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 June 30, 2000
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ---------------
Commission file number 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, 2,281,663 as of August 2, 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
June 30, 2000 (unaudited) and September 30, 1999 1
Consolidated Statements of Income for the Three and Nine
Months Ended June 30, 2000 and 1999 (unaudited) 2
Consolidated Statements of Stockholders' Equity for the Nine
Months Ended June 30, 2000 (unaudited) 3
Consolidated Statements of Cash Flows for the Nine Months
Ended June 30, 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 10-11
Part II OTHER INFORMATION
Item 1. - 6. 12
Signatures 13
<PAGE>
Harleysville Savings Financial Corporation
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
--------------------- ----------------------
(unaudited)
Assets
<S> <C> <C>
Cash and amounts due from depository institutions $ 1,006,640 $ 1,273,990
Interest bearing deposits in other banks 3,035,288 2,681,828
--------------------- ----------------------
Total cash and cash equivalents 4,041,928 3,955,818
Investment securities held to maturity (fair value -
June 30, $66,373,000; September 30, $59,201,000) 69,003,313 61,014,582
Investment securities available-for-sale at fair value 3,395,090 3,201,932
Mortgage-backed securities held to maturity (fair value -
June 30, $111,211,000; September 30, $114,497,000) 114,319,627 116,778,337
Mortgage-backed securities available-for-sale at fair value 7,464,391 7,915,919
Loans receivable (net of allowance for loan losses -
June 30, $2,038,000; September 30, $2,040,000) 263,433,574 252,259,611
Accrued interest receivable:
Investments and interest-bearing deposits 1,066,551 863,305
Mortgage-backed securities 697,503 685,581
Loans receivable 1,370,294 1,346,223
Federal Home Loan Bank stock - at cost 6,880,400 6,472,900
Office properties and equipment 4,511,318 4,677,886
Deferred income taxes 351,550 304,060
Prepaid expenses and other assets 1,207,149 371,568
--------------------- ----------------------
TOTAL ASSETS $ 477,742,688 $ 459,847,722
===================== ======================
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 312,469,857 $ 303,660,099
Advances from Federal Home Loan Bank 129,158,065 125,179,928
Accrued interest payable 1,049,490 601,813
Advances from borrowers for taxes and insurance 3,867,499 874,167
Accounts payable and accrued expenses 564,542 569,068
--------------------- ----------------------
Total liabilities 447,109,453 430,885,075
--------------------- ----------------------
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,
June 30, 2000, 2,279,663; September 30, 1999, 2,256,750 22,797 22,568
Paid-in capital in excess of par 7,061,986 6,829,794
Treasury stock, at cost (44,200 shares) (627,194)
Retained earnings - partially restricted 24,368,589 22,211,041
Accumulated other comprehensive loss (192,943) (100,756)
--------------------- ----------------------
Total stockholders' equity 30,633,235 28,962,647
--------------------- ----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 477,742,688 $ 459,847,722
===================== ======================
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
Harleysville Savings Financial Corporation
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
-------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
(unaudited) (unaudited)
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest on mortgage loans $ 3,821,029 $ 3,708,879 $11,132,330 $11,178,290
Interest on mortgage-backed securities 2,097,961 1,577,262 6,262,549 4,211,867
Interest on consumer and other loans 1,135,378 1,127,426 3,348,385 3,363,515
Interest and dividends on investments 1,319,212 1,054,954 3,847,098 3,326,436
----------- ----------- ----------- -----------
Total interest income 8,373,580 7,468,521 24,590,362 22,080,108
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits 3,835,720 3,526,639 11,073,821 10,646,151
Interest on borrowings 1,873,866 1,480,498 5,659,723 4,422,647
----------- ----------- ----------- -----------
Total interest expense 5,709,586 5,007,137 16,733,544 15,068,798
----------- ----------- ----------- -----------
Net Interest Income 2,663,994 2,461,384 7,856,818 7,011,310
Provision for loan losses -- 5,000 -- 12,428
----------- ----------- ----------- -----------
Net Interest Income after Provision
for Loan Losses 2,663,994 2,456,384 7,856,818 6,998,882
----------- ----------- ----------- -----------
Other Income:
Other income 126,284 107,007 350,089 336,517
----------- ----------- ----------- -----------
Total other income 126,284 107,007 350,089 336,517
----------- ----------- ----------- -----------
Other Expenses:
Salaries and employee benefits 691,330 602,649 2,023,886 1,772,874
Occupancy and equipment 254,132 296,774 750,901 900,434
Deposit insurance premiums 15,775 43,094 76,494 129,581
Other 406,027 285,273 1,126,773 860,550
----------- ----------- ----------- -----------
Total other expenses 1,367,264 1,227,790 3,978,054 3,663,439
----------- ----------- ----------- -----------
Income before Income Taxes 1,423,014 1,335,601 4,228,853 3,671,960
Income tax expense 455,400 423,000 1,325,800 1,155,000
----------- ----------- ----------- -----------
Net Income $ 967,614 $ 912,601 $ 2,903,053 $ 2,516,960
=========== =========== =========== ===========
Basic Earnings Per Share $ 0.43 $ 0.40 $ 1.29 $ 1.12
=========== =========== =========== ===========
Diluted Earnings Per Share $ 0.43 $ 0.40 $ 1.28 $ 1.10
=========== =========== =========== ===========
Dividends Per Share $ 0.11 $ 0.09 $ 0.33 $ 0.27
=========== =========== =========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
Harleysville Savings Financial Corporation
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Paid-in 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 2,903,053 2,903,053
Issuance of Common Stock: 229 232,192 232,421
Dividends - $.11 per share (745,505) (745,505)
Treasury stock purchased (627,194) (627,194)
Unrealized holding loss on available-
for-sale securities net of tax -- -- -- -- (92,187) (92,187)
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 2000 $ 22,797 7,061,986 $ (627,194) $ 24,368,589 $ (192,943) $ 30,633,235
============ ============ ============ ============ ============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
Harleysville Savings Financial Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended June 30,
----------------------------
2000 1999
---- ----
(unaudited)
Operating Activities:
<S> <C> <C>
Net Income $ 2,903,053 $ 2,516,960
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Provision for loan losses 12,428
Depreciation 326,240 242,252
Amortization of deferred loan fees (114,024) (276,921)
Changes in assets and liabilities which provided (used) cash:
Increase in deferred income taxes (35,587) (62,119)
(Increase) decrease in accounts payable and accrued
expenses and income taxes payable (4,526) 346,654
Increase in prepaid expenses and other assets (715,966) (324,965)
Increase in accrued interest receivable (239,239) (103,496)
Increase (decrease) in accrued interest payable 447,677 (10,371)
------------ ------------
Net cash provided by operating activities 2,567,628 2,340,422
------------ ------------
Investing Activities:
Purchase of investment securities held to maturity (9,513,731) (41,834,406)
Proceeds from maturities of investment securities held to maturity 1,525,000 35,475,406
Purchase of investment securities available for sale (201,001) (2,644,623)
Purchase of FHLB stock (407,500) (540,500)
Long-term loans originated or acquired (44,788,531) (47,676,219)
Purchase of mortgage-backed securities held to maturity (7,514,846) (42,523,785)
Principal collected on long-term loans & mortgage-backed securities 43,937,814 67,672,520
Purchases of premises and equipment (159,672) (1,003,621)
------------ ------------
Net cash used in investing activities (17,122,467) (33,075,228)
------------ ------------
Financing Activities:
Net (decrease) increase in demand deposits, NOW accounts and
savings accounts (5,463,115) 20,815,811
Net increase (decrease) in certificates of deposit 14,272,873 (10,160,676)
Cash dividends (745,505) (604,806)
Net increase (decrease) in FHLB advances 3,978,137 881,442
Purchase of treasury stock (627,194)
Net proceeds from issuance of stock 232,421 176,944
Net increase in advances from borrowers for taxes & insurance 2,993,332 3,000,563
------------ ------------
Net cash provided by financing activities 14,640,949 14,109,278
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 86,110 (16,625,528)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,955,818 18,873,926
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,041,928 $ 2,248,398
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 1,311,500 $ 1,297,176
Interest expense 16,285,867 15,079,170
Noncash transfer from loans to real estate owned 119,615
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
Notes to Unaudited Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying unaudited financial statements 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 nine months ended June 30, 2000 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
Comprehensive Income - The Bank 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 June 30, 2000 and 1999, was approximately $875,000 and $837,000,
respectively. For the nine month periods ended June 30, 2000 and 1999, was
approximately $2.81 million and $2.4 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>
June 30, 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 $ (456,000) $ 13,044,000
Due after 5 years through 10 years 21,980,038 (1,447,038) 20,533,000
Due after 10 years through 15 years 19,411,073 $ 54,688 (812,761) 18,653,000
Tax Exempt Obligations
Due after 10 years through 15 years 1,828,633 (12,633) 1,816,000
Due after 15 years 12,283,569 94,590 (51,159) 12,327,000
------------ ------------ ------------ ------------
Total Investment Securities $ 69,003,313 $ 149,278 $ (2,779,591) $ 66,373,000
============ ============ ============ ============
<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
$999,000 at June 30, 2000 and September 30, 1999.
The Bank has the positive intent and the ability to hold these securities to
maturity. At June 30, 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>
June 30, 2000
====================================================================================================
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
====================================================================================================
<S> <C> <C> <C> <C>
ARM Mutual Funds $ 3,443,086 $ - $ (47,996) $ 3,395,090
------------- ------------ -------------- ---------------
Total Investment Securities $ 3,443,086 $ - $ (47,996) $ 3,395,090
============= ============ ============== ===============
<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>
June 30, 2000
====================================================================================================
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
====================================================================================================
<S> <C> <C> <C> <C>
Collateralized mortgage obligations $ 48,129,343 $ 250,575 $ (1,174,918) $ 47,205,000
FHLMC pass-through certificates 10,348,940 9,498 (213,438) 10,145,000
FNMA pass-through certificates 21,988,129 18,049 (902,178) 21,104,000
GNMA pass-through certificates 33,853,215 -- (1,096,215) 32,757,000
------------ ------------ ------------ ------------
Total Mortgage-backed Securities $114,319,627 $ 278,122 $ (3,386,749) $111,211,000
============ ============ ============ ============
<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>
June 30, 2000
=====================================================================================================
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gain Losses Fair Value
=====================================================================================================
<S> <C> <C> <C> <C>
FHLMC pass-through certificates $ 2,913,526 $ - $ (153,827) $ 2,759,699
GNMA pass-through certificates 4,795,207 - (90,515) 4,704,692
----------- ------------ ------------ -----------
Total Mortgage-backed Securities $ 7,708,733 $ - $ (244,342) $ 7,464,391
=========== ============ ============ ===========
<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:
June 30, 2000 September 30, 1999
------------- ------------------
Residential Mortgages $ 205,655,939 $ 195,126,790
Commercial Mortgages 752,103 766,627
Construction 6,350,235 3,885,232
Education 3,325,466 1,347,591
Savings Account 492,249 535,036
Home Equity 46,280,605 49,240,261
Automobile and other 660,637 660,504
Line of Credit 7,506,093 7,175,891
------------- -------------
Total 271,023,327 258,737,932
Undisbursed portion of loans in process (3,636,025) (2,533,342)
Deferred loan fees (1,915,660) (1,904,979)
Allowance for loan losses (2,038,068) (2,040,000)
------------- -------------
Loans receivable - net $ 263,433,574 $ 252,259,611
============= =============
The total amount of loans being serviced for the benefit of others was
approximately $6.8 million and $7.6 million at June 30, 2000 and September 30,
1999, respectively.
The following schedule summarizes the changes in the allowance for loan losses:
Nine Months Ended June 30,
--------------------------
2000 1999
---- ----
Balance, beginning of period $ 2,040,000 $ 2,040,000
Provision for loan losses -- 12,428
Amounts charged off, net (1,932) (12,428)
----------- -----------
Balance, end of period $ 2,038,068 $ 2,040,000
=========== ===========
7. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized by major classification as
follows:
June 30, 2000 September 30, 1999
------------- ------------------
Land and buildings $ 4,162,515 $ 4,139,005
Furniture, fixtures and equipment 2,873,083 2,740,822
Automobiles 56,164 52,263
----------- -----------
Total 7,091,762 6,932,090
Less accumulated depreciation (2,580,444) (2,254,204)
----------- -----------
Net $ 4,511,318 $ 4,677,886
=========== ===========
8. DEPOSITS
Deposits are summarized as follows:
June 30, 2000 September 30, 1999
------------- ------------------
NOW accounts $ 11,737,798 $ 11,811,986
Checking accounts 5,768,229 5,372,003
Money Market Demand accounts 48,814,740 54,490,438
Passbook and Club accounts 2,597,233 2,706,688
Certificate accounts 243,551,857 229,278,984
------------ ------------
Total deposits $312,469,857 $303,660,099
============ ============
The aggregate amount of certificate accounts in denominations of more than
$100,000 at June 30, 2000 amounted to approximately $12.9 million.
<PAGE>
9. COMMITMENTS
At June 30, 2000, the following commitments were outstanding:
Origination of fixed-rate mortgage loans $ 2,093,910
Origination of adjustable-rate mortgage loans 3,910,709
Unused line of credit loans 10,088,358
Loans in process 3,636,025
-----------
Total $19,729,002
===========
10. DIVIDEND
On July 26, 2000, the Board of Directors declared a cash dividend of $.11 per
share payable on August 23, 2000 to the stockholders' of record at the close of
business on August 9, 2000.
11. EARNINGS PER SHARE
The calculations of earnings per share were based on the number of common stock
and common stock equivalents outstanding for the three and nine months ended
June 30, 2000 and 1999.
The following average shares were used for the computation of earnings per
share:
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
---- ---- ---- ----
Basic 2,243,354 2,246,945 2,257,240 2,241,234
Diluted 2,265,705 2,287,092 2,279,984 2,296,189
<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 Nine-Month Period Ended June 30, 2000
---------------------------------------------------------------------------
Total assets at June 30, 2000 were $477.7 million, an increase of $17.9 million
or 3.9% for the nine-month period. The increase was primarily the result of an
increase in loans receivable of $11.2 million and an increase in investment
securities held to maturity of $8.0 million.
During the nine-month period ended June 30, 2000, total deposits increased by
$8.8 million to $312.5 million. Advances from borrowers for taxes and insurance
also increased by $3.0 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 $4.0 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 Nine-Month Periods
--------------------------------------------------------------------------------
Ended June 30, 2000 with the Three and Nine-Month Periods Ended June 30, 1999.
------------------------------------------------------------------------------
Net Interest Income
-------------------
The increase in the net interest income for the three and nine month periods
ended June 30, 2000 when compared to the same periods in 1999 can be attributed
to the increase in the average balance of interest-earning assets increasing
from $426.3 and $419.0 million for the three and nine month periods ended June
30, 1999, respectively, to $464.5 and $462.2 million for the comparable periods
ended June 30, 2000.
Total interest income was $8.4 million for the three-month period ended June 30,
2000 compared to $7.5 million for the comparable period in 1999. For the nine
month period ended June 30, 2000, total interest income was $24.6 million
compared to $22.1 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 7.21% and 7.09% for the three
and nine-month period ended June 30, 2000, respectively from 7.01% and 7.03% for
the comparable periods in 1999.
Total interest expense increased to $5.7 million for the three-month period
ended June 30, 2000 from $5.0 million for the comparable period in 1999. For the
nine-month period ended June 30, 2000, total interest expense increased to $16.7
million from $15.1 million for the comparable period in 1999. These increases
occurred as a result of an increase in the average interest-bearing liabilities
from $396.6 million and $391.1 for the three and nine month periods ended June
30, 1999, respectively, to $433.5 and $432.1 million for the comparable period
ended June 30, 2000.
<PAGE>
Other Income
------------
Other income increased to $126,000 for the three-month period ended June 30,
2000 from $107,000 for the comparable period in 1999. For the nine-month period
ended June 30, 2000, other income increased to $350,000 from $337,000 for the
comparable period in 1999. The three-month and nine month increase is due to an
increase in the fee generating services offered by the Company.
Other Expenses
--------------
During the quarter ended June 30, 2000, other expenses increased by $140,000 or
11.4% to $1.4 million when compared to the same period in 1999. For the nine
month period ended June 30, 2000, other expenses increased by $315,000 or 8.6%
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 nine month periods ended June 30, 2000 was 1.13%.
Income Taxes
------------
The Company made provisions for income taxes of $455,000 and $1.3 million for
the three and nine-month periods ended June 30, 2000, respectively, compared to
$423,000 and $1.2 million 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 June 30, 2000 of $968,000
increased stockholder's equity to $30.6 million or 6.4% of total assets. This
amount is well in excess of the Company's minimum regulatory capital
requirements as illustrated below:
(in thousands)
Leveraged Risk-based
--------------- -----------------
Actual regulatory capital $ 30,794 6.4% $ 32,832 15.5%
Minimum required regulatory capital 19,110 4.0% 16,946 8.0%
--------- ---- -------- -----
Excess capital $ 11,684 2.4% $ 15,886 7.5%
The liquidity of the Company's operations, measured by the ratio of the cash and
securities balances to total assets, equaled 41.5% at June 30, 2000 compared to
42.0% at September 30, 1999.
As of June 30, 2000, the Company had $19.7 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 June 30, 2001 is $170 million. Management expects that a
substantial portion of these maturing deposits will remain as accounts in the
Company.
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 June 30, 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.
<TABLE>
<CAPTION>
1 Year 1 to 3 3 to 5 Over 5
or less Years Years Years Total
--------- --------- --------- --------- ---------
Interest-earning assets
<S> <C> <C> <C> <C> <C>
Mortgage loans $ 44,369 $ 31,755 $ 24,645 $ 105,448 $ 206,217
Mortgage-backed securities 44,445 18,708 11,951 47,012 122,116
Consumer and other loans 26,833 16,873 9,600 6,350 59,656
Investment securities and other investments 14,288 4,500 9,000 55,532 83,320
--------- --------- --------- --------- ---------
Total interest-earning assets 129,935 71,836 55,196 214,342 471,309
--------- --------- --------- --------- ---------
Interest-bearing liabilities
Passbook and Club accounts -- -- -- 2,597 2,597
NOW accounts -- -- -- 17,506 17,506
Money Market Deposit accounts -- -- -- 27,410 27,410
Choice Savings 5,351 -- -- 16,054 21,405
Certificate accounts 169,657 66,843 7,052 -- 243,552
Borrowed money 49,709 52,369 18,581 8,499 129,158
--------- --------- --------- --------- ---------
Total interest-bearing liabilities 224,717 119,212 25,633 72,066 441,628
--------- --------- --------- --------- ---------
Repricing GAP during the period $ (94,782) $ (47,376) $ 29,563 $ 142,276 $ 29,681
========= ========= ========= ========= =========
Cumulative GAP $ (94,782) $(142,158) $(112,595) $ 29,681
========= ========= ========= =========
Ratio of GAP during the period to total assets -20.10% -10.04% 6.27% 30.17%
========= ========= ========= =========
Ratio of cumulative GAP to total assets -20.10% -30.14% -23.87% 6.29%
========= ========= ========= =========
</TABLE>
<PAGE>
Part II OTHER INFORMATION
Item 1-5. Not applicable.
---------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
<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: August 3, 2000 By: /s/ Edward J. Molnar
-----------------------------------------
Edward J. Molnar
President and Chief Executive Officer
Date: August 3, 2000 By: /s/ Brendan J. McGill
-----------------------------------------
Brendan J. McGill
Senior Vice President
Treasurer and Chief Financial Officer
