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, 1997
-------------------------------------------------
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 incorporation (IRS Employer
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 732-257-2400
---------------------------
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 January 30, 1998
CLASS OUTSTANDING
------ -----------
$1.00 par value common stock 3,092,148 Shares
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial Condition at September 30,
1997 and December 31, 1997 (unaudited) 1
Consolidated Statements of Income for the Three Months
Ended December 31, 1996 and 1997 (unaudited) 2
Consolidated Statements of Cash Flows for the Three Months Ended
December 31, 1996 and 1997 (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
</TABLE>
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
September 30, December 31,
1997 1997
ASSETS (Unaudited)
- ------ -----------------------------------
<S> <C> <C>
Cash and amounts due from depository institutions............................... $ 3,550,908 $ 4,624,570
Federal funds sold.............................................................. 11,925,000 5,000,000
-----------------------------------
Total cash and cash equivalents............................................. 15,475,908 9,624,570
Investment securities held to maturity; estimated fair value of
$96,386,850 and $90,804,454, respectively..................................... 96,551,885 90,543,218
Mortgage backed securities held to maturity, net; estimated fair
value of $163,645,986 and $153,486,793, respectively.......................... 162,763,525 152,343,198
Investment securities available for sale........................................ 60,741,955 89,937,068
Mortgage-backed securities available for sale................................... 53,393,335 49,594,396
Loans receivable, net........................................................... 127,310,525 136,310,196
Premises & equipment, net....................................................... 1,322,718 1,433,243
Real estate owned, net.......................................................... 136,491 748,491
Federal Home Loan Bank of New York stock, at cost............................... 2,775,500 2,775,500
Interest receivable............................................................. 4,584,337 5,086,729
Other assets.................................................................... 959,530 925,423
-----------------------------------
Total assets............................................................... $526,015,709 $539,322,032
===================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Deposits........................................................................ $411,020,719 $416,555,821
Borrowings...................................................................... 67,675,000 73,675,000
Advance payments by borrowers for taxes & insurance............................. 805,394 687,775
Other liabilities............................................................... 3,308,037 4,200,476
-------------------------------------
Total liabilities.......................................................... 482,809,150 495,119,072
-------------------------------------
Stockholders' Equity:
Preferred stock; authorized 5,000,000 shares; issued and
outstanding - none........................................................... - -
Common stock; par value $1.00; authorized 10,000,000 shares;
4,112,128 shares issued and 3,050,048 outstanding and
4,149,978 shares issued and 3,087,898 outstanding,
respectively................................................................. 4,142,628 4,149,978
Paid in capital in excess of par value.......................................... 12,293,206 12,384,706
Retained earnings- substantially restricted..................................... 42,676,884 43,421,136
Unrealized gain on securities available for sale, net of tax.................... 771,341 924,640
Treasury Stock; at cost; 1,062,080 common shares, respectively.................. (16,677,500) (16,677,500)
------------------------------------
Total stockholders' equity................................................. 43,206,559 44,202,960
------------------------------------
Total liabilities and stockholders' equity................................. $526,015,709 $539,322,032
====================================
</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,
---------------------------
1996 1997
---------------------------
<S> <C> <C>
Interest income:
Loans .......................................... $ 2,919,887 $ 2,735,222
Mortgage-backed securities ..................... 3,353,891 3,502,049
Investments and other interest-earning assets .. 2,569,124 3,050,781
------------------------
Total interest income ....................... 8,842,902 9,288,052
------------------------
Interest expense:
Deposits ....................................... 4,525,440 4,775,511
Borrowings ..................................... 961,643 1,123,370
------------------------
Total interest expense ...................... 5,487,083 5,898,881
------------------------
Net interest income ............................... 3,355,819 3,389,171
------------------------
Net interest income after provision for loan losses 3,355,819 3,389,171
------------------------
Non-interest income:
Other fees and service charges on loans ........ 80,732 69,097
Income from real estate operations ............. 90,566 24,440
Miscellaneous .................................. 29,689 22,640
------------------------
Total non-interest income ................... 200,987 116,177
------------------------
Non-interest expenses:
Salaries and employee benefits ................. 653,699 735,832
Occupancy expense .............................. 76,747 117,777
Equipment expense .............................. 131,193 141,637
Advertising .................................... 94,707 97,990
Federal deposit insurance premium .............. 176,844 64,622
Miscellaneous .................................. 322,973 256,903
------------------------
Total non-interest expenses ................. 1,456,163 1,414,761
------------------------
Income before income taxes ........................ 2,100,643 2,090,587
Income taxes ...................................... 768,372 728,756
------------------------
Net income .................................. $ 1,332,271 $ 1,361,831
========================
Basic earnings per common share ................... $ 0.44 $ 0.44
========================
Diluted earnings per common share ................. $ 0.43 $ 0.42
========================
Dividends per common share ........................ $ 0.175 $ 0.20
========================
Diluted common shares outstanding ................. 3,130,615 3,243,610
========================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------------
1996 1997
---------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................................................... $ 1,332,271 $ 1,361,831
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of premises and equipment............................................. 37,397 42,010
Provision for losses on real estate owned ......................................... 32,850 --
Amortization of premiums, discounts and fees, net.................................. (36,628) (30,515)
Gain on sale of real estate owned ................................................. (104,172) --
Decrease (increase) in interest receivable ........................................ 749 (502,392)
Decrease in other assets .......................................................... 168,031 34,107
(Decrease) increase in other liabilities .......................................... (1,814,399) 892,439
----------------------------
Net cash (used in) provided by operating activities ............................. (383,901) 1,797,480
----------------------------
Cash flows from investing activities:
Proceeds from maturities and calls of investment securities held to maturity ...... 7,000,000 6,010,000
Purchase of investment securities held to maturity ................................ (5,000,000) --
Principal repayments of investment securities available for sale .................. -- 4,310,242
Purchase of investment securities available for sale .............................. -- (33,345,000)
Purchase of mortgage-backed securities held to maturity ........................... (12,587,646) (1,007,187)
Purchase of mortgage-backed securities available for sale ......................... -- --
Principal repayments on mortgage-backed securities held to maturity ............... 4,581,594 11,420,764
Principal repayments on mortgage-backed securities available for sale ............. 728,314 3,800,883
Net decrease (increase) in loans receivable ....................................... 5,229,895 (9,584,738)
Additions to premises and equipment ............................................... (33,882) (152,535)
Proceeds from sale of real estate owned ........................................... 2,317,146 --
----------------------------
Net cash provided by (used in) investing activities ............................. 2,235,421 (18,547,571)
----------------------------
Cash flows from financing activities:
Net increase in deposits .......................................................... 6,847,942 5,535,102
Net increase in borrowings ........................................................ 1,050,000 6,000,000
Decrease in advance payments by borrowers
for taxes and insurance ......................................................... (40,682) (117,619)
Issuance of common stock .......................................................... 2,210 98,850
Cash dividends paid ............................................................... (533,758) (617,580)
----------------------------
Net cash provided by financing activities........................................ 7,325,712 10,898,753
----------------------------
Net increase (decrease) in cash and cash equivalents .................................. 9,177,232 (5,851,338)
Cash and cash equivalents - beginning ................................................. 4,749,883 15,475,908
----------------------------
Cash and cash equivalents - ending .................................................... $ 13,927,115 $ 9,624,570
============================
Supplemental schedule of non-cash investing activities:
Transfer of loans receivable to real estate owned ............................... $ 150,000 $ 612,000
============================
Cash paid during the period for:
Income taxes..................................................................... $ -- $ 209,140
============================
Interest......................................................................... $ 5,478,297 $ 5,773,299
============================
</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,
1997 are not necessarily indicative of the results which may be expected for the
entire fiscal year.
3. LOANS RECEIVABLE, NET
- ------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1996 1997
----------------------------
<S> <C> <C>
Real Estate Mortgage:
One-to-four family ..................................................................... $ 77,761,695 $ 86,679,368
Multi family ........................................................................... 15,088,127 14,338,665
Commercial ............................................................................. 22,321,707 22,811,302
---------------------------
115,171,529 123,829,335
---------------------------
Construction Loans ........................................................................ 219,256 145,590
Consumer:
Home equity ............................................................................ 14,348,020 14,695,450
Passbook or certificate ................................................................ 229,173 203,485
---------------------------
14,577,193 14,898,935
---------------------------
Total loans ....................................................................... 129,967,978 138,873,860
---------------------------
Less: Allowance for loan losses ........................................................... 2,357,396 2,315,403
Deferred loan fees and discounts ................................................. 300,057 248,261
---------------------------
2,657,453 2,563,664
---------------------------
$127,310,525 $136,310,196
===========================
</TABLE>
<TABLE>
<CAPTION>
An analysis of the allowance for loan losses is as follows: Three Months Ended
December 31,
---------------------------
1996 1997
---- ----
<S> <C> <C>
Balance-beginning..................................................... $ 2,458,777 $ 2,357,396
Provisions charged to operations...................................... - -
Losses charged to allowance........................................... (29,504) (41,993)
---------------------------
Balance-ending........................................................ $ 2,429,273 $ 2,315,403
===========================
</TABLE>
4
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
<TABLE>
<CAPTION>
4. INVESTMENT SECURITIES
- ------------------------
September 30, 1997
------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government (including agencies) $95,954,388 $313,494 $503,532 $95,764,350
Obligations of state and political
subdivisions 597,497 25,003 -- 622,500
------------------------------------------------------------------------------------
$96,551,885 $338,497 $503,532 $96,386,850
====================================================================================
Available For Sale
U.S. Government Agency Debentures $59,822,275 $333,264 $237,084 $59,918,455
Equity securities 800,000 23,500 -- $823,500
------------------------------------------------------------------------------------
$60,622,275 $356,764 $237,084 $60,741,955
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government (including agencies) $89,955,714 $353,340 $122,264 $90,186,790
Obligations of state and political 587,504 30,160 -- $617,664
subdivisions
------------------------------------------------------------------------------------
$90,543,218 $383,500 $122,264 $90,804,454
====================================================================================
Available For Sale
U.S. Government Agency Debentures $88,174,330 $576,840 $112,602 $88,638,568
Equity securities 1,238,750 59,750 -- $1,298,500
------------------------------------------------------------------------------------
$89,413,080 $636,590 $112,602 $89,937,068
====================================================================================
</TABLE>
5
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
5. MORTGAGE-BACKED SECURITIES
- -----------------------------
<TABLE>
<CAPTION>
September 30, 1997
---------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
- ---------------- ---------------------------------------------------------
<S> <C> <C> <C> <C>
Government National Mortgage Association $ 62,595,447 $ 1,404,217 $ -- $ 63,999,664
Federal Home Loan Mortgage Corporation 35,726,553 409,980 265,291 35,871,242
Federal National Mortgage Association 30,556,079 182,409 155,962 30,582,526
Collateralized mortgage obligations 33,885,446 1,836 694,728 33,192,554
---------------------------------------------------------
$162,763,525 $ 1,998,442 $ 1,115,981 $163,645,986
=========================================================
Available For Sale
Government National Mortgage Association $ 33,217,483 $ 774,300 $ -- $ 33,991,783
Federal Home Loan Mortgage Corporation 9,473,817 189,614 -- 9,663,431
Federal National Mortgage Association 9,616,497 121,624 -- 9,738,121
---------------------------------------------------------
$ 52,307,797 $ 1,085,538 $ -- $ 53,393,335
=========================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
---------------------------------------------------------
<S> <C> <C> <C> <C>
Government National Mortgage Association $ 58,385,017 $ 1,269,643 $ -- $ 59,654,660
Federal Home Loan Mortgage Corporation 31,927,291 438,184 254,269 32,111,206
Federal National Mortgage Association 28,888,719 435,519 132,477 29,191,761
Collateralized mortgage obligations 33,142,171 1,892 614,897 32,529,166
---------------------------------------------------------
$152,343,198 $ 2,145,238 $ 1,001,643 $153,486,793
=========================================================
Available For Sale
Government National Mortgage Association $ 30,416,395 $ 581,844 $ -- $ 30,998,239
Federal Home Loan Mortgage Corporation 9,155,151 220,814 -- 9,375,965
Federal National Mortgage Association 9,102,090 118,102 -- 9,220,192
---------------------------------------------------------
$ 48,673,636 $ 920,760 $ -- $ 49,594,396
=========================================================
</TABLE>
6. NET INCOME PER COMMON SHARE
- ------------------------------
The Corporation adopted SFAS No. 128 (SFAS 128) "Earnings per Share" as of
December 31, 1997 and basic earnings per common share has been calculated based
on the weighted average number of shares outstanding. Fully diluted earnings per
share includes common stock 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. Earnings per share data for the three months
ending December 31, 1996 has been restated pursuant to the provisions of SFAS
128.
6.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Corporation's assets at December 31, 1997 totaled $539.3 million, which
represents an increase of $13.3 million or 2.5% when compared with $526.0
million at September 30, 1997. Total deposits at December 31, 1997 increased
$5.6 million or 1.4% to $416.6 million when compared with $411.0 million at
September 30, 1997. Investment securities held to maturity decreased $6.0
million or 6.2% to $90.5 million at December 31, 1997 when compared with $96.5
million at September 30, 1997. Investment securities available for sale
increased $29.2 million or 48.1% to $89.9 million at December 31, 1997 when
compared to $60.7 million at September 30, 1997. The increase was a result of
purchases of $33.3 million, which more than offset principal repayments of $4.3
million. Mortgage-backed securities held to maturity decreased by $10.4 million
or 6.4% to $152.3 million at December 31, 1997 when compared to $162.8 million
at September 30, 1997. The decrease in mortgage-backed securities held to
maturity was primarily due to repayments of $11.4 million, which more than
offset purchases of $1.0 million. Mortgage-backed securities available for sale
decreased $3.8 million or 7.1% to $49.6 million at December 31, 1997 compared to
$40.3 million at September 30, 1997. The decrease in mortgage-backed securities
available for sale was due to principal repayments of $3.8 million. Loans
receivable increased $9.0 million or 7.1% to $136.3 million at December 31, 1997
when compared to $127.3 million at September 30, 1997. The increase was a result
of loan originations of $11.3 million and the purchases of 1-4 family loans
totaling $2.6 million, which more than offset principal repayments of $4.3
million, along with the transfer of a $612,000 multi-family loan to other real
estate owned. Other liabilities increased by $0.9 million or 27.0% to $4.2
million at December 31, 1997 compared to $3.3 million at September 30, 1997. The
increase was primarily due to an increase in the Corporation's income tax
liability. Other assets remained relatively unchanged at $925,000 at December
31, 1997. Real estate owned, which consists of real estate acquired in
settlement of loans, totaled $748,000 and $136,000 at December 31, 1997 and
September 30, 1997, respectively. The increase was due to one multi-family
mortgage loan of $612,000 that transferred during the period. Stockholders'
equity amounted to $44.2 million and $43.2 million at December 31, 1997 and
September 30, 1997, respectively.
Results of operations for three months ended December 31, 1997 and 1996
Net income increased $30,000 or 2.2% to $1.36 million for the three months ended
December 31, 1997 compared to $1.33 million for the same 1996 period. The
increase was attributable to 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 December 31, 1997 decreased $184,000 or 6.3% to $2.7
million when compared to $2.9 million during the same 1996 period. The decrease
during the 1997 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 $148,000 or 4.4% during the
three months ended December 31, 1997 when compared with the same 1996 period as
a result of increased balances. Interest earned on investments and other
interest-earning assets increased $482,000 or 18.8% to $3.1 million during the
three months ended December 31, 1997 when compared to $2.6 million during the
same 1996 period. The increase during the 1997 period resulted primarily from an
increase in the average balance of investments and other interest-earning assets
outstanding.
7
<PAGE>
Interest on deposits increased $250,000 or 5.5% to 4.78 million for the three
months ending December 31, 1997 compared to $4.53 million during the same 1996
period primarily as a result of increased deposits outstanding along with an
increase in the bank's cost of funds. Interest on borrowings was $1.1 million
for the three months ended December 31, 1997 compared with $962,000 for the same
1996 period. The increase was due to a higher average balance outstanding of
securities sold under repurchase agreements during the 1997 period.
During the three months ended December 31, 1997 and 1996 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, 1997
and September 30, 1997, the Bank's non-performing loans, which includes loans
delinquent 90 days or more, totaled $2.4 million and $1.7 million, respectively.
The allowance for loan losses amounted to $2.3 million or 1.67% of total loans
at December 31, 1997 and $2.4 million or 1.82% of total loans at September 30,
1997.
Non-interest income decreased $85,000 or 42.2% to $116,000 during the three
months ended December 31, 1997 when compared with $201,000 during the same 1996
period. The decrease during the 1997 period resulted from decreases in income
from real estate operations, other fees and service charges on loans and
miscellaneous income of $66,000, $12,000 and 7,000, respectively. The decrease
in income from real estate operations was mostly due to a gain of $73,000
recorded on a sale during the 1996 period.
Non-interest expenses decreased $41,000 or 2.8% to $1.41 million during the
three months ended December 31, 1997 when compared with $1.46 million during the
same 1996 period. During the three months ended December 31, 1997, FDIC deposit
insurance and miscellaneous expense decreased by $112,000 and $66,000,
respectively. The large decrease in FDIC insurance expense was a direct result
of the lower insurance premiums that took effect January 1, 1997 due to the
recapitalization of the SAIF insurance fund. Salaries and employee benefits,
occupancy, equipment, and advertising expenses increased by $82,000, 41,000,
$10,000, and 3,000, respectively.
Income tax expense totaled $729,000 and $768,000 during the three months ended
December 31, 1997 and 1996, respectively. The decrease was primarily due to a
decrease in taxable income.
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 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
8
<PAGE>
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, 1997 and September 30, 1997 totaled $5.0 million and $11.9
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,
-------------------------------
1996 1997
-------------------------------
(In Thousands)
<S> <C> <C>
Cash and cash equivalents- beginni $ 4,750 $ 15,476
--------------------
Operating activities:
Net income 1,332 1,362
Adjustments to reconcile net
income to net cash provided
by operating activities (1,716) 435
--------------------
Net cash (used in)provided by operating activities (384) 1,797
Net cash provided by (used in) investing activities 2,235 (18,548)
Net cash provided by financing activities 7,326 10,900
--------------------
Net increase (decrease) in cash and
cash equivalents 9,177 (5,851)
--------------------
Cash and cash equivalents- ending $ 13,927 $ 9,625
====================
</TABLE>
Cash was generated by operating activities during the 1997 period and used by
operating activities during the 1996 period. The primary source of cash from
operating activities during both periods was net income. The primary operating
use of cash during the 1996 period was the one time special insurance assessment
to the FDIC of approximately $2.6 million. 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 increased $9.6 million during the three months
ended December 31, 1997 compared to a decrease of $5.2 million during the same
1996 period. During the three months ended December 31, 1997 and 1996, purchases
of mortgage-backed securities totaled $1.0 million and $12.6 million,
respectively, and principal repayments totaled $11.4 million and $4.6 million,
respectively. During the three months ended December 31, 1997 and 1996,
purchases of investment securities totaled $33.3 million and $5.0 million,
respectively, and maturities and calls totaled $10.3 million and $7.0 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 1997 and 1996 periods was
from an increase in deposits outstanding amounting to $5.5 million and $6.8
million, respectively. Net borrowings also
9
<PAGE>
increased $6.0 million and $1.0 million during 1997 and 1996, respectively.
During the three months ended December 31, 1997 and 1996, cash dividends of
$618,000 and $534,000, 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, 1997, such outstanding commitments
amounted to $13.7 million. Certificates of deposit scheduled to mature in one
year or less, at December 31, 1997, totaled $217.1 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,
1997:
Requirement Actual Excess
---------------------------------------
Risk-based Capital
Tier 1 4.00% 25.63% 21.63%
Total 8.00% 26.88% 18.88%
Leverage ratio 4.00% 7.51% 3.51%
10
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Part II
ITEM 1. Legal Proceedings
- --------------------------
Not applicable.
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 22, 1998, the
following matters were submitted to the stockholders:
A. Election of two directors:
Votes Votes
For Withheld
(i)Mr. Joseph Chadwick 2,288,448 28,500
(ii)Mr. Edwin A. Kolodziej 2,287,848 29,100
The following directors' terms of office as a director continued after
the meeting:
Mr. Benjamin S. Konopacki
Mr. George T. Hornyak, Jr.
Mr. Wayne A. Kronowski
Mr. Edwin A. Roginski
B. The appointment of KPMG Peat Marwick LLP as independent auditors
for the registrant's 1998 fiscal year was ratified.
2,305,228 votes in favor; 11,320 against; 400 abstaining
ITEM 5. Other Materially Important Events
- ------------------------------------------
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
Not applicable
11
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Part II
ITEM 7. Quantitative and Qualitative Disclosures about Market Risk
- --------------------------------------------------------------------
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: 2/4/98 By: /s/ George T. Hornyak, Jr.
---------------- ----------------------------------------
George T. Hornyak, Jr.
President
Chief Executive Officer
(Duly Authorized Officer)
Date: 2/4/98 By: /s/ Thomas B. Konopacki
---------------- -----------------------------------------
Thomas B. Konopacki
Executive Vice President
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 4,624,570
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 139,531,464
<INVESTMENTS-CARRYING> 242,886,416
<INVESTMENTS-MARKET> 244,291,247
<LOANS> 136,310,196
<ALLOWANCE> 2,315,403
<TOTAL-ASSETS> 539,322,032
<DEPOSITS> 416,555,821
<SHORT-TERM> 73,675,000
<LIABILITIES-OTHER> 4,888,251
<LONG-TERM> 0
0
0
<COMMON> 4,149,978
<OTHER-SE> 40,052,982
<TOTAL-LIABILITIES-AND-EQUITY> 539,322,032
<INTEREST-LOAN> 2,835,222
<INTEREST-INVEST> 6,394,320
<INTEREST-OTHER> 158,510
<INTEREST-TOTAL> 9,288,052
<INTEREST-DEPOSIT> 4,775,511
<INTEREST-EXPENSE> 5,898,881
<INTEREST-INCOME-NET> 3,389,171
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,414,761
<INCOME-PRETAX> 2,090,587
<INCOME-PRE-EXTRAORDINARY> 2,090,587
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,361,831
<EPS-PRIMARY> 0.44<F1>
<EPS-DILUTED> 0.42
<YIELD-ACTUAL> 1.02
<LOANS-NON> 1,716,057
<LOANS-PAST> 727,147
<LOANS-TROUBLED> 2,096,000
<LOANS-PROBLEM> 6,573,000
<ALLOWANCE-OPEN> 2,357,396
<CHARGE-OFFS> 41,993
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2,315,403
<ALLOWANCE-DOMESTIC> 2,315,403
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> BASIC EARNINGS PER SHARE
</FN>
</TABLE>
