<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-17947
HAVERFIELD CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1606726
- - --------------------------------------------------------------------------------
(State or other jurisdicfion of (IRS Employer Identification No.)
incorporation or organization)
Terminal Tower, 50 Public Square, Suite 444, Cleveland, Ohio 44113-2203
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 348-2800
Former name, former address and former fiscal year,
if changed since last report: Not Applicable
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 the latest practicable date.
Common Shares, $0.01 par value 1,904,102
- - --------------------------------------------------------------------------------
(Class) (Outstanding at May 14, 1996)
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HAVERFIELD CORPORATION
INDEX
PAGE
- - --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
Consolidated Statements of Financial Condition
March 31, 1996, December 31, 1995 and March 31, 1995 3
Consolidated Statements of Income
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis 14
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 19
Item 2 - Changes in Securities 19
Item 3 - Defaults Upon Senior Securities 19
Item 4 - Submission of Matters to a Vote of Security Holders 19
Item 5 - Other Information 19
Item 6 - Exhibits and Reports on Form 8-K 19
2
<PAGE> 3
PART I. - FINANCIAL INFORMATION
HAVERFIELD CORPORATION
Consolidated Statements of Financial Condition (unaudited)
- - --------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
-------------- ----------------- --------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 5,088 $ 7,647 $ 4,722
Due from banks-interest bearing 100 100 200
Federal funds sold 2,359 4,396 19,350
Investment securities:
Available for sale, at fair value (Amortized
cost of $35,224, $47,034, and $11,824, respectively) 34,810 47,184 11,830
Mortgage-backed securities:
Available for sale, at fair value (Amortized
cost of $2,541, $2,672 and $3,064, respectively) 2,603 2,754 3,093
Loans (net of allowance for loan losses of $2,745,
$2,734 and $2,696, respectively) 285,792 283,560 282,602
Premises and equipment 3,949 3,953 4,186
Accrued interest and other assets 4,847 4,745 3,884
Cost in excess of fair value of net assets acquired 82 166 786
--------- --------- ---------
TOTAL $ 339,630 $ 354,505 $ 330,653
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Passbook/statement accounts $ 44,596 $ 45,564 $ 52,931
Non-interest-bearing NOW accounts 7,655 11,072 10,000
Interest-bearing NOW accounts 17,152 13,804 13,470
Money market fund accounts 59,208 53,876 35,016
Certificates of deposit 175,357 193,463 183,281
--------- --------- ---------
Total deposits 303,968 317,779 294,698
Advances from Federal Home Loan Bank -- -- 2,000
Advances by borrowers for taxes and insurance 2,621 5,740 2,758
Accrued interest and other liabilities 4,847 2,928 4,108
--------- --------- ---------
Total liabilities 311,436 326,447 303,564
--------- --------- ---------
Shareholders' Equity:
Preferred stock; 1,000,000 shares authorized;
none issued
Common stock, par value $.01 per share; 5,000,000
shares authorized; 1,915,893 shares, 1,894,475
shares and 1,720,135 shares issued, respectively 19 19 17
Capital in excess of par value 16,494 16,353 13,823
Retained earnings 12,050 11,669 13,299
Net unrealized appreciation (depreciation) in the fair
value of securities (net of deferred income taxes
of $(120), $79 and $12, respectively) (233) 153 23
Common shares in treasury, at cost (11,790 shares,
11,790 shares and 6,154 shares, respectively) (136) (136) (73)
--------- --------- ---------
Total shareholders' equity 28,194 28,058 27,089
--------- --------- ---------
TOTAL $ 339,630 $ 354,505 $ 330,653
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
3
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HAVERFIELD CORPORATION
Consolidated Statements of Income (unaudited)
- - --------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Interest income:
Loans $6,033 $5,568
Investments and other 783 321
Mortgage-backed securities 53 64
------ ------
Total interest income 6,869 5,953
------ ------
Interest expense:
Deposits 3,804 3,111
Advances from Federal Home Loan Bank -- 55
------ ------
Total interest expense 3,804 3,166
------ ------
Net interest income 3,065 2,787
Provision for loan losses 34 31
------ ------
Net interest income after provision for loan losses 3,031 2,756
------ ------
Noninterest income:
Service fees and other charges 333 325
Servicing income 121 142
Other income 67 11
------ ------
Total noninterest income 521 478
------ ------
Noninterest expense:
Employee compensation and benefits 989 1,066
Occupancy and equipment 488 485
Advertising 84 144
Insurance premiums 200 183
Data processing fees 94 94
Amortization of intangibles 84 207
Other expenses 646 488
------ ------
Total noninterest expense 2,585 2,667
------ ------
Income before income taxes 967 567
Provision for income taxes 329 193
------ ------
Net income $ 638 $ 374
====== ======
Net income per common share $ .34 $ .20
====== ======
Cash dividend paid per common share $ .135 $ .127
====== ======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
HAVERFIELD CORPORATION
Consolidated Statements of Cash Flows (unaudited)
- - --------------------------------------------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 638 $ 374
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 34 31
Amortization of intangibles 84 207
Depreciation 164 202
Amortization of deferred loan fees (52) (36)
Federal Home Loan Bank stock dividends (45) (39)
Net change in other assets and other liabilities 199 28
Net change in accrued interest receivable and accrued interest payable 1,491 1,149
Other 262 (70)
-------- --------
Net cash provided by operating activities 2,775 1,846
-------- --------
INVESTING ACTIVITIES:
Disbursements on loans originated (24,338) (16,691)
Proceeds from:
Loan repayments and maturities 23,012 14,450
Mortgage-backed security repayments and maturities 130 59
Investment security calls and maturities 17,000 --
Purchases of:
Loans (873) (635)
Investment securities (5,098) (88)
Premises and equipment (160) (51)
Decrease (increase) in federal funds sold 2,038 (12,450)
Other -- 84
-------- --------
Net cash provided by (used in) investing activities 11,711 (15,322)
-------- --------
FINANCING ACTIVITIES:
Net increase (decrease) in certificates of deposit (18,106) 22,516
Net increase (decrease) in passbook, NOW and money market fund accounts 4,295 (7,087)
Payment of cash dividends (257) (240)
Proceeds from exercise of stock options 142 --
Net decrease in mortgage escrow deposits (3,119) (3,286)
-------- --------
Net cash provided by (used in) financing activities (17,045) 11,903
-------- --------
Net decrease in cash and due from banks (2,559) (1,573)
Cash and due from banks at beginning of period 7,647 6,295
-------- --------
Cash and due from banks at end of period $ 5,088 $ 4,722
======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
HAVERFIELD CORPORATION
Notes to Consolidated Financial Statements
- - --------------------------------------------------------------------------------
1. The accounting policies of Haverfield Corporation ("Haverfield" or the
"Company") conform to generally accepted accounting principles and prevailing
practices within the banking and thrift industry. A summary of the more
significant policies follows:
NATURE OF OPERATIONS - Haverfield is a unitary savings and loan holding company
whose principal operating subsidiary is Home Bank, F.S.B. (the "Bank"). The
Company is principally engaged in the business of attracting deposits from the
general public and using such deposits, together with borrowings and other
funds, to make loans secured by real estate, various types of consumer loans and
commercial loans in its market area. The Company's principal market area
consists of suburban communities of Cleveland, and the Company's business is
conducted through its corporate office located in Cleveland, Ohio and ten branch
offices located in Beachwood, Brooklyn, Cleveland, Euclid, Lakewood, Mayfield
Village, Mentor, Rocky River, University Heights, and Westiake, Ohio. Loans and
deposits are primarily generated from the areas where its banking offices are
located. The Company's income is derived predominately from interest on loans
and investments and, to a lesser extent, noninterest income. The Company's
principal expenses are interest paid on deposits and borrowings, and normal
operating costs. The Company's operations are principally in the savings
industry, which constitutes a single industry segment. The Bank's subsidiaries
engage in real estate development activities and investment counseling which are
not material to its operations as a whole and are not significant enough to
constitute a business segment.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
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.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company, the Bank, and its wholly-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated. In the
opinion of management, the accompanying unaudited financial statements include
all adjustments (consisting only of normal recurring accruals) which the Company
considers necessary for a fair presentation of (a) the results of operations for
the three-month periods ended March 31, 1996 and 1995, (b) the financial
position at March 31, 1996, December 31,1995 and March 31, 1995, and (c) cash
flows for the three-month periods ended March 31, 1996 and 1995. The results of
operations for the period ended March 31, 1996 are not necessarily indicative of
the results which may he expected for a full year. Certain amounts previously
reported in the prior years consolidated financial statements have been
reclassified to conform with the current presentation.
INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES - Securities are classified
as either held for trading, available for sale or held for investment.
Securities held for trading are carried at estimated market value with the
adjustment, if any, reflected in the statement of income. Securities classified
as available for sale are also carried at estimated market value; however, the
adjustment, if any, is reflected in shareholders' equity. Securities held for
investment continue to be carried at amortized cost. Gains or losses on the sale
of securities, representing the difference between net proceeds and carrying
value, are recorded in noninterest income on the trade date using the specific
identification method.
LOANS - At the time of origination or purchase, loans are classified as held for
sale or held for investment, based upon management's intent. Critical to the
proper classification of, and accounting for, loans as investments is the intent
and ability to hold them to maturity. Loans held for sale are accounted for at
the lower of cost or market, with any unrealized loss included in income. Loans
held for investment are stated at the principal amount outstanding adjusted for
amortization of premiums and accretion of discounts using the interest method.
Interest is accrued as earned. Transfers of loans held for sale to the
investment portfolio are recorded at the lower of cost or market value on the
transfer date.
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan,"
and SFAS No.118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," which impose certain requirements on the
measurement of impaired loans. The Company has previously measured such loans in
accordance with the methods prescribed in SFAS No. 114. Consequently, no
additional loss provisions were required by the adoption of these statements.
SFAS No. 114 also
6
<PAGE> 7
requires that impaired loans for which foreclosure is probable should be
accounted for as loans. The amounts of impaired loans, as defined by SFAS
No.114, and impaired loans for which foreclosure is probable are not significant
and have not changed materially since December 31, 1995. The initial adoption of
SFAS No. 114 and SFAS No. 118 did not have a material effect on the financial
condition or results of operations of the Company.
The Company's policy for recognition of interest on impaired loans, including
how cash receipts are recorded, is essentially unchanged as a result of the
adoption of SFAS Nos. 114 and 118. A loan (including a loan impaired under SFAS
No.114) is classified as nonaccrual when collectability is in doubt (this is
generally when the borrower is 90 days past due on contractual principal or
interest payments). A loan may be considered impaired, but remain on accrual
status, when the borrower demonstrates (by continuing to make payments) a
willingness to keep the loan current. When a loan is placed on nonaccrual
status, unpaid interest is reversed and an allowance is established by a charge
to interest income equal to all accrued interest. Income is subsequendy
recognized only to the extent that cash payments are received. Loans are
returned to accrual status when, in management's judgment, the borrower has the
ability and intent to make periodic principal and interest payments (this
generally requires that the loan be brought current in accordance with its
original contractual terms).
A loan is considered to be impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. In general, the Bank
considers a loan on income-producing properties to be impaired when the debt
service ratio is less than 1.0. Loans on non-income producing properties are
considered impaired whenever fair value is less than book value. The Bank
performs a review of all loans over $500,000 to determine if the impairment
criteria have been met. If the impairment criteria have been met, a reserve is
calculated according to the provisions of the SFAS No. 114. For loans which are
individually not significant ($500,000 or less) and represent homogeneous
populations, the Bank evaluates impairment based on the level and extent of
delinquencies. Such loans include all mortgage loans secured by 1-4 family
residential property, all consumer loans, and certain multi-family real estate
loans, nonresidential real estate loans, business loans and leases. The Bank
charges principal off at the earlier of (1) when a total loss of principal has
been deemed to have occurred as a result of the book value exceeding the fair
value or net realizable value or (2) when collection efforts have ceased.
NONPERFORMING LOANS - Loans considered to be nonperforming include nonaccrual,
accruing loans delinquent 90 days or more, and restructured loans. Loans are
classified as nonaccrual when, in management's judgment, the borrower no longer
has the ability and intent to make periodic interest and principal payments.
Loans are classified as accruing loans delinquent 90 days or more when the loan
is 90 days or more past due, is fully secured, and, in management'sjudgment, the
borrower has the ability and intent to make periodic interest and principal
payments. Loans are classified as restructured when concessions are made to
borrowers with respect to the principal balance, interest rate or the term due
to the inability of the borrower to meet the obligation under the original
terms.
LOAN FEES - Loan origination fees received for loans held for investment, net of
certain direct origination costs, are deferred and amortized to interest income
over the contractual life of the loan using the level yield method. Loan
origination fees received for loans held for sale, net of certain direct
origination costs, are deferred and recognized as an adjustment of the basis on
sale of the loans. Fees received for loan commitments that are expected to be
drawn, based on the Bank's experience with similar commitments, are deferred and
amortized over the life of the loan using the level yield method. Fees for other
loan commitments are deferred and amortized over the loan commitment period on a
straight-line basis. Unamortized deferred loan fees related to loans paid off
are included in interest income in the period the loan is paid off. Amortization
of net deferred fees is discontinued for loans that are deemed to be
nonperforming.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is established at an
amount necessary to reduce the recorded balances of loans receivable to their
estimated net realizable value, and is increased by charges to income and
decreased by charge-offs (net of recoveries). The allowance for loan losses is
based on management's estimate of the value of the collateral, considering the
current and currently anticipated future operating or sales conditions, as well
as the Bank's past loan loss experience, known and inherent risks in the
portfolio, adverse situations which may affect the borrower's ability to repay,
and current economic conditions. Consequently, these estimates are particularly
susceptible to changes that could result in a material adjustment to results of
operations. Recovery of the carrying value of such loans is dependent on
economic, operating, and other conditions that are beyond the control of the
Company. In the opinion of management, the allowance for loan losses is recorded
in accordance with generally accepted accounting principles.
7
<PAGE> 8
REAL ESTATE OWNED - Real estate owned consists of property acquired in
settlement of foreclosed loans. Real estate owned is carried at the lower of
fair value less estimated costs to sell or cost. Costs relating to the
development and improvement of property are capitalized, whereas those relating
to holding and maintaining the property are charged to expense.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the useful lives of the related assets for financial
reporting purposes. For tax purposes, depreciation on certain assets is computed
using accelerated methods.
INTANGIBLE ASSETS - Cost in excess of fair value of net assets acquired is being
amortized to expense using the interest method over a period of 3 to 12 years.
The amortization periods for intangible assets are continually monitored to
determine if events and circumstances require such periods to be reduced.
FEDERAL INCOME TAXES - The Company and its subsidiaries file a consolidated
income tax return. Deferred income taxes reflect the temporary tax consequences
on future years of differences between the tax and financial statement basis of
assets and liabilities at the balance sheet date. Within certain limits, an
allowance for bad debts based on a percentage of taxable income before such a
deduction may be deducted from taxable income. The amount deductible is limited
to 8% of taxable income.
EARNINGS PER COMMON SHARE - Earnings per common share was computed using the
weighted average number of common shares outstanding for the period. The
weighted average shares used in the computation of earnings per common share was
1,886,921 shares, and 1,885,379 shares during the three-month periods ended
March 31, 1996 and 1995, respectively.
On August 23, 1995, the Board of Directors of the Company declared a 10% stock
dividend payable to shareholders of record on September 15, 1995. The stock
dividend was distributed on October 1, 1995. Earnings per common share for prior
periods has been computed giving retroactive effect to the stock dividend.
CONSOLIDATED STATEMENTS OF CASH FLOWS - For purposes of reporting cash flows,
cash and cash equivalents include cash and due from banks. Federal Reserve Board
regulations require depository institutions to maintain certain minimum reserve
balances. Included in cash and demand deposits were required deposits at the
Federal Reserve of $628,000 and $652,000 at March 31, 1996 and 1995,
respectively.
Income tax payments made for the three months ended March 31, 1996 and 1995 were
$200,000 and $50,000, respectively. Interest paid on deposits and other
borrowings totaled $2,387,000 and $1,830,000 for the three months ended March
31, 1996 and 1995, respectively. There were no loans made to finance the sale of
foreclosed real estate during the three months ended March 31, 1996 and 1995.
There were no acquisitions of real estate property through foreclosure during
the three months ended March 31, 1996 and 1995.
NEW ACCOUNTING STANDARDS - During March, 1995, the Financial Accounting
Standards Board ("FASB") issued SFAS No.121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." This statement
requires that long-lived assets and certain intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No.121 is effective
for 1996 with impairment losses resulting from its application being reported
in the period in which the recognition criteria are first applied and met.
During May, 1995, the FASB issued SFAS No.122, "Accounting for Mortgage
Servicing Rights." This statement requires that the right to service loans,
acquired either through the purchase or origination of the loan and retained
after the loans have been sold or securitized, shall be recognized as an asset
by allocating the total cost of the loans to mortgage servicing rights and loans
based on the relative fair values. The provisions of this statement shall be
applied prospectively beginning in 1996, to transactions in which mortgage loans
are sold or securitized with servicing rights retained and to impairment
evaluations of all amounts capitalized as mortgage servicing rights, including
those purchased before the adoption of this statement.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This standard is effective for fiscal years begining after
December 15, 1995. The standard presents financial accounting and reporting
standards for stock-based employee compensation plans including stock purchase
plans, stock options and restricted stock. SFAS No.123 establishes a fair value
based method of accounting for such plans, rather than the intrinsic value
8
<PAGE> 9
based method that is contained in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25"). SFAS No. 123 does not
require an entity to adopt the new fair value based method for purposes of
preparing its basic financial statements. While the SFAS No.123 fair value based
method is considered by the FASB to be preferable to the APB 25 method, entities
are allowed to continue to use the APB 25 method. Entities not adopting the fair
value method under SFAS No. 123 are required to present pro forma net income and
earnings per share, in the notes to the annual financial statements, as if the
fair value based method had been adopted. Management has elected to continue the
use of the APB 25 method.
Management adopted these statements on January 1, 1996. The impact of adopting
these statements on the financial condition and results of operations of the
Company was not significant.
2. Amortized cost, estimated market values and weighted average end-of-period
yields of investment securities by contractual maturity are summarized as
follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31,1995
------------------------- ------------------------- -------------------------
Amortized Market Amortized Market Amortized Market
Cost Value Yield Cost Value Yield Cost Value Yield
---- ----- ----- ---- ----- ----- ---- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government obligations:
Due in one year or less $ 1,000 $ 1,011 7.25% $ 2,000 $ 2,016 5.81% $ 5,356 $ 5,340 5.68%
Due after 1 year through 5 years 15,988 15,890 6.34% 23,977 24,055 6.81% 3,985 4,007 6.83%
Due after 5 years through 10 years 15,477 15,149 6.90% 18,443 18,499 6.97% -- -- --
------- ------- ------- ------- ------- -------
Total 32,465 32,050 6.64% 44,420 44,570 6.83% 9,341 9,347 6.17%
------- ------- ------- ------- ------- -------
Marketable equity securities 100 101 6.41% -- -- -- -- -- --
Federal Home Loan Bark stock 2,659 2,659 7.00% 2,614 2,614 7.00% 2,483 2,483 6.63%
------- ------- ------- ------- ------- -------
Total $35,224 $34,810 6.66% $47,034 $47,184 6.84% $11,824 $11,830 6.26%
======= ======= ======= ======= ======= =======
</TABLE>
All investment securities were classified as available for sale at March 31,
1996.
Investment securities totaling $5.8 million at March 31, 1996 were pledged as
collateral for deposits and a standby letter of credit commitment.
Gross unrealized gains and gross unrealized losses are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
------------------------ ------------------------ ------------------------
Gross Gross Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses Gains Losses
---------- ---------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. government obligations $ 21 $ 436 $ 175 $ 25 $ 25 $ 19
Marketable equity securities 1 -- -- -- -- --
Federal Home Loan Bank stock -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total $ 22 $ 436 $ 175 $ 25 $ 25 $ 19
====== ====== ====== ====== ====== ======
</TABLE>
3. Loans may be exchanged for mortgage-backed securities guaranteed by
government agencies. Although long-term and fixed-rate in nature,
mortgage-backed securities are more liquid than real estate loans since a large
and active secondary market exists.
9
<PAGE> 10
Amortized cost, estimated market values and weighted average end-of-period
yields of mortgage-backed securities by contractual maturity are summarized as
follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
------------------------- ------------------------- --------------------------
Amortized Market Amortized Market Amortized Market
Cost Value Yield Cost Value Yield Cost Value Yield
---- ----- ----- ---- ----- ----- ---- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pass-through certificates:
Federal Home Loan Mortgage
Corporation:
Due after 5 years through 10 years $ 13 $ 13 7.50% $ 14 $ 14 7.50% $ 17 $ 16 7.50%
Due after 10 years 1,989 2,055 8.63% 2,085 2,168 8.62% 2,380 2,414 8.64%
--------- ------ --------- ------ --------- ------
Total 2,002 2,068 8.62% 2,099 2,182 8.61% 2,397 2,430 8.63%
--------- ------ --------- ------ --------- ------
Government National Mortgage
Association:
Due after 1 year through 5 years 143 141 9.14% 1 1 8.35% 1 1 8.77%
Due after 5 years through 10 years 99 98 9.20% 250 249 9.20% 283 283 9.32%
--------- ------ --------- ------ --------- ------
Total 242 239 9.16% 251 250 9.20% 284 284 9.32%
--------- ------ --------- ------ --------- ------
Collateralized mortgage obligations:
Due in 1 year or less 183 182 5.38% 201 201 5.47% -- -- --
Due after 1 year through 5 years -- -- -- -- -- -- 243 241 5.45%
Due after 10 years 114 114 5.44% 121 121 5.68% 140 138 6.25%
--------- ------ --------- ------ --------- ------
Total 297 296 5.40% 322 322 5.55% 383 379 5.74%
--------- ------ --------- ------ --------- ------
Total $ 2,541 $2,603 8.30% $ 2,672 $2,754 8.30% $ 3,064 $3,093 8.34%
========= ====== ========= ====== ========= ======
</TABLE>
At March 31, 1996, mortgage-backed securities totaling $892,000 were pledged as
collateral for public funds on deposit with the Bank.
Gross unrealized gains and gross unrealized losses are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
------------------------ ------------------------ ------------------------
Gross Gross Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses Gains Losses
---------- ---------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Pass-through certificates:
Federal Home Loan Mortgage
Corporation $ 66 $ -- $ 83 $ -- $ 35 $ 2
Government National Mortgage
Association -- 3 -- 1 -- --
Collateralized mortgage obligations -- 1 -- -- -- 4
------ ----- ----- ------ ----- -----
Total $ 66 $ 4 $ 83 $ 1 $ 35 $ 6
====== ===== ===== ====== ===== =====
</TABLE>
4. The loan portfolio is comprised primarily of residential real estate loans
granted to customers residing in northeastern Ohio. Although the Company has a
diversified loan portfolio, its debtors' ability to honor their contracts is
substantially dependent upon the general economic conditions of the region.
Loans are designated as held for sale or investment at the time of origination.
Loans held for sale are carried at the lower of cost or market value determined
on a net aggregate basis. Transfers of loans held for sale to the investment
portfolio are recorded at the lower of cost or market value on the transfer
date. There were no sales of mortgage loans during the three months ended
March 31, 1996 and 1995.
10
<PAGE> 11
The composition of the loan portfolio is as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
-------------- ----------------- --------------
(In thousands)
<S> <C> <C> <C>
Real estate loans - mortgage $ 238,752 $ 238,181 $ 248,641
Real estate loans-construction 3,116 1,616 2,146
Land 4,188 4,461 5,031
Business loans 5,146 4,758 1,522
Consumer and other loans 40,468 40,055 31,223
--------- --------- ---------
291,670 289,071 288,563
LESS:
Undisbursed portion of loans in process (2,103) (1,711) (2,231)
Unearned income on consumer loans (13) (18) (35)
Amount due other financial institutions relating
to wrap around mortgage loans (143) (145) (173)
Deferred loan fees (874) (903) (826)
Allowance for loan losses (2,745) (2,734) (2,696)
--------- --------- ---------
$ 285,792 $ 283,560 $ 282,602
========= ========= =========
</TABLE>
At March 31, 1996, December 31, 1995 and March 31, 1995, loans serviced for
others amounted to $133.2 million, $139.5 million and $157.4 million,
respectively. Servicing loans for others generally consists of collecting
mortgage payments, maintaining escrow accounts, disbursing payments to investors
and foreclosure processing.
5. The following table summarizes nonaccrual, past due and repossessed assets.
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
-------------- ----------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $1,132 $1,303 $1,619
Loans past due 90 days and accruing 6 21 33
Repossessed assets 656 737 611
------ ------ ------
Total nonperforming assets $1,794 $2,061 $2,263
====== ====== ======
Percent of nonperforming loans to total loans .39% .46% .57%
Percent of nonperforming assets to total assets .53% .58% .68%
</TABLE>
The loans included above are secured by real estate or other collateral which
limits the Company's exposure to loss. At March 31, 1996, there were no
significant commitments outstanding to lend additional funds to borrowers with
nonperforming loans. For all periods presented, there have been no troubled debt
restructurings which involved forgiving a portion of interest or principal on
any loans or making loans at a rate materially less than market rates.
In addition to the loans disclosed in the table above, the Bank has a $1.1
million loan secured by a strip shopping center located in Northeast Ohio. The
shopping center has experienced higher-than-expected vacancies, and the cash
flow from the property has not been sufficient to meet the principal and
interest due on the loan. The borrower has maintained the loan current through
March 31, 1996. The borrower is working to cure the vacancies; however,
continued high vacancies and cash flow shortages could cause management to place
this loan on nonaccrual status.
11
<PAGE> 12
6. In the normal course of business, various commitments and contingent
liabilities arise, including commitments to originate real estate loans and
commitments to extend credit. Commitments to borrowers to originate loans and
for unused lines of credit are summarized below:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
-------------- ----------------- --------------
(In thousands)
<S> <C> <C> <C>
Commitments to originate:
Fixed rate loans $ 2,722 $ 856 $ 529
Variable rate loans 6,555 2,765 1,510
Unused lines of credit 59,958 57,134 48,117
</TABLE>
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Fach customer's creditworthiness is
evaluated on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon the credit extension, is based on management's
credit evaluation of the counter-party. The commitment amount represents the
amount of credit risk; however, the Company generally extends credit on a
secured basis. Collateral held usually includes residential and commercial real
estate.
The Bank is a 19.6% participant in a standby letter of credit totaling $10.2
million, which expires on September 1, 1996. This standby letter of credit was
issued to guarantee the payment of principal and interest on multi-family
housing revenue bonds issued to finance a 240-unit apartment complex in Stone
Mountain, Georgia. The Bank had outstanding commitments under this standby
letter of credit of $2.1 million at March 31, 1996, December 31, 1995 and March
31, 1995. The Bank has established a $322,000 liability for credit loss for this
standby letter of credit. At March 31, 1996, no funds have been advanced under
this letter of credit.
7. The composition of premises and equipment is as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31,1995
-------------- ----------------- -------------
(In thousands)
<S> <C> <C> <C>
Land and improvements $ 669 $ 669 $ 997
Buildings and improvements 1,667 1,658 2,402
Furniture and fixtures 5,037 5,023 4,910
Leasehold improvements 1,936 1,799 1,564
------ ------ ------
9,309 9,149 9,874
Accumulated depreciation and amortization 5,360 5,196 5,687
------ ------ ------
$3,949 $3,953 $4,186
====== ====== ======
</TABLE>
In December, 1995, the Bank completed the sale of its Madison office, which
resulted in an after-tax gain of $204,000.
8. Accrued interest and other assets consists of the following:
<TABLE>
<CAPTION>
March 3l, 1996 December 3l, 1995 March 3l, 1995
-------------- ----------------- --------------
(In thousands)
<S> <C> <C> <C>
Accrued interest $2,528 $2,602 $1,874
Real estate owned 656 737 611
Other assets 1,663 1,406 1,399
------ ------ ------
$4,847 $4,745 $3,884
====== ====== ======
</TABLE>
12
<PAGE> 13
9. Accrued interest and other liabilities consists of the following:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
-------------- ----------------- --------------
(In thousands)
<S> <C> <C> <C>
Accrued interest payable $2,094 $ 676 $2,078
Collections on loans serviced 793 465 689
Other liabilities 1,960 1,787 1,341
------ ------ ------
$4,847 $2,928 $4,108
====== ====== ======
</TABLE>
10. In November, 1995, the Company obtained a one year revolving credit facility
from a third-party lender in the amount of $1.0 million. The interest rate
associated with this credit facility is based on the prime rate. The Company has
not drawn on this credit facility.
On April 4, 1995, the Bank repaid a $2 million advance from the Federal Home
Loan Bank, including a prepayment penalty of $16,000. The advance had an
interest rate of 10.30% and a maturity date of June 26, 1995.
11. Under the current capital regulations, the Bank must have: (i) core capital
equal to 3% of adjusted total assets, (ii) tangible capital equal to 1.5% of
adjusted total assets, and (iii) total capital equal to 8.0% of risk-weighted
assets. Risk-weighted assets are comprised of both on- and off-balance sheet
items, and are assigned a risk weighting from 0-100% based on their relative
risk. The Bank was in compliance with these regulatory capital regulations on
March 31, 1996, December 31, 1995 and March 31, 1995.
The following is a summary of the Bank's regulatory capital levels at March 31,
1996):
<TABLE>
<CAPTION>
Core Capital Tangible Capital Risk-Based Capital
------------ ---------------- ------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total regulatory capital $23,952 7.07% $23,952 7.07% $26,632 11.44%
Regulatory capital required 10,164 3.00% 5,082 1.50% 18,625 8.00%
------- ---- ------- ---- ------- -----
Regulatory capital excess $13,788 4.07% $18,870 5.57% $ 8,007 3.44%
======= ==== ======= ==== ======= =====
</TABLE>
Management believes that, under the current regulations, the minimum capital
requirements will continue to be met in the foreseeable future. However, events
beyond the control of management, such as a downturn in the local economy of
northeastern Ohio where the Bank has most of its loans, could adversely affect
future earnings and, consequently, the ability to meet its future minimum
capital requirements.
13
<PAGE> 14
HAVERFIELD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1996 was $638,000 as compared to
$374,000 for the three months ended March 31, 1995. This increase resulted from
a 10% improvement in net interest income and increased fee income attributable
to the Bank's financial services subsidiary. In addition, noninterest expense
showed an improvement of $82,000 as cost reduction measures implemented in 1995
continue to positively affect net income. Return on average assets for the first
quarter of 1996 was .75% compared with .48% in the same period of 1995. Return
on average equity was 8.88% for the first quarter of 1996, as compared with
5.49% for the same period of 1995.
NET INTEREST INCOME
- - --------------------------------------------------------------------------------
Net interest income for the three months ended March 31, 1996 was $3,065,000,
compared to $2,787,000 for the same period in 1995. The interest rate spread
increased 3 basis points to 3.22%. Due to a general increase in interest rates,
the weighted average yield on earning assets increased 49 basis points, while
the yield paid on interest-bearing liabilities increased 46 basis points. An
analysis of net interest income is presented in the following table. For each
major category of interest-earning assets and interest-bearing liabilities, the
average balance of funds employed during the period indicated is shown along
with the interest earned or paid on that balance for the period and the weighted
average annualized rate earned or paid for that category. Average balances are
determined on a daily basis.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------
1996 1995
------------------------ ------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans - net $285,481 $6,033 8.46% $283,955 $5,568 7.86%
Investments and other 47,436 783 6.54 23,350 321 5.51
Mortgage-backed securities 2,693 53 7.89 3,104 64 8.21
-------- ------ ---- -------- ------ ----
Total interest-earning assets 335,610 6,869 8.18 310,409 5,953 7.69
Noninterest-earning assets 7,249 ------ ---- 7,846 ------ ----
-------- --------
Total assets $342,859 $318,255
======== ========
Interest-bearing liabilities:
Passbook/statement accounts $ 44,634 274 2.47 $ 54,462 331 2.46
NOW accounts 24,329 59 .97 24,656 61 1.00
Money market fund accounts 55,922 689 4.96 35,100 428 4.95
Certificates of deposit 183,635 2,782 6.09 169,064 2,291 5.50
-------- ------ ---- -------- ------ ----
Total deposits 308,520 3,804 4.96 283,282 3,111 4.45
FHLB advances -- -- -- 2,267 55 9.82
-------- ------ ---- -------- ------ ----
Total interest-bearing liabilities 308,520 3,804 4.96 285,549 3,166 4.50
Noninterest bearing liabilities 5,436 ------ ---- 5,086 ------ ----
-------- --------
Total liabilities 313,956 290,635
Shareholders' equity 28,903 27,620
-------- --------
Total liabilities and shareholders' equity $342,859 $318,255
======== ========
Net interest income/interest rate spread $3,065 3.22% $2,787 3.19%
====== ==== ====== ====
Net interest margin 3.67% 3.64%
==== ====
</TABLE>
14
<PAGE> 15
The sensitivity of the Company's net interest income to general economic
conditions and the effect on net interest income due to changes in interest
rates and changes in amounts of interest-earning assets and interest-bearing
liabilities for the three months ended March 31, 1996 versus March 31, 1995 is
shown in the following table. Changes in interest due to both rate and volume
have been allocated to change due to volume and change due to rate in proportion
to the absolute amounts of the change in each.
<TABLE>
<CAPTION>
Change Due To
--------------
Total Change Volume Rate
------------ ------ ----
(In thousands)
<S> <C> <C> <C>
Interest income:
Loans $ 465 $ 29 $ 436
Investments and other 462 387 75
Mortgage-backed securities (11) (8) (3)
----- ----- -----
Total 916 408 508
----- ----- -----
Interest expense:
Deposits 693 291 402
FHLB advances (55) (55) --
----- ----- -----
Total 638 236 402
----- ----- -----
Increase in net interest income $ 278 $ 172 $ 106
===== ===== =====
</TABLE>
ALLOWANCE FOR LOAN LOSSES
- - --------------------------------------------------------------------------------
The amount of the allowance for loan losses is based on management's analysis of
risks inherent in the various segments of the loan portfolio, management's
assessment of known or potential problem credits which have come to manage-
ment's attention during the ongoing analysis of credit quality, historical loss
experience, current economic conditions and other factors. Loan loss estimates
are reviewed periodically, and adjustments, if any, are reported in earnings in
the period in which they become known. In addition, the Company maintains a
portion of the allowance to cover potential losses inherent in the portfolio
which have not been specifically identified. Activity in the loan loss allowance
for the three months ended March 31, 1996 and March 31, 1995 is presented below.
<TABLE>
<CAPTION>
March 31,
----------------------
1996 1995
---- ----
(Dollars in thousands)
<S> <C> <C>
Balance, January 1 $ 2,734 $ 2,665
Provision charged to expense 34 31
Loans (charged off) recoveries (23) --
--------- --------
Balance, March 31 $ 2,745 $ 2,696
========= ========
Average loans $ 285,481 $283,955
Loans at end of period $ 291,670 $288,563
Allowance/average loans .96% .95%
Allowance/end-of-period loans .94% .93%
Allowance/nonperforming loans 241.21% 163.20%
Allowance/nonperforming assets 152.92% 119.13%
</TABLE>
Although management believes that it uses the best information available to make
such determinations and that the allowance for loan losses is adequate at March
31, 1996, future adjustments to reserves may be necessary, and net income could
be significanfly affected, if circumstances and/or economic conditions differ
substantially from the assumptions used in making the initial determinations.
Nonperforming assets at March 31, 1996, December 31, 1995 and March 31, 1995 are
presented in note 5 of the financial statements.
15
<PAGE> 16
NONINTEREST INCOME
- - --------------------------------------------------------------------------------
Noninterest income for the first three months of 1996 totaled $521,000, compared
to $478,000 for the same period in 1995. Other income increased $56,000 largely
due to the increase in the fee income earned by the Bank's financial services
subsidiary. Servicing income decreased $21,000 due to the decreased amount of
loans serviced for others.
NONINTEREST EXPENSE
- - --------------------------------------------------------------------------------
Noninterest expense decreased to $2,585,000 for the three months ended March 31,
1996 compared to $2,667,000 for the same period in 1995.
The composition of other expenses is as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Business and management development $ 27 $ 48
Examination/audit expense 47 55
OTS assessment 22 20
Postage 47 49
Supplies 32 31
Telephone 34 33
Franchise/sales tax 96 90
Director fees 23 22
Consulting fees 12 15
Legal fees 46 11
Provision for loss on real estate owned 80 --
Miscellaneous expenses 180 114
---- ----
$646 $488
==== ====
</TABLE>
During the first quarter of 1996, a provision for loss on real estate owned was
recorded in connection with a commercial property which is carried in Real
Estate Owned. The Bank is currently negotiating a sale of the property. The loss
provision effectively reduces the Bank's recorded investment in the property to
the expected net realizable value of the property.
The increase in miscellaneous expenses in 1996 is attributable to several
relatively minor increases in various expense items.
FINANCIAL CONDITION
- - --------------------------------------------------------------------------------
Total assets at March 31, 1996 were $339.6 million compared to $354.5 million at
December 31, 1995. This $14.9 million decrease was primarily the result of a
$12.4 million decrease in investment securities as a consequence of the call or
maturity of $17.0 million of U.S. government and agency securities during the
quarter. Total deposit liabilities also declined by $13.8 million from December
31, 1995 to March 31, 1996. An $18.1 million decrease in certificates of
deposit, due to lower rates being offered on maturing certificates and increased
competition for such deposits, was partially offset by a $5.3 million increase
in money market fund accounts. Total assets increased from $330.7 million at
March 31, 1995, to $339.6 million at March 31, 1996, mainly due to purchases of
investment securities and loan growth, while shareholders' equity increased from
$27.1 million to $28.2 million. The following table shows shareholders' equity
per share and tangible shareholders' equity per share.
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
-------------- ----------------- --------------
<S> <C> <C> <C>
Shareholders' equity per share $14.81 $14.90 $14.36
Tangible shareholders' equity per share $14.76 $14.82 $13.95
</TABLE>
The Board of Directors declared a first quarter dividend of $.135 per share
which was paid on March 29, 1996.
16
<PAGE> 17
ASSET/LIABILITY MANAGEMENT
The following table sets forth at March 31, 1996, the amounts of
interest-earning assets and interest-bearing liabilities scheduled to mature or
reprice within a specified period. No prepayment assumptions or deposit decay
rates have been incorporated. The table shows the excess or shortfall of
interest-earning assets less interest-bearing liabilities. This excess or
shortfall is called the "gap."
<TABLE>
<CAPTION>
Scheduled Maturity or Repricing
--------------------------------------------------
1 Year 1 Year More than
or Less to 3 Years 3 Years Total
------- ---------- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Real estate loans:
Conventional:
Fixed-rate $ 3,739 $ 8,298 $ 58,405 $ 70,442
Adjustable-rate 120,336 43,183 4,791 168,310
Construction 1,617 1,499 -- 3,116
Land loans 4,188 -- -- 4,188
Consumer loans 39,327 602 539 40,468
Business loans 5,128 -- 18 5,146
Loans in process, allowance
for loan losses and net
deferred loan fees -- -- (5,878) (5,878)
-------- ------- -------- ---------
Total loans (1) 174,335 53,582 57,875 285,792
Mortgage-backed securities 412 231 1,960 2,603
Other interest-earning assets 5,430 4,503 27,336 37,269
-------- ------- -------- ---------
Total interest-earning assets $180,177 $58,316 $ 87,171 $ 325,664
======== ======= ======== =========
Interest-bearing liabilities:
Deposits:
Passbook and NOW accounts (2) $ -- $ -- $ 61,748 $ 61,748
Money market fund accounts 59,208 -- -- 59,208
Certificates of deposit 106,009 49,176 20,172 175,357
-------- ------- -------- ---------
Total deposits 165,217 49,176 81,920 296,313
-------- ------- -------- ---------
Total interest bearing liabilities $165,217 $49,176 $ 81,920 $ 296,313
======== ======= ======== =========
GAP $ 14,960 $ 9,140 $ 5,251 $ 29,351
Cumulative GAP $ 14,960 $24,100 $ 29,351
Cumulative GAP as a percentage of total assets 4.40% 7.10% 8.64%
- - ----------
<FN>
(1) Contractual maturities of loans do not reflect the actual term of the
Company's loan portfolio. The average life of mortgage loans is
substantially less than their contractual terms because of loan
prepayments and due-on-sale clauses.
(2) Management believes that a significant amount of passbook and NOW accounts
are core deposits.
</TABLE>
17
<PAGE> 18
REGULATORY ISSUES
- - --------------------------------------------------------------------------------
The Bank is subject to extensive regulation, supervision and examination by the
Office of Thrift Supervision (the "OTS"), as its chartering authority and
primary federal regulator, and by the Federal Deposit Insurance Corporation (the
"FDIC"), which insures its deposits up to applicable limits. Such regulation and
supervision establishes a comprehensive framework of activities in which an
institution can engage and is intended primarily for the protection of the
insurance fund and depositors. In connection with an examination of the Bank,
the Bank entered into a written agreement with the OTS dated June 4, 1993 (the
"Supervisory Agreement") providing for measures to address the regulatory
compliance concerns of the OTS regarding the Bank's policies and procedures with
respect to certain matters. Pursuant to the Supervisory Agreement, the Board of
Directors of the Bank has provided reports to the OTS documenting the actions
taken under the Supervisory Agreement. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities. Any change in such regulation, whether by the OTS,
the FDIC or the Congress could have a material impact on the Bank and its
operations. Management cannot predict what, if any, future legislation may be
enacted or regulations adopted or what impact any such actions may have on the
Company or the Bank.
The Bank's deposits are insured by the Savings Association Insurance Fund
("SAIF") of the FDIC. Deposit insurance premiums to both the SAIF and the Bank
Insurance Fund ("BIF") of the FDIC were identical when both funds were created
in 1989. In August 1995, the FDIC determined that the BIF had achieved its
designated reserve ratio and lowered BIF deposit insurance premium rates for all
but the riskiest institutions. Effective January 1, 1996, BIF deposit insurance
premiums for well-capitalized banks were further reduced to the statutory
minimum of $2,000 per institution per year. Because the SAIF remains
significantly below its designated reserve ratio, SAIF deposit insurance
premiums were not reduced and remain at 0.23% to 0.31% of deposits, based upon
an institution's supervisory evaluations and capital levels. The current
discrepancy in deposit insurance premiums between the BIF and the SAIF could
place the Bank at a competitive disadvantage to BIF insured institutions.
The current financial condition of the SAIF has resulted in proposed legislation
to recapitalize the SAIF through a one-time special assessment. After the
special assessment, it is expected that the SAIF would achieve its designated
reserve ratio and that SAIF premium rates would then become comparable to BIF
rates. The proposed legislation also contemplates a merger of the SAIF into the
BIF, which would require separate legislation. The Company is unable to predict
whether this legislation will be enacted or the amount or applicable retroactive
date of any one-time assessment or the rates that would then apply to assessable
SAIF deposits.
18
<PAGE> 19
HAVERFIELD CORPORATION
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- - --------------------------------------------------------------------------------
The Housing and Urban Development ("HUD") Mortgagee Review Board has proposed
that the Bank enter into a settlement agreement and indemnify HUD for HUD/FHA
insurance claims and associated costs paid against insured properties affected
by the indictment and guilty plea of a former loan originator of the Bank on
charges of fraud. The Bank is submitting this request for indemnification to its
insurance carrier to determine if the claim by HUD is covered in whole or in
part by policies of insurance maintained by the Bank. The settlement agreement
provides for indemnification to HUD by the Bank for a sum which shall not exceed
$707,866.25. The Bank is negotiating with HUD the resolution of this claim and
no assurances can be given as to the outcome of these negotiations.
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
- - --------------------------------------------------------------------------------
At the Annual Meeting of Shareholders of the Registrant held on April 24, 1996,
the appointment of Deloitte & Touche LLP as the Registrant's independent
auditors for 1996 was approved.
ITEM 5. OTHER INFORMATION
- - --------------------------------------------------------------------------------
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - --------------------------------------------------------------------------------
(a) Exhibits
(27) Financial Data Schedule -- Edgar Only
(b) Reports on Form 8-K
NONE
19
<PAGE> 20
HAVERFIELD CORPORATION
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.
HAVERFIELD CORPORATION
Dated: May 14, 1996 /S/ William A. Valerian
-----------------------------------------
William A. Valerian
President and Chief Executive Officer
Dated: May 14, 1996 /S/ Richard C. Ebner
-----------------------------------------
Richard C. Ebner
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Treasurer
20
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HAVERFIELD CORPORATION INCLUDED IN THE FORM
10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,088
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 2,359
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 37,413
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 288,537
<ALLOWANCE> 2,745
<TOTAL-ASSETS> 339,630
<DEPOSITS> 303,968
<SHORT-TERM> 0
<LIABILITIES-OTHER> 7,468
<LONG-TERM> 0
<COMMON> 19
0
0
<OTHER-SE> 28,175
<TOTAL-LIABILITIES-AND-EQUITY> 339,630
<INTEREST-LOAN> 6,033
<INTEREST-INVEST> 783
<INTEREST-OTHER> 53
<INTEREST-TOTAL> 6,869
<INTEREST-DEPOSIT> 3,804
<INTEREST-EXPENSE> 3,804
<INTEREST-INCOME-NET> 3,065
<LOAN-LOSSES> 34
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,585
<INCOME-PRETAX> 967
<INCOME-PRE-EXTRAORDINARY> 638
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 638
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
<YIELD-ACTUAL> 3.67%
<LOANS-NON> 1,132
<LOANS-PAST> 6
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,065
<ALLOWANCE-OPEN> 2,734
<CHARGE-OFFS> 25
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 2,745
<ALLOWANCE-DOMESTIC> 2,154
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 591
</TABLE>
