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 March 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 0-18764
PULSE BANCORP, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-3016360
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6 JACKSON ST., SOUTH RIVER, N.J. 08882
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 908-257-2400
N/A
Former name, former address and former fiscal year, if changed since last report
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities 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 [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date May 1, 1996
CLASS OUTSTANDING
$1.00 par value common stock 3,886,458 Shares
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Index
Page Number
PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial Condition at September 30,
1995 and March 31, 1996 (unaudited) 1
Consolidated Statements of Income for the Three and Six Months
Ended March 31, 1995 and 1996 (unaudited) 2
Consolidate Statements of Cash Flows for the Six Months Ended
March 31, 1995 and 1996 (unaudited) 3
Notes to Consolidated Financial Statements 4-6
Managements Discussion and Analysis of Financial Condition and
Results of Operations 7-11
PART II - OTHER INFORMATION 12
SIGNATURES 13
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
(Unaudited)
ASSETS
<S> <C> <C>
Cash and amounts due from depository institutions.................$ 4,836,510 $ 4,946,623
Federal funds sold................................................ 3,925,000 5,050,000
------------ ------------
Total cash and cash equivalents............................... 8,761,510 9,996,623
Investment securities held to maturity; estimated fair value of
$112,886,000 and $79,120,000, respectively...................... 114,380,553 80,571,655
Mortgage backed securities held to maturity, net; estimated fair
value of $174,629,000 and $160,221,000, respectively............ 174,969,291 160,836,688
Securities available for sale at market........................... - 57,083,059
Loans receivable, net............................................. 134,276,842 131,205,068
Premises & equipment, net......................................... 1,207,162 1,204,448
Real estate owned, net............................................ 2,627,864 2,373,564
Federal Home Loan Bank of New York stock, at cost................. 2,540,200 2,543,100
Interest receivable............................................... 4,071,079 3,534,097
Other assets...................................................... 2,944,797 3,106,894
------------ ------------
Total assets.................................................$445,779,298 $452,455,196
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Deposits..........................................................$391,037,843 $396,244,329
Advance payments by borrowers for taxes & insurance............... 458,356 590,494
Other liabilities................................................. 2,009,508 1,843,832
------------ ------------
Total liabilities............................................ 393,505,707 398,678,655
------------ ------------
Stockholders' Equity:
Preferred stock; authorized 5,000,000 shares; issued and
outstanding - none............................................. - -
Common stock; par value $1.00; authorized 10,000,000 shares;
4,077,828 shares issued and 3,852,828 outstanding and
4,111,458 shares issued and 3,886,458 outstanding,
respectively................................................... 4,077,828 4,111,458
Paid in capital in excess of par value............................ 11,819,769 12,099,541
Retained earnings- substantially restricted....................... 38,078,494 39,391,033
Unrealized (loss) on securities available for sale, net of tax.... - (122,991)
Treasury Stock; at cost; 225,000 common shares.................... (1,702,500) (1,702,500)
------------ ------------
Total stockholders' equity................................... 52,273,591 53,776,541
------------ ------------
Total liabilities and stockholders' equity...................$445,779,298 $452,455,196
============ ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31,
1995 1996 1995 1996
Interest income:
<S> <C> <C> <C> <C>
Loans ......................................................... $3,107,182 $3,007,228 $ 6,280,059 $ 6,024,176
Mortgage-backed securities..................................... 2,722,432 2,962,497 5,403,148 5,797,071
Investments and other interest-earning assets.................. 1,773,234 1,887,293 3,344,157 3,880,289
--------- --------- ---------- ----------
Total interest income....................................... 7,602,848 7,857,018 15,027,364 15,701,536
--------- --------- ---------- ----------
Interest expense:
Deposits....................................................... 4,286,806 4,451,551 8,171,922 8,974,080
--------- --------- ---------- ----------
Total interest expense...................................... 4,286,806 4,451,551 8,171,922 8,974,080
--------- --------- ---------- ----------
Net interest income............................................... 3,316,042 3,405,467 6,855,442 6,727,456
Provision for loan losses......................................... 0 0 0 0
--------- --------- ---------- ----------
Net interest income after provision for loan losses............... 3,316,042 3,405,467 6,855,442 6,727,456
--------- --------- ---------- ----------
Non-interest income:
Other fees and service charges on loans........................ 60,126 59,097 120,680 116,173
Income (expense) from real estate operations................... 30,664 8,404 (8,868) 3,300
Miscellaneous.................................................. 17,024 15,204 30,200 51,914
--------- --------- ---------- ----------
Total non-interest income................................... 107,814 82,705 142,012 171,387
--------- --------- ---------- ----------
Non-interest expenses:
Salaries and employee benefits................................. 621,343 590,215 1,219,350 1,185,233
Occupancy expense.............................................. 55,356 82,419 114,888 153,385
Equipment expense.............................................. 153,027 145,045 269,284 276,438
Advertising.................................................... 78,218 72,624 134,502 132,981
Federal deposit insurance premium.............................. 224,980 222,655 451,521 449,007
Miscellaneous.................................................. 440,353 275,033 714,713 526,501
--------- --------- ---------- ----------
Total non-interest expenses................................. 1,573,277 1,387,991 2,904,258 2,723,545
--------- --------- ---------- ----------
Income before income taxes........................................ 1,850,579 2,100,181 4,093,196 4,175,298
Income taxes...................................................... 639,247 755,000 1,439,384 1,506,634
--------- --------- ---------- ----------
Net income.................................................. $1,211,332 $1,345,181 $ 2,653,812 $ 2,668,664
========== ========== ========== ==========
Net income per common share and common stock equivalents.......... $0.31 $0.34 $0.68 $0.67
===== ===== ===== =====
Dividends per common share........................................ $0.15 $0.175 $0.30 $0.30
===== ====== ===== =====
Weighted average number of common shares and common
stock equivalents outstanding.................................. 3,936,659 3,955,549 3,915,166 3,954,565
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1995 1996
Cash flows from operating activities:
<S> <C> <C>
Net income................................................................... $ 2,653,812 $ 2,668,664
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of premises and equipment..................................... 78,506 68,710
Provision for loan losses.................................................. - -
Provision for losses on real estate owned.................................. 29,700 76,000
Amortization of premiums, discounts and fees, net.......................... (79,042) (119,342)
Gain on sale of real estate owned.......................................... (32,539) (62,462)
(Increase) decrease in interest receivable................................. (155,475) 536,982
Decrease (increase) in other assets........................................ 4,132,164 (162,097)
Decrease in other liabilities.............................................. (213,060) (165,676)
---------- ----------
Net cash provided by operating activities................................ 6,414,066 2,840,779
---------- ----------
Cash flows from investing activities:
Proceeds from maturities and calls of investment securities held to maturity 1,000,000 53,000,000
Purchase of investment securities held to maturity......................... (10,000,000) (48,979,670)
Proceeds from principal repayments of investment securities held for sale.. - 1,686,777
Mortgage-backed securities purchased....................................... (5,095,219) (25,507,350)
Mortgage-backed securities repayments...................................... 7,442,519 10,669,731
Proceeds from sales of student loans....................................... 90,093 4,454
Net decrease in loans receivable........................................... 6,088,976 2,424,625
Additions to premises and equipment........................................ (17,467) (65,996)
Proceeds from sale of real estate owned.................................... 1,220,294 868,762
Redemption (purchase) of Federal Home Loan Bank of New York Stock.......... 170,100 (2,900)
---------- ----------
Net cash provided by (used in) investing activities...................... 899,296 (5,901,567)
---------- ----------
Cash flows from financing activities:
Net increase in deposits................................................... 1,588,924 5,206,486
(Decrease) increase in advance payments by borrowers
for taxes and insurance.................................................. (131,514) 132,138
Issuance of common stock................................................... 410,275 313,402
Cash dividends paid........................................................ (1,154,978) (1,356,125)
---------- ----------
Net cash provided by financing activities................................ 712,707 4,295,901
---------- ----------
Net increase in cash and cash equivalents...................................... 8,026,069 1,235,113
Cash and cash equivalents - beginning ......................................... 16,125,664 8,761,510
---------- ----------
Cash and cash equivalents - ending............................................. $24,151,733 $ 9,996,623
=========== ===========
Supplemental schedule of non-cash investing activities:
Transfer of loans held for sale to loans receivable...................... $3,586,035 -
=========== ==========
Transfer of loans receivable to real estate owned........................ $24,561 $628,000
=========== ==========
Transfer of mortgage-backed securities and investments held to...........
maturity to available for sale......................................... - $58,764,618
=========== ==========
Cash paid during the period for:
Income taxes............................................................. $75,000 $1,255,000
=========== ==========
Interest................................................................. $8,171,922 $8,987,738
=========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Pulse Bancorp,
Inc. (the "Corporation") and its wholly owned subsidiary, Pulse Savings Bank
(the "Bank"). The Corporation's business is conducted principally through the
Bank. All significant intercompany accounts and transactions have been
eliminated in consolidation.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include
information or footnotes necessary for a complete presentation of consolidated
financial condition, results of operations, and cash flows in conformity with
generally accepted accounting principles. However, all adjustments, consisting
only of normal recurring adjustments, which, in the opinion of management, are
necessary for fair presentation of the consolidated financial statements, have
been included. The results of operations for the six months ended March 31, 1996
are not necessarily indicative of the results which may be expected for the
entire fiscal year.
3. LOANS RECEIVABLE, NET
<TABLE>
<CAPTION>
September 30, March 31,
1995 1996
Real Estate Mortgage:
<S> <C> <C>
One-to-four family.............................................$ 58,203,379 $ 61,905,534
Multi family................................................... 32,922,376 31,031,596
Commercial..................................................... 35,466,355 29,628,586
----------- -----------
126,592,110 122,565,716
----------- -----------
Construction Loans................................................ 93,334 186,668
Consumer:
Home equity.................................................... 10,397,056 11,159,952
Passbook or certificate........................................ 287,604 252,573
Student education guaranteed by
the State of New Jersey...................................... 6,864 501
----------- -----------
10,691,524 11,413,026
----------- -----------
Total loans............................................... 137,376,968 134,165,410
----------- -----------
Less: Allowance for loan losses................................... 2,603,852 2,518,700
Deferred loan fees and discounts......................... 496,274 441,642
----------- -----------
3,100,126 2,960,342
----------- -----------
$134,276,842 $131,205,068
============ ============
</TABLE>
<TABLE>
<CAPTION>
An analysis of the allowance for loan losses is as follows: Six Months Ended
March 31,
1995 1996
<S> <C> <C>
Balance-beginning................................ $3,368,816 $2,603,852
Provisions charged to operations................. - -
Losses charged to allowance...................... (104,288) (85,152)
---------- ----------
Balance-ending................................... $3,264,528 $2,518,700
========== ==========
</TABLE>
4
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
4. INVESTMENT SECURITIES HELD TO MATURITY, NET
<TABLE>
<CAPTION>
September 30, 1995
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government (including agencies) $113,780,605 $216,315 $1,725,540 $112,271,380
Obligations of state and political
subdivisions 599,948 17,484 3,040 614,392
------------ -------- ---------- ------------
$114,380,553 $233,799 $1,728,580 $112,885,772
============ ======== ========== ============
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government (including agencies) $79,971,696 $112,940 $1,590,008 $78,494,628
Obligations of state and political
subdivisions 599,959 24,945 624,904
----------- -------- ---------- -----------
$80,571,655 $137,885 $1,590,008 $79,119,532
=========== ======== ========== ===========
</TABLE>
5. INVESTMENT SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
March 31, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Government National Mortgage Association ARM's $27,468,238 $567,365 $28,035,603
U.S. Government Agency Debentures 29,804,037 756,581 29,047,456
----------- -------- -------- -----------
$57,272,275 $567,365 $756,581 $57,083,059
=========== ======== ======== ===========
</TABLE>
5
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
6. MORTGAGE-BACKED SECURITIES HELD TO MATURITY, NET
<TABLE>
<CAPTION>
September 30, 1995
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
<S> <C> <C> <C> <C>
Government National Mortgage Association $ 92,090,521 $1,311,106 $ 60,891 $ 93,340,736
Federal Home Loan Mortgage Corporation 31,374,816 301,287 275,237 31,400,866
Federal National Mortgage Association 13,559,930 172,909 $249,221 13,483,618
Collateralized mortgage obligations 37,944,024 52,535 $1,592,850 36,403,709
------------ ---------- ---------- ------------
$174,969,291 $1,837,837 $2,178,199 $174,628,929
============ ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
<S> <C> <C> <C> <C>
Government National Mortgage Association $ 72,368,895 $ 828,788 $ 199,638 $ 72,998,045
Federal Home Loan Mortgage Corporation 28,272,653 266,796 254,622 28,284,827
Federal National Mortgage Association 22,875,091 166,083 349,687 22,691,487
Collateralized mortgage obligations 37,320,049 24,541 1,098,017 36,246,573
------------ ---------- ---------- ------------
$160,836,688 $1,286,208 $1,901,964 $160,220,932
============ ========== ========== ============
</TABLE>
7. NET INCOME PER COMMON SHARE
Net income per common share has been calculated based on the weighted average
number of shares outstanding plus the shares that would be outstanding assuming
the exercise of dilutive stock options, all of which are considered to be common
stock equivalents. The number of shares that would be issued from the exercise
of stock options has been reduced by the number of shares that could have been
purchased from the proceeds at the average price of the Corporation's common
stock.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Corporation's assets at March 31, 1996 totaled $452.5 million, which
represents an increase of $6.7 million or 1.50% when compared with $445.8
million at September 30, 1995. Total deposits at March 31, 1996 increased $5.2
million or 1.33% to $396.2 million when compared with $391.0 million at
September 30, 1995. Investment securities held to maturity decreased $33.8
million or 29.56% to $80.6 million at March 31, 1996 when compared with $114.4
million at September 30, 1995. The decrease in investment securities held to
maturity was primarily due to the transfer of $29.8 million to investments
available for sale in December 1995, pursuant to the special report on FASB 115,
along with calls of investment securities of $53.0 million, which more than made
up for the purchase of $49.0 million of government agency securities.
Mortgage-backed securities held to maturity decreased by $14.2 million or 8.08%
to $160.8 million at March 31, 1996 when compared to $175.0 million at September
30, 1995. The decrease was primarily due to the transfer of $29.0 million of
mortgage-backed securities to available for sale, pursuant to the special report
on FASB 115, along with principal repayments of $10.7 million, which more than
offset the purchase of $25.5 million of mortgage-backed securities. Loans
receivable decreased $3.1 million or 2.29% to $131.2 million at March 31, 1996
when compared to $134.3 million at September 30, 1995. The decrease was a result
of loan principal repayments of $14.8 million and the transfer of $0.6 million
of loans to real estate owned, which more than offset loan originations totaling
$11.2 million.
Other assets increased by $162,000 or 5.50% during the six months ended March
31, 1996. Real estate owned, which consists of real estate acquired in
settlement of loans, totaled $2.4 million and $2.6 million at March 31, 1996 and
September 30, 1995, respectively. During the six months ended March 31, 1996,
proceeds from sales of real estate owned totaled $0.9 million, resulting in
gains on such sales of $62,000, which more than offset the transfer of $0.6
million of mortgage loans to real estate owned. Stockholders' equity amounted to
$53.8 million and $52.3 million at March 31, 1996 and September 30, 1995,
respectively.
Results of operations for three months ended March 31, 1996 and 1995
Net income increased to $1.3 million for the three months ended March 31, 1996
when compared with $1.2 million for the same 1995 period, an increase of $0.1
million. The increase in the net income during the 1996 period resulted
primarily from an increase in interest income along with a decrease in
non-interest expense, which more than offset an increase in interest expense and
a decrease in non-interest income. Interest income on loans during the three
months ended March 31, 1996 decreased $100,000 or 3.22% to $3.0 million when
compared to $3.1 million during the same 1995 period. The decrease during the
1996 period resulted from a decrease in the average balance of loans
outstanding, along with a decrease in the average yield on the loan portfolio.
Interest on mortgage-backed securities increased by $240,000 or 8.82% during the
three months ended March 31, 1996 when compared with the same 1995 period as a
result of an increase in the average yield earned on the portfolio. Interest
earned on investments and other interest-earning assets increased $114,000 or
6.43% to $1.9 million during the three months ended March 31, 1996 when compared
to $1.8 million during the same 1995 period. The increase during the 1996 period
resulted primarily from an increase in the average balance of investments and
other interest-earning
7
<PAGE>
assets outstanding, along with an increase in the yield earned on investments
and other interest-earning assets.
Interest on deposits increased by $165,000 or 3.84% to $4.5 million during the
three months ended March 31, 1996 when compared to $4.3 million during the same
1995 period. The increase during the 1996 period was primarily attributable to
an increase in the Bank's cost of deposits along with an increase in the average
balance of deposits outstanding. The increase in the Bank's cost of deposits
reflected an increase in general market interest rates paid on deposits.
During the three months ended March 31, 1996 and 1995 the Bank did not make any
provisions for loan losses. Although no provisions were made because management
believes the levels of reserves were adequate, no assurances can be made that
future increases to the reserve will not be necessary. The allowance for loan
losses is based on management's evaluation of the risk inherent in its loan
portfolio and gives due consideration to the changes in general market
conditions and in the nature and volume of loan activity. At March 31, 1996 and
September 30, 1995, the Bank's non-performing loans, which includes loans
delinquent 90 days or more, totaled $2.0 million and $3.3 million, respectively.
Furthermore, the level of loan delinquencies less than 90 days declined to $3.7
million at March 31, 1996 compared to $4.1 million at September 30, 1995. The
allowance for loan losses amounted to $2.5 million or 1.91% of total loans at
March 31, 1996 and $2.6 million or 1.93% of total loans at September 30, 1995.
Non-interest income decreased $25,000 to $83,000 during the three months ended
March 31, 1996 when compared with $108,000 during the same 1995 period. The
decrease during the 1996 period resulted primarily from a decrease in income
from real estate operations of $22,000.
The Financial Accounting Standards Board issued a Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan"
and Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosure" which
apply to financial statements for fiscal years beginning after December 15,
1994. These Statements require that impaired loans be measured based on the
present value of expected future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable market
price or at the fair value of the collateral if the loan is collateral
dependent. The Bank has reviewed its impaired loans and has determined that
there is no material impact expected on the financial position or operations as
a result of adopting these Statements, prospectively, during fiscal 1996.
Non-interest expenses decreased $185,000 or 11.77% to $1.39 million during the
three months ended March 31, 1996 when compared with $1.57 million during the
same 1995 period. During the three months ended March 31, 1996, salaries and
employee benefits, equipment, advertising, FDIC insurance premium, and
miscellaneous expenses decreased by $31,000, $8,000, $6,000, $2,000 and
$165,000, respectively, and occupancy expense increased by $27,000. The decrease
in miscellaneous expense was primarily due to a one time charge of $152,000 the
Bank took to write down its receivable regarding the fraudulent bridge loans
during the 1995 period..
Income tax expense totaled $755,000 and $639,000 during the three months ended
March 31, 1996 and 1995, respectively. The increase during the 1996 period
resulted primarily from an increase in income before income taxes.
8
<PAGE>
Results of operations for six months ended March 31, 1996 and 1995
Net income was unchanged at $2.7 million for the six months ended March 31, 1996
when compared with $2.7 million for the same 1995 period. Interest income on
loans during the six months ended March 31, 1996 decreased $256,000 or 4.07% to
$6.0 million when compared to $6.3 million during the same 1995 period. The
decrease during the 1996 period resulted from a decrease in the average balance
of loans outstanding, along with a decrease in the average yield on the loan
portfolio. Interest on mortgage-backed securities increased by $394,000 or 7.29%
during the six months ended March 31, 1996 when compared with the same 1995
period as a result of an increase in the average yield earned on the portfolio.
Interest earned on investments and other interest-earning assets increased
$536,000 or 16.03% to $3.9 million during the six months ended March 31, 1996
when compared to $3.3 million during the same 1995 period. The increase during
the 1996 period resulted primarily from an increase in the average balance of
investments and other interest-earning assets outstanding, along with an
increase in the yield earned on investments and other interest-earning assets.
Interest on deposits increased by $802,000 or 9.82% to $9.0 million during the
six months ended March 31, 1996 when compared to $8.2 million during the same
1995 period. The increase during the 1996 period was primarily attributable to
an increase in the Bank's cost of deposits along with an increase in the average
balance of deposits outstanding. The increase in the Bank's cost of deposits
reflected an increase in general market interest rates paid on deposits.
During the six months ended March 31, 1996 and 1995 the Bank did not make any
provisions for loan losses. Although no provisions were made because management
believes the levels of reserves were adequate, no assurances can be made that
future increases to the reserve will not be necessary. The allowance for loan
losses is based on management's evaluation of the risk inherent in its loan
portfolio and gives due consideration to the changes in general market
conditions and in the nature and volume of loan activity. At March 31, 1996 and
September 30, 1995, the Bank's non-performing loans totaled $2.0 million and
$3.3 million, respectively. The allowance for loan losses amounted to $2.5
million or 1.91% of total loans at March 31, 1996 and $2.6 million or 1.93% of
total loans at September 30, 1995.
Non-interest income increased $29,000 to $171,000 during the six months ended
March 31, 1996 when compared with $142,000 during the same 1995 period. The
increase during the 1996 period resulted primarily from an increase in
miscellaneous income and income from real estate operations of $22,000 and
$12,000, respectively, which more than offset a decrease in other fees and
service charges on loans of $5,000.
Non-interest expenses decreased $181,000 or 6.22% to $2.7 million during the six
months ended March 31, 1996 when compared with $2.9 million during the same 1995
period. During the six months ended March 31, 1996, salaries and employee
benefits, advertising, FDIC insurance premium, and miscellaneous expenses
decreased by $34,000, $2,000, $3,000 and $188,000, respectively, and occupancy
expense and equipment expense increased by $38,000 and $7,000, respectively. The
decrease in miscellaneous expense was primarily due to a one time charge of
$152,000 the Bank took to write down its receivable regarding the fraudulent
bridge loans during the 1995 period..
9
<PAGE>
Income tax expense totaled $1.5 million and $1.4 million during the six months
ended March 31, 1996 and 1995, respectively. The increase during the 1996 period
resulted primarily from an increase in income before income taxes.
Liquidity and Capital Resources
Liquidity is a measurement of the Bank's ability to generate sufficient
cash flow, in order to meet all current and future financial obligations and
commitments as they arise. The Bank adjusts its liquidity levels in order to
meet funding needs for deposit outflows, payment of real estate taxes from
escrow accounts on mortgage loans, repayments of borrowings, when applicable,
and loan funding commitments. The Bank also adjusts its liquidity level as
appropriate to meet its asset/liability objectives. The Bank's primary sources
of funds are deposits, amortization and prepayments of loan and mortgage- backed
securities principal, maturities of investment securities, and funds provided by
operations. While scheduled loan amortization and maturing investment securities
are a relatively predictable source of funds, deposit flow and loan and
mortgage-backed securities prepayments are greatly influenced by market interest
rates, economic conditions and competition. The Bank manages the pricing of its
deposits to maintain a steady deposit balance. In addition, the Bank invests its
excess funds in federal funds and overnight deposits with the FHLB-NY which
provides liquidity to meet lending requirements. Federal funds sold at March 31,
1996 and September 30, 1995 totaled $5.1 million and $4.0 million, respectively.
The Bank's liquidity, represented by cash and cash equivalents, is a product of
its operating, investing and financing activities. These activities are
summarized as follows:
Six months ended March 31,
1995 1996
(In Thousands)
Cash and cash equivalents- beginning $16,126 $8,762
-----------------------
Operating activities:
Net income 2,654 2,669
Adjustments to reconcile net
income to net cash provided
by operating activities 3,760 172
-----------------------
Net cash provided by operating activities 6,414 2,841
Net cash provided by (used in)
investing activities 899 (5,902)
Net cash provided by
financing activities 713 4,296
-----------------------
Net increase in cash and
cash equivalents 8,026 1,235
-----------------------
Cash and cash equivalents- ending $24,152 $9,997
========================
10
<PAGE>
Cash was generated by operating activities in each of the above periods. The
primary source of cash from operating activities during each of the periods was
net income. The primary sources and uses of investing activity of the Bank are
proceeds from net maturities and repayments and the purchase of investment and
mortgage-backed securities and net loan activity. Net loans decreased $2.4
million during the six months ended March 31, 1996 compared to a decrease of
$6.1 million during the same 1995 period. During the six months ended March 31,
1996 and 1995, purchases of mortgage-backed securities held to maturity totaled
$25.5 million and $5.1 million, respectively, and principal repayments totaled
$10.7 million and $7.4 million, respectively. During the six months ended March
31, 1996 and 1995, purchases of investment securities held to maturity totaled
$49.0 miilion and $10.0 million, resepctively, and maturities and calls totaled
$53.0 million and $1.0 million, respectively. In addition to funding new loan
production and the purchase of investment and mortgage-backed securities through
operations and financing activities, new loan production and purchases of
investment and mortgage-backed securities were also funded by principal
repayments on existing loans and mortgage-backed securities.
The primary source of financing activities during the 1996 and1995 periods were
from an increase in deposits outstanding amounting to $1.6 and $5.2 million,
respectively. During the six months ended March 31, 1996 and 1995, cash
dividends of $1.4 and $1.2 million, respectively, were paid on the Corporation's
common stock.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments,
such as federal funds and interest-bearing deposits. If the Bank requires funds
beyond its ability to generate them internally, borrowing agreements exist with
the FHLB-NY, which provides an additional source of funds.
The Bank anticipates that it will have sufficient funds available to meet its
current commitments to originate loans and to purchase mortgage-backed and
investment securities. At March 31, 1996, such outstanding commitments amounted
to $8.3 million. Certificates of deposit scheduled to mature in one year or
less, at March 31, 1996, totaled $199.7 million. Management believes that a
significant portion of such deposits will remain with the Bank.
The Bank is subject to regulatory capital requirements mandated by the Federal
Deposit Insurance Corporation ("FDIC"). The Bank is required to maintain minimum
regulatory capital ratios, defined by the FDIC as risk-based ratio capital (Tier
1 and Total) and leverage ratio capital. The following table presents the
minimum capital requirement ratios and the actual ratios as of March 31, 1996:
Requirement Actual Excess
Risk-based Capital
Tier 1 4.00% 34.84% 30.84%
Total 8.00% 36.09% 28.09%
Leverage ratio 3.00% 11.27% 8.27%
11
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Part II
ITEM 1. Legal Proceedings
The Corporation and the Bank continue to pursue legal actions against
various named parties in an attempt to recoup and recover losses resulting from
the fraudulent bridge loans previously disclosed in the Form 10-Q for the
quarter ended December 31, 1995.
In April 1996 the Corporation reached an agreement with the former
spouse of Mr. Domenichetti and has agreed to release her as a defendant in the
continuing proceedings. The former spouse has also agreed to drop her suit
against the directors, officers, and former directors and officers of the Bank.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Information concerning a January 25, 1996 meeting was disclosed in the
Form 10-Q for the quarter ended December 31, 1995.
ITEM 5. Other Materially Important Events
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
Not applicable
12
<PAGE>
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.
PULSE BANCORP, INC
Date: 5/1/96 By:/s/George T. Hornyak, Jr.
George T. Hornyak, Jr.
President
Chief Executive Officer
(Duly Authorized Officer)
Date:5/1/96 By: /s/Thomas B. Konopacki
Thomas B. Konopacki
Executive Vice President
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1996
<PERIOD-START> OCT-01-1994 OCT-01-1995
<PERIOD-END> SEP-30-1995 MAR-31-1996
<CASH> 4,836,510 4,946,623
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 3,925,000 5,050,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 57,083,059
<INVESTMENTS-CARRYING> 289,349,844 241,408,343
<INVESTMENTS-MARKET> 287,515,000 239,340,000
<LOANS> 136,880,694 133,723,768
<ALLOWANCE> 2,603,852 2,518,700
<TOTAL-ASSETS> 445,779,298 452,455,196
<DEPOSITS> 391,037,843 396,244,329
<SHORT-TERM> 768,731 729,460
<LIABILITIES-OTHER> 1,699,133 1,704,866
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 4,077,828 4,111,458
<OTHER-SE> 48,195,763 49,665,083
<TOTAL-LIABILITIES-AND-EQUITY> 445,779,298 452,455,196
<INTEREST-LOAN> 12,403,877 6,024,176
<INTEREST-INVEST> 18,335,138 9,677,360
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 30,739,015 15,701,536
<INTEREST-DEPOSIT> 17,229,807 8,974,080
<INTEREST-EXPENSE> 17,229,807 8,974,080
<INTEREST-INCOME-NET> 13,509,208 6,727,456
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 5,643,390 2,723,545
<INCOME-PRETAX> 8,159,983 4,175,298
<INCOME-PRE-EXTRAORDINARY> 8,159,983 4,175,298
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,265,213 2,668,664
<EPS-PRIMARY> $1.34 $0.67
<EPS-DILUTED> $1.34 $0.67
<YIELD-ACTUAL> 1.21 1.22
<LOANS-NON> 1,928,460 914,314
<LOANS-PAST> 1,355,000 1,128,959
<LOANS-TROUBLED> 4,167,000 2,151,000
<LOANS-PROBLEM> 12,400,000 9,517,000
<ALLOWANCE-OPEN> 3,368,816 2,518,700
<CHARGE-OFFS> 764,964 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 2,603,852 2,518,700
<ALLOWANCE-DOMESTIC> 2,603,852 2,518,700
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
