEC
on June 5, 2000 (the "Proxy Statement") is incorporated herein by reference.
Item 10. Executive Compensation
--------------------------------
The required information is contained under the sections captioned
"Compensation of Directors" and "Executive Compensation" on pages 6-7 in the
Proxy Statement is incorporated herein by reference.
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<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by reference
to the Section captioned "Voting Securities and Principal Holders Thereof" on
pages 1-2 of the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by reference
to the section captioned "Voting Securities and Principal Holders Thereof", and
"Proposal I - Election of Directors" on pages 1-4 of the Proxy Statement.
(c) Change in Control
Not Applicable.
Item 12. Certain Relationships and Related Transactions
--------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section captioned "Indebtedness of Management and Transactions
with Certain Related Parties" on page 8 of the Proxy Statement.
Item 13. Exhibits, List and Reports on Form 8-K
------------------------------------------------
(a) Exhibits
3.1 Charter of Skibo Financial Corp.(1)
3.2 Bylaws of Skibo Financial Corp.(1)
10.1 Supplemental Executive Retirement Plan(2)
10.2 Directors' Retirement Plan(2)
10.3 Employment Agreements
10.4 1998 Stock Option Plan(1)
10.5 1998 Restricted Stock Plan(1)
13 Annual Report to Stockholders for Fiscal Year Ended March
31, 2000 (Only those portions incorporated by reference in
this document are deemed filed.)
21 Subsidiaries of the Registrant
23.1 Consent of Stokes Kelly & Hinds, LLC
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23.2 Consent of KPMG LLP
27 Financial Data Schedule (in electronic filing only)
(b) Reports on Form 8-K
During the fourth quarter of the fiscal year, the Company filed Current
Reports on Form 8-K on February 24, 2000 (items 5 and 7), to report an intent to
initiate a stock repurchase plan if regulatory authority is received, and
January 28, 2000 (Items 4 and 7), to report a change in accountants and file a
related letter from the prior accountants.
-------------
1 Incorporated by reference to the identically numbered exhibit to the
registrant's Form 10-QSB filed with the SEC on November 16, 1998 (SEC File
No. 0-25009).
2 Incorporated by reference to the identically numbered exhibit to the
registrant's Form 10-KSB for the year ended March 31, 1999 (SEC File No.
0-25009).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SKIBO FINANCIAL CORP.
Date: June 5, 2000 By: /s/ Walter G. Kelly
----------------------------------
Walter G. Kelly
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
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>
<CAPTION>
<S> <C>
/s/ Walter G. Kelly /s/ Carol A. Gilbert
---------------------------------------------- ---------------------------------------------------
Walter G. Kelly Carol A. Gilbert
President and Chief Executive Officer Chief Financial and Operating Officer and Treasurer
(Principal Executive Officer) (Principal Financial and Accounting Officer)
Date: June 5, 2000 Date: June 5, 2000
/s/ John C. Burne /s/ John T. Mendenhall, Jr.
---------------------------------------------- ---------------------------------------------------
John C. Burne John T. Mendenhall, Jr.
Chairman of the Board and Director Director
Date: June 5, 2000 Date: June 5, 2000
/s/ Layne W. Craig /s/ Alexander J. Senules
---------------------------------------------- ---------------------------------------------------
Layne W. Craig Alexander J. Senules
Director Vice President and Secretary and Director
Date: June 5, 2000 Date: June 5, 2000
</TABLE>
