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 the Quarter ended June 30, 1996 Commission File No. 0-19843
ALBANK Financial Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 14-1746910
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 NORTH PEARL STREET, ALBANY, NY 12207
(Address of principal executive offices)
Registrant's telephone number, including area code: (518) 445-2100
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. Yes x No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Number of shares outstanding
Class of Common Stock as of July 31, 1996
Common Stock, Par $.01 13,149,433
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-Q
INDEX
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings for the Three
Months Ended June 30, 1996 and 1995 (unaudited)
Consolidated Statements of Earnings for the Six
Months Ended June 30, 1996 and 1995 (unaudited)
Consolidated Statements of Financial Condition as
of June 30, 1996 (unaudited) and December 31, 1995
Consolidated Statements of Changes in
Stockholders' Equity for the Six Months
Ended June 30, 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995 (unaudited)
Notes to Unaudited Consolidated Interim Financial
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
(in thousands, except per share data)
<CAPTION>
Three months ended
June 30,
1996 1995
(unaudited)
<S> <C> <C>
Interest income:
Mortgage loans $ 37,501 31,200
Other loans 9,391 6,861
Securities available for sale 10,603 2,839
Investment securities 2,282 11,206
Federal funds sold 321 166
Securities purchased under agreement to resell 719 191
Stock in Federal Home Loan Bank 272 316
Total interest income 61,089 52,779
Interest expense:
Deposits and escrow accounts 29,401 26,045
Borrowed funds and repurchase agreements 446 68
Total interest expense 29,847 26,113
Net interest income 31,242 26,666
Provision for loan losses 1,425 1,125
Net interest income after provision for loan losses 29,817 25,541
Noninterest income:
Service charges on deposit accounts 1,342 1,237
Net security transactions 3 --
Brokerage and insurance commissions 547 410
Other 1,200 1,269
Total noninterest income 3,092 2,916
Noninterest expense:
Compensation and employee benefits 9,509 7,926
Occupancy, net 2,263 2,066
Furniture, fixtures and equipment 1,262 985
Federal deposit insurance premiums 1,147 1,417
Professional, legal and other fees 686 649
Telephone, postage and printing 1,075 1,011
Other 3,787 2,459
Total noninterest expense 19,729 16,513
Income before income taxes 13,180 11,944
Income tax expense 5,345 4,687
Net income $ 7,835 7,257
Primary and fully diluted earnings per share <F1> $ 0.54 0.48
<FN>
<F1> Adjusted to reflect the 6-for-5 stock dividend effected on April 1, 1996.
See accompanying notes to unaudited consolidated interim financial statements.
</TABLE>
<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
(in thousands, except per share data)
<CAPTION>
Six months ended
June 30,
1996 1995
(unaudited)
<S> <C> <C>
Interest income:
Mortgage loans $ 75,207 60,866
Other loans 18,523 13,611
Securities available for sale 21,957 5,203
Investment securities 4,542 22,986
Federal funds sold 480 372
Securities purchased under agreement to resell 1,457 306
Stock in Federal Home Loan Bank 511 659
Total interest income 122,677 104,003
Interest expense:
Deposits and escrow accounts 59,493 49,551
Borrowed funds and repurchase agreements 1,050 107
Total interest expense 60,543 49,658
Net interest income 62,134 54,345
Provision for loan losses 2,850 2,250
Net interest income after provision for loan losses 59,284 52,095
Noninterest income:
Service charges on deposit accounts 2,698 2,505
Net security transactions 5 (1,199)
Brokerage and insurance commissions 945 860
Other 2,454 2,169
Total noninterest income 6,102 4,335
Noninterest expense:
Compensation and employee benefits 18,969 15,887
Occupancy, net 4,672 4,124
Furniture, fixtures and equipment 2,509 1,934
Federal deposit insurance premiums 2,296 2,830
Professional, legal and other fees 1,340 1,258
Telephone, postage and printing 2,304 2,060
Other 7,287 4,967
Total noninterest expense 39,377 33,060
Income before income taxes 26,009 23,370
Income tax expense 10,463 9,162
Net income $ 15,546 14,208
Primary earnings per share <F1> $ 1.07 0.93
Fully diluted earnings per share <F1> $ 1.07 0.92
<FN>
<F1> Adjusted to reflect the 6-for-5 stock dividend effected on April 1, 1996.
See accompanying notes to unaudited consolidated interim financial statements.
</TABLE>
<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Financial Condition
(dollars in thousands, except per share data)
<CAPTION>
June 30, December 31,
1996 1995
(unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 64,774 54,002
Federal funds sold 2,000 1,000
Securities purchased under agreement to resell 50,000 50,000
Total cash and cash equivalents 116,774 105,002
Securities available for sale, at approximate market value 653,707 656,784
Investment securities (approximate market value of $138,848 at
June 30, 1996 and $155,862 at December 31, 1995) 138,417 153,740
Loans receivable 2,283,253 1,946,601
Less: allowance for loan losses 24,337 15,949
Loans receivable, net 2,258,916 1,930,652
Accrued interest receivable 28,980 26,351
Office premises and equipment, net 45,790 40,655
Stock in Federal Home Loan Bank, at cost 16,913 15,750
Real estate owned 5,563 3,899
Other assets 60,532 37,337
$ 3,325,592 2,970,170
Liabilities
Deposits $ 2,872,407 2,558,288
Escrow accounts 36,358 34,928
Accrued income taxes payable 4,547 4,529
Borrowed funds and repurchase agreements 34,364 1,290
Obligation under capital lease 4,696 4,743
Other liabilities 56,517 43,210
Total liabilities 3,008,889 2,646,988
Stockholders' Equity
Preferred stock, $.01 par value. Authorized 25,000,000 shares;
none outstanding -- --
Common stock, $.01 par value. Authorized 50,000,000 shares;
15,697,500 shares issued; 13,287,933 shares outstanding at June 30, 1996
and 11,521,970 shares outstanding at December 31, 1995 157 157
Additional paid-in capital 180,172 151,969
Retained earnings, substantially restricted 207,242 258,631
Treasury stock, at cost (2,409,567 shares at June 30, 1996
and 4,175,530 shares at December 31, 1995) (60,660) (82,381)
Unrealized gain (loss) on securities available for sale, net of tax (2,163) 3,528
Common stock acquired by:
Employee stock ownership plan ("ESOP") (7,325) (7,535)
Bank recognition plan ("BRP") (720) (1,187)
Total stockholders' equity 316,703 323,182
$ 3,325,592 2,970,170
See accompanying notes to unaudited consolidated interim financial statements.
</TABLE>
<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
(in thousands) (unaudited)
<CAPTION>
Net Unrealized
Gain (Loss) on Common Common
Additional Securities Stock Stock
Common Paid-in Retained Treasury Available for Acquired Acquired
Stock Capital Earnings Stock Sale, Net of Tax by ESOP by BRP Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended June 30, 1996
Balance at December 31, 1995 $ 157 151,969 258,631 (82,381) 3,528 (7,535) (1,187) 323,182
Net income -- -- 15,546 -- -- -- -- 15,546
Purchase of treasury stock -- -- -- (15,097) -- -- -- (15,097)
Proceeds from the exercise
of stock options -- -- (235) 570 -- -- -- 335
Reduction of stock option
rollover liability upon
exercise of stock options -- -- 602 -- -- -- -- 602
Tax benefits related to
vested BRP stock and
stock options exercised -- 400 -- -- -- -- -- 400
Adjustment of securities
available for sale
to market, net of tax -- -- -- -- (5,691) -- -- (5,691)
Cash dividends declared -- -- (3,251) -- -- -- -- (3,251)
Stock dividends declared -- 27,803 (64,051) 36,248 -- -- -- --
Amortization of award
of ESOP stock -- -- -- -- -- 210 -- 210
Amortization of award
of BRP stock -- -- -- -- -- -- 467 467
Balance at June 30, 1996 $ 157 180,172 207,242 (60,660) (2,163) (7,325) (720) 316,703
Six months ended June 30, 1995
Balance at December 31, 1994 $ 157 151,433 235,065 (58,218) (735) (8,791) (2,122) 316,789
Net income -- -- 14,208 -- -- -- -- 14,208
Purchase of treasury stock -- -- -- (12,870) -- -- -- (12,870)
Proceeds from the exercise
of stock options -- -- (9) 59 -- -- -- 50
Tax benefits related to
vested BRP stock and
stock options exercised -- 281 -- -- -- -- -- 281
Adjustment of securities
available for sale
to market, net of tax -- -- -- -- 3,296 -- -- 3,296
Cash dividends declared -- -- (2,906) -- -- -- -- (2,906)
Amortization of award
of ESOP stock -- -- -- -- -- 203 -- 203
Amortization of award
of BRP stock -- -- -- -- -- -- 468 468
Balance at June 30, 1995 $ 157 151,714 246,358 (71,029) 2,561 (8,588) (1,654) 319,519
See accompanying notes to unaudited consolidated interim financial statements.
</TABLE>
<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(in thousands)
<CAPTION>
Six months ended
June 30,
1996 1995
(unaudited)
<S> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net income $ 15,546 14,208
Reconciliation of net income to net cash provided by operating activities:
Depreciation and lease amortization 1,290 1,878
Amortization of goodwill 1,472 768
Net amortization (accretion) of premiums/discounts on securities available for sale 662 (211)
Net amortization of premiums/discounts on investment securities 23 898
Amortization of award of ESOP and BRP stock 677 671
Net security transactions (5) 1,199
Net gain on sale of real estate owned (192) (256)
Origination of loans receivable for sale (11,473) (2,709)
Sale of loans receivable originated for sale 16,831 2,200
Provision for loan losses 2,850 2,250
Write-down of real estate owned 364 208
Change in assets and liabilities net of effects from the purchase of Marble:
Net increase in accrued income taxes payable 388 262
Net decrease (increase) in accrued interest receivable 179 (593)
Net decrease in other assets 5,751 2,189
Net increase (decrease) in other liabilities and obligation under capital lease 9,299 (6,497)
Net cash provided by operating activities 43,662 16,465
Cash flows from investing activities
Payment for purchase of Marble, net of cash acquired (54,437) --
Proceeds from the sale of securities available for sale 22,985 --
Proceeds from the maturity or call of securities available for sale 112,181 66,200
Proceeds from the maturity or call of investment securities 40,719 90,690
Purchase of securities available for sale (44,627) (52,545)
Purchase of investment securities (25,179) (10,350)
Purchase of loans receivable (58,608) (78,772)
Net increase in loans receivable (10,530) (37,278)
Redemption (purchase) of Federal Home Loan Bank stock 2,912 (1,621)
Proceeds from the sale of real estate owned 2,564 3,794
Capital expenditures (817) (7,362)
Net cash used by investing activities (12,837) (27,244)
Cash flows from financing activities
Branch purchases -- deposits acquired -- 18,194
Less: purchase premium and capitalized costs -- 655
Net -- 17,539
Net increase (decrease) in deposits (12,481) 27,622
Net increase in escrow accounts 1,290 6,330
Proceeds from borrowed funds and repurchase agreements 11,215 --
Repayment of borrowed funds and repurchase agreements (1,290) (13,300)
Purchase of treasury stock (15,097) (12,870)
Dividends paid (3,025) (2,713)
Proceeds from the exercise of stock options 335 50
Net cash (used) provided by financing activities (19,053) 22,658
Net increase in cash and cash equivalents 11,772 11,879
Cash and cash equivalents at beginning of period 105,002 107,192
Cash and cash equivalents at end of period $ 116,774 119,071
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest on deposits, borrowed funds, and repurchase agreements $ 60,758 49,581
Income taxes 8,569 8,543
Net reduction in loans resulting from transfers to real estate owned 3,226 2,846
Net unrealized (loss) gain on debt and equity securities available for sale (9,670) 4,352
Tax benefits related to vested BRP stock and stock options 400 281
The Company purchased all of the common stock of Marble for $61,229.
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ 415,485 --
Cash paid for the common stock (61,229) --
Liabilities assumed $ 354,256 --
See accompanying notes to unaudited consolidated interim financial statements.
</TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOTE 1. Presentation of Financial Information
The accompanying unaudited consolidated interim financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. The accompanying unaudited consolidated interim
financial statements should be read in conjunction with the financial
statements and the related management's discussion and analysis of
financial condition and results of operations filed with the 1995
Form 10-K of ALBANK Financial Corporation and subsidiary. In the
opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the six months ended
June 30, 1996, are not necessarily indicative of results that may be
expected for the entire year ending December 31, 1996.
The unaudited consolidated interim financial statements include the
accounts of ALBANK Financial Corporation (the "Holding Company") and
its wholly owned subsidiary, ALBANK, FSB and subsidiaries (the
"Bank"; collectively with the Holding Company, the "Company"). The
accounting and reporting policies of the Company conform in all
material respects to generally accepted accounting principles and to
general practice within the savings bank industry. Certain prior
period amounts have been reclassified to conform to the current
period classifications.
NOTE 2. Earnings Per Share
Earnings per share for the quarters and six month periods ended June
30, 1996 and June 30, 1995, have been determined by dividing net
income by the weighted average number of shares of common stock and
weighted average number of common stock equivalents outstanding and
have been adjusted to reflect the 20% stock dividend effected on
April 1, 1996.
Stock options are regarded as common stock equivalents and,
accordingly, are considered in both primary and fully diluted
earnings per share calculations. Common stock equivalents are
computed using the treasury stock method.
NOTE 3. Acquisitions
On January 3, 1996, the Bank acquired all of the outstanding common
stock of Marble Financial Corporation ("Marble") of Rutland, Vermont for
$18.00 per share in cash. On the date of closing, Marble and
its banking subsidiary Marble Bank had consolidated assets and deposits
of $396.2 million and $326.6 million, respectively. Marble's seven
banking offices are operating as a division of the Bank. The
transaction, which was accounted for under the purchase method of
accounting, generated goodwill of approximately $20.1 million which
is being amortized over 15 years.
On February 27, 1996, the Company announced that it had entered into
a purchase and assumption agreement with Arrow Financial Corporation
of Glens Falls, New York under which the Bank will assume the deposit
liabilities and purchase loans owned and serviced by six banking
offices currently operated by the Green Mountain Bank of Rutland,
Vermont, a wholly owned subsidiary of Arrow Financial Corporation.
The Office of Thrift Supervision, the Bank's primary regulator, has
approved the transaction, and, pending approval from the Vermont
banking authorities, the transaction is expected to close in the
third quarter of 1996. The Green Mountain offices are located in
central Vermont and, the acquisition will include approximately
$110.0 million in deposits, loans with a net book value of $115.0
million and $45.0 million in loans serviced for other investors.
NOTE 4. Write-off of Investment in Nationar
The Bank wrote off its $1.2 million capital investment in Nationar
during the first quarter of 1995. Formed in 1933, and originally
known as Savings Banks Trust Co., Nationar was organized as a special
purpose commercial bank to service New York State savings banks. In
February 1995, the State Banking Department seized Nationar because
of its deteriorating financial condition. The $1.2 million charge,
after taxes, was equivalent to $0.05 per share.
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
ALBANK Financial Corporation (the "Holding Company", "Company",
"ALBANK") is the holding company for ALBANK, FSB and subsidiaries
(the "Bank"), a federally chartered stock savings bank. On April 1,
1992, the Bank completed its conversion from a mutual to a stock
savings bank. On that date, the Holding Company issued and sold
15,697,500 shares of its common stock. Net proceeds to the Holding
Company were $150.8 million after reflecting conversion expenses of
$6.1 million. The Holding Company used $75.4 million of the net
proceeds to acquire all of the issued and outstanding stock of the
Bank. ALBANK's business currently consists primarily of the business
of the Bank.
The Bank operates as a thrift institution with its principal business
being the solicitation of deposits from the general public; these
deposits, together with funds generated from operations, are invested
primarily in single-family, owner occupied adjustable rate mortgage
loans. The Bank is a member of the Federal Home Loan Bank of New York
("FHLB") and is subject to certain regulations of the Board of
Governors of the Federal Reserve System with respect to reserves
required to be maintained against deposits and certain other matters.
Approximately 69% of the Bank's deposit accounts as of June 30, 1996,
were insured by the Savings Association Insurance Fund ("SAIF"), as
administered by the Federal Deposit Insurance Corporation (the
"FDIC"), and approximately 31% were insured by the Bank Insurance
Fund ("BIF"), as administered by the FDIC, in each case, up to the
maximum amount permitted by law. The Bank is subject to regulation by
the Office of Thrift Supervision ("OTS"). The Bank conducts its
operations through a network of 64 branch offices in upstate New
York, western Massachusetts and Vermont. The Bank's principal
operating subsidiary is Alvest Financial Services, Inc. This wholly
owned company, operating through the Bank's branch network, offers a
full range of investment and insurance products and services.
The Bank's results of operations are dependent primarily on net
interest income, which is the difference between the interest income
earned on its loan portfolio, investment securities and securities
available for sale portfolios and other earning assets, and its cost
of funds, consisting of the interest paid on its deposits and
borrowings. The Bank's operating results are also impacted by
provisions for loan losses, and to a lesser extent, by gains and
losses on the sale of its securities available for sale portfolio,
the operations of its brokerage and insurance subsidiary and other
noninterest income. The Bank's operating expenses principally consist
of employee compensation and benefits, federal deposit insurance
premiums, occupancy expense and other general and administrative
expenses. The Bank's results of operations are also significantly
affected by general economic and competitive conditions, particularly
changes in market interest rates, government policies and actions of
the regulatory authorities.
Liquidity and Capital Resources
The Company's most liquid assets are cash and cash equivalents and
highly liquid short-term investments. The levels of these assets are
dependent on the Company's operating, financing and investing
activities during any given period. Cash and cash equivalents of
$105.0 million at December 31, 1995, increased $11.8 million (11%) to
$116.8 million as of June 30, 1996.
The Company's primary sources of funds are deposits and principal and
interest payments on its loan and securities portfolios. While
maturities and scheduled amortization of loans and securities are, in
general, a predictable source of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates,
economic conditions and competition.
The Bank is required to maintain minimum levels of liquid assets as
defined by OTS Regulations. This requirement, which may vary at the
direction of the OTS depending on economic conditions and deposit
flows, is based upon a percentage of deposits and short-term
borrowings. The required ratio of liquid assets to deposits and
short-term borrowings is currently 5%. The Bank's liquidity ratio at
June 30, 1996, was 27.46%.
The Company's cash flows are comprised of three classifications: cash
flows from operating activities; cash flows from investing
activities; and cash flows from financing activities. Cash flows
provided by operating activities, consisting primarily of interest
and dividends received less interest paid on deposits, were $43.7
million and $16.5 million for the six months ended June 30, 1996 and
1995, respectively. Net cash used by investing activities amounted to
$12.8 million and $27.2 million for the six months ended June 30,
1996 and 1995, respectively. The 1996 usage included a $54.4 million
cash outlay (net of cash acquired) to fund the acquisition of Marble
Financial Corporation ("Marble"). The Company acquired assets with a
fair value of $415.5 million and assumed liabilities with a fair
value of $354.3 million in exchange for $18.00 per share in cash
totaling $61.2 million. Adjusting for the Marble acquisition, the
cash used by investing activities between the first half of 1995 and 1996
declined $68.8 million. This decline was the result of decreased cash
expenditures for the purchase of loans receivable and net declines in
loans receivable aggregating $46.9 million, a net provision of funds from
security activity totaling $12.1 million and a net decline in cash
usage in the remaining investing categories of $9.8 million. Cash
flows used by financing activities of $19.0 million for the first
half of 1996 compared with cash flows provided by financing
activities of $22.7 million in the first half of 1995. Net cash
provided by borrowed funds and repurchase agreements of $9.9 million
in 1996 compared with net cash used to repay such borrowings of $13.3
million in 1995. Cash outflows from a net decrease in deposits during
1996 of $12.5 million compared with cash inflows from normal deposit
activity of $27.6 million and from the acquisition of deposits of
$17.5 million during 1995.
On February 27, 1996, the Board of Directors of the Holding Company
declared a 6-for-5 stock split effected as a 20% stock dividend. The
stock dividend was paid April 1, 1996, to shareholders of record on
March 15, 1996. The quarterly cash dividend was maintained at $0.12
per share. Effectively, the stock dividend resulted in a 20% increase
in cash dividend distributions by the Holding Company.
At June 30, 1996, the Bank's capital exceeded each of the capital
requirements of the OTS. At June 30, 1996, the Bank's tangible and
core capital levels were both $251.4 million (7.67% of total adjusted
assets) and its risk-based capital level was $275.4 million (14.28%
of total risk-weighted assets). The minimum regulatory capital ratio
requirements are 1.5% for tangible capital, 3.0% for core capital and
8.0% for risk-based capital.
Financial Condition
As of June 30, 1996, total assets were $3.326 billion, an increase of
$355.4 million (12%) from $2.970 billion at year-end 1995. This
increase is primarily the result of the acquisition of Marble on
January 3, 1996.
An $11.8 million (11%) increase in cash and cash equivalents to
$116.8 million at June 30, 1996 was the result of a $10.8 million
(20%) increase in cash and due from banks and a doubling of the level
of federal funds sold to $2.0 million. Most of the increase in cash
and cash equivalents resulted from balances that were acquired from
Marble.
Securities available for sale decreased $3.1 million (1%) to $653.7
million at June 30, 1996. A $9.7 million (161%) increase in the
valuation allowance for securities available for sale was only
partially offset by net activity within the remainder of the
portfolio. Additions included $142.4 million in purchases of
securities available for sale, including $91.3 and $6.5 million in
mortgage-backed securities and U.S. Government agencies,
respectively, that were a result of the Marble acquisition. These
increases were partially offset by maturities, payments, and calls of
$112.2 million and sales of $23.0 million for the six months ended
June 30, 1996. The net amortization of premiums and discounts
accounted for the remainder of the change.
Investment securities declined $15.3 million (10%) to $138.4 million
as maturities and calls exceeded new purchases. Proceeds from maturities and
calls were redirected into the loan portfolio. Stock in the Federal
Home Loan Bank ("FHLB"), an investment required by law, is determined
annually using year-end Bank financial information, increased $1.2
million (7%) to $16.9 million at June 30, 1996.
Loans receivable grew $336.7 million (17%) to $2.283 billion at June
30, 1996. Mortgage loans, which showed the greatest dollar increase,
rose $245.7 million (15%) to $1.876 billion. Increases in mortgage
loans included $198.9 million in mortgage loans acquired from Marble,
$154.5 million in loan originations, and $58.6 million in purchases
of one- to four-family loans. Principal repayments of $145.9
million, sales of loans amounting to $16.8 million and transfers to
real estate owned of $4.1 million represented principal reductions to
mortgage loans during the period. Residential mortgage application
volume topped $417.0 million during the first half of 1996 compared
with $138 million for the comparable period in 1995; as a result,
1996 is on track to be a record year for residential mortgage
originations. Nonmortgage loans increased to $404.2 million as a result
of increases in the commercial and consumer loan portfolios of $67.7
million (58%) and $22.3 million (11%), respectively. Included in
this increase were commercial loans of $53.4 million and consumer
loans of $26.0 million acquired from Marble as well as current year
loan originations totaling $49.8 million. Reductions were comprised
principally of principal payments of $39.3 million.
The allowance for loan losses increased $8.4 million (53%) to $24.3
million at June 30, 1996, primarily as a result of the $7.6 million
in balances that were acquired from Marble. The additions of the
provision for loan losses and net chargeoffs accounted for the
remainder of the change.
The remaining asset categories increased by $32.5 million (30%) and
were mainly reflective of assets received in the Marble acquisition.
Goodwill resulting from the Marble acquisition of $20.1 million was
the principle cause of the overall increase in other assets. Office
premises and equipment increased $5.1 million (13%) due to the
expanded branch franchise. Absent the $6.0 million acquired from
Marble, this figure would have declined marginally. Accrued interest
receivable increased $2.6 million (10%) during the period as a result
of loans and securities acquired from Marble. Real estate owned
increased $1.7 million (43%) since December 31, 1995, $1.2 million of
which was related to balances acquired from Marble.
Total liabilities increased $361.9 million (14%) to $3.009 billion
predominantly as a result of the $354.3 million in liabilities that
was assumed by the Bank as part of the Marble acquisition. Deposits
increased $314.1 million (12%) to $2.872 billion as the $326.6
million in deposits acquired from Marble were partially offset by
subsequent net deposit outflows of $12.5 million. Borrowed funds
increased $33.1 million to $34.4 million as FHLB advances were used
to partially finance the Marble acquisition. Primarily as a result of
the expanded branch network, the Bank's other liabilities, which include
accrued expenses and outstanding checks, increased $13.3 million
(31%) to $56.5 million at June 30, 1996.
Stockholders' equity of $316.7 million decreased $6.5 million (2%)
from $323.2 million at year-end 1995. Significant increases included
net income of $15.5 million and stock option exercises of $0.9
million. The remainder of the increase was related to amortization
and tax benefit related to ESOP and BRP stock. Offsetting these
increases were purchases of treasury stock amounting to $15.1
million, net unrealized depreciation in the securities available for
sale portfolio of $5.7 million since December 31, 1995 (primarily as
a result of increasing interest rates), and cash dividends declared
during the first six months of 1996 of $3.3 million.
Book value per common share increased to $23.83 per share at June 30,
1996, from $23.37 per share at December 31, 1995. The increase is a
result of a net decrease in stockholders' equity of $6.5 million (2%)
to $316.7 million at June 30, 1996, offset by a reduction in shares
outstanding as additional stock was purchased under the Company's
ongoing repurchase program. At June 30, 1996, the Holding Company
held 2,409,567 shares of its common stock as treasury stock. As of
June 30, 1996, the Holding Company had cumulatively acquired
4,758,747 shares pursuant to its repurchase program at a cost of
$98.0 million. On April 1, 1996, the Holding Company distributed
2,267,307 shares of stock from treasury stock with a fair market
value of $64.1 million to shareholders of record on March 15, 1996 to
effect a 20% stock dividend. Additional cumulative distributions of
81,873 shares have been made to fulfill stock option exercises. At
June 30, 1996, the ratio of equity to assets was 9.52%, compared with
10.88% at December 31, 1995. The lower equity to assets ratio at June
30, 1996 reflects the progress of management's capital deployment
strategies.
Nonperforming assets increased $9.5 million (35%) to total $36.5
million at June 30, 1996, compared with $27.1 million as of December
31, 1995. Nonperforming loans increased $7.8 million (34%) and
totaled $30.9 million at June 30, 1996, compared with $23.2 million
as of December 31, 1995. The increase in nonperforming assets and
nonperforming loans reflects mainly the nonperforming classification
of certain assets acquired from Marble or originated subsequent to
January 3, 1996 by the Bank's Marble Division. As of June 30, 1996,
the current balances of nonperforming loans and real estate owned of
Marble related assets were $7.6 million and $0.7 million
respectively. The ratio of nonperforming assets to total assets at
June 30, 1996, was 1.10% compared with 0.91% at December 31, 1995.
The ratio of nonperforming loans to total loans was 1.35% at June 30,
1996, compared with 1.19% at December 31, 1995.
Comparisons of Operating Results for the Three and Six Months Ended
June 30, 1996 and 1995
Analysis of Changes in Net Interest Income
The analyses of changes in net interest income that are shown in the
following two tables are an integral part of the discussion of the
results of operations for three and six months ended June 30, 1996,
compared with the corresponding period of the prior year.
The rate/volume analysis table below presents the extent to which
changes in interest rates and changes in the volume of
interest-earning assets and interest-bearing liabilities have
affected the Bank's interest income and interest expense during the
periods indicated. Information is provided in each category with
respect to (i) changes attributable to changes in volume (changes in
volume multiplied by prior rate), (ii) changes attributable to
changes in rate (changes in rate multiplied by prior volume), and
(iii) the net change. The changes attributable to the combined impact
of volume and rate have been allocated proportionately to the changes
due to volume and the changes due to rate.
<TABLE>
<CAPTION>
Three months ended June 30, 1996
compared with
Three months ended June 30, 1995
Increase (Decrease)
Due to
Volume Rate Net
(in thousands) (unaudited)
<S> <C> <C> <C>
Interest-earning assets:
Mortgage loans, net $ 5,138 1,163 6,301
Other loans, net 2,467 63 2,530
Securities available for sale 8,031 (267) 7,764
Investment securities (9,419) 495 (8,924)
Federal funds sold 177 (22) 155
Securities purchased under agreement to resell 546 (18) 528
Stock in Federal Home Loan Bank 22 (66) (44)
Total interest-earning assets 6,962 1,348 8,310
Interest-bearing liabilities:
Deposits:
Savings accounts (268) 47 (221)
Transaction accounts 807 297 1,104
Certificate accounts 2,788 (315) 2,473
Borrowed funds and repurchase agreements 391 (13) 378
Total interest-bearing liabilities 3,718 16 3,734
Change in net interest income $ 3,244 1,332 4,576
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1996
compared with
Six months ended June 30, 1995
Increase (Decrease)
Due to
Volume Rate Net
(in thousands) (unaudited)
<S> <C> <C> <C>
Interest-earning assets:
Mortgage loans, net $ 10,915 3,426 14,341
Other loans, net 4,924 (12) 4,912
Securities available for sale 17,143 (389) 16,754
Investment securities (19,257) 813 (18,444)
Federal funds sold 145 (37) 108
Securities purchased under agreement to resell 1,161 (10) 1,151
Stock in Federal Home Loan Bank 50 (198) (148)
Total interest-earning assets 15,081 3,593 18,674
Interest-bearing liabilities:
Deposits:
Savings accounts (994) 127 (867)
Transaction accounts 1,545 804 2,349
Certificate accounts 6,849 1,611 8,460
Borrowed funds and repurchase agreements 956 (13) 943
Total interest-bearing liabilities 8,356 2,529 10,885
Change in net interest income $ 6,725 1,064 7,789
</TABLE>
Average Balance Sheets, Interest Rates and Interest Differential
The average balance sheets that follow reflect the average yield on
assets and average cost of liabilities for the periods indicated.
Such yields and costs are derived by dividing income or expense by
the average balance of assets or liabilities, respectively, for the
periods shown. The yields and costs include fees which are considered
adjustments to yields. Tax-exempt securities income, which is not
material, has not been calculated on a tax equivalent basis.
<TABLE>
<CAPTION>
Three Months Ended June 30,
1996 1995
Average Average
Average Yield/ Average Yield/
Balance <F1> Interest <F2> Cost Balance <F1> Interest <F2> Cost
(dollars in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans, net <F3> $ 1,843,887 37,501 8.14% $ 1,589,648 31,200 7.85%
Other loans, net <F3> 401,327 9,391 9.38 295,870 6,861 9.28
Securities available for sale 679,611 10,603 6.24 166,230 2,839 6.83
Investment securities 143,413 2,282 6.37 736,786 11,206 6.08
Federal funds sold 24,198 321 5.32 10,999 166 6.05
Securities purchased under
agreement to resell 50,000 719 5.79 12,088 191 6.34
Stock in Federal Home Loan Bank 16,913 272 6.47 15,750 316 8.05
Total interest-earning assets 3,159,349 61,089 7.74 2,827,371 52,779 7.47
Noninterest-earning assets 170,425 128,545
Total assets $ 3,329,774 $ 2,955,916
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
Savings accounts <F4> $ 875,610 6,380 2.93 $ 912,429 6,601 2.90
Transaction accounts <F5> 464,423 2,881 2.49 329,643 1,777 2.16
Certificate accounts 1,493,433 20,140 5.42 1,287,074 17,667 5.51
Borrowed funds and repurchase
agreements 33,796 446 5.31 4,308 68 6.33
Total interest-bearing liabilities 2,867,262 29,847 4.19 2,533,454 26,113 4.13
Noninterest-bearing liabilities 141,999 99,880
Total liabilities 3,009,261 2,633,334
Stockholders' equity 320,513 322,582
Total liabilities and
stockholders' equity $ 3,329,774 $ 2,955,916
Net interest income and
interest spread 31,242 3.55% 26,666 3.34%
Net interest-earning assets and
net interest margin $ 292,087 3.94% $ 293,917 3.76%
Interest-earning assets to
interest-bearing liabilities 1.10x 1.12x
<FN>
<F1> Average balances are derived principally from average daily balances and include nonaccruing loans.
<F2> Includes dividends on equity securities.
<F3> Net of unearned discounts, premiums and related deferred loan fees/costs, where applicable.
<F4> Includes passbook, statement and interest-bearing escrow accounts.
<F5> Includes NOW, Super NOW, money market and interest-bearing demand deposit accounts.
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
Average Average
Average Yield/ Average Yield/
Balance <F1> Interest <F2> Cost Balance <F1> Interest <F2> Cost
(dollars in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans, net <F3> $ 1,837,727 75,207 8.19% $ 1,567,713 60,866 7.76%
Other loans, net <F3> 395,800 18,523 9.38 290,586 13,611 9.37
Securities available for sale 704,659 21,957 6.23 155,296 5,203 6.70
Investment securities 144,054 4,542 6.31 755,767 22,986 6.08
Federal funds sold 18,102 480 5.33 12,760 372 5.88
Securities purchased under
agreement to resell 50,000 1,457 5.86 10,166 306 6.07
Stock in Federal Home Loan Bank 16,593 511 6.20 15,356 659 8.65
Total interest-earning assets 3,166,935 122,677 7.75 2,807,644 104,003 7.41
Noninterest-earning assets 169,276 129,366
Total assets $ 3,336,211 $ 2,937,010
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
Savings accounts <F4> $ 871,845 12,717 2.93 $ 940,077 13,584 2.91
Transaction accounts <F5> 458,335 5,695 2.50 326,114 3,346 2.07
Certificate accounts 1,496,103 41,081 5.52 1,244,479 32,621 5.29
Borrowed funds and repurchase
agreements 39,529 1,050 5.34 3,561 107 6.06
Total interest-bearing liabilities 2,865,812 60,543 4.25 2,514,231 49,658 3.98
Noninterest-bearing liabilities 148,863 101,758
Total liabilities 3,014,675 2,615,989
Stockholders' equity 321,536 321,021
Total liabilities and
stockholders' equity $ 3,336,211 $ 2,937,010
Net interest income and
interest spread 62,134 3.50% 54,345 3.43%
Net interest-earning assets and
net interest margin $ 301,123 3.91% $ 293,413 3.84%
Interest-earning assets to
interest-bearing liabilities 1.11x 1.12x
<FN>
<F1> Average balances are derived principally from average daily balances and include nonaccruing loans.
<F2> Includes dividends on equity securities.
<F3> Net of unearned discounts, premiums and related deferred loan fees/costs, where applicable.
<F4> Includes passbook, statement and interest-bearing escrow accounts.
<F5> Includes NOW, Super NOW, money market and interest-bearing demand deposit accounts.
</TABLE>
Net Income and Interest Analysis
Three Months Ended June 30, 1996 compared with 1995
Net income for the quarter ended June 30, 1996, was $7.8 million, an
increase of $0.6 million (8%) from the comparable quarter last year.
Per share earnings, both primary and fully diluted, were $0.54 for
the three months ended June 30, 1996, up from $0.48 per share a year
ago, representing a 13% increase. The per share earnings have been
adjusted to reflect the 20% stock dividend effected on April 1, 1996.
The increase in net income generally reflects increases in net
interest income provided by the spread between interest related
assets and liabilities acquired from Marble which more than
compensated for increases in noninterest expense related to operating
an expanded branch network. Net interest income increased $4.6
million (17%) and totaled $31.2 million for the second quarter of
1996. Noninterest income increased slightly to $3.1 million, while
noninterest expense increased $3.2 million (19%) to $19.7 million
during the second quarter of 1996 compared with $16.5 million in
1995. Return on average assets equaled 0.95% for the second quarter
of 1996 compared with 0.98% in 1995; the return on average equity of
9.83% for the current years second quarter compared with 9.02% a year
earlier.
Interest income for the three months ended June 30, 1996, totaled
$61.1 million, an increase of $8.3 million (16%) from 1995's second
quarter that was a combined result of a $332.0 million (12%) rise in
average interest-earning assets to $3.159 billion and a 27 basis
point (4%) increase in the average rate earned to 7.74%. The most
significant factor contributing to the higher level of interest
income was the acquisition of interest-earning assets with balances
totaling $383.7 million from Marble. Earnings on mortgage loans rose
$6.3 million (20%) as a $254.2 million (16%) increase in average
balance invested combined with a 29 basis point (4%) rise in the
average rate earned. Other loan income advanced by $2.5 million (37%)
as a $105.5 million (36%) increase in average balance (which occurred
primarily in commercial, auto and student loans) combined with a 10
basis point (1%) increase in the average rate earned. Interest income
from securities available for sale increased $7.8 million (273%) as a
decrease of 59 basis points (9%) in the average rate earned was more
than offset by a $513.4 million (309%) increase in the average amount
invested. The increased average amount invested reflects the
acquisition of securities classified as available for sale from
Marble of $98.0 million as well as the December 29, 1995, transfer of
investment securities with a book value of $492.3 million and a
market value of $491.9 million to securities available for sale.
Earnings on investment securities for the current quarter declined
$8.9 million (80%) compared with the prior year as the average amount
invested decreased $593.4 million (81%) due to the previously
mentioned transfer to securities available for sale. Securities
purchased under agreement to resell income increased $0.5 million
(276%) as a decrease of 55 basis points (9%) in average rate earned
was more than offset by an increase in average amount invested of
$37.9 million (314%).
Interest expense for the quarter ended June 30, 1996, amounted to
$29.8 million, $3.7 million (14%) more than the corresponding quarter
of last year as a result of a $333.8 million (13%) increase in
average interest-bearing liabilities to $2.867 billion and a 6 basis
point (1%) rise in the average rate paid to 4.19%. The increase in
average interest-bearing deposits was primarily attributable to the
assumption of $326.6 million in deposits in conjunction with the
Marble acquisition. The mix within the deposit structure changed as
savings accounts average balances declined $36.8 million (4%) while
the average rate paid increased 3 basis points (1%) resulting in a
decrease of $0.2 million (3%) in interest expense compared with the
second quarter of 1995. Transaction and certificate account average
balances grew $134.8 million (41%) and $206.4 million (16%),
respectively, as rates paid increased by 33 basis points (15%) on
transaction accounts and decreased by 9 basis points (2%) on
certificate accounts resulting in an increase in interest expense of
$1.1 million (62%) on transaction accounts and $2.5 million (14%) on
certificates. Interest expense on borrowed funds (representing
advances from the Federal Home Loan Bank of New York) and repurchase
agreements grew more than five-fold to $0.4 million as an increase in
average balance for the period of $29.5 million was used to partially
fund the Marble acquisition.
Net interest income for the three months ended June 30, 1996, totaled
$31.2 million, $4.6 million (17%) greater than the $26.7 million
reported for the comparable quarter a year ago. The increase in net
interest income was generally volume driven reflecting the impact of
the acquisition of Marble. The net interest spread of 3.55% and the
net interest margin of 3.94% for the quarter ended June 30, 1996, were
21 basis points and 18 basis points higher, respectively, than the
results recorded in the comparable quarter a year ago.
Six Months Ended June 30, 1996 compared with 1995
Net income for the six months ended June 30, 1996 increased $1.3
million (9%) to total $15.5 million. Per share earnings, on a fully
diluted basis, were $1.07 for the six months ended June 30, 1996, up
16% from $0.92 per share a year ago. Primary earnings per share of
$1.07 for the six months ended June 30, 1996, represented a 15%
increase over $0.93 earned during the first half of 1995. The above
per share earnings results have been adjusted to reflect the
Company's April 1, 1996, 20% stock dividend. Net income increased as
a result of a higher volume of net interest income which increased
$7.8 million (14%) to $62.1 million for the first half of 1996. The
volume increased due primarily to the Marble acquisition on January
3, 1996. Noninterest income increased $1.8 million (41%) to $6.1
million, while noninterest expense rose $6.3 million (19%) to $39.4
million. Return on average assets was 0.94% for the six months ended
June 30, 1996 and 0.98% for the comparable period of 1995; the return
on average equity of 9.72% increased from 8.92% a year earlier.
Interest income of $122.7 million for the six months ended June 30,
1996 was $18.7 million (18%) higher than the $104.0 million
recognized during the first six months of 1995. This growth was a
combined result of a $359.3 million (13%) rise in average
interest-earning assets to $3.167 billion and a 34 basis point (5%)
increase in the average rate earned to 7.75%. The acquisition of
interest-earning assets in conjunction with the Marble acquisition
continued to drive interest income to higher levels throughout the
first half of 1996. Earnings on mortgage loans rose $14.3 million
(24%) as a $270.0 million (17%) increase in average balance invested
combined with a 43 basis point (6%) rise in the average rate earned.
Other loan income advanced by $4.9 million (36%) as a $105.2 million
(36%) increase in average balance (which occurred primarily in
commercial and auto loans) combined with an average rate earned which
increased slightly. Interest income from securities available for
sale increased $16.8 million (322%) as a decrease of 47 basis points
(7%) in the average rate earned was more than offset by a $549.4
million (354%) increase in the average amount invested. As previously
discussed, the increased average amount invested reflects the
acquisition of securities from Marble of $98.0 million as well as the
December 29, 1995, transfer of investment securities to securities
available for sale. Earnings on investment securities for the current
period declined $18.4 million (80%) compared with the prior year due
to the transfer to securities available for sale noted above.
Securities purchased under agreement to resell income increased $1.2
million (376%) as an increase in average amount invested of $39.8
million (392%) more than compensated for a decrease of 21 basis
points (3%) in the average rate earned.
Interest expense for the six months ended June 30, 1996, amounted to
$60.5 million, $10.9 million (22%) more than the corresponding period
of last year. This increase was the product of a $351.6 million (14%)
increase in average interest-bearing liabilities to $2.866 billion
and a 27 basis point (7%) rise in the average rate paid to 4.25%.
Increases in the average balance of interest-bearing deposits
acquired from Marble were the most significant reason for the higher
level of interest expense. The largest increases in average balances
occurred in transaction and certificate accounts which grew $132.2
million (41%) and $251.6 million (20%), respectively, as rates paid
increased by 43 basis points (21%) on transaction accounts and by 23
basis points (4%) on certificate accounts. The foregoing increases in
average balances and rates paid generated additional interest expense
of $2.3 million (70%) on transaction accounts and $8.5 million (26%)
on certificate accounts compared with the six months ended June 30,
1995. Savings accounts average balances declined $68.2 million (7%)
while the average rate paid increased 2 basis points (1%) resulting
in a $0.9 million (6%) decrease in interest paid on savings accounts.
Average borrowed funds (representing advances from the Federal Home
Loan Bank of New York) and repurchase agreements rose $36.0 million
and were used to partially fund the Marble acquisition. The average
rate paid on such borrowings dropped 72 basis points (12%) and helped
mitigate a $1.0 million increase in interest expense incurred during
1996 compared with the first half of 1995.
Net interest income for the six months ended June 30, 1996, totaled
$62.1 million, $7.8 million (14%) greater than the $54.3 million
reported for the comparable period a year ago. Although the increase
in net interest income was principally volume driven, net interest
spread and net interest margin both advanced 7 basis points over
amounts recorded in 1995 to equal 3.50% and 3.91%, respectively for
the six months ended June 30, 1996.
Provision for Loan Losses
The provision for loan losses amounted to $1.4 million for the
quarter and $2.9 million for the six months ended June 30, 1996
compared with $1.1 million and $2.3 million, respectively, a year
ago. The Bank utilizes the provision for loan losses to maintain an
allowance for loan losses that it deems appropriate to provide for
known and inherent risks in its loan portfolio. In determining the
adequacy of its allowance for loan losses, management takes into
account the current status of the Bank's loan portfolio and changes
in appraised values of collateral as well as general economic
conditions. As of June 30, 1996, the Bank's allowance for loan losses
totaled $24.3 million (1.07% of loans and 78.67% of nonperforming
loans) compared with $15.9 million (0.82% of loans and 68.88% of
nonperforming loans) at December 31, 1995. The increase in the
allowance during 1996 was primarily a reflection of the addition of
the Marble allowance which totaled $7.6 million.
Noninterest Income
Noninterest income increased slightly to $3.1 million for the three
months ended June 30, 1996, compared with $2.9 million for the same
period last year. Service charges on deposit accounts, the largest
component of noninterest income, increased $0.1 million (8%) as a
result of increased fees related to the higher level of deposit
accounts that resulted from the Marble acquisition. Brokerage and
insurance commissions also increased $0.1 million (33%) as brokerage
activity increased during the second quarter of 1996.
Noninterest income for the six months ended June 30, 1996 amounted to
$6.1 million, an increase of $1.8 million (41%) over the same period
in 1995. 1995's results included a security loss of $1.2 million that
resulted from the write-off of the Bank's investment in Nationar (See
NOTE 4 to the accompanying interim financial statements). Service
charges on deposit accounts increased $0.2 million (8%) primarily due
to increased savings and NOW account fees related to the higher level
of these types of deposits that have been maintained since the Marble
acquisition. Brokerage and insurance commissions increased $0.1
million (10%). Other noninterest income increased $0.3 million (65%)
due to the combined effects of increases in fees received for loans
serviced for other institutions, gains recorded on the
sale/origination of loans, and a one-time real estate insurance
settlement.
Noninterest Expense
Noninterest expense increased $3.2 million (19%) to $19.7 million for
the three months ended June 30, 1996 and $6.3 million (19%) to $39.4
million for the six months ended June 30, 1996, compared with $16.5
million and $33.1 million for the respective comparable periods in 1995.
Compensation and employee benefits, was the largest element of
noninterest expense, and increased $1.6 million (20%) and $3.1
million (19%) for the respective periods. The majority of the above
increase was a direct result of the Marble acquisition and the remainder
of the increase was principally related to annual merit increases,
which were effective in March of each year.
Occupancy expense increased $0.2 million (10%) and $0.5 million
(13%), respectively, in the second quarter of 1996 and the first half
of 1996 compared with corresponding periods in the prior year. This
was primarily due to costs associated with operating the Marble
branch network. Furniture, fixtures and equipment expense increased
$0.3 million and $0.6 million for the quarter and six month period
ended June 30, 1996 compared with 1995. These additional costs are
attributable not only to the acquisition of branches and banking
house in the Marble acquisition but also to the acquisition and
rental of computer equipment which is being used in the conversion
and upgrading of the Bank's data processing system.
In spite of the previously noted increase in deposits, FDIC deposit
insurance premiums actually declined $0.3 million for the quarter and
$0.5 million for the six months ended June 30, 1996. Throughout the
first six months of 1996 approximately 31% of the Bank's deposits,
including all of the deposits acquired in the Marble acquisition,
were BIF insured. The remainder of the Bank's deposits were insured
by the SAIF. The BIF rate of insurance in 1996 is effectively zero,
while the SAIF rate is $0.23 per $100 of deposits. During 1995, there
was no differential between the BIF and the SAIF rates. Therefore,
the Bank realized a decrease in the insurance premium paid, even
though deposits increased significantly due to the Marble
acquisition.
Telephone, postage and printing rose $0.1 million (6%) and $0.2
million (12%) for the quarter and six months ended June 30, 1996 as
additional operational costs were incurred in conjunction with the
Bank's expanding franchise in the State of Vermont.
Other noninterest expense increased to $3.8 million for the quarter,
up $1.3 million (54%) from last year while expense rose $2.3 million
(47%) and totaled $7.3 million for the six months ended June 30,
1996. Increases for the quarter and for the six months ended June 30,
1996 were as follows: amortization of goodwill rose $0.3 million and
$0.7 million, respectively, as a result of the Marble acquisition;
advertising increased $0.2 million and $0.4 million, respectively;
foreclosure related cost jumped $0.3 million and $0.4 million,
respectively, over amounts incurred in 1995 due to increases in
bankruptcy filings; and costs associated with increased loan activity
rose $0.2 million and $0.3 million, respectively. Additional expense
connected to operating an expanded branch network increased $0.3
million for the quarter and $0.5 million for the six months ended
June 30, 1996.
The ratios of noninterest expense, excluding gains and losses related
to the securities portfolios, to average assets were 2.37% and 2.36%
on an annualized basis for the three months and six months ended June
30, 1996, compared with 2.23% and 2.25% for the same periods ended
June 30, 1995. The ratios of noninterest expense net of noninterest
income (exclusive of gains or losses on net security transactions) to
average assets were 2.00% and 1.84% on an annualized basis for the
three months ended June 30, 1996 and 1995, respectively, and 2.00%
and 1.87% for the six months ended June 30, 1996 and 1995. The
efficiency ratio measures noninterest expense (excluding amortization
of intangibles and real estate owned related expense) as a percentage
of net interest income plus noninterest income (exclusive of net
security transactions and real estate owned related income). The
efficiency ratios for the quarters ended June 30, 1996 and 1995 were
54.17% and 53.00%, respectively. Efficiency ratios for thrift
institutions in the $1-5 billion asset range, as reported by SNL
Securities, were 58.94% and 59.36%, respectively for the quarters
ended December 31, 1995 and March 31, 1996. Comparable ratios for all
thrifts in the above time periods were 63.27% and 62.39%,
respectively.
Income Tax Expense
Income tax expense for the three months ended June 30, 1996, totaled
$5.3 million, a $0.7 million (14%) increase over the same period of
the prior year. Largely due to the effect of the Marble acquisition
on earnings, pre-tax income generated during the second quarter of
1996 reached $13.2 million, a $1.2 million (10%) increase over the
prior year. The Company's effective tax rate of 40.6% for the second
quarter of 1996 compares with 39.2% for 1995.
Income tax expense for the six months ended June 30, 1996, totaled
$10.5 million, a $1.3 million (14%) increase over 1995. Earnings
before income taxes were $26.0 million or $2.6 million (11%) in
excess of 1995 levels. This increase is attributable mainly to the
Marble acquisition's impact on earnings. The Company's effective tax
rate for the six months ended June 30, 1996 was 40.2% compared to
39.2% for the prior year.
Part II OTHER INFORMATION
Item 1. Legal Proceedings
The Holding Company and the Bank are not engaged
in any legal proceedings of a material nature at
the present time.
Item 2. Changes in Securities
None.
Item 3. Default upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
(a.) The annual meeting of the shareholders of the
Holding Company for the election of three
directors and the consideration of
certain other matters was held on
May 22, 1996. Proxies were solicited
with respect to such meeting
under Regulation 14A of the Securities
Exchange Act of 1934 pursuant
to Proxy materials dated April 3, 1996.
There was no solicitation in opposition
to the management's nominees for directors
and all of such nominees were elected.
(b.) The ratification of KPMG Peat Marwick LLP
as independent auditors of the Company
for the fiscal year ending December 31, 1996.
Number of Number of Number of
Affirmative Negative Withheld
Votes Votes Votes
9,483,574 93,032 52,081
(c.) Amendment of the Albany Savings Bank, FSB
Recognition and Retention Plan
and Trust Agreement for Outside Directors
to close participation as of April 24, 1995.
Number of Number of Number of
Affirmative Negative Withheld
Votes Votes Votes
7,213,549 812,818 118,420
(d.) Termination of the ALBANK Financial Corporation
1992 Stock Incentive Plan for Outside Directors.
Number of Number of Number of
Affirmative Negative Withheld
Votes Votes Votes
8,667,183 622,496 90,979
(e.) Approval of the ALBANK Financial Corporation
1995 Stock Incentive Plan for Outside Directors.
Number of Number of Number of
Affirmative Negative Withheld
Votes Votes Votes
5,692,045 2,097,751 354,991
(f.) Approval of the amendments to the
ALBANK Financial Corporation
1992 Stock Incentive Plan for Key Employees.
Number of Number of Number of
Affirmative Negative Withheld
Votes Votes Votes
5,252,757 2,664,962 310,331
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
The following exhibit is filed as part of this report.
Regulation S-K Exhibit
Reference Number
11 11.1 Statement regarding Computation of Per Share
Earnings
(b). Reports on Form 8-K
None
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.
ALBANK Financial Corporation
(Registrant)
DATE: August 12, 1996 BY: /s/ Barry G. Blenis
Barry G. Blenis
Executive Vice President,
Operations and Strategic Planning
(Duly Authorized Officer)
DATE: August 12, 1996 BY: /s/ Richard J. Heller
Richard J. Heller
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
Form 10-Q
Exhibit Index
Regulation S-K Exhibit Exhibit
Reference Number Number
11 11.1 Statement regarding Computation of
Per Share Earnings Ex. - 11.1
<TABLE>
ALBANK FINANCIAL CORPORATION AND SUBSIDIARY
Form 10-Q
Statement regarding Computation of Per Share Earnings
<CAPTION>
Three months Six months
ended June 30, ended June 30,
Exhibit 11.1 1996 1995 1996 1995
<S> <C> <C> <C> <C>
1. Net income $ 7,834,414 7,256,248 $ 15,545,878 14,207,723
2. Weighted average common shares outstanding <F1> 13,509,270 14,479,062 13,579,636 14,612,063
3. Weighted average common stock equivalents due
to the dilutive effect of stock options when utilizing
the treasury stock method. Per share market price is based
on the average per share market price for the period. <F1> 905,404 757,193 883,077 742,177
4. Total weighted average common shares and
common stock equivalents outstanding for primary
earnings per share computation 14,414,674 15,236,255 14,462,713 15,354,240
5. Primary earnings per share <F1> $ 0.54 0.48 $ 1.07 0.93
6. Weighted average common shares outstanding <F1> 13,509,270 14,479,062 13,579,636 14,612,063
7. Weighted average common stock equivalents due
to the dilutive effect of stock options when utilizing
the treasury stock method. Per share market price used
is the greater of the average market price for the period
or the end-of-period market price per share. <F1> 905,404 762,176 887,149 762,176
8. Total weighted average common shares and
dilutive shares outstanding for fully diluted
earnings per share computation 14,414,674 15,241,238 14,466,785 15,374,239
9. Fully diluted earnings per share <F1> $ 0.54 0.48 $ 1.07 0.92
<FN>
<F1> Adjusted to reflect the 20% stock dividend effected on April 1, 1996
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 64,774
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 653,707
<INVESTMENTS-CARRYING> 138,417
<INVESTMENTS-MARKET> 138,848
<LOANS> 2,283,253
<ALLOWANCE> 24,337
<TOTAL-ASSETS> 3,325,592
<DEPOSITS> 2,872,407
<SHORT-TERM> 4,364
<LIABILITIES-OTHER> 102,118
<LONG-TERM> 30,000
0
0
<COMMON> 157
<OTHER-SE> 316,546
<TOTAL-LIABILITIES-AND-EQUITY> 3,325,592
<INTEREST-LOAN> 93,730
<INTEREST-INVEST> 26,499
<INTEREST-OTHER> 2,448
<INTEREST-TOTAL> 122,677
<INTEREST-DEPOSIT> 59,191
<INTEREST-EXPENSE> 60,543
<INTEREST-INCOME-NET> 62,134
<LOAN-LOSSES> 2,850
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 39,377
<INCOME-PRETAX> 26,009
<INCOME-PRE-EXTRAORDINARY> 15,546
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,546
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
<YIELD-ACTUAL> 3.91
<LOANS-NON> 21,027
<LOANS-PAST> 9,907
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 15,949
<CHARGE-OFFS> 2,479
<RECOVERIES> 391
<ALLOWANCE-CLOSE> 24,337
<ALLOWANCE-DOMESTIC> 16,836
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,501
</TABLE>
