<TABLE>
INTERCHANGE FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
MARCH 31, December 31,
1998 1997
-------------- --------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 17,868 $ 17,797
Federal funds sold 24,400 8,400
-------------- --------------
Total cash and cash equivalents 42,268 26,197
-------------- --------------
Investment securities at amortized cost (approximate
market value of $46,963 and $46,786) 46,552 46,370
Securities available for sale at estimated market value
(amortized cost of $58,971 and $59,433) 60,577 61,257
Loans 419,121 401,854
Less: Allowance for loan losses 5,089 4,893
-------------- --------------
Net loans 414,032 396,961
-------------- --------------
Premises and equipment, net 7,988 7,871
Accrued interest receivable and other assets 7,976 9,381
-------------- --------------
TOTAL ASSETS $579,393 $548,037
============== ==============
LIABILITIES
Deposits
Noninterest bearing $ 87,416 $ 92,145
Interest bearing 408,183 378,548
-------------- --------------
Total deposits 495,599 470,693
Securities sold under agreements to repurchase 17,303 13,027
Accrued interest payable and other liabilities 5,312 4,668
Long-term borrowings 9,852 9,879
-------------- --------------
TOTAL LIABILITIES 528,066 498,267
-------------- --------------
COMMITMENTS AND CONTINGENT LIABILITIES - -
STOCKHOLDERS' EQUITY
Common stock 4,811 4,811
Capital surplus 15,627 15,836
Retained earnings 30,980 29,698
Unrealized gain - securities available for sale, net of taxes 999 1,131
-------------- --------------
52,417 51,476
Less: Treasury Stock (85,377 and 134,025 common shares) 1,090 1,706
-------------- --------------
Total stockholders' equity 51,327 49,770
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $579,393 $548,037
============== ==============
- --------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
INTERCHANGE FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
<CAPTION>
Three Months Ended
March 31,
------------------------------
1998 1997
------------- ------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $8,742 $7,812
Interest on federal funds sold 250 34
Interest and dividends on securities
Taxable interest income 1,549 1,702
Interest income exempt from federal income taxes 29 15
Dividends 54 53
------------- ------------
TOTAL INTEREST INCOME 10,624 9,616
------------- ------------
INTEREST EXPENSE
Interest on deposits 3,774 3,292
Interest on short-term borrowings 208 198
Interest on long-term borrowings 147 148
------------- ------------
TOTAL INTEREST EXPENSE 4,129 3,638
------------- ------------
NET INTEREST INCOME 6,495 5,978
Provision for loan losses 210 610
------------- ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,285 5,368
------------- ------------
NONINTEREST INCOME
Service fees on deposit accounts 593 428
Net gain on sale of loans - 1,067
Other 308 159
------------- ------------
TOTAL NONINTEREST INCOME 901 1,654
------------- ------------
NONINTEREST EXPENSES
Salaries and benefits 2,288 2,011
Net occupancy 505 486
Furniture and equipment 234 168
Advertising and promotion 168 152
Federal Deposit Insurance Corporation assessment 16 3
Foreclosed real estate expense, net - 8
Other 995 1,034
------------- ------------
TOTAL NONINTEREST EXPENSES 4,206 3,862
------------- ------------
Income before income taxes 2,980 3,160
Income taxes 1,058 1,106
------------- ------------
NET INCOME $ 1,922 $ 2,054
============= ============
BASIC EARNINGS PER COMMON SHARE $0.30 $0.32
============= ============
DILUTED EARNINGS PER COMMON SHARE $0.30 $0.32
============= ============
- ------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
INTERCHANGE FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<CAPTION>
Accumulated
Other
Comprehensive Retained Comprehensive Common Capital Treasury
Income Earnings Income/(Loss) Stock Surplus Stock Total
------------ -------- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $24,429 $268 $4,733 $14,931 - $44,361
Comprehensive income
Net Income $2,054 2,054 2,054
Other comprehensive income, net of taxes
Unrealized losses on securities (246) (246) (246)
------------
Other comprehensive income (246)
------------
Comprehensive income $1,808
============
Dividends on common stock at $0.09 per share (1) (575) (575)
Issued 12,822 shares of common stock in connection
with Executive Compensation Plan (1) 9 159 168
Exercised 27,440 option shares (1) 20 143 163
Purchased 12,200 shares in exchange for option shares (1) $ (163) (163)
-------- ------------- -------- -------- -------- --------
Balance at March 31, 1997 25,908 22 4,762 15,233 (163) 45,762
Comprehensive income
Net Income $5,502 5,502 5,502
Other comprehensive income, net of taxes
Unrealized gains on securities 1,109 1,109 1,109
-----------
Other comprehensive income 1,109
-----------
Comprehensive income $6,611
===========
Dividends on common stock at $0.27 per share (1) (1,712) (1,712)
Exercised 23,225 option shares (1) 18 97 115
Fractional shares on 3 for 2 stock split (4) (4)
Issued 229,562 shares of common stock in merger with
Washington Interchange Corporation (1) 170 2,765 2,935
Acquired 187,283 shares of common stock held by
Washington Interchange Corporation (1) (2,394) (2,394)
Retired 187,283 shares of common stock held by
Washington Interchange Corporation (1) (139) (2,255) 2,394 -
Purchased 121,826 shares of common stock (1) (1,543) (1,543)
-------- -------------- -------- -------- -------- --------
Balance at December 31, 1997 29,698 1,131 4,811 15,836 (1,706) 49,770
Comprehensive income
Net Income $1,922 1,922 1,922
Other comprehensive income, net of taxes
Unrealized losses on securities (132) (132) (132)
-----------
Other comprehensive income (132)
-----------
Comprehensive income $1,790
===========
Dividends on common stock at $0.10 per share (1) (640) (640)
Issued 12,769 shares of common stock in connection
with Executive Compensation Plan (1) 70 162 232
Exercise of 35,878 option shares (1) (279) 454 175
-------- -------------- -------- -------- -------- --------
Balance at March 31, 1998 $30,980 $999 $4,811 $15,627 $(1,090) $51,327
======== ============== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------
(1) Adjusted for the effects of the 3 for 2 stock split issued on April 17, 1998 to shareholders of record on March 20, 1998
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTERCHANGE FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the three months ended
March 31,
------------------------------
1998 1997
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,922 $ 2,054
Non-cash items included in earnings
Depreciation and amortization of fixed assets 309 227
Amortization of securities premiums 179 202
Accretion of securities discounts (36) (17)
Amortization of premiums in connection with acquisition 111 111
Provision for loan losses 210 610
Net gain on sale of loans - (1,067)
Net gain on sale of foreclosed real estate - (3)
Increase in carrying value of loans available for sale - 26
Decrease (increase) in operating assets
Net repayment of loans available for sale - 6
Accrued interest receivable 65 364
Other 1,279 (367)
Increase in operating liabilities
Accrued interest payable 170 67
Other 475 1,269
------------ ----------
CASH PROVIDED BY OPERATING ACTIVITIES 4,684 3,482
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
(Payments for) proceeds from
Net originations of loans (6,155) (10,065)
Purchase of loans (3,626) -
Purchase of term federal funds (7,500) -
Sale of loans - 5,945
Purchase of securities available for sale (254) (1,985)
Maturities of securities available for sale 639 221
Sale of foreclosed real estate - 329
Purchase of investment securities (4,260) -
Maturities of investment securities 4,011 16,672
Net payments on foreclosed real estate - 2
Purchase of fixed assets (390) (624)
Sale of fixed assets - 13
------------ ----------
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (17,535) 10,508
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments for)
Deposits more than withdrawals 24,906 8,125
Securities sold under agreements to repurchase 6,600 1,650
Retirement of other borrowings (27) (5,225)
Retirement of securities sold under agreement to repurchase (2,324) (1,000)
Dividends (640) (575)
Common stock issued 232 168
Exercise of option shares from Treasury 175 -
------------ ----------
CASH PROVIDED BY FINANCING ACTIVITIES 28,922 3,143
------------ ----------
INCREASE IN CASH AND CASH EQUIVALENTS 16,071 17,133
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 26,197 24,322
============ ==========
CASH AND CASH EQUIVALENTS, END OF PERIOD $42,268 $41,455
============ ==========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $3,959 $3,571
Income taxes 423 110
Supplemental disclosure of non-cash investing activities:
Decrease - market valuation of securities available for sale $218 $353
Amortization of valuation allowance - securities transferred from
available for sale to held to maturity - 2
- -------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The consolidated financial statements should be read in conjunction
with the financial statements and schedules as presented in the Annual Report on
Form 10-K of Interchange Financial Services Corporation (the "Company") for the
year ended December 31, 1997.
Consolidated financial data for the three months ended March 31, 1998
and 1997, are unaudited but reflect all adjustments consisting of only normal
recurring adjustments which are, in the opinion of management, considered
necessary for a fair presentation of the financial condition and results of
operations for the interim periods. Results for interim periods are not
necessarily indicative of results to be expected for any other period or the
full year.
2. LEGAL PROCEEDINGS
The Company is a party to routine litigation involving various aspects
of its business, none of which, in the opinion of management and its legal
counsel, is expected to have a material adverse impact on the consolidated
financial condition, results of operations or liquidity of the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is an analysis of the consolidated financial
condition and results of operations of the Company for the three months ended
March 31, 1998 and 1997, and should be read in conjunction with the consolidated
financial statements and notes thereto included in Item 1 hereof.
RESULTS OF OPERATIONS
EARNINGS SUMMARY
For the first quarter of 1998, the Company reported net income of $1.9
million or $0.30 diluted earnings per common share, as compared with $2.1
million or $0.32 diluted earnings per common share for the same period of 1997,
a decrease of $132 thousand. The decrease was due to a non-recurring gain of
$1.1 million recognized in the first quarter of 1997 from the sale of commercial
loans. The provision for loan losses declined $400 thousand during the first
quarter of 1998 as compared to the same period in 1997 and partially offset the
gain from the sale of commercial loans. Adjusting for the non-recurring items,
earnings for the first quarter of 1998 would have increased $302 thousand.
NET INTEREST INCOME
Net interest income is the most significant source of the Company's
operating income. Net interest income on a tax equivalent basis increased $520
thousand to $6.5 million for the quarter ended March 31, 1998 as compared to the
same quarter of 1997. The increase in net interest income is principally due to
higher levels of interest earning assets and increased loan production. The loan
growth was funded largely by the growth in deposit liabilities.
Average interest earning assets increased $66.5 million or 14.2% to
$534.3 million for the quarter ended March 31, 1998, over the same period in
1997. The growth was mainly the result of an increase in volume of commercial
mortgages, home equity loans and consumer auto leases. For the first quarter of
1998, average loans increased $56.3 million or 15.9% over the same period in
1997. The average yield on loans was negatively impacted by a decline in market
rates and increased competitive factors. However, the increased loan volume
contributed to a $930 thousand growth in loan income which offset the decline in
yield. The growth in loan income was instrumental to the growth in net interest
income.
For the quarter ended March 31, 1998, average interest bearing deposits
grew $38.9 million or 10.9% and noninterest bearing demand deposits grew $13.2
million or 18.4%. The total growth in average deposits amounted to 12.2% and is
considered exceptional relative to the industry as a whole and considering the
competition and alternative investments available to consumers. Despite the
outstanding growth in deposits, the Company's cost of funds increased only 5
basis points over the first quarter of 1997.
NONINTEREST INCOME
For the quarter ended March 31, 1998, noninterest income amounted to
$901 thousand, a decrease of $753 thousand as compared to the same period in
1997. The decrease was principally due to a nonrecurring gain of $1.1 million
recognized in the first quarter of 1997 from the sale of commercial loans.
Adjusting for the nonrecurring item, noninterest income increased $314 thousand
and was largely the result of a $165 thousand increase in service charges on
deposits. The higher levels of service charges on deposits can be attributed to
the growth of the deposit base and the implementation of ATM surcharges.
A gain of $53 thousand from the sale of reverse mortgage servicing also
contributed to the increase in noninterest income.
NONINTEREST EXPENSES
For the quarter ended March 31, 1998, noninterest expenses amounted to
$4.2 million, an increase of $344 thousand as compared to the same period in
1997. Increases in salaries and benefits, the largest component of noninterest
expenses, were predominantly responsible for the increase. Salaries and benefits
expense increased $277 thousand mostly due to normal salary raises,
promotions and increases in staff. At March 31, 1998, full-time equivalent staff
was 179 as compared to 173 at March 31, 1997.
Occupancy and equipment costs which increased $85 thousand from
the first quarter of 1997 were also partly responsible for the increase. The
increase in occupancy and equipment costs was mostly due to the
installation of a new mainframe computer, the addition of new equipment and the
renovation of a branch.
One of the Company's goals is to control expenses in order to maximize
earnings and shareholder value. Generally, the efficiency ratio is one method
utilized to measure a bank's operating expenses. The efficiency ratio is gross
operating expenses, excluding the amortization of intangibles and net expenses
of foreclosed real estate, expressed as a percentage of net interest income (on
a fully taxable equivalent basis) and other noninterest income, excluding gains.
Generally, the lower the efficiency ratio the more effective the Company is in
utilizing its resources to produce income. The Company's efficiency ratio for
the quarter ended March 31, 1998, was 55.7% as compared to 55.1% for the year
1997. The slight deterioration resulted from the installation of a new
mainframe computer, the addition of new equipment and the renovation of a
branch. The national peer group average (published by SNL Securities) for the
year 1997 was 60.4%.
INCOME TAXES
Income tax expense as a percentage of pre-tax income was 35.5% for the
three months ended March 31, 1998 as compared to 35.0% for the first quarter of
1997. The increase is attributable to an increase in the effective state income
tax rate.
NONPERFORMING ASSETS
Nonperforming assets are comprised of nonaccrual loans, restructured
loans and foreclosed real estate. At March 31, 1998, nonperforming assets
amounted to $2.4 million, a decrease of $450 thousand from $2.9 million at March
31, 1997. The sale of $282 thousand of real estate owned comprised most of the
decrease. The ratio of nonperforming assets to total loans and foreclosed real
estate decreased to 0.58% at March 31, 1998 from 0.81% at March 31, 1997.
At March 31, 1998, nonperforming assets increased $353 thousand from
$2.1 million at December 31, 1997. For the first quarter of 1998, the ratio
of nonperforming assets to total loans and foreclosed real estate increased
6 basis points from 0.52% at December 31, 1997.
<PAGE>
PROVISION FOR LOAN LOSSES AND LOAN LOSS EXPERIENCE
The provision for loan losses represents management's determination of
the amount necessary to bring the allowance for loan losses to a level that
management considers adequate to reflect the risk of future losses inherent in
the Company's loan portfolio. In its evaluation of the adequacy of the allowance
for loan losses, management considers past loan loss experience, changes in the
composition of performing and nonperforming loans, the condition of borrowers
facing financial pressure, the relationship of the current level of the
allowance to the credit portfolio and to nonperforming loans and existing
economic conditions. However, the process of determining the adequacy of the
allowance is necessarily judgmental and subject to changes in external
conditions. Accordingly, there can be no assurance that existing levels of the
allowance will ultimately prove adequate to cover actual loan losses.
The allowance for loan losses was $5.1 million at March 31, 1998, and
$4.9 million at December 31, 1997, representing 208.6% and 234.45% of
nonperforming loans at those dates, respectively. In the first quarter of 1998,
the Company's provision for loan losses was $210 thousand, a decrease of $400
thousand from the same period a year ago. In the first quarter of 1997, the
provision for loan losses was higher since, during that period, the Company's
loan growth and focus was largely in commercial lending. Such growth and
concentration can change the characteristics and potentially increase the
inherent credit risk of the Company's loan portfolio. Accordingly, during the
first quarter of 1997, the Company revised the risk allocation percentages
applied to commercial loans used in computing the allowance for loan losses to
capture such risk. This resulted in the increase in the provision for loan
losses during the period ended, March 31, 1997.
<PAGE>
<TABLE>
SECURITIES
Securities held to maturity and securities available for sale consist of
the following: (in thousands)
<CAPTION>
MARCH 31, 1998
------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY
OBLIGATIONS OF U.S. TREASURY $ 20,074 $ 106 - $ 20,180
MORTGAGE-BACKED SECURITIES 16,798 146 $27 16,917
OBLIGATIONS OF U.S. AGENCIES 6,718 186 - 6,904
OBLIGATIONS OF STATES & POLITICAL SUBDIVISIONS 2,812 - - 2,812
OTHER DEBT SECURITIES 150 - - 150
------------ ------------ ----------- ------------
46,552 438 27 46,963
------------ ------------ ----------- ------------
SECURITIES AVAILABLE FOR SALE
OBLIGATIONS OF U.S. TREASURY 35,406 583 53 35,936
MORTGAGE-BACKED SECURITIES 15,443 187 36 15,594
OBLIGATIONS OF U.S. AGENCIES 3,957 83 - 4,040
EQUITY SECURITIES 4,165 842 - 5,007
------------ ------------ ----------- ------------
58,971 1,695 89 60,577
------------ ------------ ----------- ------------
TOTAL SECURITIES $105,523 $2,133 $116 $107,540
============ ============ =========== ============
December 31, 1997
------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ----------- ------------
Securities held to maturity
Obligations of U.S. Treasury $ 22,134 $ 122 - $ 22,256
Mortgage-backed securities 14,326 153 $ 25 14,454
Obligations of U.S. Agencies 6,711 166 - 6,877
Obligations of states & political subdivisions 3,049 - - 3,049
Other debt securities 150 - - 150
------------ ------------ ----------- ------------
46,370 441 25 46,786
------------ ------------ ----------- ------------
Securities available for sale
Obligations of U.S. Treasury 35,452 605 74 35,983
Mortgage-backed securities 16,115 197 18 16,294
Obligations of U.S. Agencies 3,954 66 - 4,020
Equity securities 3,912 1,048 - 4,960
------------ ------------ ----------- ------------
59,433 1,916 92 61,257
------------ ------------ ----------- ------------
Total securities $105,803 $2,357 $117 $108,043
============ ============ =========== ============
</TABLE>
<PAGE>
<TABLE>
At March 31, 1998, the contractual maturities of securities held to maturity and securities available
for sale are as follows: (in thousands)
<CAPTION>
SECURITIES SECURITIES
HELD TO MATURITY AVAILABLE FOR SALE
------------------------------- ----------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
WITHIN 1 YEAR $16,907 $16,954 $ 3,513 $ 3,545
AFTER 1 BUT WITHIN 5 YEARS 10,006 10,152 38,764 39,366
AFTER 5 BUT WITHIN 10 YEARS 12,830 12,958 5,208 5,326
AFTER 10 YEARS 6,809 6,899 7,321 7,333
EQUITY SECURITIES - - 4,165 5,007
------------- ------------- ------------ ------------
TOTAL $46,552 $46,963 $58,971 $60,577
============= ============= ============ ============
</TABLE>
<TABLE>
CAPITAL ADEQUACY
The Company's and the Bank's capital amounts and ratios are as follows: (dollars in thousands)
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------ ------------------------ -----------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
AS OF MARCH 31, 1998:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS):
THE COMPANY $54,493 13.95 % $31,249 8.00 % N/A N/A
THE BANK 52,621 13.54 31,102 8.00 $38,877 10.00 %
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS):
THE COMPANY 49,610 12.70 15,624 4.00 N/A N/A
THE BANK 47,761 12.29 15,551 4.00 23,326 6.00
TIER 1 CAPITAL (TO AVERAGE ASSETS):
THE COMPANY 49,610 8.84 16,831 3.00 N/A N/A
THE BANK 47,761 8.56 16,745 3.00 27,908 5.00
As of December 31, 1997:
Total Capital (to Risk Weighted Assets):
The Company $52,541 14.03 % $29,961 8.00 % N/A N/A
The Bank 50,691 13.60 29,815 8.00 $37,269 10.00 %
Tier 1 Capital (to Risk Weighted Assets):
The Company 47,860 12.78 14,981 4.00 N/A N/A
The Bank 46,032 12.35 14,908 4.00 22,361 6.00
Tier 1 Capital (to Average Assets):
The Company 47,860 8.86 16,214 3.00 N/A N/A
The Bank 46,032 8.56 16,135 3.00 26,892 5.00
</TABLE>
<PAGE>
LIQUIDITY
LIQUIDITY IS THE ABILITY TO PROVIDE SUFFICIENT RESOURCES TO MEET ALL
FINANCIAL OBLIGATIONS AND FINANCE PROSPECTIVE BUSINESS OPPORTUNITIES. LIQUIDITY
LEVELS OVER ANY GIVEN PERIOD OF TIME ARE A PRODUCT OF THE COMPANY'S OPERATING,
FINANCING AND INVESTING ACTIVITIES. THE EXTENT OF SUCH ACTIVITIES ARE OFTEN
SHAPED BY SUCH EXTERNAL FACTORS AS COMPETITION FOR DEPOSITS AND DEMAND FOR
LOANS.
FINANCING FOR THE COMPANY'S LOANS AND INVESTMENTS IS DERIVED PRIMARILY
FROM DEPOSITS, ALONG WITH INTEREST AND PRINCIPAL PAYMENTS ON LOANS AND
INVESTMENTS. AT MARCH 31, 1998, TOTAL DEPOSITS AMOUNTED TO $495.6 MILLION, AN
INCREASE OF $24.9 MILLION OR 5.3% FROM DECEMBER 31, 1997. IN ADDITION, THE
COMPANY SUPPLEMENTED THE MORE TRADITIONAL FUNDING SOURCES WITH BORROWINGS FROM
THE FEDERAL HOME LOAN BANK OF NEW YORK ("FHLB") AND WITH SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE ("REPOS"). AT MARCH 31, 1998, ADVANCES FROM THE FHLB
AND REPOS AMOUNTED TO $9.9 MILLION AND $17.3 MILLION, RESPECTIVELY, AS COMPARED
TO $9.9 MILLION AND $13.0 MILLION, RESPECTIVELY, AT DECEMBER 31, 1997.
IN THE FIRST QUARTER OF 1998, LOAN PRODUCTION CONTINUED TO BE THE
COMPANY'S PRINCIPAL INVESTING ACTIVITY. NET LOANS AT MARCH 31, 1998 AMOUNTED TO
$414.0 MILLION, COMPARED TO $397.0 MILLION AT THE END OF 1997, AN INCREASE OF
$17.0 MILLION OR 4.3%.
THE COMPANY'S MOST LIQUID ASSETS ARE CASH AND DUE FROM BANKS AND
FEDERAL FUNDS SOLD. AT MARCH 31, 1998, THE TOTAL OF SUCH ASSETS AMOUNTED TO
$42.3 MILLION OR 7.3% OF TOTAL ASSETS, COMPARED TO $26.2 MILLION OR 4.8% OF
TOTAL ASSETS AT YEAR-END 1997.
ANOTHER SIGNIFICANT LIQUIDITY SOURCE IS THE COMPANY'S
AVAILABLE-FOR-SALE ("AFS") SECURITIES. AT MARCH 31, 1998, AFS SECURITIES
AMOUNTED TO $60.6 MILLION OR 56.5% OF TOTAL SECURITIES, COMPARED TO $61.3
MILLION OR 56.9% OF TOTAL SECURITIES AT YEAR-END 1997.
IN ADDITION TO THE AFOREMENTIONED SOURCES OF LIQUIDITY, THE COMPANY HAS
AVAILABLE VARIOUS OTHER SOURCES OF LIQUIDITY, INCLUDING FEDERAL FUNDS PURCHASED
FROM OTHER BANKS AND THE FEDERAL RESERVE DISCOUNT WINDOW. THE BANK ALSO HAS A
$51.0 MILLION LINE OF CREDIT AVAILABLE THROUGH ITS MEMBERSHIP IN THE FEDERAL
HOME LOAN BANK OF NEW YORK.
MANAGEMENT BELIEVES THAT THE COMPANY'S SOURCES OF FUNDS ARE SUFFICIENT
TO MEET ITS FUNDING REQUIREMENTS.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
REFERENCE IS MADE TO FORM 10-K FILED FOR THE YEAR ENDED DECEMBER 31,
1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) THE FOLLOWING EXHIBITS ARE FURNISHED HEREWITH:
EXHIBIT NO.
11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
27 FINANCIAL DATA SCHEDULE
(B) FORM 8-K FILED MARCH 17, 1998 ANNOUNCING THE ACQUISITION OF
THE JERSEY BANK FOR SAVINGS BY MERGER.
(C) FORM 8-K FILED MARCH 17, 1998 ANNOUNCING ITS INCREASED
QUARTERLY CASH DIVIDEND AND 3 FOR 2 STOCK SPLIT.
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
INTERCHANGE FINANCIAL SERVICES CORPORATION
BY: /S/ ANTHONY LABOZZETTA
______________________________
ANTHONY LABOZZETTA
EXECUTIVE VICE PRESIDENT & CFO
<TABLE>
EXHIBIT 11. COMPUTATION RE EARNINGS PER SHARE
<CAPTION>
------------------------------------------------------------------------------------
Three Months Ended,
------------------------------------------------------------------------------------
March 31, 1998 March 31, 1997
---------------------------------------- --------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
------------- ------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER
COMMON SHARE
Income available to
common shareholders $1,922 6,387 $0.30 $2,054 6,393 $0.32
============ ===========
EFFECT OF DILUTIVE SHARES
Options issued to
management - 75 - 74
------------- ------------- ----------- --------------
DILUTED EARNINGS PER
COMMON SHARE $1,922 6,462 $0.30 $2,054 6,467 $0.32
============= ============= ============ =========== ============== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
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0
0
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</TABLE>
