<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
-----------------
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: 0-18126
-------
FINANCIAL BANCORP, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1391814
-------- ----------
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
42-25 Queens Boulevard, Long Island City, NY 11104
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
(718) 729-5002
--------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed 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. (1) X Yes No
------ ------
(2) X Yes No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
There were 1,747,686 shares of the Registrant's common stock outstanding
as of February 13, 1997.
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1
<PAGE> 2
FINANCIAL BANCORP, INC.
Form 10-Q
Index
Part I - Financial Information Page
- ------------------------------ ----
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of December 31, 1996 (Unaudited) and September 30, 1996 3
Consolidated Statements of Income for the
Three Months ended December 31, 1996 and 1995 (Unaudited) 4
Consolidated Statement of Changes in
Stockholders' Equity for the Three Months
ended December 31, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for
the Three Months ended December 31, 1996 and 1995 (Unaudited) 6-7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-16
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings 17
Item 2. Changes in Securities
Not applicable. 17
Item 3. Defaults Upon Senior Securities
Not applicable. 17
Item 4. Submission of Matters to a Vote of Security
Holders
Not applicable. 17
Item 5. Other Information 17
Item 6. Reports on Form 8-K
Not applicable. 17
Exhibits
Exhibit 11: Computation of per share earnings 18
Signature Page 19
2
<PAGE> 3
<TABLE>
<CAPTION>
FINANCIAL BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------- ----------------
<S> <C> <C>
Assets
- ------
Cash and amounts due from depository institutions $ 1,603,668 $ 2,917,223
Federal funds sold and securities purchased under agreements to resell 2,000,000 2,185,000
------------ ------------
Total cash and cash equivalents 3,603,668 5,102,223
Investment securities available for sale 701,750 3,608,125
Investment securities held to maturity, net; estimated fair value of $44,058,000 and
$49,903,000 at December 31, 1996 and September 30, 1996, respectively 45,010,382 51,122,128
Mortgage-backed securities available for sale 5,002,458 5,016,112
Mortgage-backed securities held to maturity, net; estimated fair value of $48,149,000
and $49,901,000 at December 31, 1996 and September 30, 1996, respectively 47,734,831 49,836,734
Loans receivable, net 145,481,700 140,314,158
Real estate owned, net 218,500 377,910
Investments in real estate, net 3,468,494 3,493,153
Premises and equipment, net 2,489,883 2,522,264
Federal Home Loan Bank of New York stock, at cost 1,689,800 1,675,800
Accrued interest receivable, net 1,649,967 1,788,970
Other assets 2,052,549 1,904,945
------------ ------------
Total assets $259,103,982 $266,762,522
============ ============
Liabilities and stockholders' equity
- ------------------------------------
Deposits $203,499,815 $202,883,766
Advance payments by borrowers for taxes and insurance 871,337 1,063,036
Advances from Federal Home Loan Bank of New York 12,000,000 9,725,000
Securities sold under agreements to repurchase 5,000,000 14,046,000
Treasury tax and loan account and other short term borrowings 10,006,868 9,880,970
Other liabilities 1,967,716 3,376,552
------------ ------------
Total liabilities 233,345,736 240,975,324
------------ ------------
Stockholders' equity
Preferred stock, $0.01 par value, 2,500,000 shares authorized; none issued
Common stock, $0.01 par value, 6,000,000 shares authorized; 2,185,000 shares issued,
1,747,686 and 1,790,622 shares outstanding at December 31, 1996
and September 30, 1996, respectively 21,850 21,850
Additional paid-in capital 20,156,882 20,151,858
Retained earnings - substantially restricted 12,688,064 12,218,607
Common stock acquried by Employee Stock Ownership Plan (ESOP) (1,132,958) (1,173,422)
Common stock acquired by Recognition & Retention Plan (RRP) (420,154) (454,221)
Unrealized gain (loss) on securities available for sale, net of income taxes 34,180 (488)
Treasury stock, at cost; 437,314 and 394,378 shares at December 31, 1996 and
at September 30, 1996, respectively (5,589,618) (4,976,986)
------------ -------------
Total stockholders' equity 25,758,246 25,787,198
------------ -------------
Total liabilities and stockholders' equity $259,103,982 $ 266,762,522
============ =============
See accompanying notes to consolidated financial statements
</TABLE>
3
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<TABLE>
<CAPTION>
FINANCIAL BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
-----------------------------------
December 31,
-----------------------------------
1996 1995
------------ -----------
<S> <C> <C>
Interest income:
Loans $2,899,293 $2,338,631
Mortgage-backed securities 955,509 1,070,231
Investments and other interest-earning assets 1,041,882 791,956
Federal funds sold and securities purchased
under agreements to resell 15,789 11,003
------------ -----------
Total interest income 4,912,473 4,211,821
------------ -----------
Interest expense:
Deposits 1,981,214 1,909,176
Borrowings 476,765 161,653
------------ -----------
Total interest expense 2,457,979 2,070,829
------------ -----------
Net interest income 2,454,494 2,140,992
Provision for loan losses 99,600 54,000
------------ -----------
Net interest income after provision for loan losses 2,354,894 2,086,992
------------ -----------
Non-interest income (loss):
Fees and service charges 131,280 88,072
Gain on sale of investment securities 26,353 0
(Loss) from real estate operations (28,053) (22,610)
Miscellaneous 10,629 11,698
------------ -----------
Total non-interest income 140,209 77,160
------------ -----------
Non-interest expenses:
Salaries and employee benefits 742,047 646,505
Net occupancy expense of premises 132,511 112,480
Equipment 150,346 137,650
Advertising 9,587 25,049
Loss from real estate owned 18,384 29,216
Federal insurance premium 81,772 89,145
Miscellaneous 250,043 261,410
------------ -----------
Total non-interest expenses 1,384,690 1,301,455
------------ -----------
Income before income taxes 1,110,413 862,697
Income taxes 516,974 378,939
------------ -----------
Net income $593,439 $483,758
============ ===========
Net income per common share & common stock equivalents $0.35 $0.26
============ ===========
Weighted average number of common shares & common
stock equivalents 1,688,000 1,894,600
============ ===========
See accompanying notes to consolidated financial statements
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Financial Bancorp. Inc.
And Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Unrealized Gain
on Investment
Retained Common Common Securities
Additional Earnings - Stock Stock Available for
Common Paid-in Substantially Acquired Acquired sale Net of Treasury
Stock Capital Restricted By ESOP By RRP Income Taxes Stock Total
-------- ---------- ----------- --------- --------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September
30, 1996 $21,850 $20,151,858 $12,218,607 ($1,173,422)($454,221) ($488) ($4,976,986) $25,787,198
Net Income for the
three months
ended December 31, 1996 - - 593,439 - - - - 593,439
Purchase of 47,000 shares
of treasury stock - - - - - (663,938) ($663,938)
Amortization relating to
allocation of ESOP stock
and earned portion of RRP
stock - 17,965 - 40,464 34,067 - - 92,496
Adjustment to valuation
reserve on securities
available for sale - - - - - 34,668 - $34,668
Stock issued upon exercise
of stock options - (12,941) - - - - 51,306 $38,365
Cash dividends paid on
common stock - - (123,982) - - - - (123,982)
--------- ----------- ----------- ----------- --------- ------------- ------------ ------------
Balance at December 31, 1996 $21,850 $20,156,882 $12,688,064 ($1,132,958) ($420,154) $34,180 ($5,589,618) $25,758,246
========= =========== =========== =========== ========== ============= ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Financial Bancorp, Inc.
And Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
-------------------------------------------
December 31,
-------------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
Cash flow from operating activities:
Net income $593,439 $483,758
Adjustments to reconcile net income to net cash used
by operating activities
(Gain) on sale of investment securities (26,353)
Loss on write-down of investment securities 0 0
(Gain) on sale of real estate owned 0 (1,100)
Net amortization of premiums and accretion
of discounts on investment securities (49,779) 6,537
Net amortization of premiums and accretion
of discounts on mortgage-backed securities 8,559 (5,913)
Accretion of deferred loan fees and discounts (23,136) (20,339)
Amortization of intangibles 4,261 5,705
Depreciation and amortization of premises
and equipment 75,877 74,641
Provision for loan losses 99,600 54,000
Provision for losses on real estate owned 15,482 0
Cost of ESOP and RRP 92,496 88,696
Deferred income taxes 127,426 28,947
Decrease (increase) in accrued interest receivable, net 139,003 (97,115)
Increase in income taxes payable 206,276 170,435
(Increase) decrease in other assets (342,869) 124,809
(Decrease) increase in other liabilities (1,578,772) 148,985
----------------- ------------------
Net cash (used in) provided by operating activities (658,490) 1,062,046
------------------ ------------------
Cash flows from investing activities:
Purchases of investment securities (8,840,000) (15,000,000)
Proceeds of maturities of investment securities 15,000,000 8,430,000
Proceeds from sale of investment securities
available for sale 2,947,031
Purchases of mortgage-backed securities 0 0
Purchases of mortgage loans 0 (5,647,072)
Proceeds from principal repayments on
mortgage-backed securities 2,156,126 3,091,499
Loan originations, net of repayments (5,244,006) (4,783,120)
Additions to premises and equipment (43,837) (920,940)
Purchase of Federal Home Loan Bank of N.Y. stock (14,000) 0
Proceeds from sale of and insurance recoveries
on real estate owned 143,928 81,100
Capitalized expenses on real estate owned 0 (1,476)
Net (increase) in investments in real estate 25,000 0
------------------ ------------------
Net cash provided by (used in) investing activities 6,130,242 (14,750,009)
------------------ ------------------
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
FINANCIAL BANCORP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Three Months Ended
-----------------------------------------
December 31,
-----------------------------------------
1996 1995
----------------- ------------------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits $616,049 $3,068,764
Advances from FHLB of NY 2,800,000 7,825,000
Net change in short-term borrowings from FHLB N.Y. (525,000) 0
Net change in other borrowings (8,920,102) 2,937,500
(Decrease) increase in advance payments by
borrowers for taxes and insurance (191,699) 142,473
Dividends paid (123,982) (91,315)
Reissuance of treasury stock 38,365 0
Purchase of treasury stock (663,938) (133,750)
----------------- ------------------
Net cash (used in) provided by financing activities (6,970,307) 13,748,672
----------------- ------------------
Net (decrease) increase in cash and cash equivalents (1,498,555) 60,709
Cash and cash equivalents - beginning 5,102,223 7,853,316
----------------- ------------------
Cash and cash equivalents - ending $3,603,668 $7,914,025
================= ==================
Supplemental schedule of noncash investing and financing activities:
Loans transferred to real estate owned $0 $47,360
================= ==================
Property transferred to investment in real estate $0 $195,724
================= ==================
Transfer to investment securities available for sale
Investment securities $0 $1,989,839
================= ==================
Unrealized gain on investment securities available for sale $61,906 $15,791
Deferred income taxes (27,238) (6,948)
----------------- ------------------
$34,668 $8,843
================= ==================
Supplemental disclosures of cash flow information:
Cash paid (net of refunds received) during the year for:
Federal, state and city income taxes 156,034 $185,000
================= ==================
Interest on deposits and borrowed funds $2,441,301 $2,049,572
================= ==================
See Accompanying notes to consolidated financial statements.
</TABLE>
7
<PAGE> 8
FINANCIAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Financial Bancorp, Inc. (the "Company"), its wholly owned
subsidiaries, 842 Manhattan Avenue Corp. which manages real property, and
Financial Federal Savings Bank (the "Bank") a federally chartered stock
association, and the Bank's wholly owned subsidiaries, Finfed Development Corp.,
which participates in a joint venture for the development of land and sale of
lots, Finfed Funding Ltd., which serves as a conduit for funding investments in
Finfed Development Corp., and F.S. Agency Inc., which is engaged in the sale of
annuities. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Certain information and footnote disclosures required under generally accepted
accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. Financial Bancorp, Inc. (the "registrant" or
the "Company") believes that the disclosures presented are adequate to assure
that the information presented is not misleading in any material respect. It is
suggested that the following consolidated financial statements be read in
conjunction with the year-end consolidated financial statements and notes
thereto included in the registrant's Annual Report on Form 10-K for the year
ended September 30, 1996.
The results of operations for the three ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the entire fiscal
year.
Certain amounts for the three months ended December 31, 1995 have been
reclassified to conform with the current period's presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board (the "FABS") issued
Statement of Financial Accounting Standards ("SFAS") No. 123 "Accounting for
Stock-Based Compensation," effective for fiscal years beginning after December
15, 1995. The Company has elected to continue to measure compensation cost using
the intrinsic value-based method of accounting prescribed by the Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Pro forma disclosures required for entities that elect to continue
to measure compensation cost using APB Opinion No. 25 must include the effects
of all awards granted in fiscal years that begin after December 15, 1994.
Management will implement the pro forma disclosure required by SFAS No. 123 with
the preparation of the annual financial statement for the fiscal years ending
September 30, 1997.
8
<PAGE> 9
EARNINGS PER SHARE
Net income per common share and common stock equivalents is computed by dividing
net income by the weighted average number of shares of common stock outstanding
adjusted for the unallocated shares held by the ESOP. Stock options ranted are
considered in earnings per share as common stock equivalents, if dilutive, using
the treasury stock method.
INVESTMENT SECURITIES
The following table sets forth certain information regarding the carrying and
estimated fair value of the Company's investment securities at December 31, 1996
and September 30, 1995, respectively.
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1996
----------------------- -------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------ --------- ------------ -----------
(in thousands)
<S> <C> <C> <C> <C>
Investment Securities:
Available for sale
U.S. Treasury securities $0 $0 $2,919 $2,908
Corporate preferred stock 700 702 700 700
Less: Unrealized gain (loss) 2 - (11) -
------------ --------- ------------ -----------
Total investment securities available for sale $702 $702 $3,608 $3,608
============ ========= ============ ===========
Held to maturity
U.S. Treasury securities and other government agencies $45,010 $44,058 $51,122 $49,903
------------ --------- ------------ -----------
Total investment securities held to maturity $45,010 $44,058 $51,122 $49,903
============ ========= ============ ===========
</TABLE>
MORTGAGE-BACKED SECURITIES
The following table sets forth certain information regarding the carrying and
estimated fair value of the Company's mortgage-backed security portfolio at
December 31, 1996 and September 30, 1996, respectively.
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1996
--------------------- --------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- -------- ---------- -------
(in thousands)
<S> <C> <C> <C> <C>
Mortgage-backed securities:
Available for sale
FHLMC certificates $4,943 $5,002 $5,006 $5,016
Add: Unrealized gain 59 - 10 -
---------- -------- ---------- --------
Total mortgage-backed securities available for sale $5,002 $5,002 $5,016 $5,016
========== ======== ========== ========
Held to maturity
GNMA certificates $26,269 $26,595 $27,106 $27,198
FHLMC certificates 17,011 17,103 17,999 17,960
FNMA certificates 2,450 2,446 2,697 2,708
Other pass-through certificates 2,005 2,005 2,035 2,035
---------- --------- ---------- --------
Total mortgage-backed securities held to maturity $47,735 $48,149 $49,837 $49,901
========== ========= ========== ========
</TABLE>
9
<PAGE> 10
LOANS RECEIVABLE, NET
The following table sets forth the composition of the Company's loan portfolio
at December 31, 1996 and September 30, 1996, respectively.
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------------- -----------------
(in thousands)
<S> <C> <C>
Real estate mortgages:
One-to-four family $117,752 $115,500
Equity and second mortgages 2,841 2,780
Multi-family 6,127 5,622
Commercial 17,651 15,301
----------------- -----------------
144,371 139,203
----------------- -----------------
Construction/land 4,594 4,920
----------------- -----------------
Consumer:
Passbook or certificate 163 171
Home improvement 6 7
Student education guaranteed by
the State of New York 210 202
Personal 38 21
----------------- -----------------
417 401
Commercial, including lines of credit 143 168
----------------- -----------------
Total loans 149,525 144,692
----------------- -----------------
Less: Loans in process 2,104 2,509
Allowance for loan losses 1,672 1,573
Deferred loan fees and discounts 267 296
----------------- -----------------
4,043 4,378
----------------- -----------------
Total loans receivable, net $145,482 $140,314
================= =================
</TABLE>
10
<PAGE> 11
ADVANCES FROM FEDERAL HOME LOAN BANK OF NEW YORK ("FHLB")
As a member of the FHLB, the Bank has an available overnight line of credit
subject to the terms and conditions of the lender's overnight advance program in
the amount of $26,398,500 at December 31, 1996. The following table sets forth
the composition of the Bank's FHLB advances as of December 31, 1996 and
September 30, 1996, respectively.
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------------- -----------------
(in thousands)
<S> <C> <C>
FHLB advances:
Fixed rate:
5.133% due February 1997 $1,200 $1,200
5.597% due December 1997 2,000 2,000
5.670% due December 1998 6,000 6,000
----------------- -----------------
Total fixed rate 9,200 9,200
Overnight line of credit:
6.125% due October 1996 - 525
6.875% due January 1997 2,500 -
7.375% due January 1997 300 -
----------------- -----------------
Total overnight line of credit 2,800 525
----------------- -----------------
Total FHLB advances $12,000 $9,725
================= =================
</TABLE>
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase consist of borrowings
collateralized by investment securities. The following table sets forth the
composition of the Company's borrowings collateralized by securities sold under
agrrements to repurchase as of December 31, 1996 and September 30, 1996,
respectively.
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------------- -----------------
(in thousands)
<S> <C> <C>
Securities sold under agreements to repurchase:
5.44% due December 1995 $0 $14,046
5.291% due December 2001, callable December 1997 5,000 -
----------------- -----------------
Total securities sold under agreements to repurchase $5,000 $14,046
================= =================
</TABLE>
11
<PAGE> 12
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Financial Bancorp, Inc. is the holding company for Financial Federal Savings
Bank, which converted to a federally chartered stock savings association on
August 17, 1994 and to a federally chartered stock savings bank on October 20,
1994. The Bank is headquartered in Long Island City, New York and operates four
full service branches in Queens and one in Brooklyn. Deposits of the Bank are
insured up to the applicable limits of the Federal Deposit Insurance Corporation
("FDIC"). The Bank is subject to regulation by the Office of Thrift Supervision
("OTS") and the FDIC. The Company is listed on The Nasdaq Stock Market under the
symbol "FIBC".
The Company's results of operations are generally dependent on the Bank. The
Bank's sources of earnings primarily consist of net interest income, which is
the difference between the income earned on interest earning assets and the
expenses paid on interest bearing liabilities. The results of operations are
also affected, to a lesser extent, by non-interest income, which includes loan
servicing fees and charges, and other miscellaneous income. In addition,
operations are impacted by non-interest expenses such as employee salaries and
benefits, office occupancy, data processing and federal deposit insurance
premiums.
The Bank is primarily engaged in the origination of one-to-four family
residential mortgage loans, multi-family and commercial real estate mortgage
loans, and to a lesser extent residential and commercial construction loans. As
a community-oriented institution, the Bank is generally engaged in attracting
retail deposits from the areas surrounding its branch offices. In addition, the
Bank may borrow funds from the FHLB or through reverse repurchase agreements.
These funds are then generally concentrated in lending activities throughout the
New York City metropolitan area.
FINANCIAL CONDITION
As of December 31, 1996, the Company's total assets were $259.1 million,
representing a $7.7 million, or a 2.9%, decrease from $266.8 million as of
September 30, 1996. The $7.7 million decrease in assets is primarily
attributable to the sale of a $3.0 million U.S. Treasury security, classified as
available for sale, in addition to a $6.1 million decrease in investment
securities and $2.1 million decrease in mortgage-backed securities, which was
partially offset by the $5.2 million increase in loans receivable. During the
same period, securities sold under agreements to repurchase decreased by $9.0
million to $5.0 million at December 31, 1996, from $14.0 million at September
30, 1996. This was partially offset by an increase in deposits of $616,049, or
0.3%, to $203.5 million as of December 31, 1996, from $202.9 million as of
September 30, 1996. In addition, FHLB advances increased by $2.3 million to
$12.0 million, at December 31, 1996, from $9.7 million at September 30, 1996.
12
<PAGE> 13
As of December 31, 1996, investment securities, including available for sale,
consisted primarily of medium-term U.S. Government Agency obligations, with
features such as calls and/or interest rate "step-ups," decreased by $9.0
million, or 16.5%, to $45.7 million from $54.7 million as of September 30, 1996.
As of December 31, 1996, mortgage-backed securities, including available for
sale, decreased by $2.1 million, or 3.9%, to $52.7 million from $54.8 million as
of September 30, 1996. Loans receivable increased by $5.2 million, or 3.7%, to
$145.5 million as of December 31, 1996 from $140.3 million as of September 30,
1996.
Non-performing loans totaled $5.1 million, or 3.43% of total loans at December
31, 1996 as compared to $4.6 million, or 3.15% of total loans at September 30,
1996. Of the $5.1 million in non-performing loans, $528,00 represents an
increase in delinquencies in the one-to-four family mortgage loan portfolio. In
addition, $2.5 million of the non-performing loans consists of the balance of
Thrift Association Service Corporation ("TASCO") pass-through securities. In May
1996, the FDIC stated that they would not continue the scheduled pass-through of
principal and interest payments whether or not collected. At December 31, 1996,
non-performing assets totalled $8.6 million, or 3.33% of total assets, as
compared to $8.2 million, or 3.09% of total assets at September 30, 1996. The
Company's allowance for loan losses to non-performing assets and to total loans
equals 19.37% and 1.12%, respectively, as compared to 19.08% and 1.09%,
respectively, at September 30, 1996.
Total deposits at December 31, 1996, increased by $616,049, or 0.3%, to $203.5
million from $202.9 million at September 30, 1996. In addition, advances from
the FHLB, increased by $2.3 million, or 23.4%, to $12.0 million at December 31,
1996. Securities sold under agreements to repurchase decreased by $9.0 million,
or 64.4%, to $5.0 million at December 31, 1996, as compared to $14.0 million at
September 30, 1996. The decrease in securities sold under agreements to resell
was attributable to the proceeds realized from the maturity of $15.0 million in
investment securities.
Total stockholders' equity was $25.8 million at December 31, 1996, reflecting a
$28,952, or 0.1%, decrease from $25.8 million at September 30, 1996. The
decrease in stockholders' equity was primarily attributable to the repurchase of
the Company's common stock, partially offset by earnings retained. At December
31, 1996, the Company had, exclusive of shares repurchased 1,747,686 common
shares outstanding. As of December 31, 1996, the Company's stated book value per
share of common stock increased by $0.34, or 2.4%, to $14.74, from $14.40 at
September 30, 1996.
ANALYSIS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Net income for the three months ended December 31, 1996, totalled $593,439, or
$0.35 per share as compared to net income of $483,758, or $0.26 per share for
the three months ended December 31, 1995. The $109,681, or 22.7% increase, was
primarily attributable to a $700,652, or 16.6% increase in interest income,
offset in part by a $387,150 increase in interest expense and a $83,235 increase
in non-interest expenses.
13
<PAGE> 14
The return on average assets equalled 0.90% for the quarter ended December 31,
1996, as compared to 0.84% for the same quarter in 1995. For the quarter ended
December 31, 1996, the Company's return on average equity equalled 9.21%, as
compared to 7.07% for the same period in 1995.
The Company's net interest income increased by $313,502, or 14.6%, to $2.5
million for the quarter ended December 31, 1996, from $2.1 million for the
quarter ended December 31, 1995. The increase in net interest income for the
three months ended December 31, 1996 was primarily attributable to the continued
leveraging of the balance sheet, utilizing low cost borrowings and deposit
growth to fund mortgage loan originations.
As a result, for the quarter ended December 31, 1996, average interest earning
assets were $253.5 million, which represents a $32.8 million increase from
$220.7 million for the quarter ended December 31, 1995. For the quarter ended
December 31, 1996, average interest-bearing liabilities were $230.3 million, as
compared to $193.8 million for the quarter ended December 31, 1995, which
represents a $36.5 million increase.
For the current quarter, the net interest rate spread increased 10 basis points
to 3.52% from 3.42% for the corresponding period in 1995. For the quarter ended
December 31, 1996, the average yield on interest-earning assets was 7.75% and
the average cost of interest-bearing liabilities was 4.23%, as compared to 7.63%
and 4.21%, respectively, for the quarter ended December 31, 1995. The increase
in the net interest spread is the result of a 67 basis points increase in the
investment securities portfolio and higher yields realized from the growth in
loans receivable. Despite the $36.5 million increase in interest bearing
liabilities to $230.5 million, the cost of interest bearing liabilities remained
stable at 4.23%. The net interest margin equalled 3.87% for the quarter ended
December 31, 1996, which represents a slight decline from 3.88% realized for the
corresponding period in 1995.
The Company's provision for loan losses for the quarter ended December 31, 1996,
increased by $45,600, to $99,600, from $54,000 for the quarter ended December
31, 1995. The increase in provisions for loan losses reflects the increase in
non-performing loans and management's on-going effort to maintain adequate
allowances.
Non-interest income, for the quarter ended December 31, 1996, increased by
$63,049, or 81.7%, to $140,209, as compared to $77,160 for the quarter ended
December 31, 1995. This increase is primarily attributable to a $43,208 increase
in income realized from additional service fee income and automated teller
machines (ATM's) related service fees and a $26,353 net gain in sale of a $3.0
million U.S. Treasury security classified as available for sale.
Non-interest expenses increased $83,235, or 6.4%, to $1,384,690 for the quarter
ended December 31, 1996, as compared to $1,301,455 for the same period in 1995.
Salaries and employee benefits increased by $95,542, or 14.8%, to $742,047 for
the quarter ended December 31, 1996, from $646,505 for the corresponding period
in 1995. The increase in salaries and employee benefits is primarily
attributable to the reinstatement of the Company's bonus accrual, additional
commissions paid and other benefit related costs for the quarter ended December
31, 1996. For the quarter ended December 31, 1996, occupancy expense increased
by $20,031, or
14
<PAGE> 15
17.8%, to $132,511, from $112,480 for the quarter ended December 31, 1995. The
increase in occupancy expense is primarily attributable to the increase in
rental payments for a branch office and a corresponding decrease in rental
income from a Bank owned property. Equipment expense increased by $12,696, or
9.2%, to $150,346 for the quarter ended December 31, 1996, from $137,650 for the
same period in 1995. The increase in equipment expense represents costs
associated with the Company's demand deposit and check processing servicing fees
and other vendor related services and contracts. Advertising expense decreased
by $15,462, or 61.7%, to $9,587 for the quarter ended December 31, 1996, from
$25,049 for the corresponding period in 1995. Presently, the Company is limiting
its advertising campaigns in an effort to bolster earnings. Although
non-interest expenses have increased, the ratio of operating expenses to average
assets decreased 13 basis points to 2.07% for the quarter ended December 31,
1996, as compared to 2.20% for the same period last year. The Company has been
successful in controlling operating expenses, as evidenced by the efficiency
ratio 52.6% for the quarter ended December 31, 1996, as compared to 56.8% for
the same period in 1995.
For the quarter ended December 31, 1996, income tax expense increased by
$138,035, to $593,439, as compared to $378,939, for the same quarter in 1995, as
a result of a $247,716 increase in income before taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required to maintain an average daily balance of liquid assets (as
defined in the regulations) equal to a monthly average of not less than the
specified percentage of its net withdrawable deposit accounts plus short-term
borrowings. This liquidity requirement is currently 5%. OTS regulations also
require each member savings institution to maintain an average daily balance of
short-term liquid assets at a specified percentage (currently 1%) of the total
of its net withdrawable deposit accounts and borrowings payable in one year or
less. Monetary penalties may be imposed for failure to meet these liquidity
requirements. The liquidity of the Bank at December 31, 1996 was 6.6%, which
exceeded the then applicable 5% liquidity requirement. It's short-term liquidity
ratio at December 31, 1996, was 2.5%.
The primary investment activities of the Bank are the origination of mortgage
loans and the purchase of investment securities and mortgage-backed securities.
The Company's primary sources of funds are the Bank's deposit accounts, proceeds
from principal and interest payments on loans and investments, and to a lesser
extent, advances and overnight borrowings from the FHLB, as well as reverse
repurchase agreements. While maturities and scheduled amortization of loans,
mortgage-backed securities and investment securities are predictable sources of
funds, deposit flows, mortgage prepayments and callable investment securities
are greatly influenced by market interest rates, general economic conditions and
competition within the financial industry.
At December 31, 1996, the Bank had outstanding loan commitments to originate
mortgage loans and purchase mortgage-backed securities of $3.7 million and $5.0
million, respectively. Management anticipates that it will have sufficient funds
available and borrowing capability to meet its current loan originations and
loan purchase commitments. Certificates of deposit, which are scheduled to
mature in one-year or less from December 31, 1996 totalled $69.2 million, of
15
<PAGE> 16
which $16.5 million represent "Silver Certificate of Deposit" accounts, which
allow one withdrawal of principal per quarter without an early withdrawal
penalty for direct deposit customers 62 years of age or older.
Although the OTS capital regulations require savings institutions to meet a 1.5%
tangible capital ratio and a 3.0% leverage (core) capital ratio, the prompt
corrective action standards also establish, in effect, a minimum 2.0% tangible
capital standard, a 4.0% leverage (core) capital ratio (3.0% for institutions
receiving the highest rating on the CAMEL financial institution rating system).
The Bank's tangible capital and core capital totalled $18.9 million, or 7.5% at
December 31, 1996, far in excess of the regulatory requirements. The Bank's
risk-based capital ratio as of December 31, 1996 was $20.1 million, or 18.8%,
also well in excess of the regulatory capital requirement of 8.0%.
16
<PAGE> 17
FINANCIAL BANCORP, INC.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not presently engaged in any legal proceeding of a
material nature.
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
On September 27, 1996, the Company announced that it received regulatory
approval from the Office of Thrift Supervision to commence its fifth
repurchase program. The Company is authorized to purchase up to 89,531
or 5% of its common stock outstanding through open-market transactions,
subject to the availability of stock, prior to August 17, 1997. During
the quarter ended December 31, 1996, the company repurchased 47,000
shares at an average price of $14.13.
On January 15, 1997, the Holding Company declared its quarterly cash
dividend for the period ended December 31, 1996, of $0.10 per share,
which represents an increase of $0.025, payable on February 18, 1997 to
stockholders of record on February 4, 1997.
Item 6. (A) Exhibits
Exhibit 3.1 Certificate of Incorportion of Financial Bancorp, Inc.*
Exhibit 3.2 Bylaws of Financial Bancorp, Inc.*
Exhibit 11 Earnings Per Share
Exhibit 27 Financial Data Schedule
(B) Reports on Form 8-K
None
*Incorporated herein by reference to Form S-1, Registration Statement, as
amended, filed on March 18, 1994, Registration Number 33-76664
17
<PAGE> 18
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.
Financial Bancorp, Inc.
(Registrant)
Date: February 14, 1997 By: /s/ Frank S. Lataweic
----------------------
Frank S. Latawiec
President and Chief
Executive Officer
Date: February 14, 1997 By: /s/ P. James O'Gorman
--------------------------
P. James O'Gorman
Senior Vice President and
Chief Financial Officer
19
<PAGE> 1
<TABLE>
<CAPTION>
Item 6.
- -------
Exhibit 11
----------
THREE MONTHS THREE MONTHS
ENDED ENDED
COMPUTATION OF PER SHARE EARNINGS DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ----------------------
<S> <C> <C>
Net income $593,439 $483,758
======== ========
Weighted average common shares outstanding 1,652,400 1,834,900
Common stock equivalents due to dilutive effect of stock options 35,600 59,700
------ ------
Total weighted average common shares and equivalents outstanding 1,688,000 1,894,600
========= =========
Earnings per common share and common share equivalent $0.35 $0.26
===== =====
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000855932
<NAME> FINANCIAL BANCORP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,603,668
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 701,750
<INVESTMENTS-CARRYING> 45,010,382
<INVESTMENTS-MARKET> 44,058,000
<LOANS> 145,481,700
<ALLOWANCE> 1,320,000
<TOTAL-ASSETS> 259,103,482
<DEPOSITS> 203,499,815
<SHORT-TERM> 27,006,668
<LIABILITIES-OTHER> 1,967,716
<LONG-TERM> 0
0
0
<COMMON> 21,850
<OTHER-SE> 25,736,396
<TOTAL-LIABILITIES-AND-EQUITY> 259,103,982
<INTEREST-LOAN> 2,899,293
<INTEREST-INVEST> 1,997,391
<INTEREST-OTHER> 15,789
<INTEREST-TOTAL> 4,912,473
<INTEREST-DEPOSIT> 1,981,214
<INTEREST-EXPENSE> 476,765
<INTEREST-INCOME-NET> 2,454,494
<LOAN-LOSSES> 99,600
<SECURITIES-GAINS> 26,353
<EXPENSE-OTHER> 1,384,690
<INCOME-PRETAX> 1,110,413
<INCOME-PRE-EXTRAORDINARY> 593,439
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 593,439
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
<YIELD-ACTUAL> 7.63
<LOANS-NON> 4,951,000
<LOANS-PAST> 180,000
<LOANS-TROUBLED> 922,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,573,000
<CHARGE-OFFS> 2,000
<RECOVERIES> 1,000
<ALLOWANCE-CLOSE> 1,672,000
<ALLOWANCE-DOMESTIC> 1,672,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,165,000
</TABLE>
