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 March 31, 1999 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 March 31, 1999
Class C 221,996
(Common stock, $100.00 par value)
Class B 922,096
(Common stock, $100.00 par value)
Class D 3
(Common stock, $100.00 par value)
National Consumer Cooperative Bank
(doing business as National Cooperative Bank)
and Subsidiaries
INDEX
PART I FINANCIAL INFORMATION
Page No.
Item 1 Consolidated balance sheets - March 31,
1999 and December 31, 1998 ............ 3
Consolidated statements of income - for
the three months ended March 31, 1999
and 1998............................... 4
Consolidated statements of comprehensive
income - for the three months ended
March 31, 1999 and 1998................. 5
Consolidated statements of cash flows -
for the three months ended
March 31, 1999 and 1998................. 6-7
Condensed notes to the consolidated
financial statements - March 31,
1999.................................... 8-13
Item 2 Management's discussion and analysis
of financial condition and results of
operations - for the three months
ended March 31, 1999 and 1998........... 14-21
Item 3 Quantitative and qualitative disclosures
about market risk....................... 22
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of
Security Holders.................... 23
Item 6 Exhibits ........................... 24
Exhibit 27 - Financial Data Schedule
National Cooperative Bank
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and December 31, 1998
(Unaudited)
March 31, December 31,
Assets 1999 1998
Cash and cash equivalents $ 36,390,092 $ 66,563,160
Restricted cash 5,690,096 13,202,725
Investment securities
Available-for-sale 37,925,985 39,127,948
Held-to-maturity 2,726,716 2,892,312
Loans held for sale 247,700,118 184,000,331
Loans and lease financing 722,077,140 611,174,140
Less: Allowance for loan losses (17,864,467) (17,426,450)
Net loans and lease financing 704,212,673 593,747,690
Other assets 34,037,606 33,881,044
Total assets $1,068,683,286 $933,415,210
Liabilities and Member's Equity
Liabilities
Deposits $ 126,988,604 $123,419,544
Patronage dividends payable
in cash 5,978,411 5,275,325
Other liabilities 14,337,889 29,872,655
Borrowings
Short-term 386,194,436 220,652,186
Long-term 211,238,121 231,193,174
597,432,557 451,845,360
Subordinated debt 182,687,065 182,706,417
Total borrowings 780,119,622 634,551,777
Total liabilities 927,424,526 793,119,301
Members' equity
Common stock
Class B 92,209,648 92,209,648
Class C 22,199,604 22,199,604
Class D 300 300
Retained earnings
Allocated 7,978,268 7,245,656
Unallocated 17,643,878 17,097,102
Accumulated other comprehensive
income 1,227,062 1,543,599
Total members' equity 141,258,760 140,295,909
Total liabilities and
members' equity $1,068,683,286 $933,415,210
National Cooperative Bank
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three months ended March 31, 1999 1998
Interest income
Loans and lease financing $17,013,818 $15,861,896
Investments securities 1,488,772 1,514,742
Total interest income 18,502,590 17,376,638
Interest expense
Deposits 1,450,724 991,322
Short-term borrowings 3,583,426 3,121,688
Long-term debt, other borrowings
and subordinated debt 5,829,905 6,410,586
Total interest expense 10,864,055 10,523,596
Net interest income 7,638,535 6,853,042
Provision for loan losses 417,500 352,879
Net interest income after
provision for loan losses 7,221,035 6,500,163
Non-interest income
Gain on sale of loans 64,470 3,630,122
Loan and deposit servicing fees 720,595 613,965
Other 856,162 1,279,344
Total non-interest income 1,641,227 5,523,431
Non-interest expense
Compensation and employee benefits 3,613,886 3,819,023
Contractual services 1,067,046 916,980
Occupancy and equipment 1,049,780 949,031
Contribution to NCB
Development Corporation 50,000 -
Other 606,380 537,091
Total non-interest expense 6,387,092 6,222,125
Net income before income taxes 2,475,170 5,801,469
Provision for income taxes 324,414 292,533
Net income $ 2,150,756 $ 5,508,936
Distribution of net income
Patronage dividends $ 2,150,756 $ 5,508,936
Retained earnings - -
$ 2,150,756 $ 5,508,936
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the three months ended March 31, 1999 1998
Net income $2,150,756 $5,508,936
Other comprehensive income, net of tax:
Net unrealized holding
(losses) gain before tax (316,537) 228,157
Comprehensive income $1,834,219 $5,737,093
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended March 31, 1999 1998
Cash flows from operating activities
Net income $ 2,150,756 $ 5,508,936
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for loan losses 417,500 352,879
Depreciation and amortization 1,461,790 1,142,583
Gain on sale of loans (64,470) (3,630,122)
Loans originated for sale (70,837,217) (161,136,167)
Proceeds from sale of loans held for sale 7,201,898 183,960,431
(Increase) decrease in other assets (1,342,583) (1,840,592)
(Decrease) increase in other liabilities (15,534,766) 116,812
Net cash provided by (used in) operating
activities (76,547,092) 24,474,760
Cash flows from investing activities
Redemption of restricted cash 7,512,629 1,003,495
Purchase of investment securities
Available-for-sale (1,000,000) -
Proceeds from maturities of investments
securities
Available-for-sale 1,337,832 1,920,357
Held-to-maturity 165,596 -
Net increases in loans and lease financing (117,955,242) (14,882,227)
Proceeds from sale of portfolio loans - 8,156,399
Net cash used in investing activities (102,737,287) (3,801,976)
Cash flows from financing activities
Net increase in deposits 3,569,061 6,716,856
Net increase (decrease) in short-term
borrowings 165,542,250 (47,456,223)
Proceeds from issuance of long-term debt - 34,800,000
Repayment on long term debt (20,000,000) (8,000,000)
Net cash provided by (used in) financing
activities 149,111,311 (13,939,367)
(Decrease) increase in cash and cash equivalents (30,173,068) 6,733,417
Cash and cash equivalents, beginning of year 66,563,160 21,689,245
Cash and cash equivalents, end of period $ 36,390,092 $ 28,422,662
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental schedule of investing and financing activities:
For the three months ended March 31, 1999 1998
Unrealized (loss) gain on investment
available-for-sale $ (316,537) $ 228,157
Interest paid $9,772,836 $8,389,843
Income taxes paid $ 1,494 $ 300,000
NATIONAL COOPERATIVE BANK
CONDENSED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 1999
(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.
1. Cash, Cash Equivalents and Investment Securities
As of March 31, 1999, NCB's portfolios of investment
securities, cash and cash equivalents had an average adjusted
maturity of 1,358 days with interest rates in those portfolios
varying from 5.38% to 9.40%.
Cash and Investments Investments
Cash Available- Held-to-
Equivalents for-Sale Maturity
Cash $10,008,919 $ - $ -
Federal funds 1,578,298 - -
Money market
securities 24,802,875 703,816 -
Private debt
security - - 784,404
Mutual funds - 1,513,489 -
Mortgage-backed
securities - 4,808 1,942,312
Corporate bonds - 6,657,845 -
U.S. Treasury and Agency
obligations - 4,455,621 -
Interest-only
receivables - 24,590,406 -
$36,390,092 $37,925,985 $2,726,716
At March 31, 1999, the investments in the available-for-sale
portfolio were recorded at aggregate fair value. Restricted cash
of $5,690,096 is held by a trustee for the benefit of certificate
holders in the event of a loss on certain loans sold in 1992 and
1993, the remaining balance of which totalled $46,811,226
and $49,354,025, respectively. The restricted cash will become
available to NCB I, Inc. as the principal balance of the
respective loans decreases. The loans sold have original
maturities of ten to fifteen years. In January 1999, $7,512,630
of the restricted cash account was replaced by a letter of credit.
Interest-only receivables substantially pertain to blanket
loans to cooperative housing corporations.
2. Loans and Lease Financing
Loans and leases outstanding by category at March 31, 1999
were:
Commercial loans $399,943,196
Lease financing 50,878,549
Real estate loans
Residential 511,697,834
Commercial 7,257,679
$969,777,258
At March 31, 1999 and December 31, 1998 loans held for resale
were $247.7 million and $184.0 million, respectively.
3. Impaired Assets
Impaired loans, representing the nonaccrual loans at March 31,
1999 and Decemeber 31, 1998, totalled $2,371,213 and $2,384,691,
respectively and averaged $2,367,000 and $3,097,000 during the
respective periods ending on these dates. Specific allowances
of $533,000 and $557,267 were established at March 31, 1999
and December 31, 1998, respectively. During 1999 and 1998, the
interest collected on the nonaccrual loans was applied to reduce
the outstanding principal.
At March 31, 1999 and December 31, 1998, there were no
commitments to lend additional funds to borrowers whose loans
are impaired.
At March 31, 1999 and December 31, 1998, NCB had real estate acquired
through foreclosure of $3,355,044 and $4,342,739, 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 three months ended March 31, 1999:
Balance at January 1, 1999 $17,426,450
Provision for loan losses 417,500
Charge-offs -
Recoveries of loans previously
charged-off 20,517
Balance at March 31, 1999 $17,864,467
The allowance for loan losses as a percentage of average loans
and lease financing at March 31, 1999 was 2.1%.
5. Statement of Changes in Members' Equity
The following is a summary of the activity in members' equity for the three
months ended March 31 1999:
Retained Retained Total
Common Earnings Earnings Unrealized Members'
Stock Allocated Unallocated Gain(Loss) Equity
Balance, December 31, 1998
$114,409,552 $ 7,245,656 $17,097,102 $1,543,599 $140,295,909
Net income - - 2,150,756 - 2,150,756
1999 patronage
dividends to be
distributed in
cash - - (871,368) - (871,368)
Retained in form of
equity - 732,612 (732,612) - -
Unrealized loss on investment
securities available-for-
sale - - - (316,537) (316,537)
Balance, March 31, 1999
$114,409,552 $ 7,978,268 $17,643,878 $1,227,062 $141,258,760
6. SEGMENT REPORTING
NCB's reportable segments are strategic business units that
provide diverse products and services within the financial
services industry. NCB has four reportable segments: commercial
lending, real estate, NCB Savings Bank and other. The commercial
lending segment provides financial services to cooperative and
member-owned businesses. The real estate lending segment
originates, sells and services real estate loans nationally,
with a concentration in New York City. NCB Savings Bank segment
provides traditional banking services such as lending and
deposit gathering to retail, corporate and commercial customers.
"Other" consists of NCB's unallocated parent company income and
expense, and net interest income from investments and corporate
debt after allocations to segments.
The corporation evaluates segment performance based on net
income before taxes. The accounting policies of the segments are
substantially the same as those described in the summary of
significant accounting policies in the most recent annual report.
Overhead and support expenses are allocated to each operating
segment based on number of employees, and other factors
relevant to expenses incurred. Also included in overhead and
support is depreciation allocated based on equipment usage.
The following is the segment reporting for the three months
March 31, 1999 and 1998 (dollars in thousands):
1999 Commercial Real Estate NCB
Lendng Lending NCBSB Other Consolidated
Net interest income
Interest income $ 7,844 $ 7,247 $ 2,437 $ 975
Allocated interest
expense 5,487 4,479 - (9,996)
Interest expense - - 1,454 9,410
Net interest income 2,357 2,768 983 1,531 $ 7,639
Provision for loan
losses (2,069) 193 43 2,251 418
Non-interest income-
external 609 205 251 576 1,641
Non-interest expense
Direct expense 1,148 1,111 662 3,466 6,387
Overhead and support 117 88 75 (280) -
Total non-interest
expense 1,265 1,199 737 3,186 6,387
Income (loss) before
taxes $ 3,770 $ 1,581 $ 454 $ (3,330) $ 2,475
Total average assets $385,674 $353,477 $ 131,822 $107,581 $978,554
1998 Commercial Real Estate NCB
Lending Lending NCBSB Other Consolidated
Net interest income
Interest income $ 6,993 $ 6,587 $ 1,963 $ 1,963
Allocated interest
expense 5,096 4,259 - (9,355)
Interest expense - - 992 9,531
Net interest income 1,897 2,328 971 1,657 $ 6,853
Provision for loan
losses (226) 294 35 250 353
Non-interest income-
external 876 4,148 163 339 5,523
Non-interest expense
Direct expense 942 1,071 580 3,629 6,222
Overhead and support 127 84 50 (521) -
Total non-interest
expense 1,069 1,155 630 3,368 6,222
Income (loss) before
taxes $ 1,927 $ 5,027 $ 469 $ (1,621) $ 5,801
Total average assets $334,485 $309,586 $ 98,669 $127,061 $869,801
NATIONAL COOPERATIVE BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
SUMMARY
NCB's net income for the three months ended March 31, 1999 was
$2.2 million. This was a 61% or $3.3 million decrease compared
with $5.5 million for the three months ended March 31, 1998. The
variance resulted from a 70.3% or $3.9 million decrease in non-
interest income which was partially offset by an increase in net
interest income of 11.5% or $785.5 thousand.
Total assets were $1.07 billion at March 31, 1999, up 14.5% or
$135.3 million from $933.4 million at December 31, 1998. This
resulted primarily from an increase in loans held for sale and
loans and lease financing of $174.6 million partially offset by
a decrease in cash and cash equivalents, restricted cash
and investment securities of $39.1 million.
The annualized return on average total assets was .88% for the
first three months of 1999 compared with 2.53% for the same period
in 1998. The annualized return on average equity for the period
ended March 31, 1999 and 1998 was 6.11% and 16.44%, respectively.
NET INTEREST INCOME
Net interest income for the first three months of 1999
increased 11.5% or $785.5 thousand over the same period a year
ago. As shown on Table 1, the net interest spread decreased 4
basis points to 2.31% from 2.35% for the three months ended March
31, 1998 while net interest yield on interest earning assets was
3.21% and 3.29% for the three months ended March 31, 1999 and
1998, respectively. The yield on average loans and leases
decreased 66 basis points while the yield on investment
securities and cash equivalents went down 15 basis points. The
decreases were all due to the current rate environment.
For the three months ending March 31, 1999, interest income
increased 6.5% or $1.1 million to $18.5 million from $17.4
million of the prior year's quarter. As shown on Table 2, an
increase in average volume which was due to growth in real estate
loans (most of which were held for sale) and in the commercial
loan and lease portfolio, was partially offset by a drop in
average yield.
Interest expense increased $340.5 thousand to $10.9 million for
the three months ended March 31, 1999 compared with $10.5 million
for the three months ended March 31, 1998. The interest expense
was up as a result of higher levels of notes payable and deposits.
While interest expense was up due to the higher usage of notes
payable required to fund loan volume, such increase was offset by
lower interest rates on them. The average rate on interest-bearing
liabilities decreased to 5.46% compared with 5.98% in the same
period in 1998. As shown on Table 2, a $1.2 million increase in
interest expense was volume related while a $.9 million decrease
was due to interest rates.
NON-INTEREST INCOME
Non-interest income for the three months ended March 31, 1999
of $1.6 million decreased 70.3% or $3.9 million from $5.5 million
for the same period last year. Non-interest income is composed of
gains from sales of blanket mortgages and share loans to
secondary market investors, servicing fees, origination fees,
management fees and advisory and debt placement fees. The
majority of the decrease resulted from the timing of the sale of
loans. Loans sold during the first quarter of 1999 were $7.1
million compared with $185.3 million in the year-earlier period.
However, following the end of the quarter, NCB sold in April 1999
approximately $132 million of blanket mortgages.
Servicing fee income for the quarter ended March 31, 1999
increased 17.4% or $106.6 thousand to $721 thousand compared with
$614.0 thousand for the three months ended March 31, 1998 based
on loans serviced for others of $1.7 billion and $1.5 billion at
March 31, 1999 and 1998, respectively.
Other income was down 33.1% to $856.2 thousand from $1.3
million due to lower commercial and real estate loan fees
received and amortization of excess yield for the quarter ending
March 31, 1999.
NON-INTEREST EXPENSE
Non-interest expense for the three months ended March 31, 1999
increased 2.7% or $165 thousand to $6.4 million compared
with $6.2 million for the three months ended March 31, 1998.
Compensation and benefits, the largest component of non-interest
expense, decreased 5.37% or $205 thousand due to a lower employee
base and lower bonus accruals than in the year-earlier period.
Contractual services, occupancy and equipment, and other expenses
increased 13.3% or $320 thousand primarily due to equipment and
technology costs, corporate and marketing development, placement
and compensation survey fees.
Excluding the voluntary contributions to NCB Development
Corporation, which were $50 thousand and zero during the first
quarters of 1999 and 1998, respectively, non-interest expense as
a percentage of average assets was 2.6% for the three months
ended March 31, 1999 compared with 2.9% for the same period a
year ago.
Table 1
RATE RELATED ASSETS AND LIABILITIES
(dollars in thousands)
Three Months Ended
March 31,
1999 1998
Assets Avg. Income/ Yields/ Avg. Income/ Yields
Balance Expenses Rates Balance Expense Rates
Interest earning assets
Real estate loans $458,737 $ 8,705 7.59% $390,976 $ 8,087 8.27%
Commercial loans
and leases 391,192 8,309 8.50% 341,225 7,775 9.11%
Total loans and
leases 849,929 17,014 8.01% 732,201 15,862 8.67%
Investment securities
and cash equivalents 103,106 1,489 5.78% 102,101 1,515 5.93%
Total interest
earning assets 953,035 18,503 7.77% 834,382 17,377 8.33%
Allowance for loan
losses (17,719) (17,837)
Non-interest earning assets
Cash 10,528 3,654
Other assets 32,710 49,602
Total non-interest
earning assets 43,238 53,256
Total assets $978,554 $869,801
LIABILITIES AND MEMBER'S EQUITY
Interest bearing liabilities
Subordinated debt $182,641 $ 2,588 5.67% $182,542 $ 2,680 5.87%
Notes payable 486,578 6,825 5.61% 430,261 6,583 6.37%
Deposits 126,018 1,451 4.61% 91,012 991 4.36%
Total interest
bearing liabilities 795,237 10,864 5.46% 703,815 10,524 5.98%
Other liabilities 42,443 31,944
Members' equity 140,874 134,042
Total liabilities and
members' equity $978,554 $869,801
Net interest earning
assets $157,798 $130,567
$ 7,639
Net interest revenues
and spread 2.31% $ 6,853 2.35%
Net yield on interest
earning assets 3.21% 3.29%
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 income tax provision for the three
months ended March 31, 1999 was $324 thousand compared with the
prior year's provision of $293 thousand.
CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES
Cash, cash equivalents and investment securities totalling
$77.0 million at March 31, 1999 decreased $31.5 million or 29.1%
from $108.6 million at year-end 1998 due mostly to the funding of
loans and lease financing. As a percentage of earning assets,
cash, cash equivalents and investment securities decreased to
7.9% at March 31, 1999 from 13.5% at December 31, 1998.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at March 31, 1999 increased 2.5%
to $17.9 million from $17.4 million at December 31, 1998. The
allowance during the period was impacted by recoveries of loans
previously charged-off of $20.5 thousand and the provision of
$417.5 thousand. Overall, loan portfolio quality remained both
strong and stable at the end of the first quarters of 1999 and
1998. NCB's annualized provision for loan losses as a percentage
of average loans and leases outstanding remained at .2% for the
quarters ended March 31, 1999 and 1998.
The loan loss allowance as a percentage of average loans and
leases decreased to 2.1% at March 31, 1999 from 2.2% at December
31, 1998. Management considers the current allowance to be
adequate to absorb known and inherent risks in the loan
portfolio.
As shown in Table 3, total impaired assets (non-accruing loans
and real estate owned) decreased 14.9% from $6.7 million at
December 31, 1998 to $5.7 million at March 31, 1999. Impaired
assets as a percentage of loans and leases outstanding plus real
estate owned decreased to .6% at March 31, 1999 compared with .8%
at year-end 1998. The allowance for loan losses as a percentage
of impaired assets increased to 312% at March 31, 1999 from 259%
at December 31, 1998.
Table 2
Changes in Net Interest Income
(dollars in thousands)
For the three months ended March 31, 1999 compared to 1998
Increase (decrease) due to change in:
Average Average
Volume* Yield Net**
Interest Income
Cash equivalents and
investment securities $ 14 $ (40) $ (26)
Commercial loans and leases 1,086 (552) 534
Real estate loans 1,323 (705) 618
Total interest income 2,423 (1,297) 1,126
Interest expense
Deposits 400 59 459
Notes payable 841 (868) (27)
Subordinated debt 1 (93) (92)
Total interest expense 1,242 (902) 340
Net interest income $1,181 $ (395) $ 786
* 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.
INTEREST BEARING LIABILITIES
Interest Bearing liabilites
(dollars in thousands)
3/31/99 12/31/98 % Change
Deposits $126,989 $123,420 2.9%
Short-term debt 386,194 220,652 75.0%
Long-term debt 211,238 231,193 (8.6%)
Subordinated debt 182,687 182,706 0.0%
Total $907,108 $757,971 19.7%
Interest bearing liabilities increased $149.1 million to $907.1
million at March 31, 1999 from $758.0 million at December 31,
1998.
For the first three months of 1999, deposits at NCB Saving
Bank, FSB(NCBSB) grew 2.9% to $127.0 million compared with $123.4
million at December 31, 1998. The growth was attributable to
local and national deposit accounts and deposits from cooperative
customers. Average maturity of the certificates of deposits is
15.2 months. Funds generated by the increased deposit activity
were used to originate single-family loans and increase
liquidity.
At March 31, 1999, total short-term and long-term borrowings
(including subordinated debt) increased 22.9% or $145.5 million
to $780.1 million in comparison to prior year-end 1998 of $634.6
million. Proceeds from the borrowings were used to fund growth
in loans and leases. At March 31, 1999, NCBSB had advances of
$17.0 million from the Federal Home Loan Bank and $369.2 million,
net of discount, outstanding on its short-term facilities.
Included in the short-term borrowings were revolving lines of
credit of $207.5 million; commercial paper with a face value of
$125.0 million and $38.0 million in borrowings from a related
entity and cooperative customers. Long-term debt decreased 8.6%
from year-end 1998 due to a payment of $20.0 million under the
long-term facilities. At March 31, 1999, there was unused
capacity under the short-term and long-term facilities of
approximately $32.0 million and $85.0 million, respectively.
In April 1999, NCB received Board approval to increase the
size of several funding programs. The new maximum amounts under
NCB's programs are as follows:
Short term facilities to $500.0 million
Commercial paper program to $250.0 million*
Medium term note program to $300.0 million
Long term facilities to $275.0 million
* NCB maintains available committed capacity, under its short
term facilities, in an amount not less than the outstanding
commercial paper balance.
TABLE 3
Impaired assets
(dollars in thousands)
March 31, Dec. 31, Sept. 30, June 30, March 31,
1999 1998 1998 1998 1998
Real estate owned $3,355 $4,343 $4,155 $4,272 $ 5,068
Non-accruing 2,371 2,385 819 3,445 5,738
$5,726 $6,728 $4,974 $7,717 $10,806
YEAR 2000
A significant challenge facing NCB, its subsidiaries and
affiliate as well as all companies, is the readiness of its
computer systems for the next millennium. NCB is dependent upon
its internal computer systems and has external interdependencies
with other financial institutions and customers.
NCB has surveyed all mission critical internal software and
systems (See Table (A)) and has determined a remediation
strategy. Table (B) reflects the phase completion with respect
to all mission critical systems. NCB expects all testing to be
completed by May 31, 1999.
With respect to "non-information technology items", NCB has
surveyed the vendors/providers with the results shown in Table
(C).
NCB has surveyed all associated banks and financial
institutions with which a mission critical interdependence
exists. Based upon the results of this survey, NCB took actions
which involved testing of key systems or transitioning to
alternative institutional systems. All associated respondents
indicated that they were already Year 2000 compliant by December
31, 1998.
To date, direct costs relative to the Year 2000 efforts have
totalled less than $100,000. NCB does not anticipate exceeding
this amount in addressing all associated Year 2000 issues. All
costs to date are and in the future will be funded through
operating income and are not considered material. NCB converted
to a new Year 2000 compliant loan accounting system in November
1998 which replaced its existing systems that were not Year 2000
compliant. The cost of this replacement was less than $500,000.
NCB has surveyed the major portion of its customer base to
determine the ability of its customers to continue debt service
coverage and will follow with a specific review of annual
financial statements for Year 2000 disclosure. A primary risk for
NCB lies in the ability of its customers to continue debt service
payment on schedule in the Year 2000. To date, survey results
indicated that the issue is being addressed.
NCB has substantially completed all core systems testing. Test
results to date have indicated the systems to be Year 2000 ready.
Management completed and the Board approved a business continuity
plan in April 1999 which will be tested prior to October 1, 1999 and
updated as the year progreaaes.
Table (A)
Total Mission Critical Systems (MCS) 55
Number of MCS to be:
Repaired 4
Replaced 1
Retired 0
Vendor Upgraded 50
Tested Only 0
Outsourced 0
Table (B)
Phase Completion Status As of March 31, 1999:
Phase Percent Complete Estimate or Actual #of MCS in Phase
Awareness 100.0% A 55
Assessment 100.0% A 55
Renovation 100.0% A 55
Validation 98.2% A 54
Implementation 98.2% A 54
Table (C)
Non-Information Technology Items (Infrastructure Items)
Compliant (Y=Yes)
Kastle System Y
Montgomery Kone(HVAC) Y
TRANE(Elevators) Y
Willtel(Phone) Y
PEPCO Y
Sungard Business Recovery Y
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes is NCB's market risk profile occurred from
December 31, 1998 to March 31, 1999.
Part II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
NCB held its annual meeting on April 22, 1999. Shareholders
elected the following persons to serve as directors:
James L. Burns, Jr.(re-elected)
Eben Hopson, Jr.(re-elected)
Marilyn J. McQuiade (re-elected)
Stuart M. Saft
The following directors continued in office after this meeting:
Joseph Cabral
Kirby J. Erickson
Jackie Jenkins-Scott
Michael J. Mercer
Alex N. Miller
Alfred A. Plamann
Anthony J. Scallon
Shiela A. Smith
Peter C. Young
Thomas K. Zaucha
Item 6. Exhibits
(a) The following exhibit is filed as part of this report:
Exhibit 27 - Financial Data Schedule
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 there unto duly authorized.
NATIONAL CONSUMER COOPERATIVE BANK
Date:
By:
Richard L. Reed,
Managing Director,
Chief Financial Officer
By:
Marietta J. Orcino
Vice President, Tax &
Regulatory Compliance
