FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997 Commission file number
2-99779
National Consumer Cooperative Bank
(Exact name of registrant as specified in its charter)
United States of America 52-1157795
(12 U.S.C. Section 3001 et seq.) (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
1401 Eye Street, NW, Suite 700, Washington, D.C. 20005
(Address of principal executive offices)
Registrant's telephone number, including area code (202)336-7700
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 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________.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Outstanding at September 30, 1997
Class C 217,079
(Common stock, $100.00 par value)
Class B 840,054
(Common stock, $100.00 par value)
Class D 3
(Common stock, $100.00 par value)
<PAGE>
National Consumer Cooperative Bank
(doing business as National Cooperative Bank)
and Subsidiaries
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1 Consolidated balance sheets - September 30,
1997 and 1996 and December 31, 1996............ 3
Consolidated statements of income - for the
three and nine months ended September 30,
1997 and 1996................................... 4
Consolidated statements of cash flows - for
the nine months ended September 30,1997
and 1996........................................ 5-6
Condensed notes to the consolidated
financial statements - September 30,1997........ 7-12
Item 2 Management's discussion and analysis of
financial condition and results of
operations - for the three and nine months
ended September 30, 1997 and 1996............... 13-22
PART II OTHER INFORMATION
Item 2 Changes in Securities........................... 23
Item 6 Exhibit 27 - Financial Data Schedule
<PAGE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1997 1996 1996
Assets
Cash and cash equivalents $ 26,384,451 $ 24,848,153 $ 17,150,534
Restricted cash 6,884,572 8,348,703 8,348,703
Investment securities
Available-for-sale 32,283,476 29,872,870 30,337,100
Held-to-maturity 2,795,783 3,045,425 2,946,425
Loans and lease financing 568,766,037 544,801,882 565,824,579
Loans held for sale 242,214,510 131,785,495 184,269,872
Less: Allowance for loan
losses (17,045,778) (15,089,825) (15,504,510)
793,934,769 661,497,552 734,589,941
Interest-only receivables 28,705,096 31,892,118 30,758,057
Premises and equipment, net 2,123,389 2,195,739 2,257,362
Other assets 20,800,496 8,815,116 12,947,458
Total assets $913,912,032 $770,515,676 $839,335,580
Liabilities and Members' Equity
Liabilities
Deposits $ 82,042,601 $ 81,947,147 $ 88,620,002
Patronage dividends payable
in cash 2,842,765 5,119,713 4,721,600
Other liabilities 22,153,670 17,004,947 11,332,033
Borrowings
Short-term 261,362,804 157,997,715 224,500,000
Long-term 233,659,822 202,078,691 202,137,077
492,022,626 360,076,406 426,637,077
Subordinated debt 182,802,883 182,869,445 182,853,313
Total borrowings 674,825,509 542,945,851 609,490,390
Total liabilities 784,864,545 647,017,658 714,164,025
Members' equity
Common stock
Class B 84,005,365 78,611,311 78,600,416
Class C 21,707,868 21,819,150 21,751,584
Class D 300 300 300
Retained earnings
Allocated 3,474,491 4,832,431 5,770,844
Unallocated 19,953,478 18,491,193 19,113,185
Unrealized loss on investment
securities available-for-sale (94,015) (256,367) (64,774)
Total members' equity 129,047,487 123,498,018 125,171,555
Total liabilities and
members' equity $913,912,032 $770,515,676 $839,335,580
<PAGE>
<TABLE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended Sept. 30, Three Months Ended Sept.30,
1997 1996 1997 1996
Interest income
<S> <C> <C> <C> <C>
Loans and lease financing $47,961,897 $40,285,431 $17,073,791 $13,762,641
Investment securities 3,227,878 2,871,104 1,021,234 987,589
Total interest income 51,189,775 43,156,535 18,095,025 14,750,230
Interest expense
Deposits 2,971,432 3,030,438 954,298 993,646
Short-term borrowings 9,154,820 5,034,547 3,529,479 1,662,704
Long-term debt, other
borrowings and
subordinated debt 19,986,984 17,227,260 6,944,315 5,988,445
Total interest expense 32,113,236 25,292,245 11,428,092 8,644,795
Net interest income 19,076,539 17,864,290 6,666,933 6,105,435
Provision for loan losses 2,044,000 950,000 655,000 300,000
Net interest income after
provision for loan losses 17,032,539 16,914,290 6,011,933 5,805,435
Non-interest income
Gain (loss) on sale of
loans 1,801,975 4,703,382 60,666 (234,095)
Loan and deposit servicing
fees 1,664,558 1,526,748 552,615 499,663
Other 4,571,608 4,131,288 1,688,303 1,809,918
8,038,141 10,361,418 2,301,584 2,075,486
Non-interest expenses
Compensation and employee
benefits 9,068,209 8,029,702 3,360,102 2,718,011
Contractual services 2,604,307 2,946,599 878,021 936,052
Occupancy and equipment 2,902,869 2,909,220 1,015,493 1,273,109
Contribution to NCB
Development Corporation 375,000 375,000 125,000 125,000
Other 1,782,847 2,268,064 689,370 1,136,887
Total non-interest
expenses 16,733,232 16,528,585 6,067,986 6,189,059
Income before income taxes 8,337,448 10,747,123 2,245,531 1,691,862
Provision for income taxes 1,022,276 608,190 282,744 156,579
Net income $ 7,315,172 $10,138,933 $ 1,962,787 $ 1,535,283
Distribution of net income
Patronage dividends $ 7,315,172 $10,747,123 $ 1,962,787 $ 1,691,862
Retained earnings (608,190) (156,579)
$ 7,315,172 $10,138,933 $ 1,962,787 $ 1,535,283
</TABLE>
<PAGE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended September 30, 1997 1996
Cash flows from operating activities
Net income $ 7,315,172 $ 10,138,933
Adjustments to reconcile net income to net
cash used in operating activities
Provision for loan losses 2,044,000 950,000
Depreciation and amortization 4,014,516 4,052,958
Gain on sale of assets (1,801,975) (5,028,011)
Loans originated for sale (170,827,847) (240,309,266)
Proceeds from sale of loans held for sale 146,619,898 143,577,309
Increase in other assets (1,999,625) (6,811,087)
Increase in other liabilities 10,345,915 8,396,746
Net cash used in operating activities (4,289,946) (85,032,418)
Cash flows from investing activities
Redemption of restricted cash 1,464,131 -
Purchases of investment securities
Available-for-sale (5,516,353) (7,293,886)
Held-to-maturity - (1,007,783)
Proceeds from maturities and sales of
investment securities
Available-for-sale 3,522,809 6,075,132
Held-to-maturity 150,624 1,090,000
Net increase in loans and lease financing (42,641,746) (8,226,320)
Proceeds from sale of portfolio loans - 26,278,305
Purchases of premises and equipment (460,286) (714,580)
Net cash (used in) provided by investing
activities (43,480,821) 16,200,868
Cash flows from financing activities
Net (decrease) increase in deposits (6,577,401) 3,846,974
Net increase in short-term borrowings 36,862,804 25,403,242
Proceeds from issuance of
long-term debt 31,000,000 47,500,000
Sale of common stock 400 -
Dividends paid (210,173) -
Redemption of common stock - (18,000)
Patronage dividends paid (4,070,946) (4,341,889)
Net cash provided by financing activities 57,004,684 72,390,327
Increase in cash and cash equivalents 9,233,917 3,558,777
Cash and cash equivalents, beginning of year 17,150,534 21,289,376
Cash and cash equivalents, end of period $ 26,384,451 $ 24,848,153
<PAGE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental disclosures of noncash investing and financing activities:
For the nine months ended September 30, 1997 1996
Unrealized loss on investment securities
available-for-sale $ (29,241) $ (510,406)
Interest paid 33,992,130 20,627,561
Income taxes paid 1,078,752 730,924
Loans charged off 677,168 528,145
Transfer of real estate owned from
loans receivable to other assets 5,168,018 879,000
<PAGE>
NATIONAL COOPERATIVE BANK
CONDENSED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
The accompanying financial statements have been prepared without
audit and reflect all adjustments (consisting only of normal
recurring adjustments) which were, in the opinion of management,
necessary to a fair statement of the results of the interim period
presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. Accordingly, these condensed financial statements should
be read in conjunction with the financial statements and the notes
thereto included in NCB's most current annual report. The results
of operations for the interim periods are not necessarily indicative
of the results of the entire year.
Certain reclassifications have been made to the prior-period
amounts to conform with the current year's presentation.
1. Cash, Cash Equivalents and Investment Securities
As of September 30, 1997, NCB's portfolio of investment
securities, cash and cash equivalents had an average adjusted
maturity of 985 days with interest rates in those portfolios varying
from 5.00% to 8.50%.
Cash and Investment Investment
Cash Available- Held-to
Equivalents for-Sale Maturity
Cash $ 1,020,711 $ - $ -
Federal funds 5,724,820 - -
Money market securities 14,260,475 - -
Mutual funds 5,378,445 2,074,442 -
Mortgage-backed securities - - 2,795,783
Corporate bonds - 12,513,636 -
U.S. Treasury and
Agency obligations - 17,695,398 -
$26,384,451 $32,283,476 $2,795,783
At September 30, 1997, the investments in the available-for-sale
portfolio were recorded at aggregate fair value. As of December 31,
1996, restricted cash of $8,348,703 is held by a trustee for the
benefit of certificate holders in the event of loss on certain loans
sold of $37,300,000 and $92,623,000 in 1993 and 1992, respectively.
The loans sold have original maturities of ten to fifteen years. The
restricted cash will become available to NCB I, Inc., as the
principal balance of the respective loans decreases. On August 1,
1997, $1,464,131 was received as a reduction of the restricted cash
account due to loan repayments.
2. Loans and Lease Financing
Loans and leases outstanding by category at September 30, 1997
were:
Commercial loans $341,236,076
Lease financing 14,554,791
Real estate loans
Residential 448,100,857
Commercial 7,088,823
$810,980,547
At September 30, 1997 and 1996 and December 31, 1996 real estate
loans held for sale were $242.2 million, $131.8 million and $184.3
million, respectively.
3. Impaired Assets
Loans that became impaired after January 1, 1996 totalled
$4,833,838 and $1,979,308 at September 30, 1997 and 1996,
respectively. The 1997 impaired loans are comprised of nonaccrual
loans and a restructured loan totalling $3,801,463 and $1,032,375,
respectively. The 1996 impaired loans are comprised of nonaccrual
loans and a restructured loan totalling $1,282,100 and $697,208,
respectively. A specific allowance of $1,428,349 and $244,000 was
set aside for these loans at September 30, 1997 and 1996,
respectively, as management's best estimate of their fair value is
less than the recorded investment in the loans. During 1997 and
1996, the interest collected on the nonaccrual loans was applied to
reduce the outstanding principal. Interest earned on the
restructured loans totalled $346,002 and $40,271 during the nine
months ended September 30, 1997 and 1996, respectively.
At September 30, 1997 there were no commitments to lend
additional funds to borrowers whose loans are non-performing.
At September 30, 1997 and 1996 and December 31,1996, NCB had real
estate acquired through foreclosure of $5,544,726, $518,563 and
$376,708, respectively, which is classified as other assets.
4. Allowance for Loan Losses
The following is a summary of the activity in the allowance for
loan losses during the nine months ended September 30, 1997:
Balance at January 1, 1997 $15,504,510
Provision for loan losses 2,044,000
Charge-offs (677,168)
Recoveries of loans previously charged off 174,436
Balance at September 30, 1997 $17,045,778
The allowance for loan losses as a percentage of average loans
and lease financing outstanding as of the nine months ended
September 30, 1997 was 2.3%.
<TABLE>
5. Statement of Changes in Members' Equity
The following is a summary of the activity in members' equity for the nine
months ended September 30, 1997:
Retained Retained Total
Common Earnings Earnings Unrealized Members'
Stock Allocated Unallocated Gain(Loss) Equity
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $100,352,300 $ 5,770,844 $19,113,185 $ (64,774) $125,171,555
Net income - - 7,315,172 - 7,315,172
Proceeds from issuance of
common stock 400 - - - 400
Cancellation and redemption
of stock (1,131,966) - 341,842 - (790,124)
1996 patronage dividends
Distributed in common
stock and cash 6,492,799 (6,690,367) - - (197,568)
Other dividends paid - - (210,173) - (210,173)
1997 patronage dividends
To be distributed in cash - - (2,212,534) - (2,212,534)
Retained in form of equity - 4,394,014 (4,394,014) - 0
Unrealized loss on investment
securities available for
sale - - - (29,241) (29,241)
Balance, September 30,1997 $105,713,533 $ 3,474,491 $19,953,478 $ (94,015) $129,047,487<PAGE>
</TABLE>
6. Subsequent Event
On October 1, 1997, NCB sold approximately $196.2 million in whole
loans, servicing retained, to an unrelated third party generating a net
gain, including fees, of approximately $5.4 million.
7. New Financial Accounting Standards
In June, 1996, Statement of Financial Accounting Standards("SFAS") No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" was issued. SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities, based on a financial-
components approach that focuses on control. Under this approach, after
a transfer of financial assets, financial and servicing assets are
recognized if controlled or liabilities are recognized if incurred.
Financial and servicing assets are removed from the statement of income
when control has been surrendered and liabilities are removed when
extinguished. SFAS No. 125 was effective and adopted by NCB on January
1, 1997 and was applied prospectively. NCB did not experience any
material effect on its financial position from this implementation.
In February, 1997, SFAS No. 129,"Disclosure of Information about
Capital Structure" was issued. SFAS No. 129 establishes standards for
disclosing information about an entity's capital structure. This statement
continues the previous requirements to disclose certain information about
an entity's capital structure found in APB Opinion 10, Omnibus Opinion -1966
and FASB Statement No. 47, Disclosure of Long-Term Obligations. This
statement shall be effective for financial statements for periods ending
after December 15, 1997. NCB does not anticipate any material impact from
the implementation of SFAS No. 129.
In June, 1997, SFAS No. 130 was issued - "Reporting Comprehensive
Income". SFAS No. 130 requires that certain financial activity typically
disclosed in members' equity be reported in the statements of income as
an adjustment to net income in determining comprehensive income. The only
item applicable to the Bank would include gain/loss on securities
available-for-sale. Items identified as comprehensive income should be
reported also in the statements of comprehensive income and the statements
of changes in members' equity, under separate captions. SFAS No. 130 is
effective for NCB on January 1, 1998, including the restatement of prior
periods reported consistent with this pronouncement. NCB does not
anticipate any material financial impact from the implementation of SFAS
No. 130.
In June, 1997, SFAS No. 131 was issued - "Disclosures about Segments
of an Enterprise and Related Information". SFAS 131 requires the
reporting of selected segmented information in quarterly and annual
reports. Information from operating segments is derived from methods used
by NCB's management to allocate resources and measure performance. NCB
is required to disclose profit and losses, revenues and assets for each
segment identified, including reconciliations of these items to
consolidated totals. NCB is also required to disclose the basis for
identifying the segments and the type of products and services within each
segment. SFAS No. 131 is effective for NCB on January 1, 1998, including
the restatement of prior periods reported consistent with this
pronouncement, if practical. NCB does not anticipate any material impact
from the implementation SFAS No. 131.
<PAGE>
NATIONAL COOPERATIVE BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
SUMMARY
NCB's net income for the nine months ended September 30, 1997 was $7.3
million. This was a 27.9% or $2.8 million decrease compared with $10.1
million for the nine months ended September 30, 1996. The variance
resulted primarily from a 22.4% decrease in non interest income and an
increase in the provision for loan losses of 115.2%. For the three month
period, net income increased to $2.0 million from $1.5 million due to an
increase in net interest income and non interest-income.
Total assets were $913.9 million at September 30, 1997, representing
growth of $74.6 million or 8.9% from $839.3 million at December 31, 1996.
This growth resulted from increases in loan receivables, net of allowance
for loan losses, of $59.3 million, cash, cash equivalents, restricted cash
and investments of $9.6 million and remaining assets of $5.7 million.
The annualized return on average total assets was 1.15% for the nine
months of 1997 compared with 1.89% for the same period in 1996. The
annualized return on average equity for the period ended September 30,
1997 and 1996 was 7.63% and 11.16%, respectively.
NET INTEREST INCOME
Net interest income for the nine months ended September 30, 1997
increased 6.8% or $1.2 million from the same period in the prior year.
As shown on Table 2, the increase resulted primarily from higher volume
of loans and leases outstanding. In comparison to the year earlier
quarter, net interest income for the three months ended September 30,1997
increased 9.2% or $561 thousand. As shown on Table 2A, there were
positive variances of $258 thousand and $302 thousand related to volume
and yield, respectively.
As shown on Table 1 and 1A, the net yield on interest earning assets
dropped 36 basis points to 3.17% from 3.53% and 19 basis points to 3.37%
from 3.56% for the nine month and three month periods ended September
30,1997. This is due largely to the repricing in October, 1996 of $36
million of subordinated debt and to the increased volume in 1997 of loans
held for sale.
For the nine months ended September 30,1997, interest income went up
18.6% or $8.0 million to $51.2 million compared with $43.2 million from
the prior year. The increase in interest income was mostly due to a higher
average balance of the interest earning assets. As shown on Table 1, the
average rate of the interest earning assets was flat for both nine month
periods ended September 30. As shown on Table 2, interest income for the
nine month ended September 30, 1997 increased $8.1 million due to
increased volume but decreased $142 thousand due to a drop in interest
rates.
Interest income increased 22.7% or $3.3 million to $18.1 million for
the three months ended September 30, 1997 compared with $14.8 million of
the prior year's quarter. As shown on Table 2A, interest income increased
$2.4 million and $991 thousand due to increased volume and increasing rate
environment,respectively.
Interest expense increased $6.8 million to $32.1 million for the nine
months ended September 30, 1997 compared with $25.3 million for the same
period in 1996. For the three month period ended September 30, 1997,
interest expense increased $2.8 million to $11.4 million from $8.6 million
for the three months ended September 30, 1996. As shown on Table 1 and
Table 1A, the yield on interest bearing liabilities at September 30, 1997
and for the quarter ended September 30, 1997 went up 24 basis points and
77 basis points, respectively. The increase was due to the repricing of
the $53.5 million of subordinated debt and the use of the short term and
long term facilities to fund growth of the loans held for sale.
NON-INTEREST INCOME
Non-interest income for the nine months ended September 30, 1997 of
$8.04 million decreased 22.4% or $2.3 million from $10.4 million for the
same period last year. The majority of the decrease was caused by a
lesser amount of asset sales to the secondary market. The fees and gains
on sale of blanket mortgages totalled $4.7 million for the nine months
ended September 30,1996 compared with $1.8 million in the same period in
1997. This decrease was partially offset by an increase of $578.1
thousand in servicing fees and other income due to an increase in the
servicing portfolio.
For the three month period ended September 30, 1997 non-interest income
went up 10.9% to $2.3 million from $2.1 million at the same period in the
prior year.
NON-INTEREST EXPENSES
Non-interest expenses for the nine months ended September 30, 1997
slightly increased 1.2% or $204.6 thousand to $16.7 million from $16.5
million for the nine months ended September 30, 1996. Compensation and
benefits, the largest component of non-interest expenses, increased 12.9%
or $1.0 million due to a higher employee base at the start of 1997 and
also to higher bonus accruals for the current period compared with 1996.
Contractual services and other expenses decreased 15.9% or $827.5 thousand
due to management's continued emphasis on prudent controls of non-interest
expenses. Excluding the voluntary contribution to NCB Development
Corporation, non-interest expense as a percentage of average assets,
decreased to 1.9% for the nine months ended September 30, 1997 from 2.3%
for the nine months ended September 30,1996.
For the three months ended September 30, 1997, non-interest expenses
decreased $121.1 thousand or 2% to $6.1 million from $6.2 million for the
same period in 1996. Compensation and employee benefits increased 23.6%
or $642.1 from $2.7 million for the three month period in the prior year.
The increase was primarily due to the timing of new hires and greater
commissions paid to loan officers because of higher loan production. This
increase was offset by decreases in contractual services, occupancy and
equipment and other expenses in the total amount of $763.2 thousand.
Payment of FDIC insurance premium during the third quarter of 1996
accounted for 67.3% of this decrease.
<PAGE>
Table 1
Rate Related Assets and Liabilities
(dollars in thousands)
Nine Months Ended September 30,
ASSETS 1997 1996
Average Income/ Yields/ Average Income/ Yields/
Balance Expense Rates Balance Expense Rates
Interest earning assets
[S] [C] [C] [C] [C] [C] [C]
Real estate loans $369,237 $24,198 8.74% $287,824 $19,733 9.14%
Commercial loans
and leases 368,887 23,764 8.59% 327,740 20,552 8.36%
Total loans and
leases 738,124 47,962 8.66% 615,564 40,285 8.73%
Investment securities
and cash equivalents 63,291 3,228 6.80% 59,857 2,871 6.40%
Total interest earning
assets 801,415 51,190 8.52% 675,421 43,156 8.52%
Allowance for loan
losses (16,492) (14,863)
Non-interest earning assets
Cash 5,089 3,541
Other assets 59,133 46,077
Total non-interest
earning assets 64,222 49,618
Total assets $849,145 $710,176
LIABILITIES AND MEMBERS' EQUITY
Interest bearing liabilities
Subordinated debt $182,542 7,797 5.70% $182,970 7,084 5.16%
Notes payable 426,120 21,345 6.68% 303,255 15,178 6.67%
Deposits 83,892 2,971 4.72% 81,606 3,030 4.95%
Total interest bearing
liabilities 692,554 32,113 6.18% 567,831 25,292 5.94%
Other liabilities 35,556 21,310
Members' equity 121,035 121,035
Total liabilities and
members' equity $849,145 $710,176
Net interest earning
assets $108,861 $107,590
Net interest revenues
and spread $19,007 2.33% $17,864 2.58%
Net yield on
interest earning assets 3.17% 3.53%
<PAGE>
Table 1A
Rate Related Assets and Liabilities
(dollars in thousands)
Three Months Ended September 30,
ASSETS 1997 1996
Average Income/ Yields/ Average Income/ Yields/
Balance Expense Rates Balance Expense Rates
Interest earning assets
Real estate loans $357,963 $ 9,043 10.11% $302,579 $ 6,968 9.21%
Commercial loans
and leases 369,832 8,030 8.69% 334,263 6,795 8.13%
Total loans and
leases 727,795 17,073 9.38% 636,842 13,763 8.64%
Investment securities
and cash equivalents 64,029 1,021 6.38% 50,058 988 7.89%
Total interest earning
assets 791,824 18,094 9.14% 686,900 14,751 8.59%
Allowance for loan
losses (17,107) (15,037)
Non-interest earning assets
Cash 6,585 4,382
Other assets 62,334 51,567
Total non-interest
earning assets 68,919 55,949
Total assets $843,636 $727,812
LIABILITIES AND MEMBERS' EQUITY
Interest bearing liabilities
Subordinated debt $182,542 2,630 5.76% $182,934 2,394 5.23%
Notes payable 415,187 7,843 7.56% 318,134 5,257 6.61%
Deposits 84,501 954 4.52% 81,804 994 4.86%
Total interest bearing
liabilities 682,230 11,427 6.70% 582,872 8,645 5.93%
Other liabilities 33,787 21,806
Members' equity 127,619 123,134
Total liabilities and
members' equity $843,636 $727,812
Net interest earning
assets $109,594 $104,028
Net interest revenues
and spread $ 6,667 2.44% $ 6,106 2.66%
Net yield on
interest earning assets 3.37% 3.56%
Table 2
Change in Net Interest Income
(dollars in thousands)
For the nine months ended September 30, 1997 compared to 1996
Increase (decrease) due to changes in:
Average Average
Volume* Yield Net**
Interest Income
Cash equivalents and
investment securities $ 170 $ 187 $ 357
Commercial loans and leases 2,638 574 3,212
Real estate loans 5,369 (903) 4,466
Total interest income 8,177 (142) 8,035
Interest Expense
Deposits 83 (142) (59)
Notes payable 6,977 (810) 6,167
Subordinated debt (17) 729 712
Total interest expense 7,043 (223) 6,820
Net interest income $1,134 $ 81 $1,215
* Average monthly balances
**Changes in interest income and interest expense due to changes in
rate and volume have been allocated to "change in average volume" and"
change in average rate" in proportion to the absolute dollar amounts
in each.
<PAGE>
Table 2A
Change in Net Interest Income
(dollars in thousands)
For the three months ended September 30, 1997 compared to 1996
Increase (decrease) due to changes
in:
Average Average
Volume* Yield Net**
Interest Income
Cash equivalents and
investment securities $ 244 $(211) $ 33
Commercial loans and leases 753 483 1,236
Real estate loans 1,356 719 2,075
Total interest income 2,353 991 3,344
Interest Expense
Deposits 32 (71) (39)
Notes payable 2,068 518 2,586
Subordinated debt (5) 242 237
Total interest expense 2,095 689 2,784
Net interest income $ 258 $ 302 $ 560
* Average monthly balances
**Changes in interest income and interest expense due to changes in
rate and volume have been allocated to "change in average volume" and
"change in average rate" in proportion to the absolute dollar amounts
in each.
<PAGE>
PROVISION FOR INCOME TAXES
The federal income tax provision is determined on the basis of
non-member income generated by NCB Savings Bank, FSB and reserves
set aside for the retirement of Class A notes and dividends on Class
C stock. NCB's subsidiaries are also subject to varying levels of
state taxation. The federal income tax provision for the nine
months ended September 30, 1997 was $1.02 million compared with the
prior year's provision of $608 thousand.
CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES
Cash, cash equivalents and investment securities at September 30,
1997 increased $11.0 million or 21.9% from $50.4 million at year-end 1996.
As a percentage of earning assets, cash, cash equivalents
and investment securities decreased to 7.0% at September 30, 1997
from 7.3% at December 31, 1996.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at September 30, 1997 increased 9.9%
to $17.0 million from $15.5 million at December 31, 1996. The
allowance during the period was impacted by loans charged off, net
of recoveries of loans previously charged off, amounting to $502.7
thousand and the loan loss provision of $2.04 million. Net
chargeoffs as a percentage of average loans and leases outstanding
are .07% for both the nine months ended September 30,1997 and 1996
compared with .2% for the year ended December 31, 1996. For the nine
months ended September 30,1997, NCB's provision for loan losses as
a percentage of average loans and leases outstanding at September
30, 1997 increased to .4% compared with .1% for the same period in
1996. The increase in the provision is the result of two factors:
1) growth in the real estate and commercial portfolio from the prior
year, and 2) management's assessment that additional provision
should be recorded due to the current economic environment.
The loan loss allowance as a percentage of average loans and
leases increased to 2.3% at September 30, 1997 from 2.1% at December
31, 1996. Overall, credit quality remained strong and management
considers the current allowance to be adequate to absorb known and
inherent risks in the loan portfolio.
As shown in Table 3, total nonperforming assets (restructured and
non-accruing loans and real estate owned) increased 42.4% from $8.1
million at December 31, 1996 to $11.6 million at September 30, 1997.
The increase was the result of a foreclosure on a $5.4 million loan to
a food wholesaler in the month of September, 1997. Nonperforming
assets as a percentage of loans and leases outstanding plus real estate
owned were 1.4% at September 30, 1997 compared with 1.1% at year-end
1996. The allowance for loan losses as a percentage of nonperforming
assets decreased to 147.4% at September 30,1997 from 190.8% at
December 31, 1996.
INTEREST BEARING LIABILITIES
Interest bearing liabilities
(dollars in thousands)
9/30/97 12/31/96 % Change
Deposits $ 82,043 $ 88,620 (7.4%)
Short term debt 261,363 224,500 16.4%
Long term debt 233,660 202,137 15.6%
Subordinated debt 182,803 182,853 0.0%
Total $756,869 $698,110 8.4%
Interest bearing liabilities increased by 8.4% to $756.9 million
at September 30, 1997 from $698.1 million at December 31, 1996.
For the first nine months of 1997, deposits at NCB Saving Bank,
FSB dropped 7.4% to $82.0 million. The decrease was attributable to
scheduled maturities of certificate of deposits. Average maturity
of the certificates of deposits is 13 months.
At September 30,1997, total short term and long term borrowings
(including the subordinated debt) increased 10.7% from year-end
1996. Proceeds from the borrowings were used to fund asset growth,
largely the loans available for sale. NCB had approximately $258.4
million outstanding on its short term facilities at the end of the
quarter. Included in the short term borrowings are $31.4 million
from an affiliate and cooperative entities and $30.0 million of
commercial paper. Long term debt increased 15.6% from year-end 1996
due to the issuance of $40.0 million of medium-term notes and $10.0
million under the long term facilities; such increase was partially
offset by a paydown of $19.0 million in long-term notes. Unused
capacities under the short term and long term facilities of
approximately $153.0 million and $90.0 million, respectively, are
sufficient to meet anticipated commitments during 1997.
<PAGE>
TABLE 3
Nonperforming assets
(dollars in thousands)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1997 1997 1997 1996 1996
Real estate owned $ 5,545 $ 208 $ 377 $ 377 $ 518
Non-accruing 3,801 5,577 2,731 2,601 1,282
Restructured 2,218 5,028 5,098 5,147 4,115
Total $11,564 $10,813 $8,206 $8,125 $5,915
<PAGE>
Part II Other Information
Item 2. Changes in Securities
(c) During the period covered by this report, NCB sold one share
of its Class C stock without registration under the Securities Act
of 1933 (the "1933 Act") in reliance on the exemption from
registration provided by section 4 (2) of the 1933 Act. The stock
was sold for $100 in cash without any underwriting discounts or
commissions to a cooperative organization eligible to obtain loans
from NCB. The stock was not offered to the general public; the
purchaser had access to essentially the same information that would
be contained in a registration statement and had the capability to
evaluate the merits of such an investment.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NATIONAL CONSUMER COOPERATIVE BANK
Date:
By: /s/ Richard L. Reed
Richard L. Reed,
Managing Director,
Chief Financial Officer
By: /s/ Marietta J. Orcino
Marietta J. Orcino
Vice President,
Tax & Regulatory Compliance
<PAGE>
Exhibit No. 27
Financial Data Schedule
Appendix C to Item 601 of Regulation S-K
Bank Holding Companies and Savings and Loan Holding Companies
Article 9 of Regulation S-X
Item Number Item Description Amount
9-03 (1) Cash 1,020,711
9-03 (2) Int-bearing deposits 19,638,920
9-03 (3) Fed-Funds-Sold 5,724,820
9-03 (4) Trading-Assets 0
9-03 (6) Investments-Held-For-Sale 35,019,259
9-03 (6) Investments-Carrying 0
9-03 (7) Loans 810,980,547
9-03 (7) (2) Allowance 17,045,778
9-03 (11) Total-Assets 913,912,032
9-03 (12) Deposits 82,042,601
9-03 (13) Short-Term 261,362,804
9-03 (15) Liabilities-Other 24,996,435
9-03 (16) Long-Term 416,462,705
9-03 (21) Common 105,713,533
9-03 (22) Other Stock Equity 94,015
9-03 (23) Total-Liability-And-Equity 913,912,032
9-04 (1) Interest-Loan 47,961,897
9-04 (2) Interest-Invest 3,227,878
9-04 (5) Interest-Total 51,189,775
9-04 (6) Interest-Deposit 2,971,432
9-04 (9) Total Interest-Expense 32,113,236
9-04 (10) Interest-Income-Net 19,076,539
9-04 (11) Loan-Losses 2,004,000
9-04 (13) (h) Securities-Gains/Loss 0
9-04 (14) Expense-Other 16,733,232
9-04 (15) Income-Pretax 8,337,448
9-04 (20) Net-Income 7,315,172
9-04 (21) EPS - Primary 9.23
9-04 (21) EPS - Diluted 9.23
I.B.5 Yield-Actual Int Earning 3.17
III.C.1 (a) Loans-Non-accrual 3,801,463
III.C.1 (b) Loans-Past 90 days 1,164,683
III.C.1.(c) Loans-Troubled 2,218,862
III.C.2 Loans-Potential Problem 0
IV.A.1 Allowance-Beginning 15,504,510
IV.A.2 Charge-Offs 677,168
IV.A.3 Recoveries 174,436
IV.A.4 Allowance-End 17,045,778
IV.B.1 Allowance-Domestic 0
IV.B.2 Allowance-Foreign 0
IV.B.3 Allowance-Unallocated 17,045,778
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 1,020,711
<INT-BEARING-DEPOSITS> 19,638,920
<FED-FUNDS-SOLD> 5,724,820
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,019,259
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 810,980,547
<ALLOWANCE> 17,045,778
<TOTAL-ASSETS> 913,912,032
<DEPOSITS> 82,042,601
<SHORT-TERM> 261,362,804
<LIABILITIES-OTHER> 24,996,435
<LONG-TERM> 416,462,705
0
0
<COMMON> 105,713,533
<OTHER-SE> 94,015
<TOTAL-LIABILITIES-AND-EQUITY> 913,912,032
<INTEREST-LOAN> 47,961,897
<INTEREST-INVEST> 3,227,878
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 51,189,775
<INTEREST-DEPOSIT> 2,971,432
<INTEREST-EXPENSE> 32,113,236
<INTEREST-INCOME-NET> 19,076,539
<LOAN-LOSSES> 2,004,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 16,733,232
<INCOME-PRETAX> 8,337,448
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,315,172
<EPS-PRIMARY> 9.23
<EPS-DILUTED> 9.23
<YIELD-ACTUAL> 3.17
<LOANS-NON> 3,801,463
<LOANS-PAST> 1,164,683
<LOANS-TROUBLED> 2,218,862
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 15,504,510
<CHARGE-OFFS> 677,168
<RECOVERIES> 174,436
<ALLOWANCE-CLOSE> 17,045,778
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