FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to________________
Commission file number (0-15124)
MARBLE FINANCIAL CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
VERMONT 03-0303394
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
47 MERCHANTS ROW, RUTLAND, VERMONT 05701
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(802) 775-0025
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
- --------- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 3, 1995.
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Common Stock $1 par value 3,350,501
MARBLE FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-Q
CROSS REFERENCE INDEX
Page
----
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 1
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1995 and 1994 2
Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended September 30, 1995 3
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II - Other Information
Items 1 through 5 19
Item 6 - Exhibits and Reports on Form 8-K 19
Signatures 20
Exhibits 21
Part I - Item 1
Marble Financial Corporation and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Sept 30, Dec 31,
1995 1994
- --------------------------------------------------------------------------
(Dollars in thousands)
Assets (unaudited)
<S> <C> <C>
Cash and due from banks $ 5,348 $ 6,858
Interest-bearing deposits, Federal funds
sold and other short term investments 5 4
Investment securities held to maturity
(Market value $19,939 at Sept 30, 1995 and
$18,961 at December 31, 1994) 19,597 19,767
Investment securities available for sale
(amortized cost $94,767 at Sept 30, 1995 and
$100,578 at December 31, 1994) 93,408 93,578
Securities held for trading 25,182 0
Loans 277,202 277,278
Less: Allowance for possible loan losses 7,623 8,006
- ------------------------------------------------------------------------
NET LOANS 269,579 269,272
- ------------------------------------------------------------------------
Other real estate owned, net 1,019 1,517
Bank premises and equipment, net 6,155 6,206
Other assets 7,444 11,334
- ------------------------------------------------------------------------
$427,737 $408,536
- ------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Deposits:
Demand $ 15,791 $ 14,549
Savings, Now and money market 113,762 112,587
Time 197,939 178,037
- ------------------------------------------------------------------------
TOTAL DEPOSITS 327,492 305,173
- ------------------------------------------------------------------------
Borrowed funds 55,320 64,138
Other liabilities 1,794 2,188
- ------------------------------------------------------------------------
TOTAL LIABILITIES 384,606 371,499
- ------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized authorized and unissued at
Sept 30, 1995, and December 31, 1994 0 0
Common stock, $1.00 par value, 8,000,000 shares
authorized, 3,350,501 and 3,333,438 issued and
outstanding at Sept 30, 1995 and December 31,
1994, respectively 3,351 3,333
Additional paid-in capital 42,880 42,777
Retained deficit (2,203) (4,453)
Unrealized loss on investment securities
available for sale, net (897) (4,620)
- ------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 43,131 37,037
- ------------------------------------------------------------------------
$427,737 $408,536
========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
Marble Financial Corporation and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------
(Dollars in thousands) (Dollars in thousands)
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 6,345 $ 5,353 $ 18,724 $ 15,163
Interest and dividends on investment securities 2,029 1,816 6,224 5,486
Interest on interest bearing deposits, federal
funds sold and other short-term investments 43 24 63 33
- -------------------------------------------------------------------------------------------------------
Total interest income 8,417 7,193 25,011 20,682
Interest Expense:
Interest on savings deposits 1,046 783 3,029 2,269
Interest on time deposits 2,847 1,973 7,940 5,426
Interest on borrowings 890 670 2,768 1,887
- -------------------------------------------------------------------------------------------------------
Total interest expense 4,783 3,426 13,737 9,582
- -------------------------------------------------------------------------------------------------------
Net interest income 3,634 3,767 11,274 11,100
Provision for possible loan losses 0 0 0 500
- -------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 3,634 3,767 11,274 10,600
- -------------------------------------------------------------------------------------------------------
Non-interest Income:
Service charges on deposit accounts 198 205 598 548
Net gain on trading securities 299 0 633 0
Net loss on sales of investments available for sale 0 0 (200) (17)
Net gain on sales of loans 4 6 8 0
Other 125 102 315 329
- -------------------------------------------------------------------------------------------------------
Total non-interest income 626 313 1,354 860
- -------------------------------------------------------------------------------------------------------
Non-interest Expense:
Salaries and employee benefits 1,422 1,488 4,333 4,257
Occupancy and equipment expense 357 360 1,154 1,101
Other real estate owned expense, net 34 40 82 123
Other 896 857 2,466 2,524
- -------------------------------------------------------------------------------------------------------
Total non-interest expense 2,709 2,745 8,035 8,005
- -------------------------------------------------------------------------------------------------------
Income before income taxes 1,551 1,335 4,593 3,455
Income tax expense (benefit) 458 (100) 1,340 (2,580)
- -------------------------------------------------------------------------------------------------------
Net Income $ 1,093 $ 1,435 $ 3,253 $ 6,035
=======================================================================================================
Weighted average number of common shares
outstanding, including common stock equivalents 3,485,663 3,442,060 3,460,764 3,407,197
- -------------------------------------------------------------------------------------------------------
Per common share
Net income $ 0.31 $ 0.42 $ 0.94 $ 1.77
- -------------------------------------------------------------------------------------------------------
Dividends declared $ 0.10 $ 0.08 $ 0.30 $ 0.25
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
Marble Financial Corporation and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1995
----------------------------------------------------
Unrealized
Loss On
Investment
Securities
Additional Available
Common Paid-In Retained For Sale,
Stock In Capital Deficit Net Total
- ------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $3,333 $42,777 $(4,453) $(4,620) $37,037
Exercise of stock options 18 103 121
Net income for nine months ended September 30, 1995 3,253 3,253
Dividends declared (1,003) (1,003)
Decrease in unrealized loss on investment securities
available for sale, net 3,723 3,723
- ------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 $3,351 $42,880 $(2,203) $ (897) $43,131
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
Marble Financial Corporation and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Nine Months Ended
September 30,
1995 1994
- ------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities: (unaudited)
Net income $ 3,253 $ 6,035
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 498 441
Provision for possible loan losses 0 500
Other real estate owned valuation provision (benefit) 7 (37)
Net loss on sale of investment securities available for sale 200 17
Net gain on sales of trading securities (633) 0
Net gain on sale of loans (8) 0
Net gain on sales and disposal of other real estate owned (58) (58)
Net (gain) loss on sales of bank premises and equipment (1) 129
Amortization of fees, discounts & premiums, net 284 900
(Increase) decrease in net deferred tax asset 1,280 (2,600)
(Increase) decrease in other assets 701 (562)
Decrease in other liabilities (429) (359)
- ----------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,094 4,406
- ----------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale 20,936 15,395
Proceeds from sales of trading securities 56,983 0
Proceeds from maturities of investment securities held to maturity 361 0
Proceeds from maturities of investment securities available for sale 9,391 17,221
Proceeds from sales of loans 1,437 6,115
Proceeds from sales and disposal of other real estate owned 1,016 4,598
Purchases of investment securities held to maturity 0 (16,766)
Purchases of investment securities available for sale (25,182) (10,977)
Purchases of trading securities (81,532) 0
Net increase in loans (2,212) (27,972)
Capital expenditures (447) (1,042)
Proceeds from sales of bank premises and equipment 1 3
- ----------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (19,248) (13,425)
- ----------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in deposits 22,319 7,780
Net increase in short-term borrowings 19,182 10,511
Payments of long-term borrowings (28,000) (10,000)
Proceeds from issuance of common stock 112 219
Dividends paid (968) (562)
- ----------------------------------------------------------------------------------------------
Net cash used by financing activities 12,645 7,948
- ----------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents (1,509) (1,071)
Beginning cash and cash equivalents 6,862 6,650
- ----------------------------------------------------------------------------------------------
Ending cash and cash equivalents $ 5,353 $ 5,579
==============================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 25 $ 40
Interest $ 13,776 $ 9,489
- ----------------------------------------------------------------------------------------------
Supplemental disclosures of noncash investing and financing activities:
Conversion of real estate loans to mortgage-backed securities $ 0 $ 2,017
Loans foreclosed $ 467 $ 2,238
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
Marble Financial Corporation and Subsidiary
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1995 and 1994 (Unaudited)
1. The accompanying consolidated financial statements as of September 30,
1995 and for the three and nine month periods ended September 30, 1995 and
1994 include the accounts of the Company, and have not been audited by
independent public accountants; however, these statements, prepared in
accordance with generally accepted accounting principles, reflect, in the
opinion of management, all adjustments (consisting of only normal recurring
items) necessary to present fairly the financial position as of September 30,
1995, and the results of operations and cash flows for the nine-month periods
ended September 30, 1995 and 1994. The results of operations for the nine-
month period ended September 30, 1995 are not necessarily indicative of the
results to be expected for the entire year.
These consolidated financial statements do not include all disclosures
associated with annual consolidated financial statements and, accordingly,
should be read in conjunction with the footnotes contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
2. Certain 1994 financial statement items have been reclassified to conform
to the current period's presentation.
3. As of January 1, 1995, Marble adopted Statement of Financial Accounting
Standards (SFAS) Statement No. 114, "Accounting by Creditors for Impairment of
a Loan". SFAS No. 114, as amended by SFAS No. 118 (SFAS No. 114, as amended),
requires that impaired loans, as defined, be measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable market
price or the face value of collateral if the loan is collateral-dependent.
This pronouncement amends SFAS No. 5, "Accounting for Contingencies," to
clarify that a creditor should evaluate the collectability of both contractual
interest and contractual principal of all receivables when assessing the need
for a loss accrual. This pronouncement also amends SFAS No. 15, "Accounting
by Debtors and Creditors for Troubled Debt Restructuring", to require a
creditor to measure all loans that are restructured in a troubled debt
restructuring involving a modification of terms in accordance with this
statement. The existing methods for the recognition of interest income on
impaired loans has remained unchanged by the adoption of SFAS No. 114, as
amended.
Marble has classified all non-accrual loans and troubled debt restructurings
as impaired loans.
Generally, Marble uses an estimate of fair value of the loan's underlying
collateral to determine the allowance for possible loan losses related to
impaired loans, as most loans to which SFAS No. 114, as amended, applies are
collateral dependent. Impaired loans are reviewed on an individual basis; no
impaired loans are aggregated into groups of smaller balance, homogeneous
loans for review purposes.
Management reviews all loans contractually past due 30 days or more on a
monthly basis. A loan generally is placed on non-accrual status at the
earlier of the time when management determines that doubt exists as to the
ultimate collection of principal or interest or when it is contractually past
due 90 days or more, except in certain instances when management believes that
collateral held by the Bank is clearly sufficient and full satisfaction of
both principal and interest is highly probable. In the case of residential
mortgage loans, the period is increased to 12 months.
A loan loss provision is recommended for an impaired loan when the
measurement of the impaired loan is less than the recorded investment in the
loan or the expected future cash flows are insufficient to repay the loan. A
loan is recommended for charge-off when, in management's judgement, there is
doubt as to the collectability of the balance due.
4. The Financial Accounting Standards Board (FASB) has issued SFAS Statement
No. 122, "Accounting for Mortgage Servicing Rights - An Amendment of SFAS
Statement No. 65." SFAS Statement No. 122 modifies the treatment of the
capitalization of servicing rights by enterprises that engage in mortgage
banking activities. Under SFAS Statement No. 65 there are separate procedures
for the treatment of servicing rights acquired through loan origination and
for servicing rights acquired through purchase transactions. SFAS Statement
No. 122 prescribes a single procedure for the capitalization of those rights
and is to be used in fiscal years beginning after December 15, 1996. SFAS
Statement No. 122 further requires that certain provisions of the statement
shall be applied prospectively in fiscal years beginning after December 15,
1995. Marble had sales of mortgage loans of $1.4 million during the first
nine months of 1995. The effects of the application of SFAS Statement No. 122
would have been minimal if applied during 1995. Marble has not purchased
mortgage servicing rights in the past and currently has no plans to do so in
the future. The volume of sales or securitization of mortgage loans in the
future is dependent on many variable factors, including the volatility of
interest rates and the level of originations, and cannot be reliably predicted.
5. On June 20, 1995, Marble Financial Corporation announced that it had
entered into a definitive agreement pursuant to which ALBANK, FSB, will
acquire all of the outstanding common stock of Marble Financial Corporation,
in a cash transaction, for $18.00 per share. ALBANK, FSB, is a wholly owned
subsidiary of Albank Financial Corporation, a $2.9 billion bank holding
company located in Albany, New York. The acquisition is subject to approval
by Marble Financial Corporation stockholders and various regulatory agencies.
Part 1 - Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Marble Financial Corporation (Marble) and its wholly owned subsidiary, Marble
Bank (Bank), had consolidated net income of $1,093,000 for the third quarter
of 1995, which was a decrease of $342,000 from net income of $1,435,000 during
the third quarter of 1994. For the nine month period ending September 30,
1995, Marble had net income of $3,253,000, which is a decrease of $2,782,000
when compared with net income of $6,035,000 during the nine month period ended
September 30, 1994. The decreases in net income during the three and nine
month periods ending September 30, 1995, as compared to the same periods
during 1994, are primarily due to the recording of net income tax benefits
during the 1994 periods compared to the recording of net income tax expenses
during the 1995 periods, offset in part by higher income before taxes.
Total assets increased $14,779,000, or 3.6%, during the three month period
ended September 30, 1995, from $412,958,000 at June 30, 1995 to $427,737,000
at September 30, 1995. During the twelve month period ended September 30,
1995, total assets increased $23,290,000, or 5.8%, from $404,447,000 at
September 30,1994 to $427,737,000 at September 30, 1995.
Selected Consolidated Financial Highlights
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Three Months Ended September 30,
1995 1994 $ Change % Change
- --------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Income statement data:
Net interest income $ 3,634 $ 3,767 $ (133) (3.5)%
Non-interest income 626 313 313 100.0
Non-interest expense 2,709 2,745 (36) (1.3)
Net income 1,093 1,435 (342) (23.8)
Interest rate spread * 2.9% 3.4%
Net interest margin * 3.5% 3.9%
Return on average assets 1.0% 1.4%
Return on average equity 10.2% 16.2%
- --------------------------------------------------------------------------------------
<CAPTION>
Nine Months Ended September 30,
1995 1994 $ Change % Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income statement data: (Dollars in thousands)
Net interest income $ 11,274 $ 11,100 $ 174 1.6%
Non-interest income 1,354 860 494 57.4
Non-interest expense 8,035 8,005 30 0.4
Net income 3,253 6,035 (2,782) (46.1)
Interest rate spread * 3.1% 3.5%
Net interest margin * 3.7% 3.8%
Return on average assets 1.0% 2.0%
Return on average equity 10.7% 23.6%
- --------------------------------------------------------------------------------------
<CAPTION>
Sept 30, June 30,
1995 1995 $ Change % Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance sheet data: (Dollars in thousands)
Total asset $427,737 $412,958 $ 14,779 3.6%
Total loans 277,202 279,637 (2,435) (0.9)
Total deposits 327,492 311,827 15,665 5.0
Stockholders' equity 43,131 42,115 1,016 2.4
Equity to assets ratio 10.1% 10.2%
- -----------------------------
<F*> fully tax equivalent basis
</TABLE>
Net Interest Income
The tables below set forth a comparison of average earning assets, average
interest-bearing liabilities, interest income and interest expense expressed
as a percentage of the related asset or liability. In order to reflect the
economic impact of the investment in state and municipal securities and
certain dividend paying securities, and to place data on a comparative basis,
income from and yields on these securities have been restated to a current
taxable-equivalent basis. Such adjustment, however, has no impact on reported
net income. The average balance stated includes non-performing loans. The
amount of taxable-equivalent adjustments are $20,000 and $5,000 for the three
month periods ended September 30, 1995 and September 30, 1994, and $40,000 and
$15,000 for the nine month periods ended September 30, 1995 and September 30,
1994, respectively.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Three Months Ended Sept 30, 1995 Three Months Ended Sept 30, 1994
-------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc/Exp Yld/Rate Balance Inc/Exp Yld/Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Loans $278,248 $6,366 9.2% $271,247 $5,358 7.9%%
Mortgage-backed securities (1) 94,540 1,655 7.0 93,783 1,463 6.2
Trading securities 21,649 0 0.0 0 0 0.0
Other investment securities (1) 20,510 373 7.3 20,206 353 7.0
Short-term investments and interest-
bearing deposits 3,060 43 5.6 1,959 24 4.9
- ------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 418,007 8,437 8.1% 387,195 7,198 7.4%
- ------------------------------------------------------------------------------------------------------------------
Other real estate owned 1,090 802
Other non-interest-earning assets 11,343 10,083
- ------------------------------------------------------- --------
Total assets $430,440 $398,080
======================================================= ========
Liabilities and Stockholders' Equity
Savings and time deposits $309,848 3,893 5.0% $288,772 2,756 3.8%
FHLB advances 53,548 797 6.0 50,344 581 4.6
Other borrowed funds 7,039 93 5.3 7,687 89 4.6
- ------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 370,435 4,783 5.2 346,803 3,426 4.0
- ------------------------------------------------------------------------------------------------------------------
Non-interest-bearing liabilities 17,433 16,130
- ------------------------------------------------------- --------
Total liabilities 387,868 362,933
Stockholders' equity 42,572 35,147
- ------------------------------------------------------- --------
Total liabilities and stockholders' equity $430,440 $398,080
======================================================= ========
Net interest income $3,654 $3,772
=================== ====== ======
Net interest spread (2) 2.9% 3.4%
Net interest margin (3) 3.5% 3.9%
- -----------------------------
<F1> Includes both investments held to maturity and available for sale.
<F2> Interest rate spread is the difference between the yield on earning assets
and the rates paid on interest-bearing liabilities.
<F3> Net interest margin is net interest income divided by average earning
assets.
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Nine Months Ended Sept 30, 1995 Nine Months Ended Sept 30, 1994
-----------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc/Exp Yld/Rate Balance Inc/Exp Yld/Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Loans $277,390 $18,764 9.0% $265,113 $15,176 7.6%
Mortgage-backed securities (1) 97,224 5,160 7.1 106,191 4,796 6.0
Trading securities 13,823 0 0.0 0 0 0.0
Other investment securities (1) 21,360 1,064 6.6 13,320 692 6.9
Short-term investments and interest-
bearing deposits 1,466 63 5.7 1,013 33 4.3
- ----------------------------------------------------------------------------------------------------------------
Total interest-earning assets 411,263 25,051 8.1% 385,637 20,697 7.2%
- ----------------------------------------------------------------------------------------------------------------
Other real estate owned 1,249 2,710
Other non-interest-earning assets 12,618 7,002
- ------------------------------------------------------- --------
Total assets $425,130 $395,349
======================================================= ========
Liabilities and Stockholders' Equity
Savings and time deposits $304,249 10,969 4.8% $284,572 7,695 3.6%
FHLB advances 53,991 2,356 5.8 47,442 1,545 4.3
Other borrowed funds 9,850 412 5.6 12,283 342 3.7
- ----------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 368,090 13,737 5.0 344,297 9,582 3.7
- ----------------------------------------------------------------------------------------------------------------
Non-interest-bearing liabilities 16,227 16,871
- ------------------------------------------------------- --------
Total liabilities 384,317 361,168
Stockholders' equity 40,813 34,181
- ------------------------------------------------------- --------
Total liabilities and stockholders' equity $425,130 $395,349
======================================================= ========
Net interest income $11,314 $11,115
=================== ======= =======
Net interest spread (2) 3.1% 3.5%
Net interest margin (3) 3.7% 3.8%
- -----------------------------
<F1> Includes both investments held to maturity and available for sale.
<F2> Interest rate spread is the difference between the yield on earning assets
and the rates paid on interest-bearing liabilities.
<F3> Net interest margin is net interest income divided by average earning
assets.
</TABLE>
Rate/Volume Analysis of Net Interest Income
The following table reflects changes in Marble's net interest income
attributable to the changes in interest rates and the changes in the volume of
earning assets and interest-bearing liabilities. Amounts attributable to the
variance in the rate are based upon the change in rate multiplied by the prior
period's volume. Amounts attributable to the variance in volume are based
upon the changes in volume multiplied by the prior period's rate. The combined
effect for changes in both volume and rate, which cannot be separately
identified, has been allocated proportionately to the variance due to volume
and the variance due to rate.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
Compared to Three Months Compared to Nine Months
Ended September 30, 1994 Ended September 30, 1994
-----------------------------------------------------------------
Variance Variance Variance Variance
Due To Due to Total Due To Due to Total
Volume Rate Variance Volume Rate Variance
-----------------------------------------------------------------
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income on earning assets:
Gross loans $141 $ 867 $1,008 $ 729 $2,859 $3,588
Mortgage-backed securities 12 180 192 (339) 703 364
Trading securities 0 0 0 0 0 0
Other investment securities (1) 5 15 20 399 (27) 372
Short-term investments and interest bearing deposits 15 4 19 17 13 30
- --------------------------------------------------------------------------------------------------------------------------
Total interest income 173 1,066 1,239 806 3,548 4,354
- --------------------------------------------------------------------------------------------------------------------------
Interest expense on deposits
and borrowed funds:
Savings and time deposits 213 924 1,137 562 2,712 3,274
FHLB advances 39 177 216 234 577 811
Other borrowed funds (6) 10 4 (46) 116 70
- --------------------------------------------------------------------------------------------------------------------------
Total Interest expense 246 1,111 1,357 750 3,405 4,155
- --------------------------------------------------------------------------------------------------------------------------
Change in net interest income $(73) $ (45) $ (118) $ 56 $ 143 $ 199
==========================================================================================================================
- -----------------------------
<F1> Income on tax-exempt investment securities is stated on a taxable-
equivalent basis using a 34% tax rate.
</TABLE>
As shown in the above analysis, net interest income decreased by $73,000 due
to variances attributable to volume during the third quarter of 1995 and
decreased by $45,000 due to variances attributable to rate. These variances
resulted in a decrease in net interest income of $118,000 for the third
quarter of 1995, as compared to the third quarter of 1994. During the first
nine months of 1995, net interest income increased by $56,000 due to variances
attributable to volume and increased by $143,000 due to variances attributable
to rate, which led to an increase in net interest income of $199,000 for the
first nine months of 1995 as compared to the same period in 1994.
Non-Interest Income
Non-interest income increased $313,000, or 100.0%, from $313,000 during the
third quarter of 1994 to $626,000 during the third quarter of 1995. There
were gains on trading activities of $299,000 during the third quarter of 1995.
The Bank did not maintain a trading portfolio during 1994. Services charges
on deposit accounts decreased $7,000 and all other non-interest income
increased $21,000. During the first nine months of 1995, non-interest income
increased by $494,000, or 57.4%, from $860,000 during the first nine months of
1994 to $1,354,000 during the first nine months of 1995. There were realized
gains on trading activities of $633,000 during the nine month period ended
September 30, 1995 and there was a loss of $200,000 on sales of securities
during the first nine months of 1995 compared to a loss of $17,000 during the
first nine months of 1994. Service charges on deposit accounts increased
$50,000, or 9.1%, and all other non-interest income decreased $6,000, or 1.8%,
during the first nine months of 1995 as compared to the first nine months of
1994.
Non-Interest Expense
Non-interest expense decreased by $36,000, or 1.3%, from $2,745,000 during the
third quarter of 1994 to $2,709,000 during the third quarter of 1995.
Salaries and benefits expense decreased $66,000, or 4.4%, due to decreased
salary and benefits costs. Occupancy and equipment expenses decreased
$3,000, or 0.8%, due mainly to decreased maintenance expenses. Expenses
relative to ownership of foreclosed properties decreased by $6,000, from net
expenses of $40,000 during the third quarter of 1994 to net expenses of
$34,000 during the third quarter of 1995. Other non-interest expenses
increased $39,000, or 4.6%, from $857,000 during the third quarter of 1994 to
$896,000 during the third quarter of 1995. Included in other expenses during
the third quarter of 1995 are expenses totalling $305,000 relative to the
proposed merger with Albank Financial Corporation, and a $204,000 refund
received from the Federal Deposit Insurance Corporation (F.D.I.C.) relative to
a reduction in prepaid F.D.I.C. insurance premiums for the months of June
through September 1995.
During the nine month period ended September 30, 1995, non-interest expense
increased $30,000, or 0.4%, from $8,005,000 during the first nine months of
1994 to $8,035,000 during the first nine months of 1995. Salaries and
benefits expense increased $76,000, or 1.8%, due mainly to increased salary
levels. Occupancy and equipment expenses increased $53,000, or 4.8%, due to
increases in depreciation and net rental expenses which offset decreased
equipment maintenance costs. Expenses relative to ownership of foreclosed
properties decreased by $41,000, or 33.3%, from $123,000 during the first nine
months of 1994 to $82,000 during the first nine months of 1995. All other
operating expenses decreased $58,000, or 2.3%, from $2,524,000 during the
first nine months of 1994 to $2,466,000 during the first nine months of 1995.
Provision for Possible Loan Losses
There was no provision for possible loan losses made during the third quarter
of 1995. Marble has not made provisions to the allowance for possible loan
losses since the second quarter of 1994, when the level of non-performing
loans was decreased substantially as a result of a bulk sale of non-performing
assets in June 1994. At the end of the second quarter of 1994, the ratio of
the allowance for possible loan losses to total non-performing loans was
136.6%. It has been the policy of Marble to maintain the coverage level of
the allowance for possible loan losses at a minimum ratio of 100.0% of non-
performing loans. The coverage ratios in the ensuing periods have been
135.7%, 138.7%, 119.5%, 110.2% and 118.3%, for the third and fourth quarters
of 1994 and the first three quarters of 1995, respectively. Provisions are
made to keep the balance in the allowance for possible loan losses at a level
consistent, in management's judgement, with the risk in the loan portfolio.
Applicable Income Taxes
Marble's deferred tax asset and related valuation allowance under Statement of
Financial Accounting Standards #109 are reviewed quarterly and adjustments
thereto are recognized as deferred income tax expense or benefit based on
management's judgement relating to the realizability of such asset. For the
three month period ended September 30, 1995 this review resulted in the
recording of income tax expense of $458,000.
Asset/Liability Management
Investment Portfolio
Over the past several years Marble has acquired, both on the open market and
through securitization of portions of its mortgage loan portfolio, a large
volume of U.S. Government Agency and mortgage-backed securities. As part of
its balance sheet management strategy, Marble has elected to maintain
flexibility in the management of its investment portfolio in order to maintain
liquidity and be able to react to changes in the marketplace and the economic
environment and therefore does not want, at this time, to keep a large volume
of investments until they mature. Marble has elected to classify the majority
of its investment securities as available for sale, which allows it to turn
over portions of the investment portfolio from time to time in order to take
advantage of changes in the market. Financial Accounting Standards Board
Statement No. 115 - Accounting For Certain Investments in Debt and Equity
Securities, requires that debt and equity securities classified as available-
for-sale be reported at fair value, with unrealized gains and losses, net of
taxes, shown as a component of stockholders' equity.
The yield on mortgage-backed securities is sensitive to changes in interest
rates. On bonds purchased at a premium, when interest rates rise the market
value and the prepayment speeds will generally decline and the yields will
increase. When interest rates fall, the market value and prepayment speeds
will generally increase and the yields will decline.
As interest rates rose during 1994, the market value of much of the investment
portfolio decreased. At December 31, 1994 investment securities classified as
available-for-sale of $93,578,000 had a net unrealized loss of $4,620,000.
Interest rates declined slightly during the first nine months of 1995, which
improved the market value of the investment portfolio. At September 30, 1995
investment securities classified as available-for-sale of $93,408,000 had a
net unrealized loss of $897,000. Marble does not consider the principal to be
at risk on these securities and consequently, does not believe that the
unrealized losses are permanent or represent permanent impairment of the
ability to recover invested principal. If, in connection with a planned
restructuring of the investment portfolio or any other reason, Marble becomes
aware that a security will not be retained for a period of time sufficient to
allow for the recovery of the unrealized loss in market value, such unrealized
loss would be recognized in current operations. Given the current volatility
in interest rates, it is possible that the amount of unrealized loss could
increase or decrease significantly in future periods.
The following table illustrates the changes in investments during the third
quarter of 1995. The changes are due to principal payments and pay-offs on
various investment securities. The volume of mortgage-backed securities is
reflective of Marble's current strategy to increase the liquidity of its asset
base in order to be in a position to react to changes in interest rates. To
this end, Marble had in recent years, also been securitizing pools of its
fixed rate, long term residential mortgage loans and turning them into
mortgage-backed securities, which were then added to the investment portfolio.
This improved liquidity while still maintaining most of the yield of the
underlying loans. Marble has not securitized any pools of loans thus far in
1995.
During the second and third quarters of 1995, Marble made several investments
in mutual funds on a trading basis. These investments were primarily for the
purpose of resale in the near-term in order to generate income on short-term
differences in price. Investments in debt and equity securities classified as
trading securities are carried at fair value, with unrealized gains and losses
included in earnings. At September 30, 1995 Marble held trading securities
with a purchase price of $24,999,000, and unrealized gains of $183,000.
During the third quarter of 1995, the realized gains on trading securities
were $116,000.
An analysis of investments follows:
<TABLE>
<CAPTION>
Balance at September 30, 1995 Balance at June 30, 1995
-----------------------------------------------------------------------
Net Net
Amortized Unrealized Market Amortized Unrealized Market
Cost Gain(Loss) Value Cost Gain(Loss) Value
- -----------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Investment securities held to maturity:
United States Government obligations $ 11,000 $ (12) $ 10,988 $ 11,000 $ 116 $ 11,116
Mortgage-backed securities 8,597 354 8,951 8,652 364 9,016
- -------------------------------------------------------------------------------------------------------------------------------
19,597 342 19,939 19,652 480 20,132
- -------------------------------------------------------------------------------------------------------------------------------
Investment securities available for sale:
United States Government obligations 5,427 (26) 5,401 5,442 (6) 5,436
Mortgage-backed securities 85,264 (1,363) 83,901 89,154 (1,653) 87,501
Federal Home Loan Bank stock 4,075 0 4,075 4,075 0 4,075
Other bank and corporate stocks 1 30 31 1 27 28
- -------------------------------------------------------------------------------------------------------------------------------
94,767 (1,359) 93,408 98,672 (1,632) 97,040
- -------------------------------------------------------------------------------------------------------------------------------
Securities held for trading 24,999 183 25,182 0 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Total investment securities 139,363 (834) 138,529 118,324 (1,152) 117,172
- -------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in other banks 5 0 5 5 0 5
Federal funds sold and other short-term investments 0 0 0 765 0 765
- -------------------------------------------------------------------------------------------------------------------------------
$139,368 $(834) $138,534 $119,094 $(1,152) $117,942
===============================================================================================================================
</TABLE>
Loans
As shown in the following table, total loans decreased by $2,435,000, or 0.9%,
during the third quarter of 1995.
<TABLE>
<CAPTION>
Growth (Decrease) in
Balance at Balance at Three Month Period
Sept 30, June 30, Ended Sept 30, 1995
1995 1995 Amount Percent
_______________________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage:
Residential $127,192 $126,198 $ 994 0.8%
Commercial 6,176 6,224 (48) (0.8)
Construction 1,138 1,038 100 9.6
_______________________________________________________________________________________
Total mortgage loans 134,506 133,460 1,046 0.8
_______________________________________________________________________________________
Commercial:
Secured by real estate 70,743 73,142 (2,399) (3.3)
Construction 166 163 3 1.8
All other 30,747 32,642 (1,895) (5.8)
_______________________________________________________________________________________
Total commercial loans 101,656 105,947 (4,291) (4.1)
_______________________________________________________________________________________
Consumer loans:
Equity lines of credit 28,702 28,339 363 1.3
All other 12,338 11,891 447 3.8
_______________________________________________________________________________________
Total consumer loans 41,040 40,230 810 2.0
_______________________________________________________________________________________
Total loans 277,202 279,637 (2,435) (0.9)
Less: Allowance for possible loan losses 7,623 7,675 (52) (0.7)
_______________________________________________________________________________________
Net loans $269,579 $271,962 $(2,383) (0.9)%
_______________________________________________________________________________________
Included in above totals:
Deferred loan origination fees $ 136 $ 164
_______________________________________________________________
Mortgages available for sale $ 0 $ 0
_______________________________________________________________
</TABLE>
Allowance for Possible Loan Losses
An analysis of the allowance for possible loan losses follows:
<TABLE>
<CAPTION>
Three Months Ended
Sept 30, June 30,
1995 1995
_____________________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Balance beginning of period $7,675 $7,688
Provisions charged to operations 0 0
Recoveries on amounts previously charged off:
Mortgage 1 1
Commercial and other 8 40
Consumer 7 16
_____________________________________________________________________
16 57
_____________________________________________________________________
$7,691 $7,745
_____________________________________________________________________
Less loans charged off:
Mortgage 22 48
Commercial and other 32 5
Consumer 14 17
_____________________________________________________________________
68 70
_____________________________________________________________________
Balance at end of period $7,623 $7,675
_____________________________________________________________________
Percent of total loans outstanding 2.7% 2.8%
_____________________________________________________________________
</TABLE>
While Marble considers the allowance for possible loan losses at September 30,
1995 to be adequate in relation to its assessment of the risk in the
portfolio, including, among other things, the volume of non-performing loans,
it is not able to predict whether, or the extent to which, the real estate
market and the economy could decline during 1995 and beyond. Given this
uncertainty, it is possible a decline could result in additional charge-offs,
additional writedowns in the value of non-performing assets, changes in the
level of the allowance for possible loan losses and increases in the level of
non-performing loans, foreclosures and other real estate owned. Non-
performing assets have a negative effect on income in that a significant
amount of interest is foregone on them and there is considerable legal and
other non-interest expense incurred as a result of foreclosure actions and
ownership costs. This negative impact on income will continue in the future
until all non-performing assets are disposed of through resolution or sale.
Marble has determined after review of its credit quality policies, that loans
recognized as nonaccrual, in-substance foreclosure and restructured are
equivalent to "impaired loans" as defined in SFAS No. 114. At September 30,
1995 impaired loans with SFAS No. 114 required reserves totaled $4,006,000 and
the reserve for possible loan losses allocated to such loans was in the amount
of $905,000. Also, at September 30, 1995, Marble has additional impaired
loans of $2,572,000 that did not require reserves. Marble also determined
that the reserve for possible loan losses at September 30, 1995 did not
require an additional loan loss provision as a result of the adoption of this
Standard.
The existing methods for the recognition of interest income on impaired loans
has remained unchanged by the adoption of SFAS No. 114 as amended by SFAS No.
118. During the third quarter of 1995, Marble recognized $29,000 of interest
income on impaired loans.
Non-performing Assets
The following tables present information regarding non-performing loans and
assets at the indicated dates.
<TABLE>
<CAPTION>
Increase (Decrease) in
Balance at Balance at Three Month Period
Sept 30, June 30, Ended Sept 30, 1995
1995 1995 Amount Percent
______________________________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Non-accrual loans $5,704 $6,553 $(849) (13.0)%
Accruing loans past due 90 days or more 740 412 328 79.6
______________________________________________________________________________________________
Total non-performing loans 6,444 6,965 (521) (7.5)
______________________________________________________________________________________________
Other real estate owned 1,056 1,138 (82) (7.2)
Less: valuation allowance 37 33 4 12.1
______________________________________________________________________________________________
Net other real estate owned 1,019 1,105 (86) (7.8)
______________________________________________________________________________________________
Troubled debt restructurings 934 938 (4) (0.4)
______________________________________________________________________________________________
Total non-performing assets $8,397 $9,008 $(611) (6.8)%
______________________________________________________________________________________________
Total non-performing loans as a percentage of
total loans 2.3% 2.5%
___________________________________________________________________
Total non-performing assets as a percentage of
total loans and other non-performing assets 3.0% 3.2%
___________________________________________________________________
Total non-performing assets as a percentage of
total assets 2.0% 2.2%
___________________________________________________________________
Allowance for possible loan losses as a
percentage of total non-performing loans 118.3% 110.2%
___________________________________________________________________
</TABLE>
The decrease in non-performing assets during the third quarter of 1995 is
mainly the result of a large commercial loan being placed back on accrual
status, which offset increased delinquency on a small number of mortgage
loans. As a result of these actions during the third quarter, total non-
performing assets decreased by $611,000, or 6.8%, to $8,397,000 at September
30, 1995.
During the third quarter of 1995, approximately $148,000 of interest income
would have been recorded on loans accounted for on a non-accrual basis if such
loans had been current and in accordance with their original terms. Of this
amount, approximately $14,000 of interest was received and included in net
income on a cash basis during the third quarter of 1995.
An analysis of non-performing loans at September 30, 1995 follows:
<TABLE>
<CAPTION>
Non-Performing Loans
In Category as a
Percent of
____________________________________________________________________
Non- Total Total Non-
Total Performing Loans In Performing
Loans Loans Category Loans
____________________________________________________________________
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage:
Residential $127,192 $ 912 0.7% 14.1%
Commercial 6,176 173 2.8 2.7
Construction 1,138 120 10.5 1.9
____________________________________________________________________
Total mortgage loans 134,506 1,205 0.9 18.7
____________________________________________________________________
Commercial:
Secured by real estate 70,743 3,362 4.8 52.2
Construction 166 0 0.0 0.0
All other 30,747 1,669 5.4 25.9
____________________________________________________________________
Total commercial loans 101,656 5,031 4.9 78.1
____________________________________________________________________
Consumer loans:
Equity lines of credit 28,702 121 0.4 1.9
All other 12,338 87 0.7 1.3
____________________________________________________________________
Total consumer loans 41,040 208 0.5 3.2
____________________________________________________________________
Total loans $277,202 $6,444 2.3% 100.0%
====================================================================
</TABLE>
An analysis of the activity relative to other real estate owned follows:
<TABLE>
<CAPTION>
Three Months Ended
- ---------------------------------------------------------
Sept 30, June 30,
1995 1995
_________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period $1,138 $1,353
Foreclosures 206 30
Properties disposed of (285) (244)
Property writedowns, net (3) (1)
_________________________________________________________
Balance at end of period 1,056 1,138
_________________________________________________________
Less valuation allowance:
Balance at beginning of period 33 34
Provisions 7 0
Property writedowns, net (3) (1)
_________________________________________________________
Balance at end of period 37 33
_________________________________________________________
Net other real estate owned $1,019 $1,105
=========================================================
</TABLE>
Deposits
Total deposits decreased by $15,665,000, or 5.0%, during the third quarter of
1995. Demand deposits increased slightly during the three month period ended
September 30, 1995, due to normal fluctuations. Savings deposits decreased
$1,155,000, or 4.1%, due to balances being moved to higher yielding products.
N.O.W. and money market deposits increased $7,663,000, or 9.7%, and time
deposits increased $9,047,000, or 4.8%, during the third quarter, due
primarily to seasonal fluctuations in municipal deposits.
<TABLE>
<CAPTION>
Increase(Decrease) In
Balance at Balance at Three Month Period
Sept 30, June 30, Ended September 30, 1995
1995 1995 Amount Percent
______________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Demand $ 15,791 $ 15,681 $ 110 0.7%
Savings 26,954 28,109 (1,155) (4.1)
NOW and money market 86,808 79,145 7,663 9.7
Time 197,939 188,892 9,047 4.8
______________________________________________________________________
$327,492 $311,827 $15,665 5.0%
======================================================================
</TABLE>
Borrowed Funds
Borrowed funds decreased by $2,051,000, or 3.6%, during the third quarter of
1995, from $57,371,000 at June 30, 1995 to $55,320,000 at September 30, 1995.
Fluctuations in the amount of loans, investments, other real estate owned and
total deposits have created the changes in the need for borrowed funds.
Interest Sensitivity
Marble regularly monitors its interest rate sensitivity as a means of
insuring that changes in interest rates do not have a material adverse impact
on income. The Asset and Liability Committee of the Bank analyzes the
interest rate gap and attempts to manage and improve interest rate
sensitivity. The interest rate gap is the difference between the volume of
interest sensitive assets and interest sensitive liabilities that will mature
or reprice within a given time period.
A positive gap position exists when the volume of rate sensitive assets
exceeds the volume of rate sensitive liabilities in a given time frame, and
indicates that more assets than liabilities will mature or reprice during that
period. A positive gap position will tend to improve earnings in a rising
rate environment and impede earnings in a declining rate environment. A
negative gap position exists when the volume of rate sensitive liabilities
exceeds the volume of rate sensitive assets in a given time frame, and
indicates that more liabilities than assets will mature or reprice during that
period. A negative gap position will tend to impede earnings in a rising rate
environment and improve earnings in a declining rate environment.
The following schedule reflects the interest sensitive assets and
liabilities which will mature or reprice within the stated time frames, as of
September 30, 1995.
<TABLE>
<CAPTION>
At September 30, 1995
_________________________________________________________________________________________________
Over 3 Over 6 Over 1
Months Months Year
3 Months Through Through Through Over 5
or Less 6 Months 1 Year 5 Years Years (4) Total
_________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Rate-sensitive assets: (Dollars in thousands)
Mortgage loans (1) $ 12,158 $31,318 $39,011 $19,354 $32,665 $134,506
Commercial and other loans (2) 64,490 2,210 5,304 17,695 11,957 101,656
Consumer loans 24,556 2,253 1,797 8,502 3,932 41,040
_________________________________________________________________________________________________
Total loans 101,204 35,781 46,112 45,551 48,554 277,202
_________________________________________________________________________________________________
Investments and other (3) 36,542 5,353 23,752 38,533 34,012 138,192
_________________________________________________________________________________________________
Total rate-sensitive assets 137,746 41,134 69,864 84,084 82,566 415,394
_________________________________________________________________________________________________
Rate-sensitive liabilities:
Savings, NOW and money (5) 72,703 0 0 0 41,059 113,762
Time deposits 49,709 39,438 48,072 60,550 170 197,939
_________________________________________________________________________________________________
Total deposits 122,412 39,438 48,072 60,550 41,229 311,701
_________________________________________________________________________________________________
Borrowed funds 55,320 0 0 0 0 55,320
_________________________________________________________________________________________________
Total rate-sensitive liabilities 177,732 39,438 48,072 60,550 41,229 367,021
_________________________________________________________________________________________________
Interest sensitive gap $(39,986) $ 1,696 $21,792 $23,534 $41,337 $ 48,373
_________________________________________________________________________________________________
Rate-sensitive assets/rate-sensitive
liabilities 77.5% 104.3% 145.3% 138.9% 200.3% 113.2%
Interest sensitive gap as a percent
of total assets (9.3)% 0.4% 5.1% 5.5% 9.7% 11.3%
_________________________________________________________________________________________________
- -----------------------------
<F1> Includes residential construction loans.
<F2> Includes commercial loans secured by real estate and commercial
construction loans.
<F3> Maturities of mortgage-backed securities are based on mortgage loan
prepayment assumptions.
<F4> Includes non-accrual loans without regarding to contractual maturities.
<F5> Savings and NOW deposits are considered core deposits that will reprice
within the longest time frame. Super NOW and money market deposits will
reprice within the shortest time frame.
</TABLE>
Income Taxes
At September 30, 1995 and June 30, 1995 gross deferred tax assets and gross
deferred tax liabilities were as follows:
<TABLE>
<CAPTION>
Sept 30, June 30,
1995 1995
- ----------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Gross deferred tax assets:
Operating loss carryforward $1,403 $1,978
Allowance for possible loan losses 2,592 2,609
Capital loss carryforward 306 408
Valuation allowance on other real estate owned 13 11
Alternative minimum tax credit 393 357
Loan origination fees 85 54
Accrued deferred compensation 75 75
Accrued interest expense 126 67
Other, accrued expenses 24 0
Depreciation 47 46
Unrealized loss on investments available-for-sale 462 555
- ------------------------------------------------------------------------
5,526 6,160
- ------------------------------------------------------------------------
Valuation reserve 431 408
- ------------------------------------------------------------------------
Gross deferred tax assets, net 5,095 5,752
- ------------------------------------------------------------------------
Gross deferred tax liabilities:
Tax bad debt reserves in excess of base year 1,499 1,632
Excess servicing gains 20 24
Stock dividends 27 27
- ------------------------------------------------------------------------
1,546 1,683
- ------------------------------------------------------------------------
Net deferred tax asset $3,549 $4,069
========================================================================
</TABLE>
As a result of sixteen consecutive quarters of profitability, the
decrease in non-performing assets from the bulk sale in June 1994 and the
ability to project profitability three or more years into the future, Marble
feels it is more likely than not that the deferred tax asset will be realized,
and accordingly has reversed the valuation reserve established in prior years.
Management believes the existing net deductible temporary differences
which give rise to the net deferred income tax asset will reverse during
periods in which the Company generates net taxable income. For the quarter
ending September 30, 1995, the Company generated taxable income of
approximately $2,060,000. In addition, gross deductible temporary
differences are expected to reverse in periods during which off-setting gross
taxable temporary differences are expected to reverse. It should be noted,
however, that factors beyond management's control, such as the general state
of the economy and real estate values, can affect future levels of taxable
income and that no assurance can be given that sufficient taxable income will
be generated to fully absorb gross deductible temporary differences.
Marble has capital loss carryforwards of $900,000 which will expire, to
the extent not utilized, in fiscal 1995, net operating loss carryforwards of
$4,126,000 which will expire to the extent not utilized, in fiscal 2006, and
an alternative minimum tax credit of $393,000 that may be carried forward
indefinitely.
Liquidity and Capital Resources
Marble's principal sources of funds are deposits, loan and investment
amortization, prepayments and sales of loans and income on earning assets of
its banking subsidiary, Marble Bank. The Bank may also borrow from the
Federal Home Loan Bank and other correspondent banks.
The Bank experienced a net increase in total deposits of $15.7 million during
the third quarter of 1995. In addition to liquidity provided by the
aforementioned sources, Marble Bank maintains a portfolio of short-term
investments, investment securities held-for-trading and investment securities
available-for-sale which averaged $120.1 million, or 27.9% of average assets,
during the third quarter of 1995.
Marble is required to meet certain minimum leverage and risk-weighted assets
to capital ratios adopted by the Federal Reserve Board (FRB) and the Federal
Deposit Insurance Corporation (FDIC) and made applicable to bank holding
companies and state non-member banks, respectively. All regulatory agencies
have adopted the requirements of 3% to 5% leveraged (core) capital and 8%
risk-adjusted capital. The following table sets forth a comparison of
Marble's capital position to the minimum regulatory requirements as of
September 30, 1995 and June 30, 1995. For regulatory capital purposes, the
impact of the adoption of Statement 115 need not be considered.
<TABLE>
<CAPTION>
Ratio Requirements September 30, 1995 June 30, 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Leverage (core) 3.0% - 5.0% (1) 10.1% 10.2%
Risk-based capital - Tier I 4.0% (2) 15.8% 16.8%
Total (Tier I and II) 8.0% (3) 17.1% 18.1%
- -----------------------------
<F1> Total stockholders' equity before the Statement 115 adjustment and less
the amount of intangible assets and the amount of the net deferred tax
asset that will not be realized within one year, divided by total assets.
The current requirement is 3.0% for banks with the highest regulatory
rating and higher requirements applied on a case-by-case basis for other
banks.
<F2> Total stockholders' equity before the Statement 115 adjustment and less
the amount of intangible assets, and the amount of the net deferred tax
asset that will not be realized within one year, divided by risk-adjuste
total assets. The current requirement is 4.0%.
<F3> The sum of Tier 1 capital and the allowance for possible loan losses
(limited to 1.25% of risk-adjusted total assets), divided by risk-adjusted
total assets. The current requirement is 8.0%.
</TABLE>
Part II - Items 1-6
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of banking, to which Marble or
the Bank is or may be considered a party or of which any of Marble's or the
Bank's property is the subject. There are no material pending legal proceedings
to which any director, officer or affiliate of Marble, any owner of record or
beneficiary of more than five percent (5%) of the common stock of Marble, or
any associate of any such director, officer, affiliate of Marble or any
security holder is or may be a party, adverse to Marble or has or may have
a material interest adverse to Marble or the Bank.
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Statement of Computation of Per Share Earnings
(b) On July 10, 1995, Marble Financial Corporation filed a report on
Form 8-K relative to its entering into a definitive agreement and plan of
merger, providing for the acquisition of all of the outstanding capital stock
of Marble by ALBANK, FSB, a federally chartered stock savings bank
headquartered in Albany, New York. Pursuant to the definitive agreement,
ALBANK, FSB will pay $18.00 in cash for all of the outstanding shares of
capital stock of Marble.
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.
MARBLE FINANCIAL CORPORATION
(Registrant)
Date: November 3, 1995 By: /s/ Edward J. Grover
---------------- --------------------------------
Edward J. Grover
President
(Principal Executive Officer)
Date: November 3, 1995 By: /s/ George B. Williams
---------------- --------------------------------
George B. Williams
Vice President, Secretary & Treasurer
(Principal Financial Officer)
EXHIBIT 11. STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1995 September 30, 1994
-----------------------------------------
Fully Fully
Primary Diluted Primary Diluted
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $1,093 $1,093 $1,435 $1,435
====================================================================================
Common and common equivalent shares:
- ------------------------------------
Weighted average number of common
shares outstanding 3,346 3,346 3,324 3,324
Shares arising from assumed exercise
of stock options (as determined under
the Treasury Stock Method) (1) 140 140 118 118
- ------------------------------------------------------------------------------------
Weighted average number of common and
equivalent shares outstanding 3,486 3,486 3,442 3,442
====================================================================================
Earnings per share:
- -------------------
Net income $ 0.31 $ 0.31 $ 0.42 $ 0.42
====================================================================================
<CAPTION>
Six Months Ended Six Months Ended
September 30, 1995 September 30, 1994
-----------------------------------------
Fully Fully
Primary Diluted Primary Diluted
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $3,253 $3,253 $6,035 $6,035
====================================================================================
Common and common equivalent shares:
- ------------------------------------
Weighted average number of common
shares outstanding 3,340 3,340 3,312 3,312
Shares arising from assumed exercise
of stock options (as determined under
the Treasury Stock Method) (1) 121 141 95 116
- ------------------------------------------------------------------------------------
Weighted average number of common and
equivalent shares outstanding 3,461 3,481 3,407 3,428
====================================================================================
Earnings per share:
- -------------------
Net income $ 0.94 $ 0.93 $ 1.77 $ 1.76
====================================================================================
- -----------------------------
<F1> Assumes the exercise of only those options which would be dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000794620
<NAME> MARBLE FINANCIAL CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,348
<INT-BEARING-DEPOSITS> 5
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 25,182
<INVESTMENTS-HELD-FOR-SALE> 93,408
<INVESTMENTS-CARRYING> 19,597
<INVESTMENTS-MARKET> 19,939
<LOANS> 277,202
<ALLOWANCE> 7,623
<TOTAL-ASSETS> 427,737
<DEPOSITS> 327,492
<SHORT-TERM> 55,320
<LIABILITIES-OTHER> 1,794
<LONG-TERM> 0
<COMMON> 3,351
0
0
<OTHER-SE> 39,780
<TOTAL-LIABILITIES-AND-EQUITY> 427,737
<INTEREST-LOAN> 6,345
<INTEREST-INVEST> 2,029
<INTEREST-OTHER> 43
<INTEREST-TOTAL> 8,417
<INTEREST-DEPOSIT> 3,893
<INTEREST-EXPENSE> 4,783
<INTEREST-INCOME-NET> 3,634
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 299
<EXPENSE-OTHER> 2,709
<INCOME-PRETAX> 1,551
<INCOME-PRE-EXTRAORDINARY> 1,551
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,093
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
<YIELD-ACTUAL> 3.50
<LOANS-NON> 5,704
<LOANS-PAST> 740
<LOANS-TROUBLED> 934
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,675
<CHARGE-OFFS> 68
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 7,623
<ALLOWANCE-DOMESTIC> 7,623
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
