<PAGE>
================================================================================
UNITED STATES 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 Quarter Ended: March 31, 2000
--------------
Commission File Number: 0-19345
-------
ESB FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1659846
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Lawrence Avenue, Ellwood City, PA 16117
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(724) 758-5584
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark 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 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. X Yes ______ No
-----
Number of shares of common stock outstanding as of April 28, 2000:
Common Stock, $0.01 par value 5,550,915 shares
----------------------------- ----------------
(Class) (Outstanding)
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<PAGE>
ESB FINANCIAL CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of March 31, 2000 (Unaudited) and December 31, 1999....... 1
Consolidated Statements of Operations for the three
months ended March 31, 2000 and 1999 (Unaudited)............. 2
Consolidated Statements of Changes in Stockholders' Equity
for the three months ended March 31, 2000 (Unaudited)........ 3
Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999 (Unaudited)............. 4
Notes to Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations............. 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk... 18
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings............................................ 19
Item 2. Changes in Securities........................................ 19
Item 3. Defaults Upon Senior Securities.............................. 19
Item 4. Submission of Matters to a Vote of Security Holders.......... 19
Item 5. Other Information............................................ 19
Item 6. Exhibits and Reports on Form 8-K............................. 19
Signatures................................................... 20
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- ------------------------------
ESB Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
As of March 31, 2000 (Unaudited) and December 31, 1999
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
--------------- ---------------
<S> <C> <C>
Assets
------
Cash on hand and in banks $ 3,498 $ 6,712
Interest-earning deposits 9,769 5,780
Federal funds sold 2,630 269
Securities available for sale; amortized cost of $603,579 and $579,046 589,393 561,125
Loans receivable, net of allowance for loan losses of $4,915 and $4,823 471,589 393,929
Accrued interest receivable 7,304 6,871
Federal Home Loan Bank (FHLB) stock 19,308 18,435
Premises and equipment, net 7,742 6,880
Real estate acquired through foreclosure, net 90 71
Prepaid expenses and other assets 17,287 16,589
Bank owned life insurance 15,986 15,784
--------------- ---------------
Total assets $ 1,144,596 $ 1,032,445
=============== ===============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits $ 498,300 $ 431,783
Borrowed funds 315,643 317,636
Reverse repurchase agreements 235,469 201,920
Guaranteed preferred beneficial interest in subordinated debt, net 24,082 24,071
Advance payments by borrowers for taxes and insurance 4,456 3,339
Accrued expenses and other liabilities 6,982 3,814
--------------- ---------------
Total liabilities 1,084,932 982,563
--------------- ---------------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
none issued - -
Common stock, $.01 par value, 10,000,000 shares authorized; 6,936,317 and
6,337,755 shares issued; 5,541,814 and 5,102,655 shares outstanding 69 63
Additional paid-in capital 67,750 59,686
Treasury stock, at cost; 1,394,503 and 1,235,100 shares (20,667) (19,214)
Unearned Employee Stock Ownership Plan (ESOP) shares (3,810) (3,076)
Unvested shares held by Management Recognition Plan (MRP) (237) (237)
Retained earnings, substantially restricted 25,922 24,488
Accumulated other comprehensive loss, net (9,363) (11,828)
--------------- ---------------
Total stockholders' equity 59,664 49,882
--------------- ---------------
Total liabilities and stockholders' equity $ 1,144,596 $ 1,032,445
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
ESB Financial Corporation and Subsidiaries
Consolidated Statements of Operations
For the three months ended March 31, 2000 and 1999 (Unaudited)
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
-------- --------
<S> <C> <C>
Interest income:
Loans receivable $ 8,395 $ 6,955
Securities available for sale 9,590 7,272
Securities held to maturity - 846
FHLB stock 318 296
Deposits with banks and federal funds sold 84 62
-------- --------
Total interest income 18,387 15,431
-------- --------
Interest expense:
Deposits 4,976 4,397
Borrowed funds and reverse repurchase agreements 8,122 6,662
Guaranteed preferred beneficial interest in subordinated debt 557 557
-------- --------
Total interest expense 13,655 11,616
-------- --------
Net interest income 4,732 3,815
(Recovery of) provision for loan losses (452) 3
-------- --------
Net interest income after (recovery of) provision for loan losses 5,184 3,812
-------- --------
Noninterest income:
Fees and service charges 334 330
Net realized gain on sales of securities available for sale 4 215
Increase of cash surrender value of bank owned life insurance 202 176
Other 125 16
-------- --------
Total noninterest income 665 737
-------- --------
Noninterest expense:
Compensation and employee benefits 1,950 1,620
Premises and equipment 452 363
Federal deposit insurance premiums 26 69
Data processing 162 112
Other 758 808
-------- --------
Total noninterest expense 3,348 2,972
-------- --------
Income before provision for income taxes 2,501 1,577
Provision for income taxes 578 222
-------- --------
Net income $ 1,923 $ 1,355
======== ========
Net income per share:
Basic $ 0.37 $ 0.27
Diluted $ 0.37 $ 0.26
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ESB Financial Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For the three months ended March 31, 2000 (Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
other
Additional Unearned Unvested comprehensive Total
Common paid-in Treasury ESOP MRP Retained income (loss) stockholders'
stock capital stock shares shares earnings net of tax equity
------ -------- --------- -------- ------ -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 63 $ 59,686 $ (19,214) $ (3,076) $ (237) $ 24,488 $ (11,828) $ 49,882
Comprehensive results:
Net income - - - - - 1,923 - 1,923
Other comprehensive results, net - - - - - - 2,530 2,530
Reclassification adjustment - - - - - - (65) (65)
------ -------- --------- -------- ------ -------- ----------- ------------
Total comprehensive results - - - - - 1,923 2,465 4,388
Common stock issued as a result
of the acquisition of SHS
Bancorp, Inc. (SHS) 6 8,065 - (888) - - - 7,183
Cash dividends at $0.09 per share - - - - - (452) - (452)
Purchase of treasury stock, at
cost (127,303 shares) - - (1,523) - - - - (1,523)
Reissuance of treasury stock
for stock options exercised - - 70 - - (37) - 33
Principal payments on ESOP debt - (1) - 154 - - - 153
------ -------- --------- -------- ------ -------- ----------- ------------
Balance at March 31, 2000 $ 69 $ 67,750 $ (20,667) $ (3,810) $ (237) $ 25,922 $ (9,363) $ 59,664
====== ======== ========= ======== ====== ======== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ESB Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the three months ended March 31, 2000 and 1999 (Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 1,923 $ 1,355
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization for premises and equipment 175 140
(Recovery of) provision for losses (451) 7
Amortization of premiums and accretion of discounts 16 558
Origination of loans available for sale (297) (5,585)
Proceeds from sale of loans available for sale 302 4,918
Net gain on sale of securities available for sale (4) (215)
Amortization of intangible assets 174 150
Compensation expense on ESOP 153 116
Increase in accrued interest receivable 131 383
Decrease (increase) in prepaid expenses and other assets 961 (546)
Increase in accrued expenses and other liabilities 2,032 699
Other (441) 6
-------- --------
Net cash provided by operating activities 4,674 1,986
-------- --------
Investing activities:
Loan originations and purchases (35,622) (28,296)
Purchases of securities available for sale (48,673) (64,754)
Purchases of FHLB stock (246) -
Additions to premises and equipment (116) (504)
Principal repayments of loans receivable 19,197 29,299
Principal repayments of securities available for sale 16,352 30,929
Principal repayments of securities held to maturity - 5,443
Proceeds from the sale of securities available for sale 31,076 21,611
Proceeds from sale of REO - 15
Payment for purchase of SHS, net of cash acquired (3,082) -
-------- --------
Net cash used in investing activities (21,114) (6,257)
-------- --------
Financing activities:
Net decrease in deposits (915) (35)
Proceeds from long-term borrowings 51,600 10,000
Repayments of long-term borrowings (75,617) (22,970)
Net increase in short-term borrowings 46,459 18,401
Proceeds received from exercise of stock options 33 105
Dividends paid (461) (474)
Payments to acquire treasury stock (1,523) (646)
Stock purchased by ESOP - (39)
-------- --------
Net cash provided by financing activities 19,576 4,342
-------- --------
Net increase in cash equivalents 3,136 71
Cash equivalents at beginning of period 12,761 10,303
-------- --------
Cash equivalents at end of period $ 15,897 $ 10,374
======== ========
</TABLE>
Continued.
4
<PAGE>
ESB Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows, (Continued)
For the three months ended March 31, 2000 and 1999 (Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999
-------- --------
<S> <C> <C>
Supplemental information:
Interest paid $ 14,830 $ 11,593
Income taxes paid 385 90
Non-cash transactions:
Transfers from loans receivable to real estate acquired
through foreclosure 19 -
Dividends declared but not paid 505 473
Supplemental schedule of non-cash investing and financing activities:
The Company purchased all of the common stock of SHSBC for $14.5
million. In conjunction with the acquisition, the assets
acquired and liabilities assumed were as follows:
Fair value of assets acquired $ 91,550 -
Stock and stock options issued for the purchase of SHSBC
common stock (8,071) -
Cash paid for SHSBC common stock (6,448) -
Liabilities assumed (79,116) -
-------- --------
Excess liabilities assumed over assets acquired $ (2,085) -
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
ESB Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Presentation
ESB Financial Corporation (the "Company") is a thrift holding company. The
consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary savings banks, ESB Bank, F.S.B. ("ESB Bank")
and Spring Hill Savings Bank, F.S.B. ("Spring Hill") (collectively the
"Banks"), and its other subsidiaries, PennFirst Financial Services, Inc.,
PennFirst Capital Trust I, THF, Inc. and AMSCO, Inc.
The accompanying unaudited consolidated financial statements for the
interim periods include all adjustments, consisting only of normal
recurring accruals, which are necessary, in the opinion of management, to
fairly reflect the Company's financial position and results of operations.
Additionally, these consolidated financial statements for the interim
periods have been prepared in accordance with instructions for the
Securities and Exchange Commission's Form 10-Q and therefore do not include
all information or footnotes necessary for a complete presentation of
financial condition, results of operations and cash flows in conformity
with generally accepted accounting principles. For further information,
refer to the audited consolidated financial statements and footnotes
thereto for the year ended December 31, 1999, as contained in the 1999
Annual Report to Stockholders.
The results of operations for the three month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the
entire year. Certain amounts previously reported have been reclassified to
conform with the current year's reporting format.
2. Subsequent Event
On April 18, 2000, the Board of Directors declared a 10% stock dividend to
stockholders of record on May 17, 2000 and payable on May 31, 2000.
3. Acquisition
On February 10, 2000, the Company completed its acquisition of SHS Bancorp,
Inc. ("SHS") and its subsidiary, Spring Hill, based in Pittsburgh,
Pennsylvania. Spring Hill is a community savings bank that offers a variety
of financial products and services through four branch offices that operate
in Allegheny County, Pennsylvania.
The acquisition was accounted for under the purchase method of accounting.
Under the terms of the merger agreement, SHS merged with and into the
Company. The consideration paid by the Company in connection with the
acquisition consisted of $6.4 million in cash and 599,000 shares of the
Company's common stock. In addition, options to purchase shares of SHS were
converted into options to acquire 43,000 shares of the Company's common
stock.
At March 31, 2000, Spring Hill had total assets of $91.0 million, including
$60.1 million in net loans receivable, and total liabilities of $81.3
million, including $66.0 million in customer deposits. Goodwill arising
from this transaction was $2.1 million. Goodwill is amortized on a
straight-line basis over 15 years.
Pro forma combined historical results of operations for the current year up
to the most recent interim statement of financial condition date as though
the Company and Spring Hill had combined at the beginning of the year are
presented below. These unaudited condensed pro forma combined statements of
operations are presented as if the acquisition had been effective on
January 1, 2000 and 1999, respectively.
6
<PAGE>
The unaudited condensed pro forma combined statements of operations for the
three months ended March 31, 2000 combines Spring Hill's results of
operations for the period January 1, 2000 through February 10, 2000, and
the Company's results of operations for the three months ended March 31,
2000, which include Spring Hill's results of operations from February 10,
2000 to March 31, 2000. The unaudited condensed pro forma combined
statements of operations include the estimated effect of a pro forma
adjustment for the amortization of goodwill attributed to the merger that
would have been realized had the acquisition actually occurred at the
beginning of the respective periods.
The unaudited condensed pro forma combined statement of operations
information is intended for informational purposes only and is not
necessarily indicative of the future results of operations of the Company,
or results of operations that would have actually occurred had the
acquisition been in effect for the periods presented.
The unaudited condensed pro forma combined statements of operations for the
three month periods ended March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data) Pro Forma Pro Forma
combined for the combined for the
three months ended three months ended
March 31, 2000 March 31, 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income $ 18,933 $ 17,099
Interest expense 13,962 12,530
------------ ------------
Net interest income before (recovery of)
provision for loan losses 4,971 4,569
(Recovery of) provision for loan
losses (402) 11
------------ ------------
Net interest income after (recovery of)
provision for loan losses 5,373 4,558
Other operating income 671 764
Other operating expenses 3,512 3,544
------------ ------------
Income before provision
for income taxes 2,532 1,778
Provision for income taxes 603 314
------------ ------------
Net income $ 1,929 $ 1,464
============ ============
Earnings per share
Basic $ 0.36 $ 0.26
Diluted $ 0.35 $ 0.25
----------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
4. Securities
The Company's securities available for sale portfolio is summarized as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(In thousands) Amortized Unrealized Unrealized Fair
cost gains losses value
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
------------------
As of March 31, 2000:
Trust Preferred securities $ 2,768 $ - $ (487) $ 2,281
U.S. Government securities 19,981 15 (578) 19,418
Municipal securities 88,694 496 (3,998) 85,192
Equity securities 2,717 30 (585) 2,162
Corporate Bonds 57,486 448 (358) 57,576
Mortgage-backed securities 431,933 583 (9,752) 422,764
--------- --------- ---------- ---------
$ 603,579 $ 1,572 $ (15,758) $ 589,393
========= ========= ========== =========
As of December 31, 1999:
Trust Preferred securities $ 3,274 $ - $ (443) $ 2,831
U.S. Government securities 22,980 - (641) 22,339
Municipal securities 89,597 741 (4,871) 85,467
Equity securities 2,682 75 (450) 2,307
Corporate Bonds 52,664 - (1,351) 51,313
Mortgage-backed securities 407,849 666 (11,647) 396,868
--------- --------- ---------- ---------
$ 579,046 $ 1,482 $ (19,403) $ 561,125
========= ========= ========== =========
------------------------------------------------------------------------------------------
</TABLE>
5. Loans Receivable
The Company's loans receivable as of the respective dates are summarized as
follows:
--------------------------------------------------------------------------
March 31, December 31,
(In thousands) 2000 1999
--------------------------------------------------------------------------
Mortgage loans:
Residential - single family $ 300,432 $ 249,966
Residential - multi family 15,679 15,035
Commercial real estate 58,536 39,171
Construction 47,902 42,935
--------- ---------
422,549 347,107
Other loans:
Consumer loans 62,128 59,351
Commercial business 10,279 8,884
--------- ---------
494,956 415,342
Less:
Allowance for loan losses 4,915 4,823
Deferred loan fees and net discounts 1,295 858
Loans in process 17,157 15,732
--------- ---------
$ 471,589 $ 393,929
========= =========
-------------------------------------------------------------------------
8
<PAGE>
6. Deposits
The Company's deposits as of the respective dates are summarized as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands) March 31, 2000 December 31, 1999
---------------------------------- -----------------------------------
Weighted Weighted
average average
Type of accounts rate Amount % rate Amount %
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits - $ 9,601 1.9% - $ 8,094 1.9%
Interest-bearing demand deposits 2.48% 187,259 37.6% 2.47% 166,448 38.5%
Time deposits 5.48% 301,440 60.5% 5.37% 257,241 59.6%
--------- ----- --------- -----
4.31% $ 498,300 100.0% 4.23% $ 431,783 100.0%
========= ===== ========= =====
Time deposits mature as follows:
Within one year $ 200,701 40.3% $ 178,944 41.4%
After one year through two years 49,656 10.0% 40,709 9.4%
After two years through three years 28,578 5.7% 15,213 3.5%
Thereafter 22,505 4.5% 22,375 5.2%
--------- ----- --------- -----
$ 301,440 60.5% $ 257,241 59.6%
========= ===== ========= =====
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
7. Borrowed Funds
The Company's borrowed funds as of the respective dates are summarized as
follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands) March 31, 2000 December 31, 1999
---------------------- ----------------------
Weighted Weighted
average average
rate Amount rate Amount
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FHLB advances:
Due within 12 months 6.30% $ 175,822 6.17% $ 179,044
Due beyond 12 months but within 2 years 5.59% 31,263 5.46% 48,707
Due beyond 2 years but within 3 years 6.13% 102,537 6.09% 53,435
Due beyond 3 years but within 4 years 6.89% 1,655 5.89% 35,655
Due beyond 4 years but within 5 years 8.31% 55 8.31% 55
Due beyond 5 years 6.61% 4,154 7.05% 571
--------- ---------
315,486 317,467
Treasury tax and loan note payable 5.76% 157 5.20% 169
--------- ---------
$ 315,643 $ 317,636
========= =========
Reverse repurchase agreements:
Due within 12 months 5.82% $ 77,829 5.55% $ 65,880
Due beyond 12 months but within 2 years 6.01% 82,000 5.82% 72,000
Due beyond 2 years but within 3 years 6.17% 64,640 6.05% 64,040
Due beyond 3 years but within 4 years 7.30% 11,000 -
--------- ---------
$ 235,469 $ 201,920
========= =========
-----------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
8. Net Income Per Share
The following table summarizes the Company's net income per share.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
(amounts, except earnings per share, in thousands)
-----------------------------------------------------------------------------------------------------
Three Months Three Months
Ended Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net income $ 1,923 $ 1,355
Weighted-average common shares outstanding 5,155 5,034
-------------- --------------
Basic earnings per share $ 0.37 $ 0.27
============== ==============
Weighted-average common shares outstanding 5,155 5,034
Common stock equivalents due to effect of stock options 89 157
-------------- --------------
Total weighted-average common shares and equivalents 5,244 5,191
Diluted earnings per share $ 0.37 $ 0.26
============== ==============
-----------------------------------------------------------------------------------------------------
</TABLE>
Options to purchase 62,085 shares of common stock at $18.00 per share and
78,605 shares of common stock at $14.00 per share were outstanding as of
March 31, 2000 but were not included in the computation of diluted earnings
per share because the options' exercise price was greater than the average
market price of common shares. The options expire on June 30, 2008 and June
30, 2009. Options to purchase 63,735 shares of common stock at $18.00 per
share were outstanding as of March 31, 1999 but were not included in the
computation of diluted earnings per share because the options' exercise
price was greater than the average market price of common shares. The
options expire on June 30, 2008.
9. Comprehensive Income
In complying with FAS No. 130, "Reporting Comprehensive Income", the
Company has developed the following table which includes the tax effects of
the components of other comprehensive income (loss). Other comprehensive
income (loss) consists of net unrealized gain on securities available for
sale. Other comprehensive income and related tax effects for the three
months ended March 31 consists of:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
(in thousands) 2000 1999
---------------------------------------------------------------------------------------
Unrealized Reclassification Unrealized Reclassification
Gain Adjustment Gain Adjustment
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Before tax amount $ 3,834 $ (99) $ 2,619 $ 57
Tax (expense) benefit (1,304) 34 (903) (10)
----------- ---------------- ---------- ----------------
After tax amount $ 2,530 $ (65) $ 1,716 $ 47
=========== =============== ========== ================
---------------------------------------------------------------------------------------
</TABLE>
Total comprehensive income for the three months ended March 31, 2000 and
1999 was $4.4 million and $3.1 million, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
CHANGES IN FINANCIAL CONDITION
General. The Company's total assets increased by $112.2 million or 10.9% to $1.1
billion at March 31, 2000 from $1.0 billion at December 31, 1999. This net
increase was primarily the result of the acquisition of SHS Bancorp, Inc. ("the
acquisition") on February 10, 2000. Cash and cash equivalents, securities, loans
receivable, accrued interest receivable, Federal Home Loan Bank stock, premises
and equipment, and prepaid expenses and
10
<PAGE>
other assets increased $3.1 million, $28.3 million, $77.7 million, $433,000,
$873,000, $862,000 and $698,000, respectively. Bank owned life insurance
increased $202,000 because of an increase in cash surrender value. The increase
in total assets reflects a corresponding increase in total liabilities and
stockholders' equity of $102.4 million or 10.4% and $9.8 million or 19.6%,
respectively. The increase in total liabilities was primarily the result of
increases in deposits, borrowed funds, advance payments by borrowers for taxes
and insurance, and accrued expenses and other liabilities of $66.5 million,
$31.6 million, $1.1 million and $3.2 million, respectively. The increase in
stockholders' equity was the result of increases in common stock, additional
paid in capital, retained earnings and accumulated other comprehensive income of
$6,000, $8.1 million, $1.4 million and $2.5 million, respectively, offset by an
increase in treasury stock and unearned employee stock ownership plan ("ESOP")
shares of $1.5 million and $734,000, respectively.
Cash on hand, Interest-earning deposits and Federal funds sold. Cash on hand,
interest-earning deposits and federal funds sold represent cash equivalents.
Cash equivalents increased a combined $3.1 million or 24.6% to $15.9 million at
March 31, 2000 from $12.8 million at December 31, 1999. These accounts are
typically increased by deposits from customers into savings and checking
accounts, loan and security repayments and proceeds from borrowed funds.
Decreases result from customer withdrawals, new loan originations, security
purchases and repayments of borrowed funds. The net increase between March 31,
2000 and December 31, 1999 can be attributed primarily to the acquisition.
Securities. The Company's securities portfolio increased by $28.3 million or
5.0% to $589.4 million at March 31, 2000 from $561.1 million at December 31,
1999. This net increase was primarily the result of the acquisition. During the
quarter ended March 31, 2000, the Company recorded purchases of available for
sale securities of $48.7 million, consisting of purchases of mortgage-backed
securities of $34.0 million, corporate bonds of $13.5 million and municipal
bonds of $1.2 million. Offsetting the purchases of securities were sales of
available for sale securities of $31.1 million, consisting of sales of municipal
bonds of $1.7 million, corporate bonds of $1.6 million and mortgage-backed
securities of $27.8 million, and repayments and maturities of securities of
$16.4 million, during the three months ended March 31, 2000.
Loans receivable. Net loans receivable increased $77.7 million or 19.7% to
$471.6 million at March 31, 2000 from $393.9 million at December 31, 1999
primarily due to the acquisition. Included in this increase were increases in
mortgage loans of $75.4 million or 21.7% and other loans of $4.2 million or
6.1%, partially offset by an increase in loans in process, deferred loan fees
and allowance for loan losses of $2.0 million or 9.1%, during the three months
ended March 31, 2000.
Non-performing assets. Non-performing assets include non-accrual loans and real
estate acquired through foreclosure. Non-performing assets amounted to $3.6
million or 0.32% and $4.4 million or 0.43% of total assets at March 31, 2000 and
December 31, 1999, respectively.
Deposits. Total deposits increased $66.5 million or 15.4% to $498.3 million at
March 31, 2000 from $431.8 million at December 31, 1999. This increase was
primarily the result of the acquisition. Time deposits, interest-bearing demand
deposit accounts and noninterest-bearing deposit accounts increased $44.2
million, $20.8 million and $1.5 million, respectively, during the three months
ended March 31, 2000.
Borrowed funds and reverse repurchase agreements. Borrowed funds increased $31.6
million or 6.1% to $551.1 million at March 31, 2000 from $519.6 million at
December 31, 1999. This increase is primarily the result of the acquisition.
FHLB advances decreased $2.0 million or 0.6% while reverse repurchase agreement
borrowings increased $33.5 million or 16.6% during the three months ended March
31, 2000.
Stockholders' equity. Stockholders' equity increased $9.8 million to $59.7
million at March 31, 2000 from $49.9 million at December 31, 1999. This increase
was principally the result of the acquisition which generated increases in
common stock and additional paid in capital of $6,000 and $8.1 million,
respectively. Additionally, retained earnings and accumulated other
comprehensive income increased $1.4 million and $2.5 million,
11
<PAGE>
respectively. The increases were offset by increases in treasury stock and
unearned ESOP shares of $1.5 million and $734,000, respectively, during the
three months ended March 31, 2000.
RESULTS OF OPERATIONS
General. The Company recorded net income of $1.9 million for the three months
ended March 31, 2000, as compared to net income of $1.4 million for the same
period in the prior year. The $568,000 or 41.9% increase in net income for the
three months ended March 31, 2000, as compared to the three months ended March
31, 1999, was primarily attributable to an increase in net interest income of
$917,000 and a decrease in the provision for loan losses of $455,000, offset by
increases in noninterest expense of $376,000 and the provision for income taxes
of $356,000, and a decrease in noninterest income of $72,000.
Net interest income. Net interest income increased $917,000 or 24.0% to $4.7
million for the three months ended March 31, 2000, compared to $3.8 million for
the same period in the prior year. This increase in net interest income can be
attributed to an increase in interest income of $3.0 million offset by an
increase in interest expense of $2.0 million.
Interest income. Interest income increased $3.0 million or 19.2% to $18.4
million for the three months ended March 31, 2000, compared to $15.4 million for
the same period in the prior year. This increase can be attributed to an
increase in interest earned on loans receivable, interest earned on securities,
FHLB stock and interest-earning deposits of $1.4 million, $1.5 million, $22,000
and $22,000, respectively.
Interest earned on loans receivable increased $1.4 million or 20.7% to $8.4
million for the quarter ended March 31, 2000, compared to $7.0 million for the
same period in the prior year. This increase was primarily attributable to an
increase in the average balance of loans outstanding of $71.6 million or 19.7%
to $434.8 million for the three months ended March 31, 2000, compared to $363.2
million for the same period in the prior year, with an increase in the yield of
loans receivable to 7.72% for the three months ended March 31, 2000, compared to
7.66% for the same period in the prior year.
Interest earned on securities increased $1.5 million or 18.1% to $9.6 million
for the three months ended March 31, 2000, compared to $8.1 million for the same
period in the prior year. This increase was primarily attributable to an
increase in the average balance of securities held of $26.0 million or 4.7% to
$573.4 million for the three months ended March 31, 2000, compared to $547.4
million for the same period in the prior year, along with an increase in the tax
equivalent yield on securities to 7.12% for the three months ended March 31,
2000, compared to 6.47% for the same period in the prior year. The increase in
the average balance of securities between periods was primarily the result of
the acquisition of Spring Hill.
Interest expense. Interest expense increased $2.0 million or 17.6% to $13.7
million for the three months ended March 31, 2000, compared to $11.6 million for
the same period in the prior year. This increase in interest expense can be
primarily attributed to increases in interest incurred on deposits and borrowed
funds of $579,000 and $1.5 million, respectively.
Interest incurred on deposits increased $579,000 or 13.2% to $5.0 million for
the three months ended March 31, 2000, compared to $4.4 million for the same
period in the prior year. This increase was primarily attributable to an
increase in the average balance of interest-bearing deposits of $41.3 million or
9.9% to $458.4 million for the three months ended March 31, 2000, compared to
$417.1 million for the same period in the prior year. The cost of
interest-bearing deposits increased to 4.37% for the quarter ended March 31,
2000 compared to 4.28% for the same period in the prior year.
Interest incurred on borrowed funds increased $1.4 million or 21.9% to $8.1
million for the three months ended March 31, 2000, compared to $6.7 million for
the same period in the prior year. This increase was primarily attributable to
an increase in the average balance of borrowed funds of $78.5 million or 17.3%
to $532.4 million for the three months ended March 31, 2000, compared to $453.9
million for the same period in the prior year.
12
<PAGE>
This increase in borrowed funds is a reflection of the increase in net loans
receivable and securities, as such funds were utilized to provide for growth.
Adding to the increase in interest incurred on borrowed funds was an increase in
the cost of these funds to 6.14% for the three months ended March 31, 2000,
compared to 5.95% for the same period in the prior year.
Provision for loan losses. The provision for loan losses decreased $455,000,
reflecting a recovery of loan losses of $452,000 at March 31, 2000, compared to
a provision of $3,000 for the same period in the prior year. The $455,000
decrease in the provision for loan losses is attributable to a $605,000 recovery
recorded in January associated with the Company's Bennett Lease Pools which was
received from the bankruptcy trustee, offset by a $153,000 provision recorded
for the three month period ended March 31, 2000. In determining the appropriate
level of allowance for loan losses, management considers historical loss
experience, the financial condition of borrowers, economic conditions
(particularly as they relate to markets where the Company originates loans), the
status of non-performing assets, the estimated underlying value of the
collateral and other factors related to the collectability of the loan
portfolio. The Company's total allowance for losses on loans at March 31, 2000
and December 31, 1999 amounted to $4.9 million or 0.99% and $4.8 million or
1.16%, respectively, of the Company's total loan portfolio. The Company's
allowance for losses on loans as a percentage of non-performing loans was 139.6%
and 111.3% at March 31, 2000 and December 31, 1999, respectively.
Noninterest income. Noninterest income decreased $72,000 or 9.8% to $665,000 for
the three months ended March 31, 2000, compared to $737,000 for the same period
in the prior year. This decrease can be attributed primarily to a decrease in
the net realized gains on sales of securities available for sale of $211,000,
partially offset by increases in fees and service charges, increase in the cash
surrender value of the bank owned life insurance and other income of $4,000,
$26,000 and $109,000, respectively.
Noninterest expense. Noninterest expense increased $376,000 or 12.7% to $3.3
million for the three months ended March 31, 2000, from $3.0 million for the
same period in the prior year. This increase was the result of increases in
compensation and employee benefits, premises and equipment and data processing
costs of $330,000, $89,000 and $50,000, respectively, partially offset by a
decrease in federal deposit insurance premiums and other expenses of $43,000 and
$50,000, respectively. The increase in compensation and employee benefits,
premises and equipment, and data processing costs were primarily the costs of
operations of Spring Hill included in the operations of the Company for two
months in the first quarter ended March 31, 2000 as compared to the same period
last year.
Provision for income taxes. The provision for income taxes increased $356,000 or
160.4% to $578,000 for the three months ended March 31, 2000, from $222,000 for
the same period in the prior year. This increase was attributable to an increase
in pre-tax income of $924,000 or 58.6% for the three months ended March 31,
2000, compared to the same period in the prior year.
13
<PAGE>
Average Balance Sheet and Yield/Rate Analysis. The following table sets forth,
for periods indicated, information concerning the total dollar amounts of
interest income from interest-earning assets and the resultant average yields,
the total dollar amounts of interest expense on interest-bearing liabilities and
the resultant average costs, net interest income, interest rate spread and the
net interest margin earned on average interest-earning assets. For purposes of
this table, average balances are calculated using monthly averages and the
average loan balances include non-accrual loans and exclude the allowance for
loan losses, and interest income includes accretion of net deferred loan fees.
Interest and yields on tax-exempt securities (tax-exempt for federal income tax
purposes) are shown on a fully tax equivalent basis utilizing a federal tax rate
of 34%. Yields and rates have been calculated on an annualized basis utilizing
monthly interest amounts.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands) Three months ended March 31,
2000 1999
------------------------------------- -----------------------------------------
Average Yield / Average Yield /
Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
- -----------------------
Taxable securities available for sale $ 488,006 $ 8,383 6.87% $ 385,756 $ 5,942 6.16%
Tax-exempt securities available for sale 85,416 1,829 8.57% 100,843 2,016 8.00%
Taxable securities held to maturity - - 0.00% 52,843 740 5.60%
Tax-exempt securities held to maturity - - 0.00% 7,995 160 8.01%
----------- --------- ---- --------- --------- ----
573,422 10,212 7.12% 547,437 8,858 6.47%
----------- --------- ---- --------- --------- ----
Mortgage loans 365,844 7,071 7.73% 293,050 5,615 7.66%
Other loans 68,978 1,324 7.68% 70,147 1,340 7.64%
----------- --------- ---- --------- --------- ----
434,822 8,395 7.72% 363,197 6,955 7.66%
----------- --------- ---- --------- --------- ----
Cash equivalents 11,505 84 2.92% 8,387 63 3.00%
FHLB stock 18,871 318 6.74% 18,435 296 6.42%
----------- --------- ---- --------- --------- ----
30,376 402 5.29% 26,822 359 5.35%
----------- --------- ---- --------- --------- ----
Total interest-earning assets 1,038,620 19,009 7.32% 937,456 16,172 6.90%
Other noninterest-earning assets 47,595 - - 36,615 - -
----------- --------- ---- --------- --------- ----
Total assets $ 1,086,215 $ 19,009 7.00% $ 974,071 $ 16,172 6.64%
=========== ========= ==== ========= ========= ====
Interest-bearing liabilities:
- ----------------------------
Interest-bearing demand deposits $ 177,259 $ 1,104 2.50% $ 157,602 $ 915 2.35%
Time deposits 281,175 3,872 5.54% 259,510 3,482 5.44%
----------- --------- ---- --------- --------- ----
458,434 4,976 4.37% 417,112 4,397 4.28%
----------- --------- ---- --------- --------- ----
FHLB advances 313,660 4,860 6.23% 317,071 4,757 6.08%
Reverse repo's & other borrowings 218,768 3,262 6.00% 136,848 1,906 5.65%
----------- --------- ---- --------- --------- ----
532,428 8,122 6.14% 453,919 6,663 5.95%
----------- --------- ---- --------- --------- ----
Preferred securities 24,077 557 9.30% 24,033 558 9.42%
----------- --------- ---- --------- --------- ----
Total interest-bearing liabilities 1,014,939 13,655 5.41% 895,064 11,618 5.26%
Noninterest-bearing demand deposits 11,354 - - 10,428 - -
Other noninterest-bearing liabilities 6,478 - - 6,109 - -
----------- --------- ---- --------- --------- ----
Total liabilities 1,032,771 13,655 5.32% 911,601 11,618 5.17%
Stockholders' equity 53,444 - - 62,470 - -
----------- --------- ---- --------- --------- ----
Total liabilities and equity $ 1,086,215 $ 13,655 5.06% $ 974,071 $ 11,618 4.84%
=========== ========= ==== ========= ========= ====
Net interest income $ 5,354 $ 4,554
========= =========
Interest rate spread (difference between 1.91% 1.64%
==== ====
weighted average rate on interest-earning
assets and interest-bearing liabilities)
Net interest margin (net interest 2.06% 1.94%
==== ====
income as a percentage of average
interest-earning assets)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
Analysis of Changes in Net Interest Income. The following table analyzes the
changes in interest income and interest expense, between the quarters ended
March 31, 2000 and 1999, in terms of: (1) changes in volume of interest-earning
assets and interest-bearing liabilities and (2) changes in yields and rates. The
table reflects the extent to which changes in the Company's interest income and
interest expense are attributable to changes in rate (change in rate multiplied
by prior period volume), changes in volume (changes in volume multiplied by
prior period rate) and changes attributable to the combined impact of
volume/rate (change in rate multiplied by change in volume). The changes
attributable to the combined impact of volume/rate are allocated on a consistent
basis between the volume and rate variances. Changes in interest income on
securities reflects the changes in interest income on a fully tax equivalent
basis.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 versus 1999
Increase (decrease) due to
-----------------------------------------------
Volume Rate Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Securities $ 434 $ 920 $ 1,354
Loans 1,382 58 1,440
Cash equivalents 23 (2) 21
FHLB stock 7 15 22
------ ------ -------
Total interest-earning assets 1,846 991 2,837
------ ------ -------
Interest expense:
Deposits 446 133 579
FHLB advances (52) 155 103
Reverse repurchases & other borrowings 1,213 143 1,356
Preferred securities 1 (2) (1)
------ ------ -------
Total interest-bearing liabilities 1,608 429 2,037
------ ------ -------
Net interest income $ 238 $ 562 $ 800
====== ====== =======
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
ASSET AND LIABILITY MANAGMENT
The primary objective of the Company's asset and liability management function
is to maximize the Company's net interest income while simultaneously
maintaining an acceptable level of interest rate risk given the Company's
operating environment, capital and liquidity requirements, performance
objectives and overall business focus. The principal determinant of the exposure
of the Company's earnings to interest rate risk is the timing difference between
the repricing or maturity of interest-earning assets and the repricing or
maturity of its interest-bearing liabilities. The Company's asset and liability
management policies are designed to decrease interest rate sensitivity primarily
by shortening the maturities of interest-earning assets while at the same time
extending the maturities of interest-bearing liabilities. The Board of Directors
of the Company continues to believe in strong asset/liability management in
order to insulate the Company from material and prolonged increases in interest
rates. As a result of this policy, the Company emphasizes a larger, more
diversified portfolio of residential mortgage loans in the form of
mortgage-backed securities. Mortgage-backed securities generally increase the
quality of the Company's assets by virtue of the insurance or guarantees that
back them, are more liquid than individual mortgage loans and may be used to
collateralize borrowings or other obligations of the Company.
The Company's Board of Directors has established an Asset and Liability
Management Committee consisting of two outside directors, the President and
Chief Executive Officer, Group Senior Vice President and Chief Financial
Officer, Group Senior Vice President/Operations and the Group Senior Vice
President/Lending. This committee, which meets quarterly, generally monitors
various asset and liability management policies and strategies which were
implemented by the Company over the past few years. These strategies have
included: (i) an emphasis on the investment in adjustable-rate and shorter
duration mortgage-backed securities and (ii) an emphasis on the origination of
single-family residential adjustable-rate mortgages (ARMs), residential
construction loans and commercial real estate loans, which generally have
adjustable or floating interest rates
15
<PAGE>
and/or shorter maturities than traditional single-family residential loans, and
consumer loans, which generally have shorter terms and higher interest rates
than mortgage loans and (iii) the purchase of off-balance sheet interest rate
caps which help to insulate the Bank's interest rate risk position from
increases in interest rates and (iv) increase the duration of the liability base
of the Company by extending the maturities of savings deposits, borrowed funds
and reverse repurchase agreements.
As of March 31, 2000, the implementation of these asset and liability
initiatives resulted in the following: (i) $207.2 million or 41.9% of the
Company's total loan portfolio had adjustable interest rates or maturities of 12
months or less; (ii) $142.6 million or 41.8% of the Company's portfolio of
single-family residential mortgage loans (including residential construction
loans) consisted of ARMs, (iii) $110.9 million or 26.4% of the Company's
portfolio of mortgage-backed securities were secured by ARMs and (iv) the
Company had $80.0 million in notional amount of interest rate caps.
The implementation of the foregoing asset and liability initiatives and
strategies, combined with other external factors such as demand for the
Company's products and economic and interest rate environments in general, has
resulted in the Company being able to maintain a one-year interest rate
sensitivity gap ranging between a positive 5.0% of total assets to a negative
15.0% of total assets. The one-year interest rate sensitivity gap is defined as
the difference between the Company's interest-earning assets which are scheduled
to mature or reprice within one year and its interest-bearing liabilities which
are scheduled to mature or reprice within one year. At March 31, 2000, the
Company's interest-earning assets maturing or repricing within one year totaled
$428.5 million while the Company's interest-bearing liabilities maturing or
repricing within one-year totaled $505.8 million, providing a deficiency of
interest-earning assets over interest-bearing liabilities of $77.3 million or a
negative 6.8% of total assets. At March 31, 2000, the percentage of the
Company's assets to liabilities maturing or repricing within one year was 84.7%.
The Company does not presently anticipate that its one-year interest rate
sensitivity gap will fluctuate beyond a range of a positive 5.0% of total assets
to a negative 15.0% of total assets.
The one year interest rate sensitivity gap has been the most common industry
standard used to measure an institution's interest rate risk position. The
Company also utilizes income simulation modeling in measuring its interest rate
risk and managing its interest rate sensitivity. The Asset and Liability
Management Committee of the Company believes that simulation modeling enables
the Company to more accurately evaluate and manage the possible effects on net
interest income due to the exposure to changing market interest rates, the slope
of the yield curve and different prepayment and deposit decay assumptions under
various interest rate scenarios. At March 31, 2000, the Company's simulation
model indicated that the Company's statement of financial condition is liability
sensitive. The Company's $80.0 million in notional amounts of interest rate caps
insulates against rising interest rates. As such, in a 300 basis point gradually
rising rate environment over 24 months, with minor changes in the statement of
condition and limited reinvestment changes, net interest income is projected to
decrease by approximately 4.3% over such 24 month period.
LIQUIDITY
The Banks are required by the Office of Thrift Supervision ("OTS") to maintain a
minimum level of liquidity to assure their ability to meet demands for
customers' withdrawals and the repayment of short term borrowings. The liquidity
requirement is calculated as a percentage of deposits and short-term borrowings,
as defined by the OTS, and currently must be maintained at amounts not less than
4.0%. The Banks' liquidity ratios fluctuate depending primarily upon deposit
flows but have been consistently maintained at levels in excess of the required
percentage. At March 31, 2000, ESB Bank and Spring Hill's liquidity ratios were
11.6% and 5.4%, respectively.
The Company's primary sources of funds generally have been deposits obtained
through the offices of the Banks, borrowings from the FHLB, reverse repurchase
agreement borrowings and amortization and prepayments of outstanding loans and
maturing investment securities. During the three months ended March 31, 2000,
the Company used its sources of funds primarily to purchase securities, and to a
lesser extent, the funding of loan
16
<PAGE>
commitments. As of such date, the Company had outstanding loan commitments
totaling $19.5 million, unused lines of credit totaling $23.5 million and $17.2
million of undisbursed loans in process.
At March 31, 2000, certificates of deposits amounted to $301.4 million or 60.5%
of the Company's total consolidated deposits, including $200.7 million which
were scheduled to mature by March 31, 2001. At the same date, the total amount
of FHLB advances which were scheduled to mature by March 31, 2001 was $175.8
million. Management of the Company believes that it has adequate resources to
fund all of its commitments, that all of its commitments will be funded by March
31, 2001 and that, based upon past experience and current pricing policies, it
can adjust the rates of savings certificates to retain a substantial portion of
its maturing certificates and also, to the extent deemed necessary, refinance
the maturing FHLB advances.
REGULATORY CAPITAL REQUIREMENTS
Current regulatory requirements specify that the Banks and similar institutions
must maintain tangible capital equal to 1.5% of adjusted total assets, core
capital equal to 4% of adjusted total assets and risk-based capital equal to 8%
of risk-weighted assets. The OTS may require higher core capital ratios if
warranted, and institutions are to maintain capital levels consistent with their
risk exposures. Both the FDIC and the OTS reserve the right to apply this higher
standard to any insured financial institution when considering an institution's
capital adequacy. At March 31, 2000, ESB Bank and Spring Hill were in compliance
with all regulatory capital requirements with tangible, core and risk-based
capital ratios of 6.5% and 9.7%, 6.5% and 9.7%, and 16.4% and 26.2%,
respectively.
RECENT ACCOUNTING, REGULATORY AND OTHER MATTERS
During March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No.44; "Accounting for Certain Transactions involving Stock
Compensation - an interpretation of APB Opinion No. 25". This Interpretation
clarifies the application of APB Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) for only certain issues. The issues addressed by this
Interpretation were resolved within the framework of the intrinsic value method
prescribed by APB 25, and do not amend APB 25. Among the issues this
Interpretation clarifies are (a) the definition of employee for purposes of
applying APB 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option award, and (d) the accounting for
an exchange of stock compensation awards in a business combination.
This Interpretation is effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occur after either December 15, 1998,
or January 12, 2000. To the extent that this Interpretation covers events
occurring during the period after December 15, 1998, or January 12, 2000, but
not before the effective date of July 1, 2000, the effects of applying this
Interpretation are recognized on a prospective basis from July 1, 2000. The
Company has not determined the impact of the adoption of the Interpretation at
this time.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires an entity
to recognize all derivatives as either assets or liabilities in the statement of
financial position and measure the instruments at their fair value. A derivative
may be designated as a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, a hedge of the
exposure to a variable cash flows of a forecasted transaction, or a hedge of the
foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. This statement was to be
effective for fiscal years beginning June 15, 1999. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133", which
17
<PAGE>
delays the effective date of SFAS No. 133 to the first quarter of fiscal years
beginning after June 15, 2000. The Company has not determined the impact of the
adoption of the standard at this time.
The Management Discussion and Analysis section of this Form 10-Q contains
certain forward-looking statements (as defined in the Private Securities
Litigation Reform Act of 1995). These forward-looking statements may involve
significant risks and uncertainties. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, actual
results may differ materially from the results in these forward-looking
statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
Quantitative and qualitative disclosures about market risk are presented at
December 31, 1999 in Item 7A of the Company's Annual Report on Form 10-K, filed
with the SEC on March 30, 2000. Management believes there have been no material
changes in the Company's market risk since December 31, 1999.
18
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- --------------------------
The Company and its subsidiaries are involved in various legal proceedings
occurring in the ordinary course of business. It is the opinion of management,
after consultation with legal counsel, that these matters will not materially
affect the Company's consolidated financial position or results of operations.
Item 2. Changes in Securities
- ------------------------------
None.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None.
Item 5. Other Information
- --------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 11 - Statement re: computation of per share earnings
(b) Exhibit 27 - Financial Data Schedule
(c) Form 8-K - The Company filed Form 8-K dated February 10, 2000 to report
the completion of the acquisition of SHS Bancorp, Inc.
Form 8-K - The Company filed Form 8-K dated March 21, 2000 to report a
$0.09 per share quarterly cash dividend payable April 25, 2000 to
stockholders of record at the close of business on March 31, 2000.
19
<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.
ESB FINANCIAL CORPORATION
Date: May 12, 2000 By: /s/ Charlotte A. Zuschlag
-----------------------------------
Charlotte A. Zuschlag
President and Chief Executive Officer
Date: May 12, 2000 By: /s/ Charles P. Evanoski
-----------------------------------
Charles P. Evanoski
Group Senior Vice President and
Chief Financial Officer
20
<PAGE>
EXHIBIT 11
- --------------------------------------------------------------------------------
ESB Financial Corporation
Exhibit 11 - Statement re: computation of per share earnings
- --------------------------------------------------------------------------------
(amounts, except earnings per share, in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net income $ 1,923 $ 1,355
Weighted-average common shares outstanding 5,155 5,034
-------------- --------------
Basic earnings per share $ 0.37 $ 0.27
============== ==============
Weighted-average common shares outstanding 5,155 5,034
Common stock equivalents due to effect of stock options 89 157
-------------- --------------
Total weighted-average common shares and equivalents 5,244 5,191
Diluted earnings per share $ 0.37 $ 0.26
============== ==============
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINES SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1ST
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,498
<INT-BEARING-DEPOSITS> 9,769
<FED-FUNDS-SOLD> 2,630
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 589,393
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 471,589
<ALLOWANCE> 4,915
<TOTAL-ASSETS> 1,144,596
<DEPOSITS> 498,300
<SHORT-TERM> 253,651
<LIABILITIES-OTHER> 6,962
<LONG-TERM> 297,461
0
0
<COMMON> 69
<OTHER-SE> 59,595
<TOTAL-LIABILITIES-AND-EQUITY> 1,144,596
<INTEREST-LOAN> 8,395
<INTEREST-INVEST> 9,590
<INTEREST-OTHER> 402
<INTEREST-TOTAL> 18,387
<INTEREST-DEPOSIT> 4,976
<INTEREST-EXPENSE> 13,655
<INTEREST-INCOME-NET> 4,732
<LOAN-LOSSES> (452)
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 3,348
<INCOME-PRETAX> 2,501
<INCOME-PRE-EXTRAORDINARY> 2,501
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,923
<EPS-BASIC> 0.37
<EPS-DILUTED> 0.37
<YIELD-ACTUAL> 7.32
<LOANS-NON> 3,520
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,823
<CHARGE-OFFS> 1
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 4,915
<ALLOWANCE-DOMESTIC> 4,915
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
