SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20429
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------------------------
Commission file number 0-29709
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-3028464
------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
271 Main Street, Harleysville, Pennsylvania 19438
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 256-8828
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock, $.01 Par Value, 2,272,618 as of May 8, 2000
<PAGE>
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
AND SUBSIDIARY
Index
PAGE(S)
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
March 31, 2000 (unaudited) and September 30, 1999 1
Consolidated Statements of Income for the Three and Six
Months Ended March 31, 2000 and 1999 (unaudited) 2
Consolidated Statements of Stockholders' Equity for the Six
Months Ended March 31, 2000 (unaudited) 3
Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 2000 and 1999 (unaudited) 4
Notes to Consolidated Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Part II OTHER INFORMATION
Item 1. - 6. 12
Signatures 13
<PAGE>
<TABLE>
<CAPTION>
Harleysville Savings Financial Corporation
Consolidated Statements of Financial Condition
March 31, September 30,
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
Assets
Cash and amounts due from depository institutions ............. $ 988,320 $ 1,273,990
Interest bearing deposits in other banks ...................... 4,126,152 2,681,828
------------- -------------
Total cash and cash equivalents .......................... 5,114,472 3,955,818
Investment securities held to maturity (fair value -
March 31, $62,752,000; September 30, $59,201,000) ..... 65,493,413 61,014,582
Investment securities available-for-sale at fair value ........ 4,990,379 3,201,932
Mortgage-backed securities held to maturity (fair value -
March 31, $113,216,000; September 30, $114,497,000) ... 116,873,189 116,778,337
Mortgage-backed securities available-for-sale at fair value ... 7,569,338 7,915,919
Loans receivable (net of allowance for loan losses -
March 31, $2,038,068; September 30, $2,040,000) ....... 256,186,077 252,259,611
Accrued interest receivable:
Investments and interest-bearing deposits ................... 972,152 863,305
Mortgage-backed securities .................................. 694,871 685,581
Loans receivable ............................................ 1,318,285 1,346,223
Federal Home Loan Bank stock - at cost ........................ 6,880,400 6,472,900
Office properties and equipment ............................... 4,548,954 4,677,886
Deferred income taxes ......................................... 357,892 304,060
Prepaid expenses and other assets ............................. 560,083 371,568
------------- -------------
TOTAL ASSETS .................................................. $ 471,559,505 $ 459,847,722
============= =============
Liabilities and Stockholders' Equity
Liabilities:
Deposits ................................................. $ 308,474,593 $ 303,660,099
Advances from Federal Home Loan Bank ..................... 128,876,107 125,179,928
Accrued interest payable ................................. 883,619 601,813
Advances from borrowers for taxes and insurance .......... 2,516,149 874,167
Accounts payable and accrued expenses .................... 523,574 569,068
------------- -------------
Total liabilities ............................................. 441,274,042 430,885,075
------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Commitments
Stockholders' equity:
Preferred Stock: $.01 par value;
7,500,000 shares authorized; none issued
Common stock: $.01 par value; 15,000,000
shares authorized; issued and outstanding,
March 31, 2000, 2,271,618; September 30, 1999, 2,256,750 22,716 22,568
Paid-in capital in excess of par ......................... 6,961,092 6,829,794
Treasury stock, at cost (10,000 shares) .................. (141,250)
Retained earnings - partially restricted ................. 23,648,158 22,211,041
Accumulated other comprehensive loss ..................... (205,253) (100,756)
------------- -------------
Total stockholders' equity .................................... 30,285,463 28,962,647
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $ 471,559,505 $ 459,847,722
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Harleysville Savings Financial Corporation
Consolidated Statements of Income
For the Three Months Ended For the Six Months Ended
March 31, March 31,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
INTEREST INCOME: (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest on mortgage loans ........... $ 3,665,955 $ 3,698,049 $ 7,311,301 $ 7,469,411
Interest on mortgage-backed securities 2,101,994 1,412,377 4,164,588 2,634,605
Interest on consumer and other loans . 1,108,944 1,115,261 2,213,008 2,236,089
Interest and dividends on investments 1,271,086 1,087,384 2,527,885 2,271,482
----------- ----------- ----------- -----------
Total interest income .................. 8,147,979 7,313,071 16,216,782 14,611,587
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits ................. 3,627,276 3,464,382 7,238,102 7,119,512
Interest on borrowings ............... 1,900,420 1,499,971 3,785,856 2,942,149
----------- ----------- ----------- -----------
Total interest expense ................. 5,527,696 4,964,353 11,023,958 10,061,661
----------- ----------- ----------- -----------
Net Interest Income .................... 2,620,283 2,348,718 5,192,824 4,549,926
Provision for loan losses .............. -- 2,521 -- 7,428
----------- ----------- ----------- -----------
Net Interest Income after Provision
for Loan Losses ...................... 2,620,283 2,346,197 5,192,824 4,542,498
----------- ----------- ----------- -----------
Other Income:
Other income ......................... 121,335 104,917 223,805 229,510
----------- ----------- ----------- -----------
Total other income ..................... 121,335 104,917 223,805 229,510
----------- ----------- ----------- -----------
Other Expenses:
Salaries and employee benefits ....... 684,311 600,983 1,332,555 1,170,225
Occupancy and equipment .............. 246,537 303,040 496,769 603,660
Deposit insurance premiums ........... 16,014 43,988 60,719 86,487
Other ................................ 367,957 294,232 720,747 575,277
----------- ----------- ----------- -----------
Total other expenses ................... 1,314,819 1,242,243 2,610,790 2,435,649
----------- ----------- ----------- -----------
Income before Income Taxes ............. 1,426,799 1,208,871 2,805,839 2,336,359
Income tax expense ..................... 439,400 385,000 870,400 732,000
----------- ----------- ----------- -----------
Net Income ............................. $ 987,399 $ 823,871 $ 1,935,439 $ 1,604,359
Basic Earnings Per Share ............... $ 0.44 $ 0.37 $ 0.86 $ 0.42
Diluted Earnings Per Share ............. $ 0.43 $ 0.36 $ 0.85 $ 0.42
Dividends Per Share .................... $ 0.11 $ 0.09 $ 0.22 $ 0.18
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Harleysville Savings Financial Corporation
Statements of Stockholders' Equity
Paid Retained Accumulated
Capital Earnings- Other Total
Common in Excess Treasury Partially Comprehensive Stockholders'
Stock of Par Stock Restricted Loss Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1999 ........... $ 22,568 $ 6,829,794 $ -- $22,211,041 $ (100,756) 28,962,647
=========== =========== =========== =========== =========== ===========
Net Income .............................. 1,935,439 1,935,439
Issuance of Common Stock ................ 148 131,298 131,446
Dividends - $.11 per share .............. (498,322) (498,322)
Treasury stock purchased (10,000) ....... (141,250) (141,250)
Unrealized holding loss on available-for-
sale securities net of tax ............. (104,497) (104,497)
----------- ----------- ----------- ----------- ----------- ----------
Balance at March 31,2000 ................ $ 22,716 $ 6,961,092 $ (141,250) $23,648,158 $ (205,253) 30,285,463
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Harleysville Savings Financial Corporation
Consolidated Statements of Cash Flows
Six Months Ended March 31,
-----------------------------
2000 1999
------------ ------------
Operating Activities: ............................................. (unaudited)
<S> <C> <C>
Net Income ........................................................ $ 1,935,439 $ 1,604,359
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses ..................................... -- 7,428
Depreciation .................................................. 221,109 161,113
Amortization of deferred loan fees ............................ (65,080) (196,839)
Changes in assets and liabilities which provided (used) cash:
Increase in deferred income taxes ............................. (107,664) (22,946)
Increase in accounts payable and accrued
expenses and income taxes payable ........................... (45,494) (62,683)
Increase in prepaid expenses and other assets ................. (188,515) (673,881)
Decrease (increase) in accrued interest receivable ............ 90,199 (47,475)
Increase in accrued interest payable .......................... 281,806 34,910
------------ ------------
Net cash provided in operating activities ......................... 2,121,800 803,986
------------ ------------
Investing Activities:
Purchase of investment securities held to maturity ................ (5,984,732) (36,835,031)
Proceeds from maturities of investment securities held to maturity 1,525,000 30,485,753
Purchase of investment securities available for sale .............. (1,879,410) --
Purchase of FHLB stock ............................................ (407,500) (490,500)
Long-term loans originated or acquired ............................ (25,055,092) (34,792,361)
Purchase of mortgage-backed securities held to maturity ........... (6,589,900) (36,227,328)
Principal collected on long-term loans & mortgage-backed securities 27,876,136 48,379,986
Purchases of premises and equipment ............................... (92,177) (64,150)
------------ ------------
Net cash used by investing activities ............................. (10,607,675) (29,543,631)
------------ ------------
Financing Activities:
Net (decrease) increase in demand deposits, NOW accounts and
savings accounts .............................................. (5,525,957) 11,124,903
Net increase (decrease) in certificates of deposit ................ 10,340,451 (8,758,868)
Cash dividends .................................................... (498,322) (402,630)
Net increase in FHLB advances ..................................... 3,696,179 9,810,740
Purchase of treasury stock ........................................ (141,250)
Net proceeds from issuance of stock ............................... 131,446 155,739
Net increase in advances from borrowers for taxes & insurance ..... 1,641,982 2,171,769
------------ ------------
Net cash provided by financing activities ......................... 9,644,529 14,101,653
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................. 1,158,654 (14,637,992)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................... 3,955,818 18,873,926
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................ $ 5,114,472 $ 4,235,934
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes .................................................. $ 871,500 $ 882,176
Interest expense .............................................. 10,742,152 10,026,751
</TABLE>
See notes to consolidated financial statements
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited consolidated financial
statements of Harleysville Savings Financial Corporation (the "Company"), a bank
holding company, of which Harleysville Savings Bank is a wholly owned
subsidiary, have been prepared in accordance with the instructions for Form 10-Q
and therefore do not include information or footnotes necessary for a complete
presentation of financial condition, results of operations and cash flows in
conformity with generally accepted accounting principles. However, all
adjustments (consisting only of normal recurring adjustments) which, in the
opinion of management, are necessary for a fair presentation have been included.
The results of operations for the six months ended March 31, 2000 are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
Comprehensive Income - The Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income, effective October 1, 1998.
The statement requires disclosure of amounts from transactions and other events
which are currently excluded from the statement of income and are recorded
directly to stockholders' equity. Comprehensive income for the three month
periods ended March 31, 2000 and 1999, was approximately $883,000 and $814,000,
respectively. For the six month periods ended March 31, 2000 and 1999, was
approximately $1.7 million and $1.6 million, respectively.
2. INVESTMENT SECURITIES HELD TO MATURITY
A comparison of cost and approximate fair value of investment securities, by
maturities, is as follows:
<TABLE>
<CAPTION>
March 31, 2000
- ---------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agencies
Due after 2 years through 5 years ........... $ 13,500,000 $ (499,000) $ 13,001,000
Due after 5 years through 10 years .......... 20,980,763 (1,453,763) 19,527,000
Due after 10 years through 15 years ......... 19,402,299 $ 54,688 (850,987) 18,606,000
Tax Exempt Obligations
Due after 10 years through 15 years ......... 828,566 6,434 835,000
Due after 15 years .......................... 10,781,785 94,590 (93,375) 10,783,000
------------ ------------ ------------ ------------
Total Investment Securities ....................... $ 65,493,413 $ 155,712 $ (2,897,125) $ 62,752,000
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 30, 1999
- ---------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agencies
Due after 3 years through 5 years . $ 11,500,000 $ (246,000) $ 11,254,000
Due after 5 years through 10 years 25,002,578 $ 1,281 (1,113,859) 23,890,000
Due after 10 years through 15 years 16,389,395 53,218 (491,613) 15,951,000
Tax Exempt Obligations
Due after 15 years ................ 8,122,609 84,835 (101,444) 8,106,000
------------ ------------ ------------ ------------
Total Investment Securities ............. $ 61,014,582 $ 139,334 $ (1,952,916) $ 59,201,000
============ ============ ============ ============
</TABLE>
U.S. Government Agencies include structured note securities with periodic
interest rate adjustments and are called periodically by the issuing agency.
These structured notes were comprised of step-up bonds with par values of
$998,000 at March 31, 2000 and September 30, 1999.
The Company has the positive intent and the ability to hold these securities to
maturity. At March 31, 2000, neither a disposal, nor conditions that could lead
to a decision not to hold these securities to maturity were reasonably foreseen.
<PAGE>
3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
A comparison of cost and approximate fair value of investment securities is as
follows:
<TABLE>
<CAPTION>
March 31, 2000
- --------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARM Mutual Funds $ 5,033,982 $ - $ (43,603) $ 4,990,379
------------ ------------ ------------ ------------
Total Investment Securities $ 5,033,982 $ - $ (43,603) $ 4,990,379
=========== ============ ============ ============
<CAPTION>
September 30, 1999
- --------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARM Mutual Funds $ 3,242,085 $ - $ (40,153) $ 3,201,932
------------ ------------ ------------ ------------
Total Investment Securities $ 3,242,085 $ - $ (40,153) $ 3,201,932
=========== ============ ============ ===========
</TABLE>
4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
A comparison of cost and approximate fair value of mortgage-backed securities is
as follows:
<TABLE>
<CAPTION>
March 31, 2000
- -----------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Collateralized mortgage obligations $ 48,063,533 $ 13,663 $ (1,199,196) $ 46,878,000
FHLMC pass-through certificates ... 10,828,319 5,468 (246,787) 10,587,000
FNMA pass-through certificates .... 22,668,559 15,875 (1,020,434) 21,664,000
GNMA pass-through certificates .... 35,312,778 -- (1,225,778) 34,087,000
------------ ------------ ------------ ------------
Total Mortgage-backed Securities .. $116,873,189 $ 35,006 $ (3,692,195) $113,216,000
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 30, 1999
- -----------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Collateralized mortgage obligations $ 43,559,590 $ 96,166 $ (908,756) $ 42,747,000
FHLMC pass-through certificates ... 9,136,261 52,811 (94,072) 9,095,000
FNMA pass-through certificates .... 26,224,652 79,902 (710,554) 25,594,000
GNMA pass-through certificates .... 37,857,834 22,070 (818,904) 37,061,000
------------ ------------ ------------ ------------
Total Mortgage-backed Securities .. $116,778,337 $ 250,949 $ (2,532,286) $114,497,000
============ ============ ============ ============
</TABLE>
5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
A comparison of cost and approximate fair value of mortgage-backed securities is
as follows:
<TABLE>
<CAPTION>
March 31, 2000
- ------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FHLMC pass-through certificates $2,986,957 $ -- $ (176,648) $2,810,309
GNMA pass-through certificates 4,849,767 -- (90,738) 4,759,029
---------- ----------- ---------- ----------
Total Mortgage-backed Securities $7,836,724 $ -- $ (267,386) $7,569,338
========== =========== ========== ==========
<CAPTION>
September 30, 1999
- --------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FHLMC pass-through certificates $ 3,125,446 $ -- $ (101,662) $ 3,023,784
GNMA pass-through certificates 4,902,981 (10,846) 4,892,135
----------- ----------- ----------- ----------- -
Total Mortgage-backed Securities $ 8,028,427 $ -- $ (112,508) $ 7,915,919
=========== =========== =========== ===========
</TABLE>
<PAGE>
6. LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
March 31, 2000 September 30, 1999
------------- ------------------
<S> <C> <C>
Residential Mortgages ................... $ 197,751,986 $ 195,126,790
Commercial Mortgages .................... 757,041 766,627
Construction ............................ 5,807,508 3,885,232
Education ............................... 3,226,079 1,347,591
Savings Account ......................... 514,560 535,036
Home Equity ............................. 46,993,649 49,240,261
Automobile and other .................... 606,038 660,504
Line of Credit .......................... 7,182,598 7,175,891
------------- -------------
Total ................................... 262,839,459 258,737,932
Undisbursed portion of loans in process (2,679,234) (2,533,342)
Deferred loan fees .................... (1,936,080) (1,904,979)
Allowance for loan losses ............. (2,038,068) (2,040,000)
------------- -------------
Loans receivable - net .................. $ 256,186,077 $ 252,259,611
============= =============
</TABLE>
The total amount of loans being serviced for the benefit of others was
approximately $7.1 million and $7.6 million at March 31, 2000 and September 30,
1999, respectively.
The following schedule summarizes the changes in the allowance for loan losses:
<TABLE>
<CAPTION>
Six Months Ended March 31,
--------------------------
2000 1999
<S> <C> <C>
Balance, beginning of period $ 2,040,000 $ 2,040,000
Provision for loan losses -- 7,428
Amounts charged off, net . (1,932) (12,428)
----------- -----------
Balance, end of period ..... $ 2,038,068 $ 2,035,000
=========== ===========
</TABLE>
7. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized by major classification as
follows:
<TABLE>
<CAPTION>
March 31, 2000 September 30, 1999
-------------- ------------------
<S> <C> <C>
Land and buildings ..................... $ 4,155,083 $ 4,139,005
Furniture, fixtures and equipment ...... 2,816,921 2,740,822
Automobiles ............................ 52,263 52,263
----------- -----------
Total .................................. 7,024,267 6,932,090
Less accumulated depreciation ........ (2,475,313) (2,254,204)
----------- -----------
Net .................................... $ 4,548,954 $ 4,677,886
=========== ===========
</TABLE>
<PAGE>
8. DEPOSITS
Deposits are summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000 September 30, 1999
-------------- ------------------
<S> <C> <C>
NOW accounts ......................... $ 11,768,438 $ 11,811,986
Checking accounts .................... 5,493,725 5,372,003
Money Market Demand accounts ......... 48,973,254 54,490,438
Passbook and Club accounts ........... 2,619,741 2,706,688
Certificate accounts ................. 239,619,435 229,278,984
------------ ------------
Total deposits ....................... $308,474,593 $303,660,099
============ ============
</TABLE>
The aggregate amount of certificate accounts in denominations of more than
$100,000 at March 31, 2000 amounted to approximately $15.2 million.
<PAGE>
9. COMMITMENTS
At March 31, 2000, the following commitments were outstanding:
Origination of fixed-rate mortgage loans $ 1,479,245
Origination of adjustable-rate mortgage loans 3,361,870
Unused line of credit loans 9,770,767
Loans in process 2,679,234
------------
Total $ 17,291,116
============
10. DIVIDEND
On April 26, 2000, the Board of Directors declared a cash dividend of $.11 per
share payable on May 24, 2000 to the stockholders' of record at the close of
business on May 10, 2000.
11. EARNINGS PER SHARE
The calculations of earnings per share were based on the number of common stock
and common stock equivalents outstanding.
The following average shares were used for the computation of earnings per
share:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
March 31, March 31,
-------------------------------- ------------------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic 2,268,324 2,241,013 2,264,202 2,238,379
Diluted 2,290,210 2,291,475 2,287,141 2,300,738
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs of management as well as
assumptions made by and information currently available to management. In
addition, in those and other portions of this document, the words "anticipate,"
"believe," "estimate," "intend," "should" and similar expressions, or the
negative thereof, as they relate to the Company or the Company's management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future-looking events and are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.
Changes in Financial Position for the Six-Month Period Ended March 31, 2000
- ---------------------------------------------------------------------------
Total assets at March 31, 2000 were $471.6 million, an increase of $11.8 million
or 2.6% for the six-month period. The increase was primarily the result of an
increase in loans receivable of $3.9 million and an increase in investment
securities held to maturity of $4.5 million. The remainder of the increase was
due to the purchase of investment securities available for sale of $1.8 and the
increase of cash and cash equivalents of approximately $1.1 million.
During the six-month period ended March 31, 2000, total deposits increased by
$4.8 million to $308.5 million. Advances from borrowers for taxes and insurance
also increased by $1.6 million. This is a seasonal increase as the majority of
taxes the Company escrows for are disbursed in the month of August. There was
also an increase in advances from Federal Home Loan Bank of $3.7 million, which
was used to fund the purchase of investment securities and maintain adequate
cash for the Company's loan growth. The increase in the accrued interest payable
was a direct result of the increased balance in the advances from Federal Home
Loan Bank.
Comparisons of Results of Operations for the Three-Month and Six-Month Periods
- --------------------------------------------------------------------------------
Ended March 31, 2000 with the Three and Six-Month Periods Ended March 31, 1999.
- -------------------------------------------------------------------------------
Net Interest Income
- -------------------
The increase in the net interest income for the three and six month periods
ended March 31, 2000 when compared to the same periods in 1999 can be attributed
to the increase in the interest rate spread. The interest rate spread increased
from 1.90% for the three-month period ended March 31, 1999 to 1.95% for the
comparable period ended March 31, 2000. For the six-month period ended March 31,
1999, the interest rate spread increased from 1.85% to 1.95% for the comparable
period ended March 31, 2000. This increase can also be attributed to the average
balance of interest-earning assets increasing from $419.1 and $415.6 million for
the three and six month periods ended March 31, 1999, respectively, to $459.8
and $457.8 million for the comparable periods ended March 31, 2000.
<PAGE>
Total interest income was $8.2 million for the three-month period ended March
31, 2000 compared to $7.3 million for the comparable period in 1999. For the six
month period ended March 31, 2000, total interest income was $16.2 million
compared to $14.6 million for the comparable period in 1999. The increase is the
result of the increased average balance of interest-earning assets and increased
average yield for the interest-earning assets to 7.09% and 7.08% for the three
and six-month period ended March 31, 2000, respectively from 6.98% and 7.03% for
the comparable periods in 1999.
Total interest expense increased to $5.5 million for the three-month period
ended March 31, 2000 from $5.0 million for the comparable period in 1999. For
the six-month period ended March 31, 2000, total interest expense increased to
$11.0 million from $10.1 million for the comparable period in 1999. These
increases occurred as a result of an increase in the average interest-bearing
liabilities from $391.3 million and $388.7 for the three and six month periods
ended March 31, 1999, respectively, to $430.6 and $429.3 million for the
comparable period ended March 31, 2000.
<PAGE>
Other Income
- ------------
Other income increased to $121,000 for the three-month period ended March 31,
2000 from $105,000 for the comparable period in 1999. For the six-month period
ended March 31, 2000, other income decreased to $224,000 from $230,000 for the
comparable period in 1999. The three-month increase is due to an increase in the
fee generating services offered by the Company. The six-month decrease is due to
a reduction in the number of mortgage late charges and fewer disability and life
insurance fees.
Other Expenses
- --------------
During the quarter ended March 31, 2000, other expenses increased by $73,000 or
5.8% to $1.3 million when compared to the same period in 1999. For the six month
period ended March 31, 2000, other expenses increased by $175,000 or 7.19%
compared to the comparable period in 1999. Management believes these are normal
increases in the cost of operations after considering the effects of inflation
and the impact of the growth in the assets of the Company when compared to the
same periods in 1999. The annualized ratio of expenses to average assets for the
three and six month periods ended March 31, 2000 was 1.12%.
Income Taxes
- ------------
The Company made provisions for income taxes of $439,000 and $870,000 for the
three and six-month periods ended March 31, 2000, respectively, compared to
$385,000 and $732,000 for the comparable periods in 1999. These provisions are
based on the levels of taxable income.
Liquidity and Capital Resources
- -------------------------------
The Company's net income for the quarter ended March 31, 2000 of $987,000
increased stockholder's equity to $30.3 million or 6.4% of total assets. This
amount is well in excess of the Company's minimum regulatory capital
requirements as illustrated below:
<TABLE>
<CAPTION>
(in thousands)
Leveraged Risk-based
------------------ ------------------
<S> <C> <C> <C> <C>
Actual regulatory capital $30,462 6.4% $32,500 15.6%
Minimum required regulatory capital 18,864 4.0% 16,683 8.0%
------- --- ------- ---
Excess capital $11,598 2.4% $15,871 7.6%
</TABLE>
The liquidity of the Company's operations, measured by the ratio of the cash and
securities balances to total assets, equaled 42.4% at March 31, 2000 compared to
42.0% at September 30, 1999.
As of March 31, 2000, the Company had $17.3 million in commitments to fund loan
originations, disburse loans in process and meet other obligations. Management
anticipates that the majority of these commitments will be funded within the
next six months by means of normal cash flows and net new deposits. In addition,
the amount of certificate accounts which are scheduled to mature during the 12
months ending March 31, 2001 is $168 million. Management expects that a
substantial portion of these maturing deposits will remain as accounts in the
Company.
<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company has instituted programs designed to decrease the sensitivity of its
earnings to material and prolonged increases in interest rates. The principal
determinant of the exposure of the Company's earnings to interest rate risk is
the timing difference between the repricing or maturity of the Company's
interest-earning assets and the repricing or maturity of its interest-bearing
liabilities. If the maturities of such assets and liabilities were perfectly
matched, and if the interest rates borne by its assets and liabilities were
equally flexible and moved concurrently, neither of which is the case, the
impact on net interest income of rapid increases or decreases in interest rates
would be minimized. The Company's asset and liability management policies seek
to increase the interest rate sensitivity by shortening the repricing intervals
and the maturities of the Company's interest-earning assets. Although management
of the Company believes that the steps taken have reduced the Company's overall
vulnerability to increases in interest rates, the Company remains vulnerable to
material and prolonged increases in interest rates during periods in which its
interest rate sensitive liabilities exceed its interest rate sensitive assets.
<PAGE>
The authority and responsibility for interest rate management is vested in the
Company's Board of Directors. The Chief Executive Officer implements the Board
of Directors' policies during the day-to-day operations of the Company. Each
month, the Chief Executive Officer presents the Board of Directors with a report
which outlines the Company's asset and liability "gap" position in various time
periods. The "gap" is the difference between interest-earning assets and
interest-bearing liabilities which mature or reprice over a given time period.
He also meets weekly with the Company's other senior officers to review and
establish policies and strategies designed to regulate the Company's flow of
funds and coordinate the sources, uses and pricing of such funds. The first
priority in structuring and pricing the Company's assets and liabilities is to
maintain an acceptable interest rate spread while reducing the effects of
changes in interest rates and maintaining the quality of the Company's assets.
The following table summarizes the amount of interest-earning assets and
interest-bearing liabilities outstanding as of March 31, 2000, which are
expected to mature, prepay or reprice in each of the future time periods shown.
Except as stated below, the amounts of assets or liabilities shown which mature
or reprice during a particular period were determined in accordance with the
contractual terms of the asset or liability. Adjustable and floating-rate assets
are included in the period in which interest rates are next scheduled to adjust
rather than in the period in which they are due, and fixed-rate loans and
mortgage-backed securities are included in the periods in which they are
anticipated to be repaid.
The following table does not necessarily indicate the impact of general interest
rate movements on Harleysville Savings' net interest income because the
repricing of certain categories of assets and liabilities is discretionary and
is subject to competitive and other pressures. As a result, certain assets and
liabilities indicated as repricing within a stated period may in fact reprice at
different rate levels.
<PAGE>
<TABLE>
<CAPTION>
1 Year 1 to 3 3 to 5 Over 5
or less Years Years Years Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Interest-earning assets
Mortgage loans ............................... $ 44,933 $ 25,851 $ 20,645 $ 105,831 $ 197,260
Mortgage-backed securities ................... 44,494 19,947 12,381 47,977 124,799
Consumer and other loans ..................... 26,313 17,194 9,776 6,462 59,745
Investment securities and other investments .. 16,947 2,500 11,000 52,030 82,477
--------- --------- --------- --------- ---------
Total interest-earning assets ................ 132,687 65,492 53,802 212,300 464,281
--------- --------- --------- --------- ---------
Interest-bearing liabilities
Passbook and Club accounts ................ -- -- -- 17,262 17,262
NOW accounts .............................. -- -- -- 2,620 2,620
Money Market Deposit accounts ............. -- -- -- 27,143 27,143
Choice Savings ............................ 5,458 -- -- 16,373 --
Certificate accounts ...................... 167,730 63,240 8,649 -- 239,619
Borrowed money ............................ 46,413 49,123 23,371 9,969 128,876
--------- --------- --------- --------- ---------
Total interest-bearing liabilities ........... 219,601 112,363 32,020 73,367 437,351
--------- --------- --------- --------- ---------
Repricing GAP during the period .............. $ (86,914) $ (46,871) $ 21,782 $ 138,933 $ 26,930
========= ========= ========= ========= =========
Cumulative GAP ............................... $ (86,914) $(133,785) $(112,003) $ 26,930
========= ========= ========= =========
Ratio of GAP during the period to total assets -18.43% -9.94% 4.62% 29.46%
========= ========= ========= =========
Ratio of cumulative GAP to total assets ...... -18.43% -28.37% -23.75% 5.71%
======== ========= ========= =========
</TABLE>
<PAGE>
Part II OTHER INFORMATION
Item 1-5. Not applicable.
---------------
Item 6. Exhibits and Reports on Form 8-K
Financial Data Schedule Exhibit 27.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Bank
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
Date: May 8, 2000 By: /s/ Edward J. Molnar
--------------------
Edward J. Molnar
President and Chief Executive Officer
Date: May 8, 2000 By: /s/ Brendan J. McGill
---------------------
Brendan J. McGill
Senior Vice President
Treasurer and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR THE SIX-MONTH PERIOD ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 988
<INT-BEARING-DEPOSITS> 4,126
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,559
<INVESTMENTS-CARRYING> 182,366
<INVESTMENTS-MARKET> 175,968
<LOANS> 256,186
<ALLOWANCE> 2,040
<TOTAL-ASSETS> 471,560
<DEPOSITS> 308,475
<SHORT-TERM> 25,100
<LIABILITIES-OTHER> 3,924
<LONG-TERM> 103,776
0
0
<COMMON> 23
<OTHER-SE> 30,623
<TOTAL-LIABILITIES-AND-EQUITY> 471,560
<INTEREST-LOAN> 9,524
<INTEREST-INVEST> 6,693
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 16,217
<INTEREST-DEPOSIT> 7,238
<INTEREST-EXPENSE> 11,024
<INTEREST-INCOME-NET> 5,193
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,611
<INCOME-PRETAX> 2,806
<INCOME-PRE-EXTRAORDINARY> 2,806
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,935
<EPS-BASIC> 0.86
<EPS-DILUTED> 0.85
<YIELD-ACTUAL> 7.08
<LOANS-NON> 0
<LOANS-PAST> 110
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,040
<CHARGE-OFFS> 2
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2,038
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,038
</TABLE>
