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
X 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 (IRS Employer
of incorporation or organization) (Identification No.)
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 February 4, 1997
----------------
CLASS OUTSTANDING
----- -----------
$1.00 par value common stock 3,061,048 Shares
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Index
Page Number
PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial Condition at September 30,
1996 and December 31, 1996 (unaudited) 1
Consolidated Statements of Income for the Three Months
Ended December 31, 1995 and 1996 (unaudited) 2
Consolidated Statements of Cash Flows for the Three Months Ended
December 31, 1995 and 1996 (unaudited) 3
Notes to Consolidated Financial Statements 4-6
Managements Discussion and Analysis of Financial Condition and
Results of Operations 7-10
PART II - OTHER INFORMATION 11-12
SIGNATURES 13
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
September 30, December 31,
1996 1996
ASSETS (Unaudited)
- ------ -------------------------------
<S> <C> <C>
Cash and amounts due from depository institutions.................. $ 4,249,883 $ 3,377,115
Federal funds sold................................................. 500,000 10,550,000
------------ ------------
Total cash and cash equivalents................................ 4,749,883 13,927,115
Investment securities held to maturity; estimated fair value of
$103,192,000 and $102,099,000, respectively...................... 105,549,457 103,550,690
Mortgage backed securities held to maturity, net; estimated fair
value of $162,617,000 and $171,430,000, respectively............. 164,091,984 172,091,469
Investment securities available for sale........................... 39,054,697 39,354,961
Mortgage-backed securities available for sale...................... 40,255,064 39,230,818
Loans receivable, net.............................................. 134,547,804 129,550,207
Premises & equipment, net.......................................... 1,235,135 1,231,620
Real estate owned, net............................................. 2,232,624 136,800
Federal Home Loan Bank of New York stock, at cost.................. 2,543,100 2,543,100
Interest receivable................................................ 4,527,354 4,528,103
Other assets....................................................... 3,712,747 3,544,716
------------ ------------
Total assets.................................................. $502,499,849 $509,689,599
============ ============
LIABILITIES AND
- ---------------
STOCKHOLDERS' EQUITY
--------------------
Liabilities:
Deposits........................................................... $394,580,611 $401,428,553
Borrowings......................................................... 64,275,000 65,325,000
Advance payments by borrowers for taxes & insurance................ 628,243 587,561
Other liabilities.................................................. 4,557,461 2,743,062
------------ ------------
Total liabilities............................................. 464,041,315 470,084,176
------------ ------------
Stockholders' Equity:
Preferred stock; authorized 5,000,000 shares; issued and
outstanding - none.............................................. - -
Common stock; par value $1.00; authorized 10,000,000 shares;
4,111,958 shares issued and 3,049,878 outstanding and
4,112,128 shares issued and 3,050,048 outstanding,
respectively.................................................... 4,111,958 4,112,128
Paid in capital in excess of par value............................. 12,105,541 12,107,581
Retained earnings- substantially restricted........................ 39,147,609 39,946,121
Unrealized (loss) gain on securities available for sale, net of tax (229,074) 117,093
Treasury Stock; at cost; 1,062,080 common shares, respectively..... (16,677,500) (16,677,500)
------------ ------------
Total stockholders' equity.................................... 38,458,534 39,605,423
------------ ------------
Total liabilities and stockholders' equity.................... $502,499,849 $509,689,599
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1995 1996
-----------------------------
Interest income:
<S> <C> <C>
Loans ................................................... $3,016,949 $2,919,887
Mortgage-backed securities............................... 2,834,573 3,353,891
Investments and other interest-earning assets............ 1,992,995 2,569,124
---------- ----------
Total interest income................................. 7,844,517 8,842,902
---------- ----------
Interest expense:
Deposits................................................. 4,522,529 4,525,440
Borrowings............................................... - 961,643
---------- ----------
Total interest expense................................ 4,522,529 5,487,083
---------- ----------
Net interest income......................................... 3,321,988 3,355,819
---------- ----------
Net interest income after provision for loan losses......... 3,321,988 3,355,819
---------- ----------
Non-interest income:
Other fees and service charges on loans.................. 57,077 80,732
Income (expense) from real estate operations............. (5,104) 90,566
Miscellaneous............................................ 36,710 29,689
---------- ----------
Total non-interest income............................. 88,683 200,987
---------- ----------
Non-interest expenses:
Salaries and employee benefits........................... 595,017 653,699
Occupancy expense........................................ 70,966 76,747
Equipment expense........................................ 131,393 131,193
Advertising.............................................. 60,357 94,707
Federal deposit insurance premium........................ 226,353 176,844
Miscellaneous............................................ 251,468 322,973
---------- ----------
Total non-interest expenses........................... 1,335,554 1,456,163
---------- ----------
Income before income taxes.................................. 2,075,117 2,100,643
Income taxes................................................ 751,634 768,372
---------- ----------
Net income............................................ $1,323,483 $1,332,271
========== ==========
Net income per common share and common stock equivalents.... $0.33 $0.43
========== ==========
Dividends per common share.................................. $0.175 $0.175
========== ==========
Weighted average number of common shares and common
stock equivalents outstanding............................ 3,952,885 3,130,615
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
2
PULSE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1995 1996
-----------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income........................................................................ $1,323,483 $1,332,271
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of premises and equipment.......................................... 35,601 37,397
Provision for losses on real estate owned....................................... - 32,850
Amortization of premiums, discounts and fees, net............................... (86,737) (36,628)
Loss (gain) on sale of real estate owned........................................ 28,301 (104,172)
Increase in interest receivable................................................. 394,646 749
(Increase) decrease in other assets............................................. (17,487) 168,031
Increase (decrease) in other liabilities........................................ 381,080 (1,814,399)
----------- -----------
Net cash provided by operating activities..................................... 2,058,887 (383,901)
----------- -----------
Cash flows from investing activities:
Proceeds from maturities and calls of investment securities held to maturity.... 36,000,000 7,000,000
Purchase of investment securities held to maturity.............................. (20,979,670) (5,000,000)
Proceeds from principal repayments of investment securities available for sale.. - -
Market value increase in investment securities available for sale............... - (295,321)
Purchase of mortgage-backed securities held to maturity......................... (15,345,600) (12,587,646)
Purchase of mortgage-backed securities available for sale....................... - -
Principal repayments on mortgage-backed securities held to maturity............. 5,282,609 4,581,594
Principal repayments on mortgage-backed securities available for sale........... - 1,023,635
Net (increase) decrease in loans receivable..................................... (1,674,153) 5,229,895
Additions to premises and equipment............................................. (22,633) (33,882)
Proceeds from sale of real estate owned......................................... 29,999 2,317,146
----------- -----------
Net cash provided by investing activities..................................... 3,290,552 2,235,421
----------- -----------
Cash flows from financing activities:
Net increase in deposits........................................................ 6,364,140 6,847,942
Net increase in borrowings...................................................... - 1,050,000
Decrease in advance payments by borrowers
for taxes and insurance....................................................... (32,759) (40,682)
Issuance of common stock........................................................ 110,500 2,210
Cash dividends paid............................................................. (675,995) (533,758)
----------- -----------
Net cash provided by financing activities..................................... 5,765,886 7,325,712
----------- -----------
Net increase in cash and cash equivalents........................................... 11,115,325 9,177,232
Cash and cash equivalents - beginning .............................................. 8,761,510 4,749,883
Cash and cash equivalents - ending.................................................. $19,876,835 $13,927,115
=========== ===========
Supplemental schedule of non-cash investing activities:
Transfer of loans receivable to real estate owned............................. $628,000 $150,000
=========== ===========
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.................................................................. - -
=========== ===========
Interest...................................................................... $ 3,328,263 $ 5,478,297
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
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 subsidiaries, Pulse Savings Bank,
Pulse Insurance Services, Pulse Real Estate, and Pulse Investment, Inc. 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 three months ended December 31,
1996 are not necessarily indicative of the results which may be expected for the
entire fiscal year.
<TABLE>
<CAPTION>
3. LOANS RECEIVABLE, NET September 30, December 31,
- ------------------------ 1996 1996
--------------------------------
Real Estate Mortgage:
<S> <C> <C>
One-to-four family................................................ $ 65,509,636 $ 65,781,473
Multi family...................................................... 28,190,149 22,795,965
Commercial........................................................ 29,882,549 29,948,427
------------ ------------
123,582,334 118,525,865
------------ ------------
Construction Loans................................................... 125,000 140,000
Consumer:
Home equity....................................................... 13,543,650 13,498,281
Passbook or certificate........................................... 184,185 225,287
------------ ------------
13,727,835 13,723,568
------------ ------------
Total loans.................................................. 137,435,169 132,389,433
------------ ------------
Less: Allowance for loan losses...................................... 2,458,777 2,429,273
Deferred loan fees and discounts............................ 428,588 409,953
------------ ------------
2,887,365 2,839,226
------------ ------------
$134,547,804 $129,550,207
============ ============
</TABLE>
An analysis of the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------------
1995 1996
------------- -------------
<S> <C> <C>
Balance-beginning............................. $2,603,852 $2,458,777
Provisions charged to operations.............. - -
Losses charged to allowance................... (85,152) (29,504)
------------ ------------
Balance-ending................................ $2,518,700 $2,429,273
============ ============
</TABLE>
4
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
4. INVESTMENT SECURITIES
- ------------------------
<TABLE>
<CAPTION>
September 30, 1996
----------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government (including agencies) $104,949,486 $104,420 $2,483,349 $102,570,557
Obligations of state and political
subdivisions 599,971 21,789 - 621,760
------------ -------- ---------- ------------
$105,549,457 $126,209 $2,483,349 $103,192,317
============ ======== ========== ============
Available For Sale
U.S. Government Agency Debentures $ 39,813,748 $ 12,500 $ 771,551 $ 39,054,697
------------ -------- ---------- ------------
$ 39,813,748 $ 12,500 $ 771,551 $ 39,054,697
============ ======== ========== ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government (including agencies) $102,950,712 $177,453 $1,652,114 $101,476,051
Obligations of state and political
subdivisions 599,978 23,022 - $ 623,000
------------ -------- ---------- ------------
$103,550,690 $200,475 $1,652,114 $102,099,051
============ ======== ========== ============
Available For Sale
U.S. Government Agency Debentures $ 39,818,691 $107,042 $ 570,772 $ 39,354,961
------------ -------- ---------- ------------
$ 39,818,691 $107,042 $ 570,772 $ 39,354,961
============ ======== ========== ============
</TABLE>
5
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
5. MORTGAGE-BACKED SECURITIES
- -----------------------------
<TABLE>
<CAPTION>
September 30, 1996
----------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Government National Mortgage Association $ 67,075,905 $ 743,542 $ 194,683 $ 67,624,764
Federal Home Loan Mortgage Corporation 39,159,809 174,932 402,384 38,932,357
Federal National Mortgage Association 21,470,218 95,144 $603,746 20,961,616
Collateralized mortgage obligations 36,386,052 10,191 $1,298,317 35,097,926
------------ ---------- ---------- ------------
$164,091,984 $1,023,809 $2,499,130 $162,616,663
============ ========== ========== ============
Available For Sale
GNMA ARMs $ 39,848,435 $ 406,629 $ - $ 40,255,064
------------ ---------- ---------- ------------
$ 39,848,435 $ 406,629 $ - $ 40,255,064
============ ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Government National Mortgage Association $ 64,932,672 $1,032,807 $ 134,844 $ 65,830,635
Federal Home Loan Mortgage Corporation 37,636,491 316,109 346,315 37,606,285
Federal National Mortgage Association 33,389,500 121,620 $ 442,869 33,068,251
Collateralized mortgage obligations 36,132,806 6,924 $1,215,083 34,924,647
------------ ---------- ---------- ------------
$172,091,469 $1,477,460 $2,139,111 $171,429,818
============ ========== ========== ============
Available For Sale
GNMA ARMs $ 38,586,944 $ 643,874 $ - $ 39,230,818
------------ ---------- ---------- ------------
$ 38,586,944 $ 643,874 $ - $ 39,230,818
============ ========== ========= ============
</TABLE>
6. 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 December 31, 1996 totaled $509.7 million, which
represents an increase of $7.2 million or 1.43% when compared with $502.5
million at September 30, 1996. Total deposits at December 31, 1996 increased
$6.8 million or 1.74% to $401.4 million when compared with $394.6 million at
September 30, 1996. Investment securities held to maturity decreased $2.0
million or 1.89% to $103.6 million at December 31, 1996 when compared with
$105.6 million at September 30, 1996. Investment securities available for sale
increased $0.3 million or 0.77% to $39.4 million at December 31, 1996 when
compared to $39.1 million at September 30, 1996. Mortgage-backed securities held
to maturity increased by $8.0 million or 4.88% to $172.1 million at December 31,
1996 when compared to $164.1 million at September 30, 1996. The increase in
mortgage-backed securities held to maturity was primarily due to the purchase of
$12.6 million, which more than offset principal repayments of $4.6 million.
Mortgage-backed securities available for sale decreased $1.0 million or 2.54% to
$39.2 million at December 31, 1996 compared to $40.2 million at September 30,
1995. Loans receivable decreased $5.0 million or 3.71% to $129.6 million at
December 31, 1996 when compared to $134.6 million at September 30, 1996. The
decrease was a result of loan principal repayments of $9.5 million and the
transfer of $150,000 of loans to real estate owned, which more than offset loan
originations totaling $4.6 million. Other liabilities decreased by $1.8 million
or 39.8% to $2.7 million at December 31, 1996 compared to $4.5 million at
September 30, 1996. The decrease was primarily due to the FDIC's one-time
special insurance assessment of $2.6 million that the Bank paid in November.
This decrease was somewhat offset by an increase in the Bank's liability for
income taxes of $0.8 million.
Other assets decreased by $168,000 or 4.53% during the three months ended
December 31, 1996. Real estate owned, which consists of real estate acquired in
settlement of loans, totaled $137,000 and $2.2 million at December 31, 1996 and
September 30, 1996, respectively. The decrease was a direct result of sales of
real estate owned that generated proceeds of $2.3 million and gains on such
sales of $104,000, which more than offset the transfer of $150,000 of loans to
other real estate owned during the period. Stockholders' equity amounted to
$39.6 million and $38.5 million at December 31, 1996 and September 30, 1996,
respectively.
Results of operations for three months ended December 31, 1996 and 1995
Net income was $1.3 million for both the three months ended December 31, 1996
and 1995. Increases to interest income and non-interest income were offset by
increases to both interest and non-interest expenses. Interest income on loans
during the three months ended December 31, 1996 decreased $97,000 or 3.22% to
$2.9 million when compared to $3.0 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 $519,000 or
18.32% during the three months ended December 31, 1996 when compared with the
same 1995 period as a result of increased balances along with an increase in the
average yield earned on the portfolio. Interest earned on investments and other
interest-earning assets increased $576,000 or 28.91% to $2.6 million during the
three months ended December 31, 1996 when compared to $2.0 million during the
same 1995 period. The increase during the 1996 period resulted primarily from an
increase in the
7
<PAGE>
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 remained unchanged at $4.5 million during the three months
ended December 31, 1996 when compared to the same 1995 period. Interest on
borrowings was $1.0 million for the three months ended December 31, 1996
compared with $-0- for the same 1995 period. During 1996 the Bank utilized
securities sold under repurchase agreements to fund both its Modified Dutch
Auction and its asset growth strategy.
During the three months ended December 31, 1996 and 1995 the Bank did not make
any provisions for loan losses. Although no provisions were made as 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 December 31, 1996
and September 30, 1996, the Bank's non-performing loans, which includes loans
delinquent 90 days or more, totaled $2.1 million and $1.8 million, respectively.
Furthermore, the level of loan delinquencies less than 90 days declined to $3.1
million at December 31, 1996 compared to $3.8 million at September 30, 1996. The
allowance for loan losses amounted to $2.4 million or 1.83% of total loans at
December 31, 1996 and $2.5 million or 1.79% of total loans at September 30,
1996.
Non-interest income increased $112,000 to $201,000 during the three months ended
December 31, 1996 when compared with $89,000 during the same 1995 period. The
increase during the 1996 period resulted from increases in income from real
estate operations and other fees and service charges on loans of $96,000 and
23,000, respectively, and was somewhat offset by a decrease in miscellaneous
income of $7,000.
Non-interest expenses increased $121,000 or 9.03% to $1.46 million during the
three months ended December 31, 1996 when compared with $1.34 million during the
same 1995 period. During the three months ended December 31, 1996, salaries and
employee benefits, advertising, miscellaneous, and occupancy expenses increased
by $59,000, $34,000, $72,000, and $6,000, respectively. FDIC deposit insurance
decreased by $50,000 due to the lower insurance rates in effect for the quarter
ending December 31, 1996. Beginning January 1, 1996 the insurance rate will
further decrease to 6.4 basis point on SAIF- insured deposits, resulting in even
lower FDIC deposit insurance expense. The increase in miscellaneous expense was
primarily attributable to a loan expense of $76,000 the Bank paid in order to
protect it's security interest in a commercial real estate loan.
Income tax expense totaled $768,000 and $752,000 during the three months ended
December 31, 1996 and 1995, respectively. The increase during the 1996 period
resulted primarily from a slight 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
8
<PAGE>
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
and short and medium term borrowings. 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 December 31, 1996 and September 30, 1996 totaled $10.6
million and $0.5 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:
<TABLE>
<CAPTION>
Three months ended December 31,
1995 1996
(In Thousands)
<S> <C> <C>
Cash and cash equivalents- beginning $ 8,762 $ 4,750
-------------------
Operating activities:
Net income 1,323 1,332
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities 736 (1,716)
-------------------
Net cash provided by (used in)operating activities 2,059 (384)
Net cash provided by investing activities 3,290 2,235
Net cash provided by financing activities 5,766 7,326
-------------------
Net increase in cash and
cash equivalents 11,115 9,177
-------------------
Cash and cash equivalents- ending $ 19,877 $ 13,927
===================
</TABLE>
Cash was utilized by operating activities in the 1996 period and generated by
operating activities in the 1995 period. The primary use of cash from operating
activities during the 1996 period was the payment of the FDIC's special
insurance assessment of approximately $2.6 million. The primary source of cash
from operating activities during the 1995 period 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, net loan activity and from borrowing. Net loans decreased $5.2
million during the three months ended December 31, 1996 compared to an increase
of $1.7 million during the same 1995 period. During the three months ended
December 31, 1996 and 1995, purchases of mortgage-backed securities held to
maturity totaled $12.6 million and $15.3 million, respectively, and principal
repayments totaled $4.6 million and $5.3 million, respectively. During the three
months ended December 31, 1996 and 1995, purchases of investment securities held
to maturity totaled $5.0 million and $21.0 million,
9
<PAGE>
respectively, and maturities and calls totaled $7.0 million and $36.0 million,
respectively. In addition to funding new loan production and the purchase of
investment and mortgage-backed securities through operations and financing
activities, these activities were also funded by principal repayments on
existing loans and mortgage-backed securities and also through short and medium
term borrowings.
The primary source of financing activities during the 1996 and 1995 periods was
from an increase in deposits outstanding amounting to $6.8 million and $6.4
million, respectively. During the three months ended December 31, 1996 and 1995,
cash dividends of $534,000 and $676,000, 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 December 31, 1996, such outstanding commitments
amounted to $2.0 million. Certificates of deposit scheduled to mature in one
year or less, at December 31, 1996, totaled $213.7 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 December 31,
1996:
Requirement Actual Excess
---------------------------------------
Risk-based Capital
Tier 1 4.00% 24.42% 20.42%
Total 8.00% 25.67% 17.67%
Leverage ratio 4.00% 7.29% 3.29%
10
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Part II
ITEM 1. Legal Proceedings
- --------------------------
As indicated under "Item 3. Legal Proceedings" of the Registrant's
Form 10-K for the year ended September 30, 1996, the Registrant and
its subsidiary, Pulse Savings Bank, had filed claims under their
malpractice insurance coverage to recover losses associated with
fictitious bridge loans, and a trial date of January 13, 1997 had been
established for the litigation. At the court proceeding on January 13,
1997, the trial was postponed until March 17, 1997. The case is a
civil action in the Superior Court of New Jersey Law Division,
Middlesex County under the name Pulse Bancorp, Inc. et al. v. Estate
of Stephen J. Domenichetti et al. In addition to postponing the trial,
the judge provided the defendants three weeks, until no later than
February 5, 1997, to submit an expert's report on the issues of legal
malpractice and accounting malpractice. In addition, the judge ordered
that a settlement conference be held on February 19, 1997. On February
4, 1997, the Bank was notified that the trial was further postponed
until April 14, 1997 due to a scheduling conflict with the defendant's
attorney.
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 stockholders' meeting held on January 23, 1997, the
following matters were submitted to the stockholders:
A. Election of three directors:
Votes Votes
For Withheld
(i)Mr. Benjamin S. Konopacki 2,198,406 98.5
(ii)Mr. George T. Hornyak,Jr. 2,193,006 98.2
(iii)Mr. Edwin A. Kolodziej 2,199,006 98.5
The following directors' terms of office as a director continued after
the meeting:
Mr. Joseph Chadwick
Mr. Wayne A. Kronowski
Mr. Edwin A. Roginski
11
<PAGE>
B. The appointment of KPMG Peat Marwick LLP as independent auditors for the
registrant's 1997 fiscal year was ratified.
2,154,154 votes in favor; 75,558 against; 2400 abstaining
ITEM 5. Other Materially Important Events
- ------------------------------------------
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
A Form 8-K (Item 5), dated January 13, 1997, was filed on January 22,
1997.
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: February 4, 1997 By: /s/ George T. Hornyak, Jr.
---------------- --------------------------
George T. Hornyak, Jr.
President
Chief Executive Officer
(Duly Authorized Officer)
Date: February 4, 1997 By: /s/ Thomas B. Konopacki
---------------- ------------------------
Thomas B. Konopacki
Executive Vice President
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 3,377,115
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,550,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 78,585,779
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<ALLOWANCE> 2,429,273
<TOTAL-ASSETS> 509,689,599
<DEPOSITS> 401,428,553
<SHORT-TERM> 65,325,000
<LIABILITIES-OTHER> 3,330,623
<LONG-TERM> 0
0
0
<COMMON> 4,112,128
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<INTEREST-TOTAL> 8,842,902
<INTEREST-DEPOSIT> 4,525,440
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<INTEREST-INCOME-NET> 3,355,819
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,456,163
<INCOME-PRETAX> 2,100,643
<INCOME-PRE-EXTRAORDINARY> 2,100,643
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,332,271
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
<YIELD-ACTUAL> 1.06
<LOANS-NON> 832,870
<LOANS-PAST> 1,230,125
<LOANS-TROUBLED> 2,126,000
<LOANS-PROBLEM> 10,111,000
<ALLOWANCE-OPEN> 2,458,777
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<ALLOWANCE-CLOSE> 2,429,273
<ALLOWANCE-DOMESTIC> 2,429,273
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
