26
THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF
REGULATION S-T.
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 Quarter Ended March 31, 2000
Commission File No. 0-14995
YORK FINANCIAL CORP
(Exact name of Registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of incorporation or organization)
23-2427539
(I.R.S. employer identification number)
101 South George Street York, Pa. 17401
(Address of principal executive offices)(Zip code)
(717) 846-8777
Registrant's telephone number, including area code
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,
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.
Common stock, par value $1.00 per share 10,107,267 shares
outstanding as of March 31, 2000.
YORK FINANCIAL CORP.
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets
March 31, 2000 (unaudited) and June 30, 1999 3
Consolidated statements of income,
three months and nine months ended
March 31, 2000 and 1999 (unaudited) 4
Consolidated statements of cash flows,
nine months ended March 31, 2000
and 1999 (unaudited) 5
Notes to consolidated financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Changes in Securities 26
Item 3. Defaults upon Senior Securities 26
Item 4. Submission of Matters to a Vote of
Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURES 27
<TABLE>
YORK FINANCIAL CORP. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
March 31 June 30
2000 1999
ASSETS (Unaudited)
(In thousands)
Cash and due from banks:
Noninterest-earning $24,433 $22,813
Interest-earning 10,829 8,958
35,262 31,771
Loans held for sale, net 1,461 30,631
Securities available for sale 351,509 295,691
Securities held to maturity (fair
value at March 31, 2000 -
$22,231 and June 30, 1999 -
$22,635) 22,665 22,618
Loans receivable, net 1,127,976 909,193
Real estate, net 5,795 8,633
Premises and equipment, net 21,464 20,842
Federal Home Loan Bank stock, at 21,290 7,976
cost
Accrued interest receivable 11,218 8,581
Other assets 21,855 20,952
Investments in joint ventures 9,795 7,738
Total Assets $1,630,290 $1,364,626
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Deposits $1,153,293 $1,115,253
Federal Home Loan Bank loans and
other borrowings 348,005 113,962
Advances from borrowers for taxes
and insurance 4,021 4,281
Other liabilities 15,033 20,720
Total Liabilities 1,520,352 1,254,216
Commitments and contingencies - -
Stockholders' Equity:
Preferred Stock: 10,000,000
shares authorized and unissued - -
Common Stock, $1.00 par value:
Authorized 20,000,000 shares;
issued March 31, 2000 -
10,107,267 shares;
June 30, 1999 - 9,565,467
shares 10,107 9,565
Additional capital 97,105 90,417
Retained earnings 11,389 15,028
Accumulated other comprehensive
income (8,133) (3,938)
Unearned ESOP shares (530) (662)
Total Stockholders' Equity 109,938 110,410
Total Liabilities and
Stockholders' Equity $1,630,290 $1,364,626
</TABLE>
<TABLE>
YORK FINANCIAL
CORP. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF
INCOME
<S> <C> <C> <C> <C>
Three Nine Months
Months Months
Ended Ended
March 31 March 31
2000 1999 2000 1999
(Dollars in thousands, except per share data,unaudited)
Interest
income:
Interest and
fees on loans $21,732 $17,139 $61,008 $52,468
Interest on
securities
held for
trading 5 157 78 475
Interest and
dividends on
securities
available
for sale 6,039 1,655 16,564 4,753
Interest and
dividends on
securities
held to
maturity 771 397 2,044 835
Other interest
income 109 1,801 305 5,819
Total interest
income 28,656 21,149 79,999 64,350
Interest
expense:
Interest on
deposits 13,272 12,224 38,306 37,789
Interest on
borrowings 5,872 369 13,271 1,087
Total interest
expense 19,144 12,593 51,577 38,876
Net interest
income 9,512 8,556 28,422 25,474
Provision for
loan losses 400 915 1,550 2,772
Net interest
income after
provision
for loan
losses 9,112 7,641 26,872 22,702
Other income:
Mortgage
banking 230 654 1,051 2,015
Gain on sale
of securities
available
for sale 20 - 125 794
Gain on sales
of real
estate 10 56 104 191
Fees and
service
charges 1,115 807 3,305 2,632
(Loss) income
from joint
ventures and
partnerships (184) (48) (1,043) 483
Other
operating
income 640 480 1,563 1,077
Total other
income 1,831 1,949 5,105 7,192
Other
expenses:
Salaries and
employee
benefits 4,235 3,565 11,631 10,290
Occupancy 1,024 952 2,946 2,767
Federal
deposit
insurance 59 165 389 484
Real estate 281 274 619 672
Data 455 311 1,234 921
processing
Advertising 387 195 1,245 770
Other 1,883 1,423 5,211 4,691
Total other
expenses 8,324 6,885 23,275 20,595
Income before
income taxes 2,619 2,705 8,702 9,299
Provision for
income taxes 293 782 1,754 3,201
Net income $2,326 $1,923 $6,948 $6,098
Per share
data:
Net income $0.23 $0.19 $0.70 $0.61
Net income -
assuming
dilution $0.23 $0.18 $0.68 $0.58
Cash dividends
paid $0.13 $0.12 $0.38 $0.36
Weighted
average
shares 10,007,061 10,169,307 9,982,897 10,047,202
Weighted
average
shares -
assuming
dilution 10,161,308 10,458,958 10,197,648 10,451,464
</TABLE>
<TABLE>
YORK FINANCIAL CORP. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
<S> <C> <C>
Nine
Months
Ended
March 31
2000 1999
(In thousands, unaudited)
OPERATING ACTIVITIES
Net income $6,948 $6,098
Adjustments to reconcile net
income to net cash provided
by operating activities:
Amortization and accretion on
securities, net (162) (37)
Provision for loan losses 1,550 2,772
Provision for real estate losses 250 200
Depreciation and amortization 1,706 1,516
Loans originated for sale (2,792) (142,013)
Proceeds from sales of
trading securities 30,563 132,802
Realized gains on trading
securities (399) (1,713)
Realized gains on sales of
securities available for sale (125) (794)
Decrease in other assets (2,313) (9,097)
Decrease in other liabilities (3,305) (1,509)
Other increase (decrease) 909 (967)
Net cash provided by (used in)
operating activities 32,830 (12,742)
INVESTING ACTIVITIES
Proceeds from sales of
securities
available for sale 82,640 40,294
Proceeds from maturities of
securities available for sale 103 21,288
Purchases of securities
available for sale (72,765) (88,415)
Purchases of securities held
to maturity - (14,371)
Proceeds from maturities of
securities held to maturity - 2,000
Purchases of FHLB stock (13,313) -
Principal repayments on
securities 10,791 17,019
Net increase in short-term
investments - 77
Loans originated or acquired,
net of change in deferred
loan fees (542,945) (209,169)
Principal collected on loans 237,876 214,588
Proceeds from sales of loans 717 -
Purchases of real estate (236) (330)
Proceeds from sales of real
estate 4,081 4,741
Purchases of premises,
equipment, and tenant
improvements, net (1,983) (2,855)
Other (2,959) 1,658
Net cash used in investing
activities (297,993) (13,475)
FINANCING ACTIVITIES
Net increase in noninterest-
bearing demand deposits,
interest-bearing
transaction accounts and
savings accounts 2,775 64,153
Net increase (decrease) in
certificates of deposit 35,264 (5,526)
Net increase (decrease) in FHLB
loans and other borrowings 234,043 (42)
Issuance of common stock :
Dividend reinvestment plan 1,671 1,716
Stock option plans 238 1,454
Cash dividends paid (3,788) (3,643)
Cash paid in lieu of fractional
shares (16) (18)
Stock repurchased (1,666) (1,001)
Release of ESOP shares 133 133
Net cash provided by
financing activities 268,654 57,226
Increase in cash and cash
equivalents 3,491 31,009
Cash and cash equivalents at
beginning of period 31,771 144,547
Cash and cash equivalents
at end of period $35,262 $175,556
</TABLE>
YORK FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2000
Note A -- Basis Of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. Such
preparation requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Although the interim amounts are unaudited, they do reflect all
adjustments (consisting of normal recurring accruals) that, in
the opinion of management, are considered necessary for a fair
presentation of the results of operations for the interim
periods. Operating results for the nine month period ended March
31, 2000 are not necessarily indicative of the results that may
be expected for the year ended June 30, 2000. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Corporation's annual report on
Form 10-K for the year ended June 30, 1999.
Cash Flow Information: For purposes of the statements of cash
flows, cash equivalents include cash and amounts due from banks.
During the nine months ended March 31, 2000 and 1999, the
Association exchanged loans for mortgage-backed securities in the
amounts of $114.2 million and $198.2 million, respectively.
During the nine months ended March 31, 2000 and 1999, the
Association transferred unpaid loan balances from loans to real
estate acquired due to foreclosures of $2.4 million and $4.0
million, respectively. During the nine months ended March 31,
2000 and 1999, there was a noncash capital distribution from an
investment in joint venture of $0 and $2,205,000, respectively.
Reclassifications: Certain reclassifications have been made to
the fiscal 1999 consolidated financial statements to conform with
the fiscal 2000 presentation.
Note B - Definitive Agreement and Plan of Reorganization
On March 28, 2000, York Financial Corp. and Harris Financial,
Inc. jointly announced that they would enter into a definitive
agreement and plan of reorganization pursuant to which York
Financial Corp. and Harris Financial, Inc. would merge.
Note B - Definitive Agreement and Plan of Reorganization -
continued
To accomplish the merger, the Board of Trustees of Harris
Financial, MHC, has adopted a plan of conversion pursuant to
which it will convert from a mutual to a capital stock form of
organization. Approximately 76% of Harris Financial's outstanding
shares of common stock are owned by its mutual holding company,
Harris Financial, MHC. The plan provides that Harris Financial
will conduct an offering of common stock to certain Harris
Savings Bank depositors.
The number and price of shares to be issued in the conversion
offering will be based on an independent appraisal. Under the
terms of the agreement, the merger consideration will be based,
in part, on the independent appraisal. The primary pricing
provisions of the agreement include that if the independent
appraisal of the common stock issued in the conversion is between
$289.5 million and $341.5 million, each York Financial share will
be exchanged for $17.25 of Harris Financial common stock based on
the price at which Harris Financial's shares are sold in the
conversion offering.
The merger is contemplated to be accounted for under the "pooling
of interests" method for business combinations. However, the
agreement provides that the parties may mutually elect to employ
the "purchase" method of accounting for the merger. In a
"purchase", between 15% and 30% of the merger consideration may
be paid in cash. The merger is intended to be a tax-free exchange
for York Financial stockholders, except to the extent that cash
is received as consideration.
Harris Savings Bank is a community bank that operates 37 branches
in five counties of south-central Pennsylvania and Washington
County, Maryland. As of December 31, 1999, Harris Financial had
assets of $2.7 billion, deposits of $1.4 billion and equity of
$169.3 million. York Federal Savings and Loan Association is a
community savings association that operates 25 full-service
offices in four counties in south central Pennsylvania and
Harford County, Maryland. As of March 31, 2000, York Financial
had assets of $1.6 billion, deposits of $1.2 billion and equity
of $109.9 million.
As a result of the conversion and merger, York Federal Savings
and Loan will be merged with Harris Savings Bank. The resulting
company will be wholly owned by New Harris Financial. Currently,
Harris Savings is ranked fourth and York Federal is ranked sixth
in deposit market share, in the five county south central region
of Pennsylvania including Dauphin, York, Cumberland, Lancaster
and Lebanon. With 13.3% of deposits after the combination, Harris
will rank second in market share in the five county south central
region. It will also have six branches holding $164 million in
deposits in two Maryland counties. Pro forma for the merger and
the expected second-step conversion indicate Harris Financial
will have assets of approximately $4.5 billion, deposits of $2.5
billion and equity of $480.0 million.
The merger is subject to the approval of York Financial's
stockholders and the conversion is subject to the approval of
Harris Savings' depositors and Harris Financial's minority
stockholders. The transactions are also subject to the approval
of federal and state bank regulatory authorities, as well as
customary conditions. The conversion and merger are expected to
be completed in the fourth quarter of 2000. The agreement
provides for breakup fees and grants Harris Financial an option
to acquire 19.9% of York Financial's common stock if the
agreement is terminated under certain circumstances.
Note C -- Per Share Data
On October 20, 1999, the Corporation declared a 5% stock
dividend, to shareholders of record on November 5, 1999, to be
distributed November 15, 1999. Net income per share is computed
based on the weighted average number of common shares outstanding
and dilutive common stock equivalents, adjusted for stock
splits/dividends. Cash dividends paid per share are based on the
number of common shares outstanding at each record date, adjusted
for stock splits/dividends.
The Corporation computes earnings per share in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share". Earnings per common share ("basic") is
computed using net income applicable to common stock and weighted
average common shares outstanding during the period. Earnings per
common share - assuming dilution ("diluted") is computed using
net income applicable to common stock and weighted average common
shares outstanding during the period after consideration of the
potential dilutive effect of common stock equivalents based on
the treasury stock method using an average market price for the
period. The Corporation's common stock equivalents are solely
related to stock options.
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<S> <C> <C> <C> <C>
Three Nine
Months Months
Ended Ended
March 31 March 31
2000 1999 2000 1999
(Dollars in thousands, Except Per Share Data)
Numerator:
Net Income $2,326 $1,923 $6,948 $6,098
Numerator for
basic and
diluted
earnings
per share $2,326 $1,923 $6,948 $6,098
Denominator:
Denominator
for
basic
earnings
per share-
weighted-
average
shares 10,007,061 10,169,307 9,982,897 10,047,202
Effect of
dilutive
securities:
Employee Stock
Options 154,247 289,651 214,751 404,262
Denominator
for
diluted
earnings
per share-
adjusted
weighted-
average
shares and
assumed
conversion 10,161,308 10,458,958 10,197,648 10,451,464
Basic earnings
per share $0.23 $0.19 $0.70 $0.61
Diluted
earnings
per share $0.23 $0.18 $0.68 $0.58
</TABLE>
Note D - Federal Home Loan Bank (FHLB) Loans and other borrowings
Borrowings consist of the following:
<TABLE>
<S> <C> <C>
March 31 June 30
2000 1999
(In thousands)
FHLB loans payable to FHLB
Pittsburgh, secured by all
FHLB stock and certain first
mortgage loans:
Short-term loans:
Due August 27, 1999, 5.12% $- $70,000
Due July 1, 1999, 5.57% - 14,400
Due April 1, 2000, 6.61% 227,800 -
227,800 84,400
Convertible select loans:
Due 2002, conversion option date
1999, 5.46% - 25,000
Due 2004, conversion option date
2001, 5.75% 25,000 -
Due 2006, conversion option date
2000, 5.32% 25,000 -
Due 2008, conversion option date
2003 ($25,000,000 face amount
bearing 4.69%
stated rate less unamortized
discount based on imputed
interest rate of 6.50%;
March 31, 2000, $1,439) 23,561 -
Due 2009, conversion option date
2002, 5.75% 25,000 -
Other loans:
Due 2008, 2.00% 275 285
Due 2024, 4.25% 713 727
327,349 110,412
Other borrowings:
Due 2000, libor plus 2.00% 15,000 -
Due 2004, 0.90% 29 -
Advance to ESOP
Due 2004, prime plus .75% 530 662
Repurchase agreements:
Due July 1, 1999, 3.60% - 2,888
Due April 1, 2000, 5.15% 5,097 -
$348,005 $113,962
</TABLE>
As of March 31, maturities of FHLB loans and other borrowings are
as follows: 2001-$272,690,000; 2002-$24,769,000; 2003-
$24,742,000; 2004-$24,938,000; 2005-$39,000; thereafter-$827,000.
The FHLB has the option of converting the fixed rate convertible
select loans to a LIBOR adjustable rate loan quarterly after the
conversion date. Upon conversion, management has the right to
exercise a return option to the FHLB with no prepayment penalty.
Accordingly, amounts are included in maturities based on the next
conversion date.
The FHLB of Pittsburgh has an established credit policy, which
permits the Association to borrow amounts up to twenty times the
amount of the Association's holding of FHLB stock at negotiated
interest rates. The Association may increase its borrowing over
amounts currently available by purchasing additional FHLB stock.
During 1994, the Corporation on behalf of the Employee Stock
Ownership Plan arranged for a loan in the amount of $1,325,000
payable in equal annual installments of $132,500 plus interest at
prime plus .75% for a period of 10 years. The final maturity will
be March 31, 2004. The proceeds were used to acquire shares of
the Corporation's stock for the benefit of the corporate
sponsored employee stock ownership plan.
During the second quarter of fiscal 2000, the Corporation
obtained a demand line of credit with a commercial bank in the
amount of $15.0 million at LIBOR plus 2.00%, with a review of the
commitment on a semi-annual basis.
Note E -- Comprehensive Income
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of general-purpose financial
statements that are displayed with the same prominence as other
financial statements, and also provides for footnote disclosure
of total comprehensive income in interim financial statements.
Total comprehensive income for the three months ended March 31,
2000 and 1999 was $1.3 and $1.4 million, respectively. Year to
date total comprehensive income was $2.8 million for 2000
compared to $4.9 million for 1999. Comprehensive income was lower
for the nine months ended March 31, 2000 as compared to the same
period in 1999 due to increased unrealized holding losses on
securities available for sale.
Note F - Income Taxes
Income tax expense for the Corporation is different than the
amounts computed by applying the statutory federal income tax
rate to income before income taxes because of the following:
<TABLE>
<S> <C> <C>
Percentage of Income
Before Income Taxes
Nine Fiscal
Months Year
Ended Ended
March 31 June 30
2000 1999
Income tax expense at
federal statutory rate 35.0 % 35.0 %
Tax-exempt income (0.6) (0.3)
State income taxes,
net of federal benefit (1.6) 1.0
Federal tax credits (12.0) (1.3)
Other (0.7) (0.2)
Effective tax rate 20.1 % 34.2 %
</TABLE>
Note G -- Recently Issued Accounting Guidance
In June 1998, the Financial Accounting Standards Board (FASB)
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging
activities. The effective date of the Statement was deferred in
June 1999 under SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133". This Statement is effective for
financial statements issued for all quarters of all fiscal years
beginning after June 15, 2000. The adoption of these Statements
is not expected to have a material impact on the Corporation's
consolidated financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
YORK FINANCIAL CORP.
Financial Review
The purpose of this discussion is to provide additional
information about York Financial Corp. ("York Financial" or
"Corporation"), its financial condition and results of
operations. Readers of this report should refer to the
consolidated financial statements and other financial data
presented throughout this report to fully understand the
following discussion and analysis.
York Financial is a unitary savings and loan holding company
incorporated in Pennsylvania in September 1985 and in August 1986
became the sole stockholder of York Federal Savings and Loan
Association ("York Federal" or "Association"), a federally
chartered stock savings and loan association. Presently, the
primary business of York Financial is the business of York
Federal. At March 31, 2000, the Corporation had consolidated
assets of $1.6 billion, total deposits of $1.2 billion and
stockholders' equity of $109.9 million. The Association is a
member of the Federal Home Loan Bank ("FHLB") of Pittsburgh and
is subject to supervision, examination and regulation by the
Office of Thrift Supervision ("OTS") and the Federal Deposit
Insurance Corporation ("FDIC"). The Association is primarily
engaged in the business of attracting deposits and investing
these deposits into loans secured by residential and commercial
real property, commercial business loans, consumer loans and
investment securities. York Federal conducts its business through
twenty-five offices located in south central Pennsylvania and
Maryland. In addition, York Federal maintains a commissioned
mortgage origination staff as well as mortgage correspondent
relationships which originate residential mortgage loans for the
Association primarily in Pennsylvania, Maryland and Virginia,
although loans are originated in 11 states within the Mid-
Atlantic region. The Association's deposits are insured up to
applicable limits by the Savings Association Insurance Fund
("SAIF") of the FDIC.
The Corporation's net income is highly dependent on the interest
rate spread between the average rate earned on loans and
securities and the average rate paid on deposits and borrowings
as well as the amount of the respective assets and liabilities
outstanding. Other operating income is an important supplement to
York Federal's interest income and includes mortgage banking
activities with gains on sales of mortgage-backed securities and
related value attributed to mortgage servicing rights created
from loan originations and service fee income derived from the
portfolio of loans serviced for others. Other operating income
also includes gains and losses on sales of securities available
for sale, gains and losses on sales of real estate, equity in
earnings (losses) of limited partnership interests, and fees and
service charges assessed on loan and deposit transactions.
Interest Rate Sensitivity Management
Market risk is the risk of loss from adverse changes in market
prices and rates. The Corporation's market risk arises
principally from interest rate risk within York Federal. In an
effort to maintain control over such risks, management of York
Federal focuses its attention on managing the interest rate
sensitivity of assets and liabilities and controlling the volume
of lending, securities, deposit and borrowing activities. By
managing the ratio of interest sensitive assets to interest
sensitive liabilities repricing in the same periods, the
Association seeks to control the adverse effect of interest rate
fluctuations. The Corporation's assets and liabilities are not
directly exposed to foreign currency or commodity price risk. At
March 31, 2000 and June 30, 1999, the Corporation had no off-
balance sheet derivative financial instruments.
Management utilizes an Asset/Liability Committee (ALCO), which
meets at least once a month, to review the Association's interest
sensitivity position on an ongoing basis and prepare strategies
regarding the acquisition and allocation of funds to maximize
earnings and maintain the interest rate sensitivity position at
acceptable levels. The Association originates for portfolio
principally short and intermediate term and adjustable rate loans
and sells most fixed rate loan originations. Additionally,
investment securities categorized as available for sale have been
acquired for portfolio. The funding sources for these portfolio
loans and securities are deposits and borrowings with various
maturities. In addition to normal portfolio management
activities, strategies are evaluated on an ongoing basis, and
implemented as necessary to manage interest rate risk levels,
including asset sales, equity infusions to York Federal and
extension of maturities of borrowings. As part of our risk
management, we utilized all of these strategies with the sale of
intermediate term loans totaling $82.6 million during the third
quarter, equity infusion totaling $3.0 million to York Federal
from cash available at York Financial Corp., equity infusion
totaling $15.0 million from proceeds of a commercial bank
borrowing by York Financial Corp. and through extensions of
maturities on certain borrowings, refer to Note D of the
Consolidated Financial Statements.
The ALCO monitors the Association's interest rate risk position
utilizing simulation analysis. Net interest income fluctuations
and the net portfolio value ratio are determined in various
interest rate scenarios and monitored against acceptable
limitations established by management and approved by the Board
of Directors. Such rate scenarios include immediate rate shocks
adjusting rates in +/- 100 basis point (bp) increments resulting
in projected changes to net interest income over the next 12
months and projected net portfolio value ratios as indicated in
the following table.
An analysis of hypothetical changes in interest rates as of March
31, 2000 compared to June 30, 1999 is as follows:
<TABLE>
<C> <C> <C> <C> <C>
March 31, 2000 June 30, 1999
Percentage Percentage
Basis point change in Net change in Net
Change in Net portfolio Net portfolio
interest interest value interest value
rates income (1) ratio (2) income (1) ratio (2)
300 (29.00%) 4.46% (14.00%) 4.70%
200 (18.00%) 5.70% (9.00%) 5.75%
100 (9.00%) 6.89% (4.00%) 6.69%
0 0.00% 7.98% 0.00% 7.49%
(100) 5.00% 8.96% 4.00% 8.15%
(200) 8.00% 8.94% 6.00% 8.41%
(1)The percentage change in this column represents an increase
(decrease) in net interest income for 12 months in a stable
interest rate environment versus net interest income for 12
months in the various rate scenarios.
(2)The net portfolio value ratio in this column represents net
portfolio value of the Association in various rate scenarios,
divided by the present value of expected net cash flows from
existing assets in those same scenarios. Net portfolio value is
defined as the present value of expected net cash flows from
existing assets, minus the present value of expected net cash
flows from existing liabilities, plus or minus the present value
of expected net cash flows from existing off-balance-sheet
contracts.
</TABLE>
Simulation results are influenced by a number of estimates and
assumptions with regard to embedded options, prepayment
behaviors, pricing strategies and cashflows. The risk profile of
the Association has increased as indicated in the preceding
table. The increase in net interest income variability in various
rate shock scenarios is due to the continuation of portfolio
lending and investment leverage strategies which were funded with
convertible borrowings and overnight borrowings resulting in
inherently more interest rate risk than previous periods,
combined with an increase in market interest rates. Net portfolio
value had less variability due to strategies evaluated and
implemented to manage risks over the long term. Assumptions and
estimates used in simulation analysis are inherently subjective
and, as a consequence, results will neither precisely estimate
net interest income or net portfolio value nor precisely measure
the impact of higher or lower interest rates on net interest
income or net portfolio value ratio. The results of these
simulations are reported to the Association's Board of Directors
on a quarterly basis. Management has determined that the level of
interest rate risk is within established limits at March 31,
2000.
Asset Quality
Management is aware of the risks inherent in lending and
continually monitors risk characteristics of the loan portfolio.
The Association's Business Banking Group offers financial
products and services to small and mid-sized businesses in the
Association's branch market area. The nature of these products
and services and the financial characteristics of the target
client group may have the effect of increasing the Association's
credit risk exposure. The Association has employed management
expertise and has adopted credit management policies to control
the credit risk exposure inherent in this activity.
The Association's policy is to maintain the allowance for loan
losses at a level believed adequate by management to absorb
losses in the existing loan portfolio. The allowance for loan
loss is an estimate. These estimates are reviewed periodically
and, any adjustments necessary, are recognized in operations in
the period adjustments become known. Management's determination
of the adequacy of the allowance is performed by an internal loan
review committee and is based on known and inherent loss
characteristics in the portfolio, past loss experience, adverse
situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, current economic
conditions, and such other relevant factors which in management's
judgment deserve recognition. The allowance for loan losses
related to impaired loans was determined in accordance with SFAS
No. 114, as amended by SFAS No. 118. Actual losses or recoveries
are charged or credited directly to the allowance.
An analysis of the allowance for loan losses, for the periods
indicated is as follows:
<TABLE>
<S> <C> <C>
Nine Fiscal
Months Year
Ended Ended
March 31 June 30
2000 1999
(Dollars in thousands)
Total allowance for loan losses
at beginning of period $10,803 $8,810
Loans charged-off:
Real estate - mortgage:
Residential 853 1,581
Commercial - 16
Consumer 400 397
Total charged-offs 1,253 1,994
Recoveries:
Real estate - mortgage:
Residential 129 325
Commercial 6 24
Consumer 16 6
Total recoveries 151 355
Net loans charged-off 1,102 1,639
Provision for loan losses 1,550 3,632
Total allowance for loan losses
at end of period $11,251 $10,803
Percentage of net charge-offs to
average loans outstanding
during the period 0.10% 0.18%
Percentage of allowance for loan
losses to adjusted total loans 0.99% 1.17%
</TABLE>
The allowance for loan losses totaled $11.3 million or 0.99% of
adjusted total loans of $1.1 billion at March 31, 2000 compared
to $10.8 million or 1.17% of adjusted total loans of $920.0
million at June 30, 1999. Management believes the allowance for
loan loss is adequate relative to its assessment of existing loss
characteristics within the loan portfolio. While management uses
available information to recognize losses on loans, future
additions to the allowance may be necessary based on specific
circumstances related to future problem loans, increased risk of
loss due to a change in mix within the portfolio as well as
changes in economic conditions.
An analysis of nonperforming assets is summarized as follows:
<TABLE>
<S> <C> <C>
March 31 June 30
2000 1999
(Dollars in thousands)
Loans accounted for on a
nonaccrual basis:
Real Estate-mortgage:
Residential $502 $870
Consumer - 49
Total nonaccrual loans 502 919
Accruing loans which are
contractually
past due 90 days or more:
Real estate-mortgage:
Residential 6,615 8,311
Consumer 834 823
Total of 90 days past due loans 7,449 9,134
Total of nonaccrual and 90 days
past due loans $7,951 $10,053
As a percent of total loans 0.70% 1.07%
Real estate owned:
Real estate acquired through
foreclosure or repossession by
loan type:
Real estate:
Residential $2,689 $4,571
Commercial 401 1,055
Land 1,064 1,319
Allowance for real estate losses (55) (45)
Total real estate owned $4,099 $6,900
As a percent of total assets 0.25% 0.51%
Total nonperforming assets $12,050 $16,953
As a percent of total assets 0.74% 1.24%
</TABLE>
The Association's nonaccrual policy generally covers loans, which
are 90 or more days past due, dependent upon type of loan and
related collateral. All commercial loans are placed on nonaccrual
status when the collectibility of interest is uncertain based on
specific circumstances evaluated on a loan by loan basis or when
interest is more than 90 days past due. In the case of
residential real estate and consumer loans, the Association
implemented the Uniform Retail Credit Classification Policy
effective June 30, 1999 and follows this policy for placing loans
on nonaccrual status. As noted in the previous table, loans
contractually past due 90 days or more and real estate acquired
through foreclosure have decreased as compared to the prior
period. This is primarily due to the result of favorable
economic conditions, ongoing, aggressive collection efforts to
reduce delinquencies and the impact of sales of real estate
owned.
Management recognizes the risk of reduction in value of real
estate owned during the holding period and provides for such risk
by maintaining an allowance for real estate losses (such
allowance is separate from and in addition to the allowance for
loan losses). For the nine months ended March 31, 2000, net
charge-offs were $240,000 and additions to the allowance totaled
$250,000 resulting in an increase in the allowance to $55,000 at
March 31, 2000. Management continually monitors the risk profile
of real estate owned and maintains an allowance for real estate
losses at a level believed adequate to absorb inherent losses
within the real estate portfolio.
Liquidity
The primary purpose of asset/liability management is to maintain
adequate liquidity and a desired balance between interest-
sensitive assets and liabilities. Liquidity management focuses on
the ability to meet the cash flow requirements of customers
wanting to withdraw or borrow funds for their personal or
business needs. Interest rate sensitivity management focuses on
consistent growth of net interest income in times of fluctuating
interest rates. The management of liquidity and interest rate
sensitivity must be coordinated since decisions involving one may
influence the other.
Liquidity needs can be met by either reducing assets or
increasing liabilities. Sources of asset liquidity include short
term investments, securities available for sale, maturing and
repaying loans and monthly cash flows from mortgage-backed
securities. The loan portfolio provides an additional source of
liquidity due to York Federal's participation in the secondary
mortgage market. Liquidity needs can be met by attracting
deposits and utilizing borrowing arrangements with the FHLB of
Pittsburgh and the Federal Reserve Bank of Philadelphia for short
and long term loans as well as other short-term borrowings.
Deposits represent the Association's primary source of funds. The
Association does not rely on brokered deposits as a source of
funds. During the nine months ended March 31, 2000, the
Association's deposits increased $38.0 million. To supplement
deposit-gathering efforts, York Federal borrows from the FHLB of
Pittsburgh.
At March 31, 2000, York Federal had $327.3 million in FHLB loans
outstanding at a weighted average interest rate of 6.36%, an
increase of $216.9 million for the first nine months of fiscal
2000. The Association was required to purchase additional FHLB
stock totaling $13.3 million due to increased FHLB loans
outstanding. Other borrowings also increased for the first nine
months of fiscal 2000 to $20.7 million from $4.6 million for the
same period in the prior year. For additional details of FHLB
loans and other borrowings, refer to Note D of the Notes to
Consolidated Financial Statements.
Amortization and prepayments of loans and proceeds from loan and
securities sales represent a substantial source of funds to York
Federal. These sources amounted to $362.2 million for the first
nine months of fiscal 2000. Such amount includes a loan sale to
manage the Association's risk position.
Generally, the principal use of funds is the origination of
mortgage and other loans. In addition, leverage strategies to
effectively utilize available capital were completed early in the
first nine months of fiscal 2000. These strategies resulted in
expansion of the investment portfolio through the purchase of
available for sale securities as well as an increase in loan
balances. Various types of securities were purchased during the
nine months of fiscal 2000. The carrying value of securities
available for sale increased $55.8 million for the first nine
months of fiscal 2000 from $295.7 million at June 30, 1999 to
$351.5 million at March 31, 2000.
Loan demand resulted in total originations of $548.3 million for
the period ended March 31, 2000. Loan originations were obtained
through various channels including the retail branch system,
commissioned mortgage origination staff, tele-mortgage activity,
expanded mortgage correspondent relationships and Business
Banking relationship managers. The volume of originations was
favorably impacted by the Association's pricing strategies and a
relatively low-rate interest rate environment in the earlier
portion of the fiscal year. A significant component of loan
origination volume was intermediate term mortgage products,
primarily, 5/1 CMT adjustable rate loans (fixed rate for the
first five years with annual adjustments thereafter). During the
nine months ended March 31, 2000, the loan portfolio increased
$218.8 million to $1.1 billion at March 31, 2000.
Under current regulations, York Federal is required to maintain
liquid assets at 4.0% or more of its net withdrawable deposits
plus short-term borrowings. For the quarter ended March 31, 2000,
the Association's liquidity level was 6.5%.
Capital
The management of capital provides the foundation for future
asset and profitability growth and is a major strategy in the
management of York Financial Corp. Stockholders' equity at March
31, 2000, totaled $109.9 million compared to $110.4 million at
June 30, 1999, a decrease of $0.5 million or 0.4%. This decrease
was primarily a result of the impact of unrealized losses on
"available for sale" securities, retirement of shares related to
a stock repurchase program and cash dividends paid, partially
offset by a combination of factors including current earnings and
the issuance of shares in connection with various benefit and
dividend reinvestment plans.
During August 1999, the Board of Directors authorized a second
stock repurchase program for up to 478,000 shares of the
Corporation's common stock. In February 2000, the second stock
repurchase program expired. Under each repurchase plan, share
purchases were made from time to time depending on market and
business conditions. During the nine months ending March 31,
2000, 118,293 shares were repurchased and retired under the stock
repurchase programs. To date, the Corporation has repurchased and
retired 395,957 shares under its stock repurchase programs. At
March 31, 2000, there were no open authorizations for additional
share repurchases.
OTS regulated thrifts must comply with various capital standards.
A reconciliation of York Federal's regulatory capital to capital
using accounting principles generally accepted in the United
States (GAAP) as of March 31, 2000 follows:
<TABLE>
<S> <C> <C> <C>
Risk-
Tangible Core based
capital capital capital
GAAP capital at York
Financial $109,938 $109,938 $109,938
Capital attributed to
affiliates 3,708 3,708 3,708
GAAP capital at York
Federal 113,646 113,646 113,646
Capital adjustments:
Unrealized losses on
securities available
for sale, net of taxes 7,052 7,052 7,052
Allowance for loan
losses - - 11,251
Purchased mortgage
servicing rights (238) (238) (238)
Investment in real
estate - - (850)
Regulatory capital $120,460 $120,460 $130,861
</TABLE>
Tangible Capital. Generally, common stock plus retained earnings
must equal at least 1.5% of adjusted total assets.
Tier 1 (Core) Capital to total assets. Tangible capital plus
qualifying supervisory goodwill (arising from the purchase of a
troubled savings association) and other qualifying intangible
assets must equal at least 4.0% of adjusted total assets; 5.0% to
be deemed well capitalized.
Risk-Based Capital. Risk-based capital must equal at least 8.0%
of risk-weighted assets, as defined in the regulations; 10% to be
deemed well capitalized. The tier 1 (core) capital component of
risk-based capital, as defined above, must equal at least 6.0% of
risk weighted assets to be deemed well capitalized.
At March 31, 2000, York Federal's tangible and core capital both
equaled 7.4% ($120.5 million), substantially in excess of the
minimum regulatory requirements of 1.5% and 4.0%/5.0%,
respectively. York Federal's total assets do not include any
goodwill. York Federal's core capital to risk-weighted assets
equaled 12.5% ($120.5 million) at March 31, 2000, which exceeds
the required level of 6.0%. Finally, York Federal's risk-based
capital ratio equaled 13.6% ($130.9 million) at March 31, 2000
which exceeds the required level of 8.0% by $53.7 million, and
exceeds the required level to be deemed well capitalized of 10.0%
by $34.4 million.
Transactions with Affiliates
Transactions with affiliates are limited to 10% of capital and
surplus per affiliate with an aggregate limit on all such
transactions with affiliates to 20% of capital and surplus. At
March 31, 2000 such transactions are within these regulatory
limits.
Results of Operations
Nine months ended March 31, 2000 compared to March 31, 1999
Net Interest Income
York Financial's earnings are affected by the level of York
Federal's net interest income, the difference between the income
it receives on its loan portfolio and other investments, and its
cost of funds, consisting primarily of interest paid on deposits
and borrowings. Net interest income is affected by the average
yield on interest-earning assets, the average rate paid on
interest-bearing liabilities, and the ratio of interest-earning
assets to
Net interest income for the nine months ended March 31, 2000 was
$28.4 million compared to $25.5 million for the same period last
year, which represents an 11.4% increase. The increase in net
interest income was primarily due to an increase in average
balances in loan and securities portfolios, which more than
offset the lower earning asset yield and the higher cost of funds
rate. The margin on interest-earning assets decreased to 2.55%
from 2.88% for the nine months ended March 31, 2000 and 1999,
respectively.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended March 31
2000 1999
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
(Dollars in thousands)
Interest-
earning
assets:
Loans
(1)(2)(3) $1,086,738 $61,008 7.49% $894,211 $52,468 7.82%
Securi-
ties
held for
trading 1,482 78 7.02 10,071 475 6.29
Securi-
ties
avail-
able
for sale 353,579 16,564 6.25 101,461 4,753 6.25
Securi-
ties
held to
maturity 39,598 2,044 6.83 18,576 835 5.95
Other
interest-
earning
assets 7,357 305 5.43 154,209 5,819 4.96
Total
interest-
earning
assets 1,488,754 79,999 7.16 1,178,528 64,350 7.27
Non-
interest-
earning
assets 84,037 72,921
Total $1,572,791 $1,251,449
Interest-
bearing
liabili-
ties:
Deposits
NOW
accounts $109,004 1,368 1.67 $105,022 1,601 2.03
Savings
accounts 48,251 907 2.50 59,587 1,120 2.50
Money
market
accounts 324,319 10,777 4.42 283,763 9,492 4.46
Certifi-
cate
accounts 612,108 25,254 5.49 615,283 25,576 5.54
Borrow-
ings 318,709 13,271 5.54 28,811 1,087 5.03
Total
interest-
bearing
liabili-
ties: 1,412,391 51,577 4.86 1,092,466 38,876 4.74
Non-
interest-
bearing
deposits 25,088 29,870
Non-
interest-
bearing
liabili-
ties: 26,562 16,908
1,464,041 1,139,244
Stock-
holders'
equity 108,750 112,205
Total $1,572,791 $1,251,449
Ratio of
interest-
earning
assets
to
interest-
bearing
liabili-
ties: 1.05x 1.08x
Net
interest
income/
interest
rate
spread $28,402 2.30% $25,474 2.53%
Net
interest-
earning
assets/
margin
on
interest-
earning
assets $76,363 2.55% $86,062 2.88%
(1) Average balances include loans on nonaccrual status.
(2) Average balances include loans held for sale.
(3) Interest includes amortization of loan fees.
</TABLE>
During the nine months ended March 31, 2000, York Federal
originated $548.3 million of loans including loans refinanced
from the Association's loan portfolio. The result of these
originations, when combined with mortgage securitizations and
sales totaling $114.2 million and loan repayment activity, was a
21.5% increase in average loans outstanding during the first nine
months of fiscal 2000 as compared to the same period in the prior
year. The average balance of securities and other interest
earning assets increased $117.7 million over the same period last
year and results from the above mentioned secondary market
activity and the Corporation's leveraging strategy which was
supported by an increase in deposits of $30.0 million and
increased borrowings of $289.9 million over the same period in
the prior year. The resulting composition shift of the
Association's assets had a positive effect on interest income
although the yield on earning assets decreased 11 basis points to
7.16%. The average rate on interest-bearing liabilities increased
to 4.86% as compared to 4.74% in the same period last year. The
higher rate on interest-bearing liabilities was primarily a
result of the increase in the cost of funds for borrowings. The
average rate paid on borrowings increased to 5.54% as compared to
5.03% in the same period of last year. The net effect caused the
interest rate spread for the current period to decrease to 2.30%
from 2.53% in the same period last year.
The volume/rate analysis shown in the following table presents a
comparative analysis of reported interest income and expense in
relation to changes in specific asset and liability account
balances (volume) and corresponding interest rates (rate). This
analysis illustrates the net impact of previously discussed
volume and rate changes on net interest income for the nine
months ended March 31, 2000 compared to the same period ended
March 31, 1999.
<TABLE>
<S> <C> <C> <C>
Nine Months Ended March 31
2000 compared to 1999
Increase (Decrease) Due to:
Volume Rate Net
(In thousands)
Interest income:
Loans $10,808 $(2,268) $8,540
Securities held for
trading (405) 8 (397)
Securities available for 11,690 121 11,811
sale
Securities held to
maturity 1,056 153 1,209
Other interest-earning
assets (5,540) 26 (5,514)
Total 17,609 (1,960) 15,649
Interest expense:
Deposits
NOW accounts 50 (283) (233)
Savings accounts (212) (1) (213)
Money market accounts 1,356 (71) 1,285
Certificate accounts (123) (199) (322)
Borrowings 12,061 123 12,184
Total 13,132 (431) 12,701
Net interest income $4,477 $(1,529) $2,948
</TABLE>
Provision for Loan Losses
Management is aware of the risks inherent in lending and
continually monitors risk characteristics of the loan portfolio.
See "Asset Quality".
Other Income
Other income was $5.1 million for the nine months ended March 31,
2000, a decrease of $2.1 million from the nine months ended March
31, 1999.
The following table provides the components of mortgage banking
income:
<TABLE>
<S> <C> <C>
Nine Months Ended
March 31
2000 1999
(Dollars in thousands,unaudited)
Gain on sales of loans and
trading securities $399 $1,713
Unrealized gain on loans and
trading securities - 44
Loan servicing fee income,
net of amortization 637 257
Gain on sale of mortgage
servicing rights 15 1
$1,051 $2,015
</TABLE>
Mortgage banking income for the nine months ended March 31, 2000
decreased $964,000 to $1,051,000 or 47.8% as compared to the same
period in 1999. Included in mortgage banking income are gain on
sales of loans and unrealized gain on trading securities of
$399,000 for the nine months ended March 31, 2000 compared to
$1,757,000 for the same period in 1999. Due to a change in the
rate environment, the primary loan type originated has been a
portfolio loan type instead of mortgage banking loans. This
reduced mortgage banking loan volume resulted in lower mortgage
banking income. Mortgage-backed securities created in conjunction
with the Association's mortgage banking activities are deemed
trading securities and are carried at fair value with unrealized
gains and losses reported in the income statement. At March 31,
2000, there were no securities held for trading.
The portfolio of loans serviced for others totaled $561.3 million
at March 31, 2000 with a net average servicing rate of
approximately 16.8 basis points as compared to $568.3 million at
March 31, 1999 with a net average servicing rate of approximately
6.3 basis points. The increase in net servicing rate is primarily
attributable to the change in impairment adjustments recorded as
a result of changes in prepayment speeds from year to year.
Amortization of capitalized mortgage servicing rights for the
nine months ended March 31, 2000 was $420,000 compared to
$552,000 in the prior year and is recognized as a reduction of
gross servicing fee income. The combination of these volume and
rate changes caused net loan servicing fees for the first nine
months of fiscal 2000 to increase to $637,000 from $257,000
recognized in the same period for fiscal 1999.
Gain on the sale of available for sale securities totaled
$125,000 at March 31, 2000 as compared to $794,000 at March 31,
1999. During 2000, a FreddieMac (FHLMC) Preferred Stock pairoff
resulted in a gain of $105,000. The pairoff was initiated by the
broker and as a result of an inability to deliver the security.
Additionally, during the quarter ended March 31, 2000, there was
a $20,000 gain on the asset sale as part of interest rate
management strategies. During fiscal 1999, FannieMae (FNMA)
introduced a program, which provided for the securitization of
high loan-to-value seven year balloon loans. Management,
recognizing the default risk associated with this loan type,
securitized $58.0 million of portfolio loans qualifying under the
FNMA program. Furthermore, in consideration of the interest rate
risk associated with this asset, $40.6 million of these
securities were sold resulting in the aforementioned gain for the
nine months ended March 31, 1999.
Fees and service charges for the nine months ended March 31, 2000
increased $673,000 or 25.6% to $3,305,000 as compared to
$2,632,000 in the same period in 1999. The increase in fees and
service charges is primarily a result of growth in loan and
deposit volume. The increase in deposit account servicing fees is
related to increased volume of electronic transactions initiated
by deposit customers including inter-account sweeps, ATM
transactions and VISA debit card utilization. In addition,
increased commercial loan and checking account relationships
initiated through Business Banking activities and the related fee
structure associated with such accounts contributed to the
increase in fees and service charges.
The Corporation is a partner in various joint ventures and
partnerships. For the first nine months of fiscal 2000, the loss
from these investments totaled $1,043,000 as compared to income
of $483,000 for the same period in fiscal 1999. The variance
related to joint ventures and partnerships is due primarily to
the following factors: (1) For the first nine months of fiscal
2000, losses of $602,000 on a venture capital partnership
resulted from the decreased market value of underlying portfolio
investments and operating losses compared to gains of $566,000 in
the same period of fiscal 1999; (2) The Corporation is a limited
partner in several partnerships for the purpose of acquiring,
renovating, operating and leasing qualified low-income housing
and historic properties. During the nine months ended March 31,
2000, losses related to these partnerships amounted to $495,000
compared to losses of $88,000 for the same period in the prior
year. Benefits attributed to these partnerships include low
income housing and historic tax credits, refer to Note F of the
Notes to Consolidated Financial Statements.
Other operating income was $1,563,000 in the first nine months of
fiscal 2000 as compared to $1,077,000 in the first nine months of
fiscal 1999. As products and services become more fully
integrated within the retail branch system, related income
derived from discount brokerage and insurance units resulted in
an increase in other operating income. Other effects on other
operating income were income on corporate-owned life insurance
policies related to a supplemental executive retirement plan.
Other Expenses
Other expenses of $23.3 million increased $2,680,000 or 13.0% for
the nine months ended March 31, 2000 as compared to the same
period in 1999.
Salaries and employee benefits for the nine months ended March
31, 2000 increased $1,341,000 or 13.0% over the same period in
1999 and is attributable to a combination of the following
factors: annual adjustments through the salary administration
program, increased commissions related to affiliate brokerage and
insurance units and expenses related to a supplemental executive
retirement plan. The number of full time equivalent personnel at
March 31, 2000 was 405 compared to 399 at March 31, 1999. Federal
deposit insurance decreased $95,000 or 19.6% for the nine months
ended March 31, 2000 as compared to the same period in 1999, and
is due to the lower Financing Corporation (FICO) debt service
assessment by the FDIC. Data processing increased $313,000 or
34.0% in fiscal 2000 compared to fiscal 1999 due to costs related
to technology purchases to enhance efficiency. Advertising cost
increased $475,000 or 61.7% for the nine months ended March 31,
2000 as compared to the same period in 1999, and is primarily
attributable to ongoing efforts to enhance customer and product
awareness through various media campaigns. Other expenses for
the nine months ended March 31, 2000 increased $520,000 or 11.1%
compared to the same period in 1999, as a result of increased
cost of services and the effects of increased loan and deposit
volume.
Provision for Income Taxes
The provision for income taxes of $1,754,000 for the nine months
ended March 31, 2000 represents an effective tax rate of 20.1% as
compared to 34.4% for the same period last year. For additional
details of Income Taxes, refer to Note F of the Notes to
Consolidated Financial Statements.
Other Matters
Impact of Year 2000
We passed the turn of the century without any internal or third
party problems but will continue to monitor as we pass certain
first events of the new year. Various first events have already
been tested and reviewed as part of the Year 2000 action plan. We
will have our contingency plans in effect on a continual basis in
the unlikely event that a Year 2000 disruption occurs.
The incremental cost and related investments of the Year 2000
effort has been estimated to total $320,000. The timing and
recognition of such costs has not been considered to be material
to any one fiscal period. Additional costs in the current fiscal
year related to Year 2000 are not expected.
Effects of Inflation and Changing Prices
The consolidated financial statements and related financial data
presented herein have been prepared in accordance with generally
accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical
dollars, without considering changes in relative purchasing power
over time due to inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As
a result, interest rates generally have a more significant impact
on a financial institution's performance than does the effect of
inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the price of goods and
services since such prices are affected by inflation. In the
current interest rate environment, the liquidity and maturity
structures of York Federal's assets and liabilities are critical
to the maintenance of acceptable performance levels.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed Form 8-K on April 10, 2000 regarding
the March 28, 2000 announcement of a Definitive
Agreement and Plan of Reorganization by and between
York Financial Corp. and York Federal Savings and Loan
Association and Harris Financial, MHC, Harris
Financial, Inc., New Harris Financial, Inc. and Harris
Savings Bank.
SIGNATURES
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.
York Financial Corp.
(Registrant)
Date May 12, 2000
/s/ Robert W. Pullo
Robert W. Pullo, President - Chief Executive Officer
Date May 12, 2000
/s/ James H. Moss
James H. Moss, Senior Vice President -
Chief Financial Officer/Treasurer
