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 December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-18782
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
December 31, 1996
Index Page
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Statements of Financial 1
Condition as of December 31, 1996
(Unaudited) and June 30, 1996
Consolidated Statements of Income 2
(Unaudited) for the three months and six
months ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows 3
(Unaudited) for the six months ended
December 31, 1996 and 1995
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 December 31, 1996 and
June 30, 1996
Risk-Based Capital Information at December 31,
1996 and June 30, 1996
Part II - Other Information
Signatures
<PAGE>
<TABLE>
E S & L BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
12/31/1996 6/30/1996
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalent $1,925,308 $1,373,763
Investment Securities Held for Sale $ 52,670 $ 48,508
Investment Securities,
Approximate market value of $
and $2,993,573 at 12/31/96
and 6/30/96, respectively $3,351,447 $3,030,521
Mortgage-Backed Securities Held for Sal $1,716,067 $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 $5,419,402 $5,457,831
Loans Receivable, Net $127,072,315 $121,636,011
Federal Home Loan Bank Stock, at cost $1,313,100 $1,103,800
Foreclosed Real Estate-Real Estate Ownd $ 59,000 $ 90,815
Investment In Joint Venture:
Acquisition, Development
& Construction Project $612,482 $497,165
Mortgage Banking Partnership $171,699 $170,065
Property and Equipment, Net $3,092,956 $3,121,713
Accrued Interest Receivable $836,947 $793,940
Other Receivables $ 19,748 $28,217
Other Assets $627,017 $716,590
----------------------------
Total Assets $146,367,472 $140,138,518
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
Liabilities:
Deposits $105,117,941 $106,652,829
Advances -Federal Home Loan Bank
of N.Y. $25,011,157 $17,615,560
Other Borrowings $0 $0
Accrued Interest Payable:
Deposits $ 808 $ 29,125
Borrowings $72,724 $ 73,029
Advances From Borrowers For
Taxes and Insurance $2,442,240 $2,286,398
Other Liabilities $173,075 $569,432
------------ -----------
Total Liabilities $132,877,945 $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 $10,940,599 $10,334,941
Net Unrealized Gain/(Loss) on
Investments Held for Sale $48,342 $37,888
Treasury Stock (8,483 & 5,016 shares
respectively), at cost ($101,171) ($46,441)
-------------- -----------
Total Stockholders' Equity $13,489,527 $12,912,145
--------------- -------------
Total Liabilities
& Stockholders' Equity $146,367,472 $140,138,518
============================
Shares Outstanding 845,671 844,388
</TABLE>
<PAGE>
<TABLE>
E S & L BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Unaudited) (Unaudited
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income:
Loans 2,856,434 2,715,428 5,657,176 5,378,002
Investment Securities 83,643 80,458 168,664 171,023
Mortgage-Backed
Securities 31,207 49,510 70,322 102,629
Interest-Earning Deposits
& Other 2,833 3,555 4,913 7,406
------------ --------- --------- ---------
Total Interest 2,974,117 2,848,951 5,901,075 5,659,060
Interest Expense:
Deposits 1,284,405 1,303,030 2,566,775 2,586,714
Borrowings 321,539 257,459 585,592 540,128
--------------------------------------------
Total Interest 1,605,904 1,560,489 3,152,367 3,126,842
--------------------------------------------
Net Interest Income 1,368,173 1,288,462 2,748,708 2,532,218
Provision For Loan Loss 0 0 0 0
-------------------------------------------
Net Interest Income
After Provision 1,368,173 1,288,462 2,748,708 2,532,218
Other Income:
Service Fees &
Other Charges 34,281 30,812 65,745 59,835
Gain on the Sale
of Mortgages 83,345 18,471 178,743 58,862
Income From Loan Servicing 92,014 78,897 177,384 153,052
Other Operating Income 49,343 24,873 145,859 57,150
Income from Joint Venture 10,000 0 22,000 0
Profit on Sale-Investments 0 0 0 0
------------------------------------------
Total Other 268,983 153,053 589,731 327,899
Other Expenses:
Employee Compensation
& Benefits 488,091 455,872 968,845 883,764
Office Occupancy/Equipment 142,745 125,990 258,827 258,396
FDIC Premium 58,272 69,604 787,483 137,306
Other 186,081 97,213 343,269 193,262
-----------------------------------------
Total Other 875,189 748,679 2,358,424 1,472,728
-----------------------------------------
Income Before Taxes 761,967 693,836 980,015 1,387,389
Income Taxes (291,273) (278,390) ( 84,755) (551,780)
------------------------------------------
Income before
Cumulative Effect 470,694 414,446 895,260 835,609
Cumulative Effect
on prior years of change
in accounting principle 0 0 0 0
-----------------------------------------
NET INCOME $ 470,694 414,446 895,260 835,609
=========================================
Earnings Per Share:
Income before
Cumulative Effect $ 0.56 0.49 1.06 1.00
Cumulative Effect 0.00 0.00 0.00 0.00
-----------------------------------------
Total $ 0.56 0.49 1.06 1.00
=========================================
Dividend Per Common Share 0.17 0.11 .34 .22
=========================================
Average Common
Shares Outstanding 847,191 838,163 846,672 833,072
</TABLE>
<PAGE>
<TABLE>
E S & L BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHSS ENDED DECEMBER 31,
<CAPTION>
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 895,260 $ 835,609
Adjustments To
Reconcile Net Income To Net
Cash Provided From
Operating Activities:
Depreciation 96,848 87,349
Net Amortization Of
Premiums & Discounts ( 1,760) 14,683
Deferred Loan Origination Fees (21,830) (20,524)
(Income)/Loss From Joint Ventures (22,000) 4,328
Changes in Certain Assets
and Liabilities:
Mortgage Loans Held For Sale 38,429 (1,508,454)
Foreclosed Real Estate 31,815 0
Accrued Interest Receivable (43,007) (173,410)
Other Receivables 8,469 54,067
Other Assets 89,573 233,299
Accrued Interest Payable (28,622) ( 20,536)
Advances From Borrowers For
Taxes and Insurance 155,842 ( 350,456)
Other Liabilities (396,357) 479,614
-------------- --------------
Net Cash (Used For) Provided
From Operating Activities $ 802,660 $ ( 364,431)
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Net Other Increase In
Loans Receivable (5,381,948) (2,050,332)
Investment In Joint Ventures (116,951) (254,286)
Proceeds From Sale of
Foreclosed Real Estate 0 173,500
Purchase of FHLB Stock (209,300) 0
Proceeds From Maturities
of Investments 1,005,762 1,005,460
Purchase of Investment Securities(1,325,000) (1,000,000)
Change in Mark to
Market Adjustment Items (17,423) ( 16,980)
Principal Repayments On
Mortgage-Backed Securities 269,460 335,243
Purchases Of Property &
Equipment, Net (68,091) (97,732)
-------------- --------------
Net Cash Provided From
(Used For) Investing Activities $(5,843,491) $ (1,905,127)
CASH FLOWS FROM FINANCING ACTIVITIES:
Interest Credited To
Dep. Accts., Excl. Escrow Accts. 2,565,294 2,558,927
Net Other (Decrease)
Increase in Deposits (4,040,182) 869,225
Payments On Advances
From Federal Home Loan Bank (45,504,403) (48,904,136)
Proceeds From Advances
From Federal Home Loan Bank 52,900,000 48,100,000
Proceeds From Exercise
of Stock Options 16,000 52,352
Purchase of Treasury Stock (54,730) 0
Dividends Paid on Common Stock (289,603) (189,210)
-------------- --------------
Net Cash (Used For)
Provided From Financing $ 5,592,376 2,487,158
Net Increase (Decrease)
In Cash Equivalents 551,545 217,600
Cash and Cash Equivalents
At Beginning Of Period 1,373,763 1,289,525
-------------- --------------
Cash and Cash Equivalents
At End of Period $ 1,925,308 $ 1,507,125
============== ==============
</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 six
months ending December 31, 1996 and 1995 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 six months ending
December 31, 1996 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:
Dec. 31, 1996 Dec. 31, 1995
Three Months Ended 847,191 838,163
Six Months Ended 846,672 833,072
The average total shares outstanding for the three months and six
months ending December 31, 1995 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 mtual funds
providers. ES&L Mortgage Corporation is engaged in ortgage banking
activities through the origination of mortgage oans for sale to investors,
one of whom is the Bank.
FINANCIAL CONDITION:
At December 31, 1996 the Corporation's total assets were $146,367,472,
an increase of $6,228,954, or 4.44%, over total assets of $140,138,518 at
the July 1, 1996 start of the 1997 fiscal year.
The majority of the increase in assets is the result of an increase in
the Corporation's net loans receivable, which has increased by $5,436,304,
or 4.47%, to $127,072,315 during the first six months of the 1997 fiscal
year. The growth in assets has been funded by an increase in Advances from
the Federal Home Loan Bank, which have risen $7,395,597 and totaled
$25,011,157 at December 31, 1996. The Corporation's total deposits have
decreased by $1,474,888 to $105,177,941 since the start of the 1997 fiscal
year.
The Corporation's stockholders' equity was $13,489,527 at December 31,
1996, an increase of $577,382, or 4.47%, compared to $12,912,145 at June
30, 1996.
RESULTS OF OPERATIONS: QUARTER ENDING DECEMBER 31, 1996 AND
DECEMBER 31, 1995.
During the second quarter of the 1997 fiscal year the Corporation's
net interest income was $1,368,173, an increase of $79,711, or 6.19%,
<PAGE>
compared to $1,288,462 for the same quarter a year ago.
The Corporation recorded interest income of $2,974,117 for the three
months ending December 31, 1996, an increase of $125,166, or 4.39%
compared to $2,848,951 earned during the same quarter of the previous
fiscal year. The majority of the Corporation's interest income is
provided by the Corporation's loan portfolio. During the second quarter of
the 1997 fiscal year, interest income earned on the loan portfolio
increased by $141,006, or 5.19%, to $2,856,434, compared to $2,715,428 for
the same quarter a year ago. The increase was prompted by a rise in the
average balance of the loan portfolio and despite a 14 basis point decline
in the average yield of the portfolio. For the three months ending
December 31, 1996 the average balance of the loan portfolio was $133.2
million (yielding 8.58%), while during the three months ending December
31, 1995, it totaled $124.5 million (yielding 8.72%). The Corporation
recognized a reduction in interest income from its mortgage-backed security
(MBS) portfolio, which resulted from a decrease in the average balance and
average yield of the portfolio. The average balance of the MBS portfolio
was $2.5 million (yielding 7.89%) and $1.9 million (yielding 6.73%) for the
three months ending December 31, 1995 and 1996, respectively. During the
second quarter of the 1997 the Corporation earned $31,207 from the MBS
portfolio, a decrease of $18,303, compared to the same period a year ago.
The Corporation's total interest expense increased by $45,455, or
2.91%, to $1,605,944 for the quarter ending December 31, 1996 compared to
$1,560,489 for the comparable period. Interest paid on deposits decreased
during the 1996 quarter by $18,625, or 1.43%, to $1,284,405, compared to
$1,303,030 for the three months ending December 31, 1995. The reduction is
largely attributable to a 17 basis point decrease in the average rate paid
to depositors, which more than offset a $2.2 million increase in the
average balance of deposits outstanding. For the quarter ending December
31, 1996 average deposits totaled $108.0 million (costing 4.76%), compared
to $105.8 million (costing 4.93%) for the comparable 1995 quarter.
Conversely, a $5.4 million increase in the average balance of the
Corporation's borrowings (advances form the Federal Home Loan Bank of New
York ) resulted in an increase in interest expense paid on borrowings,
despite a 25 basis point decrease in the average cost. During the three
months ending December 31, 1996 interest paid on borrowings totaled
$321,539, an increase of $64,080, or 24.89%, compared to $257,459 for the
three months ending December 31, 1995. Average borrowings outstanding were
$23.0 million (costing 5.59%) and $17.6 million (costing 5.84%) for the
quarters ending December 31, 1996 and 1995, respectively. Total borrowings
have increased inasmuch as the Corporation has determined that, at the
present time, this is a more cost effective means of funding the growth in
its' loan portfolio.
The Corporation's total other income for the quarter ending December
31, 1996 was $268,983, an increase of $115,930, or 75.75%, when compared to
$153,053 for the same period a year ago. The majority of the increase
resulted from an increase in gains on the sale of mortgages, which
increased $64,874, to $83,345, for the current quarter, compared to $18,471
for the quarter ending December 31, 1995. Of the increase, approximately
$45,000 is related to an accounting change regarding the recognition of
<PAGE>
mortgage servicing rights of loans sold by the Corporation during this
quarter. The mandated change, Financial Accounting Standard 122 (FAS 122)
was not in effect during the comparable quarter and therefore no comparable
income was recorded during the quarter ending December 31, 1995. Income
recorded as a result of loan servicing was $92,014 during the December 1996
quarter, an increase of $13,117 compared to $78,897 during the comparable
quarter. The increase is the result of an increase in the balances of
mortgages serviced, during the 1996 period, for which the Corporation is
paid a fee. The Corporation's other operating income increased by $24,470
to $49,343 for the three months ending December 31, 1996, compared to
$24,873 for the same period in 1995. The majority of the increase results
from increased commissions earned by Brilie Corporation d/b/a ES&L
Financial Services. Commissions from the sales of non-insured investment
and insurance products increased by nearly $13,500 to approximately
$36,000. Additionally, ES&L Mortgage Corporation's joint mortgage banking
partnership, PACE Funding, generated approximately $6,900 of revenue for
the subsidiary during the December 1996 quarter, compared to a loss of
approximately $600 during the comparative period, which represented PACE
Funding's first full quarter of operation. Income from the Corporation's
unconsolidated land development joint venture was $10,000 for the quarter
ending December 31, 1996. No income was earned during the comparable
period a year ago. Income is earned as lot sales occur from the real
property owned by the partnership.
Total expenses of the Corporation increased $126,510, or 16.90% to
$875,189 for the quarter ending December 31, 1996, compared to $748,679 for
the comparative quarter. Employee compensation and benefit expense was
$488,091 for the current quarter, an increase of $32,219, or 7.07%, over
the same period a year ago. The increase reflects annual salary
adjustments, an increase in the expense related to the Corporation's
Officer/Manager bonus plan, which is related to the Corporation's net
income, and to increases in the expense related to employee benefits.
Office occupancy and equipment expense increased by $16,755 to $142,745
for the quarter ending December 31, 1996, compared to $125,990 during the
comparative period. The majority of the increase is related to the Bank's
decision to expense certain equipment purchases under applicable IRS
regulations. The expense related to federal insurance of customer's
deposits decreased by $11,332 to $58,272 during the current period. The
decrease is the result of a credit issued to the Bank for an overpayment on
prepaid insurance premiums as a result of the final passage of the federal
legislation to recapitalize the Savings Association Insurance Fund. The
Corporation's other expenses totaled $186,081 during the December 1996
quarter, an increase of $88,868, over expenses totaling $97,213 during the
comparable 1995 quarter. The majority of the increase, $42,000, is related
to the Corporation's mortgage banking activities, including $28,200 related
to the purchase of loans from PACE Funding, ES&L Mortgage Corporation's
unconsolidated mortgage banking partnership. Also included are losses
expended by the Corporation resulting from the write down ($14,000) on the
value of the Corporation's foreclosed real estate.
The Corporation's tax expense increased by $12,883, or 4.63%, to
$291,273 for the December 1996 quarter compared to $278,390 during the
comparative period. This increase is the result of an increase in net
<PAGE>
income before taxes.
RESULTS OF OPERATIONS: SIX MONTHS ENDING DECEMBER 31, 1996 AND
DECEMBER 31, 1995.
Net interest income earned by the Corporation for the six months
ending December 31, 1996 was $2,748,708, an increase of $216,490 over
interest income of $2,532,218 earned during the comparable quarter.
Interest income for the first half of the 1997 fiscal year increased
by $242,015, or 4.28% and totaled $5,901,075 for the six month 1996 period,
compared to $5,659,060 for the same period a year earlier. Interest earned
on the Corporation's loan portfolio increase by $279,174, or 5.19%, to
$5,657,176 for the current period. During the comparable six month period
interest income generated by the loan portfolio totaled $5,378,002. The
increase in interest earnings was the result of a $7.3 million increase in
the average balance of the portfolio, which rose from an average of $124.4
million for the six month 1995 period to $131.7 for the same period during
the current fiscal year. The volume increase more than offset a 6 basis
point decrease in the average yield earned on the portfolio. A decreasing
average balance and average yield prompted lower interest earnings from the
Corporation's mortgage-backed security (MBS) portfolio. For the six
months ending December 31, 1996 the average balance of the portfolio was
$2.1 million (yielding 6.84%) while for the comparable period the average
balance was $2.6 million (yielding 7.91%). Interest earned on the
portfolio for the six months ending December 31, 1996 was $70,322, a
decrease of $32,307 from interest earnings totaling $102,629 for the same
period a year ago.
Interest paid by the Corporation for deposits and borrowings increased
by $25,525, or 0.82%, to $3,152,367 for the six months ending December 31,
1996. Interest paid on deposits decreased by $19,939, or 0.77%, to
$2,566,775 for the six month 1996 period, compared to deposit interest
expense totaling $2,586,714 for the same six month period during 1995. The
decrease was prompted by a 17 basis point decline in the average cost of
the deposits which, in total, more than offset the additional expense
generated by a $3.0 million increase in the average balance of deposits
outstanding. For the six months ending December 31, 1996 the average
balance of deposits outstanding was $108.7 million (costing 4.72%),
compared to $105.7 million (costing 4.89%) for the six months ending
December 31, 1995. Interest paid on the Corporation's borrowings totaled
$585,592 for the six months ending December 31, 1996, an increase of
$45,464, or 8.42%, over interest expense of $540,128 paid on borrowings
during the comparable period. The increase was prompted by a $2.5 million
increase in the average balance of borrowings outstanding during the
current year six month period which more than exceeded any savings derived
from the 26 basis point decrease in the average cost of borrowings.
Average borrowings outstanding were $21.1 million (costing 5.55%) and $18.6
million (costing 5.81%) for the six months ending December 31, 1996 and
1995, respectively.
Other income earned by the Corporation during the six months ending
December 31, 1996 was $589,731, an increase of $261,832 when compared to
<PAGE>
the same six month period the year earlier. The majority of the increase
is the result of an increase in gains on the sale of mortgages, which rose
from $58,862 for the 1995 six month period to $178,743 during the current
year. Of the $119,881 increase approximately $113,300 is the result of an
accounting change (Financial Accounting Standard 122) regarding the
recognition of mortgage servicing rights on loans sold by the Corporation.
The accounting change was not in effect for the Corporation until the start
of this fiscal year and therefore no comparable income was included during
the comparative six month period of the last fiscal year. Income earned by
the Corporation for servicing mortgages in the secondary mortgage market
increased by $24,332 to $177,384 during the six months ending December 31,
1996, compared to $153,052 for the same period during the comparable
period. The increase in servicing income is directly related to increased
balances of serviced mortgages outstanding. Other income earned by the
Corporation totaled $145,859 during the six months ending December 31,
1996, an increase of $88,709, more than double the $57,150 recorded during
the same period a year ago. The increase was primarily the result of
increased income generated through two of the Corporation's subsidiaries.
ES&L Mortgage Corporation earned processing fees and net income from PACE
Funding, its unconsolidated mortgage banking partnership, of approximately
$35,000 during the 1996 six month period, as compared to approximately $300
of revenue during the 1995 six month period. PACE Funding became
operational during the six month 1995 period. ES&L Financial Services
,which offers non-insured investment and insurance products, recognized an
increase in commission income of approximately $27,000 when comparing the
1996 and 1995 six month periods. Total sales by the subsidiary provided
approximately $64,000 of commission income to the Corporation.
Additionally, during the 1996 period the Corporation received $35,000 as
settlement of a deficiency judgment obtained in a foreclosure action dating
back to 1989. The Corporation's unconsolidated land development joint
venture provided $22,000 in income during the six months ending December
1996. No income was earned by the partnership during the comparable 1995
period. Income is generated as lot sales occur from the real estate owned
by the partnership.
The Corporation's other expenses have increased by $885,696 to
$2,358,424 for the six months ending December 31, 1996. The majority of
the increase, $650,177, is the result of increased insurance premiums paid
for federal deposit insurance which was prompted by a one time insurance
special assessment, of approximately $657,000, paid by the Corporation as
part of the enactment of federal legislation to recapitalize the Savings
Association Insurance Fund (SAIF). The assessment was charged to all those
institutions, including Elmira Savings & Loan, F.A., whose deposits are
insured by this Fund. As part of the legislation, the Bank's future
insurance premiums will be reduced from $0.230 per hundred of deposits to
$0.064 per hundred. Management expects the reduction in future premiums to
allow it to recapture the one time special assessment over the next several
years, but more importantly, to reduce its deposit insurance costs to a
level more in line with its competitors, the majority of which are insured
by the Bank Insurance Fund (BIF). Presently BIF charges its members
virtually no premium. Employee compensation and benefit expense was
$968,845 for the six months ending December 1996, an increase of $85,081
compared to $883,764 for the same period during the previous fiscal year.
<PAGE>
The increase is the result of annual salary adjustments, an increase in
expense related the Corporation's Officer/Manager bonus plan, which is
related to net income, as well as an increase in the cost of employee
benefits. The Corporation's other expense increased $150,007 to $343,269
for the six months ending December 1996, compared to $193,262 for the six
months ending December 1995. The majority of the increase, approximately
$88,000 is related to the Corporation's mortgage banking operations,
including approximately $45,000 related to the purchase of loans originated
by PACE Funding. The Corporation's stationery, printing and office supply
expenses have increased by approximately $6,700 and advertising and public
relations expenses, primarily as a result of the new "cashless" deposit
office in Ithaca, have increased by approximately $8,500 over the same
period during the comparative period. Also included during the 1996 period
are expenses from the write down ($14,000) of the value of the
Corporation's real estate owned through foreclosure.
The Corporation's income tax provision for the six months ending
December 1996 was $84,755, a reduction of $467,025, over the same six month
period a year ago. 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 the first quarter of the 1997 fiscal year. Additionally,
the Corporation's provision for the first six months of the 1997 fiscal
year has decreased as a result of a $407,374 decrease in pre-tax income
when compared to the same six month 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 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 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 June 30, 1996 and
Decemberr 31, 1996, respectively:
<TABLE>
<CAPTION>
12-31-96 06-30-96
<S> <C> <C>
Loans accounted for on a
non-accrual basis:
Real Estate:
Residential 276,546.21 176,550.48
Commercial 0.00 0.00
Consumer/Home Equity 31,661.61 46,103.24
Commercial(Non-Mortgage) 46,717.92 0.00
Education 0.00 0.00
Consumer 9,079.36 0.00
Other 0.00 0.00
Total 364,005.10 222,653.72
Accuring loans which are
contractually past due
90 days or more:
Real Estate:
Residential 161,954.91 70,368.27
Commercial 0.00 0.00
Consumer/Home Equity 0.00 0.00
Commercial (Non-Mortgage) 6,265.30 0.00
Education 0.00 0.00
Consumer 0.00 9,862.24
Other 0.00 0.00
Total 168,220.21 80,230.51
Total of non-accrual &
90 days past due loans 532,225.31 302,884.23
Percentage of total loans 0.40% .24%
Other non-performing
assets 59,000.00 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 December 31, 1996 and June 30, 1996
respectively:
<CAPTION>
12-31-96 06-30-96
PERCENT PERCENT
OF OF
AMOUNT ASSETS (1) AMOUNT ASSETS (1)
<S> <C> <C> <C> <C>
Tangible Capital 12,244,157.13 8.40% 12,228,068.56 8.75%
Tangible Capital
Requirement 2,187,324.58 1.50% 2,095,553.39 1.50%
Excess 10,056,832.55 6.90% 10,132,515.17 7.25%
Core Capital 12,244,157.13 8.40% 12,228,068.56 8.75%
Core Capital
Requirement 4,374,649.15 3.00% 4,191,106.79 3.00%
Excess 7,869,507.98 5.40% 8,036,961.17 5.75%
Core and
Supplementary
Capital 13,440,738.22 14.06% 13,380,818.51 14.55%
Current
Risk-Based Capital
Requirement. 7,647,100.75 8.00% 7,355,357.17 8.00%
Excess 5,793,637.47 6.06% 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>
12-31-96 06-30-96
<S> <C> <C>
Tangible Assets - 145,831,638.35 139,703,559.53
Risk Weighted Assets - 95,588,759.33 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.
(a) The registrant held its 1996 annual meeting of stockholders on
Wednesday, October 23, 1996.
(b) This item is inapplicable since (i) proxies for the
registrant's annual meeting were solicited pursuant to
Regulation 14 under the Securities Exchange Act of 1934,
(ii) there was no solicitation in opposition to management's
nominees as listed in the proxy statement and (iii) all of
such nominees were elected.
(c) The matters voted upon at the annual meeting were: (i) the
election of directors; and (ii) the ratification of the
appointment of Mengel, Metzger, Barr & Co., LLP as
independent auditors for the Corporation for the fiscal
year ending June 30, 1997.
1. Election of Directors:
For Against
Gerald F. Schichtel 694,437 505
Robert E. Butler 694,437 505
William A. McKenzie 694,437 505
2. Ratification of Appointment of Auditors:
For Against Abstain
690,357 225 5,492
(d) This item is inapplicable since the registrant's stockholders
did not receive any solicitation subject to Rule 14a-11 in
connection with the annual meeting.
<PAGE>
Item 5 - Other Information
On January 21, 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 February 28, 1997 to stockholders of record on February 14,
1997.
On November 13, 1996, Elmira Savings & Loan, F.A. opened a
deposit taking office in Ithaca, New York, within the offices of
its mortgage banking subsidiary, ES&L Mortgage Corporation, d/b/a
Cayuga Mortgage Company. The primary goal of the office, which is
staffed by one full-time bank employee, is to open transaction and
certificate of deposit accounts. Elmira Savings & Loan, F.A.
received approval from the Office of Thrift Supervision on November
29, 1995 to open the deposit taking office.
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: February 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1925308
<SECURITIES> 6530598
<RECEIVABLES> 134662956
<ALLOWANCES> (1334292)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3092956
<DEPRECIATION> 0
<TOTAL-ASSETS> 146367472
<CURRENT-LIABILITIES> 132877945
<BONDS> 0
0
0
<COMMON> 8542
<OTHER-SE> 13480985
<TOTAL-LIABILITY-AND-EQUITY> 146367472
<SALES> 0
<TOTAL-REVENUES> 3243100
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 875189
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1605944
<INCOME-PRETAX> 761967
<INCOME-TAX> (291273)
<INCOME-CONTINUING> 470694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 470694
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
