SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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: 0-18782
ES&L BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1387158
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 W. Water St., Elmira, New York 14901
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code: (607) 733-5533
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check X whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for 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
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date. 845,671
<PAGE>
ES&L BANCORP, INC. AND SUBSIDIARIES
March 31, 1997
Index Page
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Statements of Financial 1
Condition as of March 31, 1997
(Unaudited) and June 30, 1996
Consolidated Statements of Income 2
(Unaudited) for the three months and nine
months ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows 3
(Unaudited) for the nine months ended
March 31, 1997 and 1996
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis of 5
Financial Condition and Results of Operations
Non-Performing Loans at March 31, 1997 and
June 30, 1996
Risk-Based Capital Information at March 31,
1997 and June 30, 1996
Part II - Other Information
Signatures
<PAGE>
<TABLE>
ES&L BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
3/31/1997 6/30/1996
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalent $ 987,779 $1,373,763
Investment Securities Held for Sale $ 56,634 $ 48,508
Investment Securities,
Approximate market value of $3,988,743
and $2,993,573 at 3/31/97
and 6/30/96, respectively $4,023,758 $3,030,521
Mortgage-Backed Securities Held for Sal $1,622,279 $1,874,951
Mortgage-Backed Securities,
Approximate market value of $97,314 &
$194,628 at 12/31/96 and 6/30/96,
respectively $ 97,314 $ 194,628
Mortgage Loans Held For Sale $3,551,177 $5,457,831
Loans Receivable, Net $128,176,312 $121,636,011
Federal Home Loan Bank Stock, at cost $1,313,100 $1,103,800
Foreclosed Real Estate-Real Estate Ownd $ 42,000 $ 90,815
Investment In Joint Venture:
Acquisition, Development
& Construction Project $665,792 $497,165
Mortgage Banking Partnership $171,699 $170,065
Property and Equipment, Net $3,079,532 $3,121,713
Accrued Interest Receivable $834,908 $793,940
Other Receivables $ 15,704 $28,217
Other Assets $648,706 $716,590
----------------------------
Total Assets $145,286,694 $140,138,518
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
Liabilities:
Deposits $107,074,860 $106,652,829
Advances -Federal Home Loan Bank
of N.Y. $22,258,904 $17,615,560
Other Borrowings $0 $0
Accrued Interest Payable:
Deposits $13,912 $ 29,125
Borrowings $71,981 $ 73,029
Advances From Borrowers For
Taxes and Insurance $1,476,234 $2,286,398
Other Liabilities $574,507 $569,432
------------ -----------
Total Liabilities $131,470,398 $127,226,373
Stockholders' Equity:
Serial Preferred Stock, 500,000
Shares Authorized; None Issued -0- -0-
Common Stock, $.01 Par Value;
3,000,000 Shares Authorized,
854,154 and 849,758 Shares Issued $8,542 $8,498
Additional Paid-In-Capital $2,593,215 $2,577,253
Retained Earnings - Substantially
Restricted $11,268,546 $10,334,941
Net Unrealized Gain/(Loss) on
Investments Held for Sale $47,164 $37,888
Treasury Stock (8,483 & 5,016 shares
respectively), at cost ($101,171) ($46,441)
-------------- -----------
Total Stockholders' Equity $13,816,296 $12,912,145
--------------- -------------
Total Liabilities
& Stockholders' Equity $145,286,694 $140,138,518
============================
Shares Outstanding 845,671 844,742
</TABLE>
<PAGE>
<TABLE>
ES&L BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Unaudited) (Unaudited
THREE MONTHS ENDED NINE MONTHS ENDED
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest Income:
Loans 2,865,913 2,754,138 8,523,089 8,132,140
Investment Securities 80,568 77,886 249,232 248,909
Mortgage-Backed
Securities 30,360 47,995 100,682 150,624
Interest-Earning Deposits
& Other 3,552 4,734 8,465 12,140
------------ --------- --------- ---------
Total Interest Income 2,980,393 2,884,753 8,881,468 8,543,813
Interest Expense:
Deposits 1,274,369 1,294,904 3,841,144 3,881,618
Borrowings 331,437 260,258 917,029 800,386
--------------------------------------------
Total Interest Income 1,605,806 1,555,162 4,758,173 4,682,004
--------------------------------------------
Net Interest Income 1,374,587 1,329,591 4,123,295 3,861,809
Provision For Loan Loss 0 0 0 0
-------------------------------------------
Net Interest Income
After Provision 1,374,587 1,329,591 4,123,295 3,861,809
Other Income:
Service Fees &
Other Charges 29,601 34,308 95,346 94,143
Gain on the Sale
of Mortgages 102,226 42,416 280,969 101,278
Income From Loan Servicing 89,502 79,162 266,886 232,214
Other Operating Income 28,052 44,188 173,911 104,666
Income from Joint Venture (6,273) 12,441 15,727 8,113
Profit on Sale-Investments 0 0 0 0
------------------------------------------
Total Other 243,108 212,515 832,839 540,414
Other Expenses:
Employee Compensation
& Benefits 530,048 473,813 1,499,693 1,357,577
Office Occupancy/Equipment 126,145 126,177 384,972 384,573
FDIC Premium 28,401 69,746 815,884 207,052
Other 168,566 139,078 511,835 332,340
-----------------------------------------
Total Other 853,960 808,814 3,212,384 2,281,542
-----------------------------------------
Income Before Taxes 763,735 733,292 1,743,750 2,120,681
Income Taxes (292,024) (270,890) (376,779) (822,670)
------------------------------------------
Income before
Cumulative Effect 471,711 462,402 1,366,971 1,298,011
Cumulative Effect
on prior years of change
in accounting principle 0 0 0 0
-----------------------------------------
NET INCOME $ 471,711 462,402 1,366,971 1,298,011
=========================================
Earnings Per Share:
Income before
Cumulative Effect $ 0.56 0.55 1.62 1.55
Cumulative Effect 0.00 0.00 0.00 0.00
-----------------------------------------
Total $ 0.56 0.55 1.62 1.55
=========================================
Dividend Per Common Share 0.17 0.11 .51 .33
=========================================
Average Common
Shares Outstanding 849,138 844,204 845,995 836,755
</TABLE>
<PAGE>
<TABLE>
E S & L BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED March 31,
<CAPTION>
1997 1996
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,366,971 $ 1,298,011
Adjustments To
Reconcile Net Income To Net
Cash Provided From
Operating Activities:
Depreciation 135,489 130,331
Net Amortization Of
Premiums & Discounts ( 2,656) 22,770
Deferred Loan Origination Fees (26,759) (31,359)
(Income)/Loss: ADC Joint Venture (15,727) ( 8,113)
Changes in Certain Assets
and Liabilities:
Mortgage Loans Held For Sale 1,906,654 (4,185,964)
Foreclosed Real Estate 48,815 0
Accrued Interest Receivable (40,960) (208,241)
Other Receivables 12,513 58,070
Other Assets 67,884 88,960
Accrued Interest Payable (16,261) ( 6,075)
Advances From Borrowers For
Taxes and Insurance (810,164) (1,279,178)
Other Liabilities 5,075 166,208
-------------- --------------
Net Cash (Used For) Provided
From Operating Activities $ 2,630,866 $ (3,954,580)
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Net Other Increase In
Loans Receivable (6,543,465) ( 91,350)
Investment In Joint Ventures (170,261) (225,599)
Proceeds From Sale of
Foreclosed Real Estate 55,000 173,500
Purchase of FHLB Stock (209,300) 0
Proceeds From Maturities
of Investments 1,333,409 1,730,654
Purchase of Investment Securities(2,324,063) (1,988,698)
Change in Mark to
Market Adjustment Items (15,459) ( 4,322)
Principal Repayments On
Mortgage-Backed Securities 357,319 513,914
Purchases Of Property &
Equipment, Net (93,308) (105,552)
-------------- --------------
Net Cash Provided From
(Used For) Investing Activities$(7,610,128) $ 2,547
CASH FLOWS FROM FINANCING ACTIVITIES:
Interest Credited To
Dep. Accts., Excl. Escrow Accts. 3,839,029 3,853,823
Net Other (Decrease)
Increase in Deposits (3,416,998) 2,091,257
Payments On Advances
From Federal Home Loan Bank (70,056,056) (69,456,253)
Proceeds From Advances
From Federal Home Loan Bank 74,700,000 66,400,000
Proceeds From Exercise
of Stock Options 16,000 83,629
Purchase of Treasury Stock (54,730) 0
Dividends Paid on Common Stock (433,367) (285,261)
-------------- --------------
Net Cash (Used For)
Provided From Financing $ 4,593,278 2,687,195
Net Increase (Decrease)
In Cash Equivalents (385,984) (1,264,838)
Cash and Cash Equivalents
At Beginning Of Period 1,373,763 1,289,525
-------------- --------------
Cash and Cash Equivalents
At End of Period $ 987,779 $ 24,687
============== ==============
</TABLE>
<PAGE>
ES&L BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
The consolidated financial statements include the accounts
of the Corporation and its wholly-owned subsidiary, Elmira
Savings and Loan, F.A. (the Bank), as well as the Bank's wholly
owned subsidiaries, Brilie Corporation (d/b/a ES&L Financial
Services and ES&L Appraisal Services) and ES&L Mortgage
Corporation (d/b/a Cayuga Mortgage Company). All significant
inter-company accounts have been eliminated.
The consolidated financial statements for the three months
and nine months ending March 31, 1997 and 1996 are unaudited and
do not include information or footnotes necessary for a complete
presentation of financial condition and results of operations and
changes in cash flows in conformity with generally accepted
accounting principles, but reflect, in the opinion of management,
all adjustments, consisting of normal recurring accruals,
necessary to present fairly these consolidated financial
statements. The results for the three months and nine months
ending March 31, 1997 are not necessarily indicative of the
results to be expected for the entire fiscal year ending June 30,
1997.
2. Net Income Per Common Share:
Net income per common share is based on the weighted average
total shares outstanding during the respective periods. Weighted
average total shares outstanding for the periods included herein
are as follows:
March 31, 1997 March 31, 1996
Three Months Ended 849,138 844,204
Nine Months Ended 845,995 836,755
The average total shares outstanding for the three months
and nine months ending March 31, 1996 have been adjusted to
reflect the Corporation's 3 for 2 stock split, effective August
23, 1996.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL:
ES&L Bancorp, Inc., (the "Corporation") is a Delaware Corporation
whose primary asset is the stock of Elmira Savings & Loan, F.A.
(the "Bank"). The Bank, a federally chartered savings association,
founded in 1888, operates through one office located in Elmira, New
York.
The Corporation, through the Bank, is primarily engaged in the
business of accepting deposits from the general public and
originating loans secured by residential real estate. The Bank
also engages in commercial real estate lending in its primary
market area and, to a lesser extent, consumer lending and invests
in government, federal agency obligations, and high grade corporate
debt securities.
The Bank's operations include two wholly-owned subsidiaries,
Brilie Corporation (d/b/a ES&L Financial Services and ES&L
Appraisal Services) and ES&L Mortgage Corporation (d/b/a Cayuga
Mortgage Company). Brilie Corporation is a provider of appraisal
services and nontraditional investment and insurance products to
the Bank's customers and the general public. The investment
products, which include life insurance and annuity contracts,
health insurance and mutual funds, are offered under an agency
relationship with major insurance companies and third party mutual
funds providers. ES&L Mortgage Corporation is engaged in mortgage
banking activities through the origination of mortgage loans for
sale to investors, one of whom is the Bank.
FINANCIAL CONDITION AND RESULTS OF OPERATION:
The Corporation had assets totaling $145,286,694 at March 31, 1997, an
increase of $5,148,176, or 3.67%, since the July 1, 1996 beginning of the
fiscal year, when total assets equaled $140,138,518. The majority of the
increase can be found in an increase in the Corporation's Net Loans
Receivable, which has increased by $6,540,301, or 5.30%, to $128,176,312 at
March 31, 1997 compared to $121,636,011 at the beginning of the 1997 fiscal
year. Some of the increase has been offset by a decline in Mortgages Loans
Held For Sale which have decreased by $1,906,654, or 34.93%, to $3,551,177
at March 31, 1997.
At March 31, 1997 the Corporation's total liabilities had increased by
$4,244,025, or 3.34%, to $131,470,398. The majority of the increase can be
found in a $4,643,344 increase in advances from the Federal Home Loan Bank
(FHLB) of New York At March 31, 1997 total FHLB advances were
$22,258,904, an increase of 26.36%.
The Corporation's Stockholders' Equity was $13,816,296 at March 31, 1997,
an increase of $904,151, or 7.00%, from $12,912,145 at the beginning of the
current fiscal year.
<PAGE>
RESULTS OF OPERATIONS: QUARTER ENDING MARCH 31, 1997 AND
MARCH 31, 1996.
Net interest income earned by the Corporation for the quarter ending March
31, 1997 was $1,374,587, an increase of $44,996, or 3.38%, compared to
$1,329,591 for the same quarter ending March 31, 1996.
The majority of the Corporation's interest income is generated from its
loan portfolio. For the three months ending March 31, 1997, interest
earned on the loan portfolio totaled $2,865,913, an increase of $111,775,
or 4.06%, compared to $2,754,138 during the three months ending March 31,
1996. The increase in earnings is generated by an increase in the average
balance of the loan portfolio, which more than offset a 10 basis point
decrease in the average yield earned on the portfolio. For the quarter
ending March 31, 1997 the Corporation's loan portfolio averaged $134.2
million (yielding 8.54%) compared to $127.5 million (yielding 8.64%) during
the comparable period. Interest earned on the Corporation's Mortgage
Backed Security (MBS) portfolio decreased by $17,635, or 36.74%, to $30,360
for the quarter ending March 31, 1997 compared to $47,995 for the quarter
ending March 31, 1996. The reduction is the result of a decrease in both
the average balance and the average yield of the portfolio. For the
quarter ending March 31, 1997 the average balance of the MBS portfolio was
$1.8 million (yielding 6.68%) compared to $2.4 million (yielding 7.99%)
during the same quarter one year ago.
For the quarter ending March 31, 1997 interest paid on deposits decreased
by $20,535, or 1.59% and totaled $1,274,369, compared to $1,294,904 for the
same quarter in 1996. The decrease is the result of a reduction in the
average cost of deposits, which offset an increase in the average balance
of deposits outstanding. At March 31, 1997 average deposits outstanding
totaled $107.8 million (costing 4.73%) compared to $107.4 million (costing
4.82%). While the average balance of deposits doesn't seem to have changed
significantly there was a noticeable shift to time deposits from demand
deposits. This resulted in additional interest expense of $15,461 for the
March 1997 quarter, that was offset by a 9 basis point overall decrease in
the average cost of deposits, which reduced deposit interest expense by
$35,996. During the March 1997 quarter the average balance of FHLB
advances outstanding increased by $5.7 million, while the average cost of
these borrowings decreased by 11 basis points. For the three months ending
March 31, 1997 the average balance of FHLB advances totaled $24.6 million
(costing 5.39%) compared to $18.9 million (costing 5.50%) for the same
three month period during 1996. The overall result was that interest
expense paid by the Corporation for its borrowings increased by $71,179 or
27.35%. Interest expense on borrowings totaled $331,437 and $260,258 for
the three months ending March 31, 1997 and 1996, respectively.
The Corporation's other income totaled $243,108 for the quarter ending
March 31, 1997, an increase of $30,593, or 14.40% compared to the same
period one year ago. The majority of the increase is the result of a
$59,810 increase in the gains recorded on the sale of mortgages. During
the 1997 quarter the Corporation recorded gains from mortgage sales of
$102,226, compared to $42,416 during the 1996 three month period.
Included in the 1997 quarter is $68,900 which is related to an accounting
<PAGE>
change regarding the recognition of mortgage servicing rights of loans sold
by the Corporation during the quarter. The mandated change, Financial
Accounting Standard 122 (FAS 122), was not in effect during the March 1996
quarter and therefore no comparable income was recorded during that period.
Income on loans serviced by the Corporation in the national secondary
mortgage market increased by $10,340, or 13.06%, to $89,502 for the 1997
period, compared to $79,162 for the 1996 quarter. The Corporation
recorded a loss of income from its unconsolidated land development joint
venture during the quarter ending March 31, 1997. Income is earned as lot
sales occur from real property owned by the partnership. There were no lot
sales during the quarter ending March 31, 1997 when compared with the
quarter ending March 31, 1996.
The Corporation's other operating income decreased by $16,136, or 36.52%,
to $28,052 for the quarter ending March 31, 1997 compared to $44,188 during
the same quarter of the comparable period. The majority of the decrease is
the result of reduced earnings of two of the Bank's subsidiaries, Cayuga
Mortgage Company and ES&L Appraisal Services, during the 1997 quarter.
During the March 1996 quarter Cayuga Mortgage Company was paid a fee to
process mortgage applications for PACE Funding, its unconsolidated mortgage
banking partnership. Those services are now performed directly by PACE
Funding. Additionally, PACE Funding recorded net income to Cayuga Mortgage
Company of approximately $6,000 during the March 1996 quarter, while during
the March 1997 quarter Cayuga Mortgage reported a loss from PACE Funding of
approximately $7,000.
The Corporations total operating expenses for the quarter ending March 31,
1997 increased by $45,146, or 5.58%, to $853,960. Employee compensation and
benefit expense totaled $530,848 for the quarter ending March 31, 1997 an
increase of $57,035, or 12.04%, when compared to comparable expense
totaling $473,813 during the quarter ending March 31, 1996. While some of
the increase reflects annual salary adjustments and the increased cost of
employee benefits, the Corporation also incurred additional expense related
to the restructuring of the operations of Cayuga Mortgage Company, the
Corporation's mortgage banking subsidiary, located in Ithaca, NY. During
the three months ending March 31, 1997 the Corporation recognized a
$41,345, or 59.28% decrease in the cost of federal deposit insurance. The
decrease is the result of the passage of legislation during the first
quarter of the Corporation's 1997 fiscal year which recapitalized the fund
which insures the Bank's deposits. As a result of the legislation the
insurance premium assessed against members of the Savings Association
Insurance Fund (SAIF) was dramatically reduced. For the quarter ending
March 31, 1997 federal deposit insurance expense totaled $28,401, compared
to $69,746 during the same quarter a year ago. Total other expenses
incurred by the Corporation during the quarter ending March 31, 1997 were
$168,566, an increase of $29,488, or 21.20%, compared to the same quarter
of the comparable period. The majority of the increase ($15,100) is
related the purchase of mortgages by the Corporation from its
unconsolidated mortgage banking partnership, PACE Funding. Additionally,
during the March 1997 quarter the Bank incurred additional expense ($5,900)
related to the sale of foreclosed real estate and its
<PAGE>
stationery, printing and office supply expense has exceeded the comparable
quarter by approximately $4,400.
The Corporation's tax expense increased by $21,134, or 7.80%, to $292,024
for the quarter ending March 31, 1997, compared to $270,890 for the quarter
ending March 31, 1996. The increase is the result of an increase in the
Corporation's net income before taxes.
RESULTS OF OPERATIONS: NINE MONTHS ENDING MARCH 31, 1997 AND MARCH 31,
1996.
Net interest income of the Corporation was $4,123,295 for the nine months
ending March 31, 1997, an increase of $261,486, or 6.77%, compared to net
interest income of $3,861,809 earned during the nine months ending March
31, 1996.
Total interest income earned by the Corporation during the first three
quarters of the 1997 fiscal year was $8,881,468, an increase of $337,655,
or 3.95%, compared to the first three quarters of the 1996 fiscal year.
Interest recorded from the Corporation's loan portfolio increased $390,949,
or 4.81%, to $8,523,089 for the nine months ending March 31, 1997 compared
to $8,132,140 for the nine months ending March 31, 1996. The increase was
the result of a $7.1 million increase in the average balance of the
portfolio which more than offset a 7 basis point decrease in the average
yield earned on the portfolio. For the nine months ending March 31, 1997
the average balance of the portfolio was $132.4 million (yielding 8.58%)
compared to $125.3 million (yielding 8.65%) for the nine months ending
March 31, 1996. A decrease in both the average balance and the average
yield of the Corporation's Mortgage Backed Security (MBS) portfolio
prompted a $49,942, or 33.16%, decrease in income generated by the
portfolio during the 1997 period, compared to the same period during the
comparable fiscal year. During the nine months ending March 31, 1997 the
average balance of the MBS portfolio was $2.0 million (yielding 6.77%)
compared to $2.5 million (yielding 7.93%) during the nine months ending
March 31, 1996. A portion of the interest income and yield decrease in the
MBS portfolio is the result from pools totalling approximately $195,000
which have been placed in non-accrual status by the Corporation. Although
the borrowers have been making payments, a dispute has existed between the
servicer and the FDIC. The Corporation began receiving payments in April,
1997 and has fully reserved any principal or interest payments which may
not be received as a result of the settlement of the dispute. Interest
income generated from the MBS portfolio was $100,682 and $150,624 for the
nine months ending March 31, 1997 and 1996, respectively.
The Corporation's total interest expense was $4,758,173 for the nine months
ending March 31, 1997, an increase of $76,169, or 1.63% compared to
$4,682,004 for the nine months ending March 31, 1996. Interest paid to
depositors decreased by $40,474, or 1.04%, to $3,841,144 for the nine
months ending March 31, 1997 compared to $3,881,618 for the same nine
months during the comparable period. The decrease in interest is the result
of a 15 basis point decrease in the average cost of the deposits which more
than offset a $2.1 million increase in the average balance of deposits
<PAGE>
outstanding. For the nine months ending March 31, 1997 average deposits
outstanding were $108.4 million (costing 4.72%), compared to an average
balance of $106.3 million (costing 4.87%) for the nine months ending March
31, 1996. Interest expense on borrowings increased by $116,643, or 14.57%
during the nine months ending March 31, 1997. Total interest paid on
borrowings (advances from the Federal Home Loan Bank of New York) was
$917,029 and $800,386 for the nine months ending March 31, 1997 and 1996,
respectively. The increase in interest on borrowings is the result of a
$3.5 million increase in the average balance of borrowings outstanding,
which more than offset the 20 basis point decrease in the average cost of
the borrowings. For the nine months ending March 31, 1997 average
borrowings outstanding totaled $22.1 million (costing 5.53%), compared to
$18.6 million (costing 5.73%) for the nine months ending March 31, 1996.
The Corporation's other income earned during the nine months ending March
31, 1997 was $832,839, a $292,425 or 54.11% increase over the same nine
month period during the comparable period. The majority of the income is
the result of an increase in gains recorded from the sales of mortgages,
which increased by $179,691 to $280,969 for the nine months ending March
31, 1997. As reported throughout the first three quarters of the 1997
fiscal year, an accounting change (Financial Accounting Standard 122)
regarding the recognition of mortgage servicing rights on loans sold was
required to be implemented by the Corporation. No comparable income was
included during the nine months ending March 31, 1996. Without the
accounting change, the Corporation's gain on the sale of mortgages during
both nine months periods would be nearly identical. Income earned from the
servicing of mortgages in the national secondary mortgage market was
$266,886 for the nine months ending March 31, 1997, an increase of $34,672,
or 14.93%, compared to $232,214 for the same nine month period during the
comparable period. The increase is the result of the Corporation servicing
a greater dollar volume of mortgages during the 1997 nine month period.
The Corporation's other operating income increased by $69,245, or 66.16%,
to $173,911 for the nine months ending March 31, 1997, compared to $104,666
for the nine months ending March 31, 1996. The majority of the increase is
the result of a $35,000 settlement received by the Bank as a result of a
deficiency judgment obtained in a foreclosure action dating back to 1989.
Additionally, ES&L Financial Services, which offers non-insured investment
and insurance products, recognized an increase in commission income of
approximately $30,000.
The Corporation's other operating expenses were $3,212,384, for the nine
months ending March 31, 1997 an increase of $930,842, or 40.80%, compared
to $2,281,542 for the same nine month period during the previous fiscal
year. The majority of the increase ($608,832) is the result of increased
expense related to federal deposit insurance premiums. As previously
reported by the Corporation, as the result of the passage of federal
legislation to recapitalize the Savings Association Insurance Fund (SAIF)
all fund participants were assessed a one time special assessment during
the first quarter of the Corporation's 1997 fiscal year. The assessment,
which was based on deposits outstanding, totaled approximately $657,000.
As part of the legislation, the Bank's future insurance premiums were
reduced to $0.064 per hundred of deposits. Management expects the
reduction in future premiums to allow it to recapture the amount of the
special assessment over the next several years. Additionally, the premium
reduction reduced the Bank's overall deposit insurance expenses to a level
more in line with its competitors, the majority of which are insured by the
Bank Insurance Fund (BIF). Presently BIF insured institutions pay
virtually no premium for deposit insurance coverage. Employee compensation
<PAGE>
and benefit expense was $1,499,693 for the nine months ending March 31,
1997, an increase of $142,116, or 10.47%, compared to $1,357,577 during the
nine months ending March 31, 1996. Included in the increase are annual
salary adjustments and increases in the cost of employee benefits.
Additionally, part of the increase is related to the restructuring of
operations at Cayuga Mortgage Company, the Bank's mortgage banking
subsidiary in Ithaca, NY. Other expenses increased by $179,495, or 54.01%,
to $511,835 for the nine months ending March 31, 1997 compared to $332,340,
for the nine months ending March 31, 1996. The majority of the increase is
related to the Corporation's mortgage banking activities, including
approximately $60,000 related to the purchase of mortgages from PACE
Funding. Additionally, advertising and public relations expenses related
to the opening of the Bank's new "cashless" deposit office in Ithaca were
approximately $12,000 during the 1997 period. No comparable expenses were
incurred during the previous fiscal year. The Corporation has also
incurred losses totaling approximately $20,000 from the sale of foreclosed
real estate during the 1997 nine month period and the Bank's stationery and
office supply expenses have increased by approximately $11,000 over the
expenses incurred during the nine months ending March 31, 1996.
The Corporation's income tax provision for the nine months ending March 31,
1997 was $376,779, a reduction of $445,891, over the same nine month period
during the 1996 fiscal year. During the first quarter of the 1997 fiscal
year the Corporation performed an extensive analysis of its income tax
liability, which ultimately provided for an income tax benefit, rather than
a provision, during that quarter. Additionally, the Corporation's
provision for the nine months ending March 31, 1997 has decreased as a
result of a $376,931 decrease in pre-tax income, when compared to the same
period during the last fiscal year.
<PAGE>
ELMIRA SAVINGS & LOAN, F.A.
NON-PERFORMING LOANS
Loans are reviewed on a monthly basis and are placed on
non-accrual status when, in the opinion of management, the collection
of additional interest is doubtful. Residential and commercial
mortgage loans are generally placed on non-accrual when either
principal or interest is more than 90 days past due. Interest
accrued and unpaid at the time a loan is placed on non-accrual
status is charged again interest income. Subsequent payments are
either applied to the outstanding principal balance or recorded
as interest income, depending on the assessment ultimate
collectibility of the loan. Consumer loans are generally charged
off on or before the loan becomes 120 days delinquent, although
collection efforts continue.
The following table sets forth information with respect to
the Association's non-performing assets at March 31, 1997 and
June 30, 1996, respectively:
<TABLE>
<CAPTION>
03-31-97 06-30-96
<S> <C> <C>
Loans accounted for on a
non-accrual basis:
Real Estate:
Residential 277,005.68 176,550.48
Commercial 57,230.82 0.00
Commercial/Line of Credit 32,404.98 0.00
Consumer/Home Equity 28,516.34 46,103.24
Commercial(Non-Mortgage) 0.00 0.00
Education 0.00 0.00
Consumer 8.604.88 0.00
Other 0.00 0.00
Total 403,762.70 222,653.72
Accuring loans which are
contractually past due
90 days or more:
Real Estate:
Residential 32,880.20 70,368.27
Commercial 0.00 0.00
Commercial/Line of Credit 0.00 0.00
Consumer/Home Equity 2,659.86 0.00
Commercial (Non-Mortgage) 0.00 0.00
Education 0.00 0.00
Consumer 0.00 9,862.24
Other 0.00 0.00
Total 35,540.06 80,230.51
Total of non-accrual &
90 days past due loans 439,302.76 302,884.23
Percentage of total loans 0.33% .24%
Other non-performing
assets 42,000.00 90,815.36
</TABLE>
<PAGE>
ELMIRA SAVINGS & LOAN, F.A.
RISK BASED CAPITAL CALCULATION
<TABLE>
The table below presents the Association's capital position
relative to its various minimum statutory and regulatory
requirements at March 31, 1997 and June 30, 1996
respectively:
<CAPTION>
03-31-97 06-30-96
PERCENT PERCENT
OF OF
AMOUNT ASSETS (1) AMOUNT ASSETS (1)
<S> <C> <C> <C> <C>
Tangible Capital 12,661,899.91 8.75% 12,228,068.56 8.75%
Tangible Capital
Requirement 2,170,307.17 1.50% 2,095,553.39 1.50%
Excess 10,491,592.74 7.25% 10,132,515.17 7.25%
Core Capital 12,661,899.91 8.75% 12,228,068.56 8.75%
Core Capital
Requirement 4,340,614.34 3.00% 4,191,106.79 3.00%
Excess 8,321,285.57 5.75% 8,036,961.17 5.75%
Core and
Supplementary
Capital 13,857,308.70 14.50% 13,380,818.51 14.55%
Current
Risk-Based Capital
Requirement. 7,643,787.68 8.00% 7,355,357.17 8.00%
Excess 6,213,521.02 6.50% 6,025,461.34 6.55%
<FN>
(1) Based upon tangible assets for purposes of the tangible
capital and core capital requirements and risk-weighted assets
for purpose of the risk-based capital requirement.
</TABLE>
<TABLE>
<CAPTION>
03-31-97 06-30-96
<S> <C> <C>
Tangible Assets - 144,687,144.08 139,703,559.53
Risk Weighted Assets - 95,547,346.04 91,941,964.70
</TABLE>
<PAGE>
ES&L BANCORP, INC.
PART II
OTHER INFORMATION
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.
Not Applicable
Item 5 - Other Information
On April 15, 1997, the Board of Directors of ES&L Bancorp,
Inc. declared a cash dividend of $0.17 per share. The total of
dividends to be paid will be $143,764. The dividend will be paid
on May 30, 1997 to stockholders of record on May 16, 1997.
Item 6 - Exhibits and Reports on Form 8-K
Not Applicable
<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.
ES&L BANCORP, INC.
S/WILLIAM A. McKENZIE
WILLIAM A. McKENZIE
President and Chief Executive Officer
(Duly Authorized Officer)
S/J. MICHAEL ERVIN
J. MICHAEL ERVIN
Sr. Vice President and Chief
Financial Officer
(Principal Financial Officer)
Date: May 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1996
<CASH> 987779
<SECURITIES> 7113085
<RECEIVABLES> 133891867
<ALLOWANCES> (1313766)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3079532
<DEPRECIATION> 0
<TOTAL-ASSETS> 145286694
<CURRENT-LIABILITIES> 131470398
<BONDS> 0
0
0
<COMMON> 8542
<OTHER-SE> 13807754
<TOTAL-LIABILITY-AND-EQUITY> 145286694
<SALES> 0
<TOTAL-REVENUES> 3223501
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 853960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1374587
<INCOME-PRETAX> 763735
<INCOME-TAX> (292024)
<INCOME-CONTINUING> 471711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 471711
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
